Axia withdraws from Palo Alto 'fiber' project

Pullout cites economy, city's unwillingness to help with financing

The Canadian-based Axia Netmedia Corporation consortium has pulled out of Palo Alto's troubled fiber-to-the-premises (FTTP) project, citing "deteriorated" financial markets and Palo Alto's unwillingness to contribute funding to help win financing.

The pullout essentially throws the city back to ground zero on fiber installation, the subject of community discussion for 15 years. Discussions with the Axia group began seven months ago after Axia was deemed the only acceptable response to an earlier request for proposals by the city.

"Regretfully, in spite of genuine effort on both sides, we have not been able to agree to a model that works for both parties," Drew McNaughton, Axia's chief technology officer, said in a March 9 letter, delivered electronically to city officials.

The city announced the withdrawal in an e-mail press release late Friday afternoon (March 13).

McNaughton said when Axia and its consortium members, PacketFront and 180Connect Network, lost their financing partner the only way they could proceed was to redefine the arrangement with the city. Axia had proposed that the city contribute $3 million to $5 million annually to the financing package to pay for the $45 million fiber-installation project.

City Council members at a Feb. 25 study session indicated they would decline to commit funds, triggering the Axia response.

City officials expressed disappointment in the pull-out, but said they still hoped for something positive on fiber.

City Manager James Keene said fiber is still an important subject for the community to consider.

"As we worked through the negotiations with Axia and explored possibilities with the Community Advisory Group, I became convinced that a 100 percent fiber-connected Palo Alto would be transformative and improve our community in so many positive ways, some of which we can't yet imagine," Keene said.

"High speed broadband is still highly desirable, as the Obama administration has recognized, and there are options that the City can pursue to be a leader in this field," Councilman Larry Klein said of the pullout.

"The City's vision of obtaining an ultra-high-speed, open system-based broadband network in Palo Alto to provide extraordinary economic, educational and social benefits is still a worthy goal," Councilwoman Yoriko Kishimoto said.

The press release said city staff will "return to council for direction in the coming weeks."


Axia Withdraws from Broadband RFP Process,

City of Palo Alto to Consider Next Steps

Palo Alto, CA -- The City of Palo Alto was notified by Axia Net Media Corporation (Axia) of its withdrawal from the City's Broadband Request for Proposal (RFP) process. As their proposal evolved and the financial markets deteriorated, Axia, along with consortium members, PacketFront and 180 Connect Network Services, Inc., required a substantial annual financial investment from the City that was contrary to the City Council's original direction for the RFP. City staff will return to Council for direction in the coming weeks.

At the Council study session of February 25, 2009, the Consortium sought approximately $3.4 million annually from the City in addition to a discount on use of 36 dark fibers and payment for managing the City's existing dark fiber licensee program. The Consortium's business model relied on a close public-private partnership and a significant investment by the public sector, which was at odds with Council's direction to preclude general funding and the consortium's original response. The letter from Axia states, "Regretfully, in spite of genuine effort on both sides, we have not been able to agree to a model that works for both parties."

"The City's vision of obtaining an ultra-high-speed, open system-based broadband network in Palo Alto to provide extraordinary economic, educational and social benefits is still a worthy goal," said Council Member Yoriko Kishimoto. "Despite sincere effort by all parties involved in the negotiations, we could not reach agreement; however, I hope we will continue to explore ways to make this exciting project a reality."

"For over seven months, the City and Axia have explored how to build and operate an open access fiber to the premise (FTTP) network that would serve the Palo Alto community," stated Council Member Larry Klein. "The business models proposed by the consortium all required significant investment by the City, which was not practical or desirable from the City's viewpoint. High speed broadband is still highly desirable, as the Obama administration has recognized, and there are options that the City can pursue to be a leader in this field," added Klein.

"As we worked through the negotiations with Axia and explored possibilities with the Community Advisory Group, I became convinced that a 100% fiber-connected Palo Alto would be transformative and improve our community in so many positive ways, some of which we can't yet imagine," said City Manager James Keene.

