Can Palo Alto finally pull off high speed internet service?
Original post made
by Frank Bravo, webmaster of Palo Alto Online,
on Jul 21, 2006
Would you support a public-private partnership to provide high-speed, broadband (100 megabit per second two-way)communication throughout Palo Alto? Assume this would be provided at a competive price. Do you think this makes sense?
Like this comment
Posted by Sanford Forte
a resident of Evergreen Park
on Jul 29, 2006 at 1:09 pm
FTTH deployment via public/private partnership is something that I have long advocated for. Assuming the deal was structured in a way that makes fiscal sense (not a difficult thing to achieve), this is the way we should be going. After some years of resistance to this idea, it's gratifying to see that so many FTTH supporters and Council members have come around to this way of thinking.
As far as a grassroots effort at writing a proposal that describes what should be built, we have been there and done that, and failed. I don't thinkn it's wise to venture in that direction, again.
1) Let's first take a look at the RFP's that are coming forward. If nothing is appropriate, pehaps *then* we can look into tweaking one of those, in cooperation with the most suitable vendor(s), for a deployment.
2) If we find someone with the capacity to deploy, in a deal that makes sense, the FTTH effort will take further _organized_, grass roots efforts, to the neighborhood level. We're talking about a well-honed PR effort that helps ordinary citizens to understand the benefits of a local FTTH network. The effort should be presented in ways that eschew technospeak, and refer to the everyday entertainment and municipal efficiency and revenue uptake advcantages of an FTTH deployment. Rather then reinvent thte wheel ofo technological diligence applied to what the _best_local system can be, we need to think about that aspect of community adoption. This is where the last local effort to deploy FTTH fell flat on its face.
4) We need to bring in large scale, local institutional stakeholders.
4) Following is a fairly long private placement framework that could be modified in any number of ways. I put this forward to PAU and Council a few years ago when the idea of private/public partnership was receiving a lot of resistance.
Here's the framework - note that some of the numbers have changed, but the geberal idea is there.
Suggested Funding Models for Municipal Communications Infrastructure
by Sanford Forte
Palo Alto is considering the construction of a municipally-owned-and-operated communications infrastructure. Currently, three financing models have been put forth a general bond, financing from CPAU's reserve fund, or a combination of both.
What follows are some general, to mid-specific suggestions for alternate means to funding a new Palo Alto communications infrastructure. They both follow a private placement model many variations on this theme are possible.
1) Pursue direct investment from local institutions that would profit most directly from the deployment of local communications infrastructure.
Many private (commercial and otherwise) organizations would experience direct benefits from a CPAU-run communications infrastructure. Lower cost structure, and economies would result.
Many agencies serving the public e.g. Stanford University (including Stanford University Hospital), Veteran's Administration Hospital, public and private schools, etc. would also benefit from lower costs, and increased efficiencies within their respective domains.
Given the above, CPAU should create a sensitivity model that illustrates the quantifiable benefits gained by local institutions if a municipal communications infrastructure is built, versus not being built. The model should illustrate clear cost savings, opportunity costs (if the network is not built) and other quantifiable benefits e.g. enhanced consumer convenience and/or choice as a result of the network's presence.
The data drawn from the sensitivity analysis should then be used as part of a local campaign directed at promoting the benefits of a municipal network to local institutions. Largely, this campaign should point toward soliciting at least a significant portion of the funds necessary to build the network.
Additional benefits resulting from such a campaign would be to create a working dialogue, focused on how local institutions can cooperate financially and otherwise to get the network built. Either way, a benefit is derived for Palo Alto.
Many organizations have direct means or direct access to peripheral means (e.g. foundation capital) to make significant financial contributions to a municipal communications build.
Within this scenario, CPAU would be designated as "owner" to the network, with quantifiable benefits including any contributions from a bond or CPAU's reserve fund - created by the network over time considered as CPAU's 'investment' capital. Essentially, the benefit profile presented to potential contributors should be modeled (accurately) in a way to show a real return on investment to operations through benefits obtained via participation in the network.
