Editorial: Put fiber plan to November vote Editorial: Put fiber plan to November vote (April 14, 2004)

Years of study, surveys, extensive trial and legal analysis provide cautious support for City Council to proceed to full public airing and vote
The decision is at last coming to a head on whether Palo Alto should create a city-owned fiber-optics system to provide Internet access, television and telephone service to homes and businesses.

The City Council next Monday will begin its consideration of the so-called "fiber-to-the-home" (or FTTH) plan to create a new city utility, after electric, water, gas and sewer services the city has long provided.

As fiber proponents frequently note, the roots of the city's electric utility reach back a century. The utility has provided rates that are significantly lower than in neighboring communities served by PG&E. At the same time it has provided millions of dollars to the city's General Fund -- it has been called the city's Golden Goose.

Yet while there are clear parallels, it would be a serious mistake to assume that what worked for electric lights -- and the plethora of electrical gizmos that followed, from can openers to computers -- will work in a frenetically competitive information age where success and failure swirl amid a constant of rapid change.

The estimated cost of $35 million to $40 million is a significant concern -- specifically how it would be repaid if done as a revenue bonds (no vote required, repaid by anticipated revenues) or general obligation bonds (requiring two-thirds voter approval).

Other legitimate concerns include the philosophical question of whether a public entity should be competing with private firms. This question will certainly be raised vigorously by those most likely to be hurt by widespread municipal or other public ventures into the telecommunications field: the cable-television firm Comcast and SBC, the successor to Pacific Bell telephone company. But we haven't seen a scintilla of evidence that either of these giants really cares what Palo Altans want or need in an electronic-communications network, either.

The info-war has already begun. In addition to reviewing the three Guest Opinions in this issue, interested citizens would do well to read the extensive business plan for the proposed fiber utility -- especially Attachment C, delineating specific risk factors. (Links to the reports and past Weekly articles on FTTH are on www.PaloAltoOnline.com.) Reading the reports will provide an inoculation against claims and counterclaims that stray from facts into hyperbole.

Despite acknowledged risks, the city staff, backed by the city's Utilities Advisory Commission majority, is recommending that the council proceed along a timeline leading to a citywide vote in the Nov. 2 election. Risks include an array of intimidating "variables" that could cause swings of millions of dollars in revenue/cost projections -- from how many subscribers sign up to potential legal challenges and "strong, possibly predatory price pressure by the incumbent providers."

Competitive risks of other technologies, such as satellite systems or wireless Internet access, are discounted. Wireless may be "quicker and cheaper to market," but "does not represent a credible threat at this time because bandwidth is limited, security and interference are significant drawbacks, and environmental (visual and other) and health risks require further investigation," the risk-assessment attachment states.

Legal risks would be reduced by a holding a public vote, complying strictly with state and federal regulations, enacting a City Charter amendment to allow creation of a separate board to oversee video content, and creating a franchise agreement with the new entity, the report notes.

Most significantly, the staff has built in "off ramps" to the proposed local electronic superhighway -- where the city can exit if projections are heading the wrong direction. At an off ramp, the council could opt to terminate roll-out or explore alternatives to a full build-out. The first off ramp may occur Monday night, or soon thereafter. Another comes up in May, before significant design expenditures are made. Assuming voter approval Nov. 2, completion of the phased system is targeted for November 2007.

Too much has been invested, in time, energy and dollars, to drop this exciting opportunity prior to an enabling vote in November. We urge the council to approve the next phase of study, which includes public outreach, engineering design, further legal analysis and more detailed business and financial plans.

Then, in November, the community can give its formal input regarding the risks and benefits of "fiber to the home" for Palo Alto.

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