At Council direction, a Citywide Ultra-High-Speed Broadband System RFP was issued on September 27, 2006. Two firms responded to the RFP and, on March 5, 2007, the Council directed staff to enter into negotiations with a consortium, 180 Connect Network and PacketFront, Inc. On May 12, 2008, Axia joined the Consortium, to provide both additional expertise and financing.

On July 14, 2008, staff presented to the Council the Consortium's conceptual business plan for a fiber-to-the-premises network in Palo Alto. Since September 2008, the City and Consortium conducted many discussions and explored various options. However, after the Council study session in February 2009, it became clear that the Consortium could not make its business plan work without a significant and ongoing financial commitment from the City. The challenge of providing such funding from existing City revenues was not feasible.

Staff will return to Council with a formal termination of the original RFP process and potential options for Council consideration on how to develop a citywide broadband network.

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Like this comment
Posted by Etaoin Shrdlu
a resident of another community
on Mar 14, 2009 at 12:12 pm

Looks like the "Palo Alto Process" strikes again.
Moral: There is no such thing as a free lunch.

Like this comment
Posted by muttiallen
a resident of Adobe-Meadow
on Mar 14, 2009 at 12:58 pm

At this point in the technology, fiber connections are so expensive for the "last foot" that it isn't viable to put it to individual homes. I'm not willing to pay $2,000+ for a faster connection. Cable modems and DSL are perfectly adequate for the basic home. I'm glad the city isn't committing funds for a system that residents wouldn't use.

Like this comment
Posted by Sharon
a resident of Midtown
on Mar 14, 2009 at 1:20 pm

The only reason for fiber into the home is if you want multiple channel, multiple set HDTVs with movies on demand.

Verizon is rolling out FiOS, which is such a system, that works.

I would trust Verizon, I would certainly not trust the City of Palo Alto with anything more complicated than a duck pond.

The Palo Alto process is paralysis by analysis, remember the quagmire over cable years ago?

Like this comment
Posted by Robertdelavera
a resident of Crescent Park
on Mar 14, 2009 at 1:51 pm

I would second the motion, Sharon. The city of Palo Alto has neither the technical expertise, nor the financial structure, to roll-out fiber to the home. How can anyone, at City Hall, pretend to provide the initiative for any project, without bringing to the table any form of "project finance" .

What the city should do, is to "encourage" Verizon to provide a comprehensive proposal. Possibly, a competitive RFP, between AT&T, Verizon and Comcast? Knowing that Verizon is the proven leader in that field.

Like this comment
Posted by Drop FTTP
a resident of Another Palo Alto neighborhood
on Mar 14, 2009 at 2:13 pm

If FTTP was economically viable you'd have a lot of companies falling over each other to get a piece of the action. But the truth is, it is simply too expensive and unprofitable. This has been proved over and over again by other cities who have lost millions.

How about all those masses of people in PA who are supposed to want FTTP stepping forward and forming their own corporation. They could get local venture capitalist to put up the money and build your own FTTP.

Meanwhile, leave the City of Palo Alto and the rest of us tax paying citizens out of it, we don't want it, or need it, and we certainly don't want to pay for it.

Like this comment
Posted by Rick
a resident of Charleston Gardens
on Mar 14, 2009 at 2:24 pm

Remember the trial "Fiber to the Home" in the community center neighborhood a few years ago? This almost 800,000$$ project was implementd with out doing research on how many people in this neighborhood or the entire city would actually sign up and pay the entire costs for this project.

After installing fiber to about 70 homes in this large neighborhood they found that those 70 didn't or wouldn't pay the thousands of installation costs.

Never was a survey to find out exactly how many people would sign up for Fiber before this "Disaster, money wasting Project" was started.

Eventually the city figured a citywide Fiber project would cost at least $40,000,000 and of course there was no money anywhere to finance the project.

In the last 20+ years the city hasn't figured out how to syncronize traffic signals.
They appear to only install underground utilities where "Policically Connected" people live. Like the latest on Alma near downtown where the util dept is spending over $2,000,000 in this commercial and maybe residental area where ex mayor may own property. The owner of commercial property on Alma came up from his home in Carmel to thank the city for doing this in this area and he told of his long connection to City Hall/Politicans there.