Following is a partial list of local employers (with employee numbers) who would stand to benefit from a CPAU-run information utility. (note: the numbers in this list have not been updated since 2003)
Stanford University: 5,000+
Space Systems/LORAL, Inc.: 3,000 - 5,000
Varian Associates: 1,500 - 2,000
Palo Alto Unified School District: 1,636
Alza Corp: 1,500+
Palo Alto Medical Foundation: 1,500
Roche Bioscience (formerly Syntex Corp.): 1,000 - 1,500
Veterans Affairs Palo Alto Health Care Systems: 1000+
Stanford University Medical Center/Hospital: 750 - 1000
2) Pursue a regional Private Placement solicitation for long-term investment.
It's a given that most established private equity groups - i.e. venture capital, and other private equity investment are not interested in funding initiatives that do don't project at least 7-10x ROI (often more) within a specific range of time (2-5 years).
However, many individuals and organizations within Palo Alto have access to considerable private capital. CPAU should be approaching those individuals and organizations as potential investors in a city-owned-and-operated municipal communications build.
Palo Alto would thus enter the domain of gathering funds by the issuance of a Private Placement. Essentially, this action would involve the solicitation of funds from individuals and institutions willing to consider a long-term, measured risk - based on the long-term future promise of a municipal network, and a return on their investment.
Initial returns to investors would be deferred until the network showed a profit.
(note: other payback scenarios could also be construed)
The majority of shares would be owned by CPAU.
Any private placement investor would have the option of transferring owned shares.
Following is a representation of how many investors it would take to accumulate $40M through a private placement, given different share prices within the offering. Thus, if the cost of one share was $1M, the $40M goal could be reached with 40 individual investors (or less, if some investors chose to buy more than one share).
(note: Estimated mean Palo Alto household income in 2000: $103,700* (* Source: "Projections `98" Association of Bay Area Governments)
Estimated mean household income in 2000: $117, 574 (source: Palo Alto Online: Web Link)
Assume fund raising goal of $40M, at one person (or institution) per share.
40 people - $1M@
80 people - $500K@
160 people - $250K @
320 people - $125K @
640 people - $62, 500K @
1080 people - $31,250 @
2160 people - $15,625 @
4320 people - $7663.00 @
Again, both examples above are brief scenarios, and meant to present only a sample of what's possible. The very least we should do is investigate these possibilities, in order to bring more funding flexibility to this potentially great opportunity.
Like this comment
Posted by Bob Harrington
a resident of Embarcadero Oaks/Leland
on Jul 30, 2006 at 6:16 pm
CALL FOR PRIVATE SPONSORS: A sponsors' syndicate should be formed from among the entities listed below a) to provide leadership and b) to alleviate Palo Alto's risk in identifying and working with private partners to build and operate a municipally-owned ultra high-speed open broadband network.
The United States, and especially Silicon Valley, needs a more aggressive telecom model to accelerate ultra high-speed broadband deployment to every premise. There are just too many major enterprises with significant investments in intellectual capital in our region for us to collectively continue to tolerate the significant restrictions being imposed by our nation's obsolete telecom strategy and structure. As America falls further behind world leaders in broadband penetration, a more rapid roll-out of high-speed broadband becomes ever more urgent for our country. It is well-known that our nation's major telecom companies just do not have the balance sheets necessary to get the job done alone.
