Palo Alto, Comcast dispute Internet fees

City, neighbors say company's proposed rates are 'excessive'

Palo Alto and its neighbors on the Peninsula are scrambling to keep affordable high-speed Internet in place at schools, city halls and other public facilities after Comcast has proposed to drastically raise service fees next summer.

The cable giant is currently charged with running the Institutional Network (I-Net), a fiber-optic cable network that connects 70 public facilities in Palo Alto, Menlo Park, East Palo Alto, Atherton and portions of San Mateo and Santa Clara counties.

A preliminary proposal lists fees of $2,200 to $3,300 per month per site, meaning that the Palo Alto Unified School District's annual bill for its 20 I-Net sites could be between $528,000 and $792,000. Ravenswood City School District's annual bill for its 12 sites could be between $316,800 and $475,000.

But officials emphasize those are preliminary proposals subject to serious negotiations.

Since 2006, 51 of the 70 connections in Palo Alto and its partners in the Joint Powers Authority (JPA) have been gradually activated (or "lighted"). The network enables voice, video and data communication internally and between the sites, according to a recent staff report.

But a recently passed state law and Comcast's recent proposal is threatening to make I-Net much costlier for local schools, community centers and other public buildings.

The agreement between the cities and Comcast expires in July 2010 and Comcast's proposed rates for future I-Net service has been characterized by Palo Alto officials as excessive and unreasonable.

But Palo Alto, which negotiates cable rates on behalf of the coalition, may have little leverage in its negotiations with Comcast. The Digital Infrastructure and Video Completion Act (DIVCA), which state legislators passed in 2006, has taken away local agencies' powers to negotiate franchise agreements and placed that power in the hands of the California Public Utilities Commission.

The state law also specified that existing cable franchise agreements would not be enforceable after their expiration dates. The agreement between Comcast and the Joint Powers Authority (the coalition) expires in July 2010.

Melissa Cavallo, cable coordinator for the JPA, said in a recent report that officials have been meeting with Comcast for the past five months in hopes of extending I-Net service beyond July 2010. On Oct. 16, Cavallo sent Comcast a letter lamenting the lack of "forward progress in developing reasonable options" for continued use of I-Net. The cities, the letter notes, are "disappointed and frustrated by Comcast's unwillingness to respond meaningfully" to the cities' I-Net concerns.

The loss of I-Net would hit East Palo Alto particularly hard. The city lies close to sea level, which makes use of underground copper wires for Internet service extremely unreliable. According to Cavallo's letter to Comcast, the Internet network at East Palo Alto schools frequently went down before I-Net was installed. When this happened, the letter notes, "school principals would have to scramble and use cell phones to receive calls from frantic parents who could not communicate with their child's school."

"The adverse educational impact on our students of not having access to the I-Net fiber bandwidth will be substantial," Cavallo said in the letter. "For the last several years, we have strived to use technology to accelerate the learning of our students and give teachers better access to tools that will engage students and accelerate student achievement.

"The backbone of that plan is the fast bandwidth that the I-Net provides, and not having it will stop our progress in its tracks."

Comcast has offered the JPA cities two options for continuing bandwidth coverage: leasing I-Net or creating "managed Ethernet service" networks at each jurisdiction that wants the service.

Under a preliminary Comcast proposal, each city that wishes to lease I-Net would have to pay between $2,200 to $3,300 per month per site. This means that the Palo Alto school district, which has 20 I-Net sites and is currently struggling to close a $5.7 million budget deficit, would have to pay $528,000 to $792,000 a year to keep the network in place.

The Ravenswood district, which covers East Palo Alto and eastern Menlo Park, has 12 I-Net sites and would be charged between $316,800 and $475,200 annually.

Meanwhile, switching to the localized Ethernet networks would effectively force the JPA to abandon I-Net and eliminate the cities' ability to exchange information freely through the network. Palo Alto and its school district would also cease to receive free Internet service, as they have since 1994.

Joe Saccio, deputy director of Palo Alto's Administrative Services Department, said Comcast's proposed rates for I-Net would essentially enable the cable company to bill the communities twice for the fiber network. The network's construction was funded by cable subscribers and according to the staff report, Comcast has already largely (if not completely) recouped those costs.

"It's felt that all the ratepayers had already paid for the system that Comcast had put into the ground through their rates," Saccio said during the City Council's Oct. 19 study session with state Sen. Joe Simitian. "It's double charging the infrastructure is already paid for and they want to continue to charge the districts for it."

Saccio also said that Comcast has refused to acknowledge and accept the cities' position that the company is required to transfer, free of charge, public, education and governmental (PEG) access channels. The channels are being operated by the Midpeninsula Community Media Center.

Comcast spokesman Andrew Johnson said the company's policy is not to discuss terms and conditions under negotiation outside the negotiating table. But he said the company takes issue with the assertion the JPA has made regarding the proposed rates.

The company is committed to negotiating in good faith with the JPA, he said.

"I will say that we plan to and will charge competitive market rates that will reflect the current demand and supply of fiber networks in the Palo Alto region," Johnson said.

Saccio told the Weekly that the city could ultimately look into expanding its own dark fiber network to local schools if Comcast's rate ends up being excessive. But he said it's too early to tell what the I-Net rates will end up being.

"Even though Comcast listed those substantial amounts, it's hard to say what its end position is going to be," Saccio said.

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Like this comment
Posted by Wants-To-Know
a resident of Midtown
on Nov 27, 2009 at 11:19 am

A few years back, the City of Palo Alto get involved with Comcast over the completion of the I-NET function. Comcast settled this action with a one-time payment of $750,000. The details of the settlement were never quite made public. The Weekly's article makes no mention of this almost $1M transfer from Comcast to the City.