Like this comment
Posted by jardins
a resident of Midtown
on Mar 14, 2009 at 4:40 pm

I'm glad that things have fallen through on this overly drawn out, super-costly proposed project, whose benefits we've been told we can "hardly imagine"!

Like this comment
Posted by jardins
a resident of Midtown
on Mar 14, 2009 at 4:46 pm

Rick of Charleston Gardens: out of interest, where do you get your figure of $800,000 from? If that's correct, and that's what it cost to connect only 70 homes to a fiber-optic system, that's $11,429 for each of those homes. Where did the money come from, to pay for that? The Utilities slush fund?

Like this comment
Posted by Sharon
a resident of Midtown
on Mar 14, 2009 at 4:47 pm

I hope the same thing happens State wide to the HSR fraud.
There is no demand now for HSR and their will be less demand when we have fully adopted TelePresence, small fuel efficient car,computers managing freeway yield and super efficient cleaner planes with automated traffic control to increase yield dramatically

Like this comment
Posted by a cool guy
a resident of Palo Verde School
on Mar 15, 2009 at 7:59 am

shows who to trust

Like this comment
Posted by Alan
a resident of Greenmeadow
on Mar 15, 2009 at 9:03 am

We need alternatives to city granted monopolies like Comcast, which is abusing it's monolopy with misleading advertising, an unresponsive service and packages that bundle make you pay for 100 channels that you don't want to get the 5 channels that you do. The service we get here in the US is way behind many other countries.

Comcast is also using it's power to hold back technology progress. For example Comcast does not want you watching TV over the internet, which is the natural progression of technology and where South Korea is today. So as a result you have a "cap" on your "unlimited" comcast service, that means Apple iTunes cannot offer a meaningful HD service.

What we need really is govt' owning the pipes into the home and companies (i.e. more that 3) competing to provide the service of which programs you get to watch. Or better yet, we completely cut out the middle-man and can get only the programs we want direct from those that make it -- in HD over the Internet.

Like this comment
Posted by pat
a resident of Midtown
on Mar 15, 2009 at 10:30 am

Does Comcast have a city-granted monopoly?

Like this comment
Posted by Robert
a resident of Greater Miranda
on Mar 15, 2009 at 1:31 pm

> We need alternatives to city granted monopolies like Comcast

AT&T provides that alternative, via its UVERSE offering. The Fiber and neighborhood nodes (VRAD boxes) have been installed for over a year now, but the service has not been offered to this community yet. The City claimed it was going to sue AT&T because it didn't like how the PEG channels were accessed and that's about the last we've heard about UVERSE in town. The AT&T trucks are now advertising UVERSE, but it's not offered here yet.

Please should call AT&T and ask why this service isn't available yet.

Like this comment
Posted by Rick
a resident of Charleston Gardens
on Mar 15, 2009 at 7:49 pm

Jardins: The local newspapers printed many articles on this project at the time it was conceived and implemented. $700,000 was the direct cost, but I am sure city staff spent $100,000 at a minimum for their time.

Try checking newspaper records or Google it.?? I haven't tried to look up newspaper records or old issues printed, but will try now.

Also city council records of all subjects should be available.??

I know they,the city council, expected a lot more people to sign up in this neighborhood (Community center ?) as they are the ones with home businnes, etc. But they didn't ck up ahead of time as to who would actually commit to pay for the service. Why ? ???????

Thanks, Rick

Like this comment
Posted by Just Give up - tjhis aint for you.
a resident of Community Center
on Mar 15, 2009 at 9:58 pm

I will repeat yet another time:

A city that cannot underground its power lines cannot provide FTTP to its residents. It is called incompetence.

Like this comment
Posted by Leonard
a resident of another community
on Mar 16, 2009 at 11:42 am

I don't have that much specific knowledge about what the City o f Palo Alto was trying to do - so I won't comment on that effort. However, I do want to comment on some general comments about FTTH being "too expensive" or not "economically viable". FTTH is not too expensive and it is economically viable. Verizon and many other smaller phone companies are building FTTH (some as extentions and others, like Verizon are complete overbuilds of existing nextworks). The largest cost component of a FTTH network is the outside plant construction. If you have to upgrade or rebuild your exisitng plant, you would be foolish not to build the new plant with FTTH. This is why even the cable companies are now looking at FTTH (called Radio Frequency over Glass (RFoG)). Clearly, the future of the network is FTTH. Again, I don't know much about the City of Palo Alto but I do know that if it weren't for municipal entry into power and cable - parts of the Southeast and Northwest US would still be without both today.