Palo Alto is about to issue an RFP seeking an acceptable municipal model that provides the impetuous to a more rapid roll-out of high-speed broadband locally. Thus, to get the ball rolling in Silicon Valley, each and every entity listed should consider becoming a sponsor of the Palo Alto network and should be pro-active in making their interests known to any member of the Palo Alto City Council: AboveNet, Actel, Adaptec, Adobe, Advanced Micro Devices, Affymetrix, Agile Software, Agilent, Align, Alcatel, Altera, AOL, Apple, Applied Materials, Applied Signal Technology, Ariba, Arthrocare, Aspect Communications, Asyst Technologies, Atheros Communications, Atmel, AT&T, Avanex, BEA Systems, Bechtel Telecommunications, Bell Microproducts, Borland, Brocade, Cadence Design, California Water, Calpine, Cisco, CNF, Coast Distribution, Coherent, Connetics, Covad, Cox Communications, Credence, Cypress Semiconductor, Dionex, DSP Group, eBay, Echelon, Electronic Arts, Electronics for Imaging, Embarcadero Publishing, Ericsson, Equinix, ESS Technology, Essex Property, Exponent, Extreme Networks, Finisar, Foundry Networks, Franklin Resources, Fujitsu Network Communications, Genencor, Genentech, Genesis Microchip, Gilead Sciences, Google, Granite Construction, Harmonic, Hewlett-Packard, Hyperion, IBM, Informatica, Integrated Device Technology, Integrated Silicon Solution, Intel, Intersil, Interwoven, Intuit, Intuitive Surgical, iPass, iTown Communications, IXYS, JDS Uniphase, Jupiter Networks, KLA-Tencor, Komag, Kyphon, Lam Research, Landec, Leadis Technology, Lexar Media, Linear Technology, Lockheed, LSI Logic, Lucent Technologies, Macrovision, Magma Design, Mattson Technology, Maxim Integrated Products, Maxtor, McAfee, MediaNews, Mercury Interactive, Micrel, Microsoft, Molecular Devices, Motorola, National Semiconductor, NASA Ames, Nektar Therapeutics, Netflix, Netgear, NetIQ, Netscreen Technologies, Network Appliance, Network Equipment Technologies, Nextel, Novellus Systems, Nvidia, Omnicell, Omnivision Technologies, Openwave Systems, Oracle, palmOne, Pacific Gas & Electric, PacketFront Inc., Pannaway Technologies, Photon Dynamics, Pinnacle Systems, Pixar, Plantronics, PMC-Sierra, Portal Software, Power Integrations, Proxim, Quantum, Rambus, Redback Networks, Robert Half International, Roche Pharmaceuticals, SanDisk, Sanmina-SCI, SAP, Serena Software, Siebel Systems, Silicon Graphics, Silicon Image, Silicon Storage, Siliconix, Sirf Technology Holdings, SJW, Solectron, Sonicwall, Stratex Networks, Sun Microsystems, Symantec, Symmetricom, Synaptics, Synnex, Synopsis, Tellabs North America, Terayon Communications, Tibco, TiVo, Trimble Navigation, Ultra Clean Holdings, Ultratech, Varian, Varian Medical Systems, VeriSign, Verizon, Veritas Software, Verity, Visx, Vulcan Inc., WebEx Communications, West Marine, Xerox, Xilinx, Yahoo, Zoomy Communications, Zoran, Joint Venture Silicon Valley, Palo Alto Downtown Business and Professional Association, Rotary Club of Palo Alto, Palo Alto Chamber of Commerce, Palo Alto Club, Palo Alto Medical Foundation, Kaiser Health, Stanford Hospital and Clinics, Lucille Packard Children's Hospital, El Camino Hospital, Baker & McKenzie, Coblentz Patch Duffy & Bass, Cooley Godward, Davis Polk, DLA Piper Rudnick Gray Cary, Dorsey & Whitney, Earthjustice, Fenwick & West, Gibson Dunn & Crutcher, Keker & Van Nest, Lieff Cabraser Heimann & Bernstein, Morrison & Foerster, Nixon Peabody, O'Melveny & Myers, Orrick Herrington, Pillsbury Winthrop, Ruby & Schofield, Sideman & Bancroft, Skadden Arps, Townsend and Townsend, Walkup Melodia Kelly Wecht & Schoenberger, Weil Gotshal & Manges, Wilson Sonsini, Accel Partners, Applied Ventures, Benchmark Capital, Bessemer Venture Partners, Canaan Partners, Draper Fisher, Goldman Sachs, Greylock, Hummer Winblad, Institutional Venture Partners, Intel Capital, Kleiner Perkins, LightSpeed, Mayfield Partners, Merrill Lynch, Mobius, Mohr Davidow, Morgan Stanley, New Enterprise, Norwest, Palo Alto Venture Partners, Redpoint, Sand Hill Capital, Sequoia, Sutter Hill, Trinity Ventures, UBS Securities, U.S. Venture Partners, Versant, Ellis Partners, Fry's Electronics, Glenborough Realty Trust, Keenan Land, King Asset Management, Marcus & Millichap, McNellis Partners, Melcher Development, Mission West Properties (Berg and Berg), Mozart Development, Peery-Arrillaga, Premier Properties, Renault & Handley, R&M Properties, Roxy Rapp & Company, Silicon Valley Association of Realtors, Simon Property Group (Stanford Shopping Center), Sobrato Development, Spieker Partners, Summerhill Homes, University Circle, Vance Brown, Wheatley Properties, and WP Investments.