So .. where has this money gone? And why doesn't the Weekly want to include this money in the overview of any continuing Comcast/I-Net issues.

Like this comment
Posted by mutti
a resident of Adobe-Meadow
on Nov 27, 2009 at 1:10 pm

I work for Ravenswood School District in East Palo Alto, and have known about this looming problem for some months. We recently received an amazing grant from Hewlett Packard to upgrade our very old server structure, but the design requires the fiber between the school sites and the district office. Also, with the help of Cisco we upgraded our phone system last year from an OS-2 (early 1990's) based system to modern VOIP. Losing the I-net will also make that system almost unusable, and send us back to regular telephone lines---which don't work at all in rainstorms.
The underlying problem is yet another money-power grab by the State of California. They decided the cable franchise fees could go to the state, and not be negotiated by and paid to local cities. This is just the unintended consequence of that state grab. Unintended, but devistating to schools.
And this will be the hardest on the schools. School budgets are being hurt the worst, and school districts have more sites that need high bandwidth. All of the new curricula include on-line video. Streaming video to many classrooms of 30 kids on laptops doesn't work over T-1 lines.

Like this comment
Posted by Monopolies SUCK
a resident of Greenmeadow
on Nov 27, 2009 at 1:29 pm

Yet another case of a huge company caring only about its bottom line, and emphatically NOT caring about who is hurt along the way. Nice, Comcast, very nice. This country is now built on the "I'm grabbing the best for me and I don't care what that does to you" unfettered credo of greed. *sigh*

Like this comment
Posted by REM
a resident of Adobe-Meadow
on Nov 27, 2009 at 1:57 pm

Gee, I wonder if ATT could help?????

Gee, I wonder if ATT could take over the system???

Gee, $$$$$$$$$$$$ !!!!!!

Like this comment
Posted by marty
a resident of College Terrace
on Nov 27, 2009 at 5:08 pm

What we need is more competition between providers. We also need the state govt. to take their greedy hands out of this. As usual, it's kids and schools who'll suffer. Only in America.

As far as Comcast and other providers are concerned, each time rates go up, I cut back on my choices. Soon, I'll have none left. I doubt I'll miss it much.

Like this comment
Posted by Solon
a resident of Professorville
on Nov 27, 2009 at 5:59 pm

"Excessive?" ""Dispute?" "Scrambling?" " "Devastated?"
Isn't this an arm's length price negotiation between a willing byer and a willing seller, both with hundreds of millions of dollars of assets and income, Comcast, the City, and the school district?

Years ago, many of us recommended the City BUY the Cable Coop, they chose not to, and let ATT take the risk (and reward!)

The school district or city can build and fund whatever they want.

Why should cities and schools get for free or for reduced rates what we all have to pay market prices AND excessive taxes for?

Competition is good; high profits invite investment and competition, creating unexpected new technologies and cheaper alternatives, driving prices down to costs, and driving profits down towards zero. Airlines, anyone? A dozen other examples?

Like this comment
Posted by Sam
a resident of Triple El
on Nov 28, 2009 at 6:37 am

How much did Comcast pay in bribes -- excuse me, "lobbying expenses" -- to get this DIVCA passed?

Like this comment
Posted by TED
a resident of Greenmeadow
on Nov 28, 2009 at 4:06 pm

Comcast has, and always will, suck.

Like this comment
Posted by Wants-To-Know
a resident of Midtown
on Nov 29, 2009 at 1:41 pm

> Why should cities and schools get for free or for reduced rates
> what we all have to pay market prices AND excessive taxes for?

This is an excellent point. While the Weekly article does say is that the cost of the I-NET is hidden in the fees paid by the individual cable subscriber, what is not discussed is the long term cost of maintenance of the system. It would be impossible for a non-technical person, such as anyone in the Department of Finance, to make claims that the system costs have been "recouped".

In addition to the "infrastructure" necessary to link the various nodes of the I-NET "members", there is also Internet access fees that have to be paid. Actually maintenance costs for running the I-NET were not supposed to fall on the Cable vendors. Many of the schools have for a long time chosen to purchase a small amount of bandwidth, and so their monthly costs were not that great. Along comes optical service with its up-to-a-terabyte-per-second speeds, and along comes costs that are significantly greater.

The I-NET requirement is for Comcast to provide the termination equipment, but this must be replaced ever so often (at least 5-7 years), and no piece of equipment works that only without have component failures along the way. It's a shame that the City of Palo Alto people interviewed in this article are so unaware of network issues.

The original I-NET idea seems to ignore the basics of Internet technology. It's time to put the I-NET to bed and let the Internet do the job it is more than able to do.

Schools also need to hire competent technology people, and begin to fund their own technology needs, rather than trying to hide them via schemes like I-NET.

Comcast is not the problem here .. yet, anyway.

Like this comment
Posted by aw
a resident of Old Palo Alto
on Nov 29, 2009 at 6:51 pm

Under federal law there's a program call e-Rate that gives school reduced internet rates. The discount can be as much as 80% off standard rates.

To amplify Wants-to-know's point, it would be a shame if the I-net community built out essential applications that can't run over conventional ISP services. Not sure we have enough information yet to say what the next step should be, but hope it's not trenching new fibers to all the schools.

Like this comment
Posted by Michael
a resident of another community
on Oct 20, 2010 at 4:28 pm

Its interesting that no one has thought about the right of ways that Comcast is operating in. In my location the phone company started abusing customers and the county so the county told the carrier to relocate there lines out of the county right of ways.... gee problem solved and the phone company fell in line.

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

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