Like this comment
Posted by ellieg
a resident of Palo Verde
on Mar 16, 2009 at 12:55 pm

The benefits of fiber optic connection are many. it stimulates home business allows people to work for their company from home, network with other businesses and all sorts of other benefits that I have read about. The city of Palo Alto has been getting One Million dollars per year, for the past 15 or so years, from leasing the service out to several businesses in town. Those same business owners were the only people arguing against putting in our own service at a Midtown Residents meeting about 8 or 9 years ago. The arguments for it were much more persuasive but the city chickened out and did not take the initiative. It is time we did as it would put our city ahead of the curve and be a leader again.
The US now rates 17th in the world for internet access by fiber optic. We should be #1 or at least in the top few. If, and it is a big if, the city had the courage of its convictions and just paid to put it in we could be getting a good revenue every month from the subscriptions just as we do from the other utilities that our much braver and more foresighted predecessors wisely chose to pay for and build themselves. We have benefited from owning our own utilities for years. It is only recently that the city government and council has been siphoning money from the utilities. The huge surplus that they have collected could easily make a good down payment on owning a modern fiber optic system ourselves and have our residents have the many benefits of truly high speed and system changing communication system.
It has proven in many cities to attract new businesses, vastly improve library services and local businesses, make it easy to go paperless in many more ways, and many other benefits. We would not need to build large concrete buildings (the manufacture of concrete is the third largest source of CO2) but could do all kinds of services using the system. Monitoring the utility meters, police communications, security cameras, reading books and magazines on line, getting instant movies, listening to radio stations around the globe, and there are many more things that have not been discovered as yet. Our new city manager understands this also also. Ownership of such a resource will bring in revenue, and as the previous writer, Leonard, indicated, the costs have been vastly over estimated. It stands to reason that the consortium was planning to reap a big profit for building it for us. Their withdrawal gives us the opportunity to own it ourselves and reap the benefits and the profits for our own benefit.
We have wasted 15 years and it is high time to step in and build it ourselves. Build it and they will come.

Like this comment
Posted by An Engineer
a resident of Downtown North
on Mar 16, 2009 at 4:05 pm

I have yet to see a convincing argument for publicly-finded FTTP. All boil down to gauzy promises of "if we'll just build it, nirvana will come," or variations on "gee whiz, the kids on the next block are getting it."

The current infrastructure can provide all the services ellieg (above) lists. Only two classes of users need the extreme bandwidth that fiber offers: home theater owners streaming hi-def movies in real time, and industrial users who can and do invest in the necessary infrastructure themselves. Neither merits a city subsidy.

I agree that fiber would be the medium of choice if our current communications infrastructure was to be replaced. Obviously that is not cost-effective right now, since no knowledgeable group wants to risk its own capital on it.

Plainly we cannot allow starry-eyed residents to risk scarce public money on alluring ventures that savvy types won't touch. If their vision is so compelling, let them raise the funds privately and build the FTTP system themselves. Who knows, I might just be one of their second wave of subscribers.

Like this comment
Posted by No Monopoly
a resident of Downtown North
on Mar 16, 2009 at 4:34 pm

"Does Comcast have a city-granted monopoly? "
"We need alternatives to city granted monopolies like Comcast ...."

There is no city-based monopoly. Federal law prohibits it. Anyone can come and run their cable, fiber, whatever through town as long as they comply with fairly minimal franchising requirements.

That said, once a provider is established, no other provider will enter the market to compete in that physical location.

Like this comment
Posted by Alan
a resident of Greenmeadow
on Mar 16, 2009 at 8:03 pm

It is a city-granted monopoly.

If a resident of Palo Alto wants "cable" they cannot call TimeWarner, or Cox Communication, the only choice for "cable" is Comcast.