Like this comment
Posted by pat
a resident of Midtown
on Aug 11, 2006 at 10:02 am
From: Pat Marriott
Sent: Thursday, August 10, 2006 9:31 PM
Cc: Jeff Hoel
Subject: Pat Marriott's letter to council about "Fiber," 8-4-06
While I hesitated getting involved in an email dialogue on this emotional topic, I felt the need to respond to the comments made by Jeff Hoel (below)because he is missing the point. I am not challenging the many benefits of fiber and high speed Internet access.
** Putting aside the technology issues, which seem to dominate the discussion, where is the business plan -- specific to Palo Alto -- written by someone on the city staff who will be held accountable for the success or failure of said plan? **
In addition to emphasizing the obvious, there are a few comments in Hoel's email that require a response. I had asked:
- Will it (FTTH) bring new business to the city? What proof points do you have?
- How much will it cost the city to build it, install it and -- more important -- to support it?
- How many new employees will have to be hired?
- What other city services might have to be sacrificed in order to pay for this new service?
Hoel responded that in answer to my first question I should see: "Measuring Broadband's Economic Impact" at
This report is from an industry publication. According to its website, "BROADBAND PROPERTIES is the leading source of information on digital and broadband technologies for buildings and communities. Our editorial aims to accelerate the deployment of Fiber-To-The-Home and Fiber-To-The-Premises . . . " The report indicates that ". . . broadband access does enhance economic growth and performance. . ." and no doubt has a great deal of information that would be useful to include in a business plan. But it would not serve as a standalone document to secure venture capital for someone starting a FTTH enterprise.
Hoel said that the intent of the RFP is to find out the answers to my other questions and "The point of the currently proposed RFP is to get bidders to supply the business plan."
The idea of publishing a RFP without a business plan is naïve at best and dangerous at worst. One cannot expect bidders to be objective. To expect a bidder to write your business plan is asking for bogus data that would supposedly prove the project worth doing and the bidder the right company to hire. Real companies do not ask vendors to provide business plans.
I stated that my priorities for city resources included fixing pot holes and sidewalks and public safety. Hoel replied, "The money for citywide FTTH won't come from a pot that could otherwise be raided to pay for the things Marriott says she wants first."
Is there a secret slush fund in the Palo Alto budget that would pay for FTTH? Are there staff members with time on their hands waiting to work on FTTH?
At Web Link Hoel is quoted as saying, "In 2004, the city came to realize that there might be no attractive way to fund citywide FTTH, given California law."
So where will the money come from? That's one of many things a business plan would tell us.
I will post these messages at Palo Alto Online, which is the appropriate place for them and any responses to them.
> On Aug 9, 2006, at 7:14 PM, Jeff Hoel wrote:
I'd like to respond to Pat Marriott's letter to Council of 8-4-06,
From: Pat Marriott
Sent: Friday, August 04, 2006 3:58 PM
To: Council, City
I see that the FTTH discussion is still alive and well in the
We are in the midst of a long term budget crisis with no clear
answers as to how we will pay for essential items like road
repair and major infrastructure improvements. Layoffs are
being discussed. Our retail tax base is dwindling with no plan
for retaining and attracting businesses. Kishimoto and Klein,
in their Weekly Guest Opinion, acknowledge these problems and
say, 'We on the City Council will soon have to decide whether we
have the institutional bandwidth to continue pursuing a leading-
edge citywide data network on top of all these "must-haves".'
