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Faster than a speeding data stream

Fiber — not Wi-Fi — may become Palo Alto's Web venture of choice

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While the nation looked to Wi-Fi, Palo Alto has long had its eyes on another technology — fiber. Exploration of the super-fast cable-based service has been going on since 1996.

Next Monday, Palo Alto's City Council is expected to discuss fiber-to-the-premises Internet service once more.

A consortium of technology firms — including Canada-based Axia NetMedia, PacketFront and 180 Connect — has proposed expanding the city's current fiber network to a citywide, ultra-high-speed service. It could start operating before the end of the year, according to the proposal submitted to the city.

The $44 million project has already garnered praise from city staff, council members and a three-person advisory committee to the mayor. They like its low financial risk — and the cutting-edge business advantage they say it could lend the city.

Orders of magnitude faster than cable services offered by telecommunications companies, a fiber network would be a boon to businesses and residences, Mayor Larry Klein has said. It would attract, retain and aid local companies, he added.

He predicted that as gas prices rise, more people could choose to work at home with help from the efficient fiber network. Recreationally, the time to download a movie would shrink from hours to minutes.

Many other nations already have fiber connections, and Palo Alto needs a system as well in order to stay competitive, he added.

At 100 megabits per second, the proposed ultra-high-speed network would have voice, video and data capabilities — and it would be priced competitively, according to Axia Chief Technical Officer Drew McNaughton.

The city would incur no debt and spend none of the General Fund to finance the project, according to the proposal. Rather, the city would commit about $13 million in assets, including the current fiber ring, revenue from its 45 paying customers, as well as possibly waiving city fees.

The tech consortium would provide the rest of the $44 million and build, own and operate the network.

Retail service providers such as Comcast would be the middlemen, selling services to customers.

The city would agree to use those retail services, provided they are competitively priced, according to staff and the advisory committee's recommendations.

After 25 years, the city could either renew the contract with the consortium — or buy the entire infrastructure for $1, according to the proposal.

In a study session Monday, Councilwoman Yoriko Kishimoto said she is thrilled to finally see a viable fiber plan.

"I can't wait to get to the end," she said.

It's been a long road. The exploration of fiber began in 1996 but foundered due to financial concerns.

The city paid nearly $1.9 million 12 years ago to install a roughly ring-shaped fiber network stretching 40 miles throughout the city to be leased to telecom firms.

Although a 70-home trial run in the Community Center neighborhood earned back some of the initial cost of building the network, a citywide system would cost $35 million, according to 2004 estimates.

Some questioned whether the city, as a public entity, should go head-to-head against telecom firms in providing Internet service.

It took until this year for the city to break even on the cost of installing the network, according to Joe Saccio, the deputy director of the administrative services department.

About 40 local businesses use the ring now, with some cable unused, Klein said.

The city would have eventually lost contracts to a more competitive seller anyway, according to Andy Poggio and Bob Harrington, who urged adopting the proposal.

"If your business is going to be cannibalized, it's probably better to be the cannibal," Harrington said.

If the consortium doesn't meet its performance targets, the city would retain a "reversionary right" to get its assets back, the third committee member, Bern Beecham, said.

The tech consortium sketches a speedy timeline in the proposal: The network could be built completely within three years — and return positive cash flow within two.

If the city agrees to fast-track the plan, the service could reach homes and businesses before the year's end.

In a report released last week, city staff praised the proposal overall but expressed hesitation over rushing into the agreement.

The plan still leaves crucial details undefined, including the impact of construction on city neighborhoods and whether enough retail providers could be attracted to sell the service, the report states.

The report also lists concerns including lawsuits from Internet retailers objecting to the competition and whether the city would be saddled with service obligations if the project falls through.

Axia's McNaughton said lawsuits from firms such as Comcast could be avoided by creating partnerships early.

The network would also increase competition among providers, he said, noting Axia's fiber network in Alberta, Canada, has caused the number of providers to skyrocket from seven to 94. Competition would create lower prices and benefit consumers, he said.

City staff is recommending an initial "Letter of Intent," covering the most basic points of agreement, then creating a more detailed final plan.

Beecham Monday urged the council to draft the letter and set an October deadline for final contracts. The council will decide how to move forward at its next Monday meeting.

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