One choice = monopoly.

Now it is not the consumer that gets to chose who the cable operator in any city is. It is the city government. If the city wanted they could kick Comcast out and select TimeWarner to be that provider.

Thus: "city-granted monopoly".

Now perhaps not here, but in other cities, Comcast has been known to hire relatives, friends of city officials. This can lead to corruption is HOW a cable company is selected. (I'm not suggesting that happened here, but it HAS happened at in other cities.)

Web Link

Like this comment
Posted by Usually Named
a resident of Old Palo Alto
on Mar 16, 2009 at 9:42 pm

Um, Uverse is here. What are you talking about?

Like this comment
Posted by ????!!
a resident of St. Claire Gardens
on Mar 17, 2009 at 12:30 am

"Um, Uverse is here."

Um, kind of. I called AT&T six (6) times to install UVERSE. I lost three work days for an install truck that never came. When one did come I was telling the guy how to do his job. They dropped out of the last three service calls, every single time. I was sent from CSR to CSR until I didn't know what planet I was on.


The installer didn't know if they had to do dry loop; nobody was sure about how to handle my current provider; and on, and on. Pathetic!

And, it turns out that UVERSE uses a technology that is not scalable, or adaptable to new developments. Gee, that means you're going to have to call ATT again. Huzzah!! NOT!

Comcast? You must be kidding. I'm now paying almost $120 for Comcast junk (most of it). I'm canceling next week. Comcast rates keep rising faster than inflation.

Verizon? Oh, you mean the company that collected BILLIONS in service fees to install fiber, YEARS ago, and didn't?

Wake up and smell the corruption, folks. We have been had by the large telecommunication providers. - - e.g. Just compare your domestic mobile service (ATT, Sprint, Verizon, etc.) to what you get in Asia or Europe. Check you wallet.

We are a dumbed down population, willing to believe anything that we see in a commercial. Funny thing: the way things are going, your kids are going to have to learn Hindi, Korean, and Chinese to watch TV in 20 years, after they come home from a hard days work for Indian, Chinese, and Korean bosses who will be more knowledgeable, tech savvy, harder working, and all around better prepared than our keep-'em-ignorant-Comcast population.

No, "we don't need no steeeenking fiber" - not US. Nosirree! We got DSL!!!

We've come to trust the thieves that have been robbing us blind for years. And so goes the relative evolution of cultures. Prepare to be dominated.

Like this comment
Posted by MeMe
a resident of Old Palo Alto
on Mar 17, 2009 at 7:12 am

Once high-speed rail sucks the money out of Palo Alto there won't even be funds left to change the light bulbs in city hall (but you'll have a lovely $3 billion bike path over the railroad tunnels).

If FTTH were economically viable, companies would be lining up to provide the service. Want to "stream" movies into your multi-million-dollar Palo Alto McMansion? Forget cable, forget fiber and skip the usual Palo Alto/Stanford/Silicon Valley overthinking process. Get a satellite dish! Done deal.

The reason Palo Alto has so many trees is because money grows on them.

Like this comment
Posted by George
a resident of Old Palo Alto
on Mar 18, 2009 at 4:11 pm

The bottleneck in the network today is really the speed of the Internet's backbone today. FTTH really only makes a difference if you're moving files within the proposed Palo Alto FTTH network. What application is this really going to help? HD video conferencing.

You can stream movies into your house today with Netflix. You can also use an AppleTV or Vudu box to download them as well. SD starts immediately and HD with some wait time. The real limiter of this technology isn't the network it's the movie studios holding back content to support the cable and satellite based operators and cable channel owners (HBO and Showtime).

You can already work from home on a Cable Modem. What kind of job cannot be done from home because of the last mile limitation??? I don't know of one.

If you want to video conference today for free use Skype. They'll be upgrading the quality of the video with time.

A blazing fast cable modem works fine. We don't need this until the backbone of the Internet is much, much faster.

Like this comment
Posted by An Engineer
a resident of Downtown North
on Mar 18, 2009 at 5:41 pm

George: Well said.

Sorry, but further commenting on this topic has been closed.

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