Having watched the city government fumble its way through
discussions and debates on libraries and police buildings with
little real forward movement or accountability, it's beyond my
comprehension that anyone would still be discussing FTTH as a
I don't doubt the technology, though I wonder if anyone on the
council or city staff has a real understanding of it.
Is Marriott saying she doesn't doubt that the technology works at
all or that it can be used to implement a system that is financially
viable? Officials in UTOPIA understand the technology well enough to
delegate the details of implementing and running the network to a
Kishimoto and Klein talk about preserving "net neutrality and
open access," but apart from using these terms as "god-motherhood-
apple pie" benefits, I don't see how the city would preserve them.
Does Marriott acknowledge that UTOPIA is preserving them? I don't
see why Palo Alto couldn't preserve them the same way.
Voting on an RFP at this time is putting the cart before the
horse. If your were running a company, and were responsible -- and
accountable -- to your shareholders, you would want the answers
to the following questions before voting on whether to invest in
- By the time the city gets around to actually building it, will
there be some new technology that's better?
If the city gets around to actually building it anytime soon, then
no, there will not be some new technology that's better. Any number
of experts say this. The theoretical bandwidth limit of the
(singlemode) fiber infrastructure would be at least four orders of
magnitude greater than the 100 Mb/s speeds the RFP requires,
supporting at least four generations of order-of-magnitude optronics
upgrades. So it ought to last for decades. Optronics upgrades can
be done for individual homes that require it without affecting
(Recall that the city has promised undergrounding of utility
Lines for many years, but few of us enjoy that benefit.)
The city's undergrounding of utility lines isn't really relevant, is
This project has to take a long time because it's expensive. For
one thing, the courts have determined that what it costs the
incumbent cable and phone companies per year has to be limited.
- Will it bring new business to the city? What proof points
do you have?
See: "Measuring Broadband's Economic Impact"
- How much will it cost the city to build it, install it and --
more important -- to support it?
The intent of the RFP is to find out.
How many new employees will have to be hired?
What other city services might have to be sacrificed in order to
pay for this new service?
- What will it cost to subscribe to the service?
Here's where to look to find out how much UTOPIA customers are
paying for FTTH services:
I think the pricing is competitive. It's not cast in stone that
Palo Alto's prices would have to be exactly the same.
How many average citizens actually need it AND would be
willing to pay for it?
How many citizens would admit to being average? It would be all
right with me if the city sent out an invitation to sign up for
service to all homes in Palo Alto and committed to building the
system if enough people signed up. I'd be happy to go door-to-door
to encourage sign-ups.
In other words, where is the business plan with an ROI model
Using REAL DATA vs. wishful thinking?
The point of the currently proposed RFP is to get bidders to supply
the business plan. (That wouldn't be my first choice, but it might
work.) Would Marriott accept REAL DATA from UTOPIA and Provo? It's
hard to get REAL DATA about the future.
Years ago, when I was working for one of the top companies in
Silicon Valley, we were developing a secret "killer" product. We
built a special demo facility, to which we invited CEOs, CIOs,
engineering VPs and other executives of Fortune 500 companies.
They were all thrilled with the product and raved over its
capabilities. We thought we had done our market research well.
There was just one problem: we never asked for an order. When
the product was announced, no one bought it.
Palo Alto isn't talking about developing anything that is so
original it has to be kept secret. UTOPIA works. Provo works.
What's wrong with doing the same thing?
Kishimoto and Klein say that "Palo Alto's quality of life is
dependent on a complex network of economic, environmental and
social mechanisms that all work together." True enough. So
let the city focus on doing its job of fixing and maintaining our
infrastructure (long overdue), providing essential services like
police and fire departments and living within its budget. Let
private enterprise take care of cable and Internet access. A
"fat pipeline" will mean very little to me if I can't drive
through the city without bumping through potholes or walk safely
without tripping over broken sidewalks or being attacked by a
The money for citywide FTTH won't come from a pot that could
otherwise be raided to pay for the things Marriott says she wants first.
This shareholder will hold you accountable for focusing on