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For the past two decades, Palo Alto's plan to connect every home and business in the city to ultra high-speed Internet has been hovering just out of reach despite an overwhelming consensus by elected leaders that the project is worth pursuing.
That rule largely held on Monday night, when the City Council debated its options for what is known as "Fiber to the Premises" (FTTP) and landed in familiar territory: requesting more data and deferring action.
After a three-hour discussion, the council passed a long and convoluted motion that effectively calls on the city to wait and see what Google will do before revisiting the topic early next year.
The Monday hearing about fiber was the council's few extensive policy discussions about the topic since February, when members commissioned a master plan for the project. The council had adopted "technology and the connected city" as its priority in early 2014, signaling a desire to finally make the dream a reality. This year, the priority was removed with the understanding that staff is already pursuing the project and that it does not require too much additional council guidance.
As in the past, council members talked about the great benefit ultra high-speed Internet would bring to the masses. Yet with Google still considering bringing its fiber network, Google Fiber, to Silicon Valley communities and both AT&T and Comcast looking to upgrade their Internet offerings, officials agreed that it's best to wait and see how the private market shakes before making any commitments to a municipal system.
The decision to defer was prompted by recommendations from Utilities Department staff and the Utilities Advisory Commission, which voted 4-3 earlier this month to recommend deferring action for at least three months.
The commission minority Chair Jonathan Foster and commissioners Arne Ballentine and James Cook took a different stance and went along with a memo from a group of citizen advisors who urged a more assertive stance and recommended that Palo Alto adopt as a goal "to own at least a dark fiber to the premises network with dark fiber drops to all Palo Alto premises, residences and businesses alike."
Councilman Tom DuBois, a strong proponent of a municipal fiber network, urged his colleagues to adopt as a goal "a ubiquitous fiber network in Palo Alto with city ownership of fiber assets."
Though he acknowledged the high level of activity in the private market, he pointed out not clear whom they would serve and how much they would charge. By building a city-owned system, the city could make sure everyone has access to ultra high-speed Internet and that the city has long-term control over the fiber network.
"This question of ubiquitous access, ownership and control is really what we need to decide as a council," DuBois said.
He also recommended that the city enter into discussions with Google and other providers about a possible "co-build" scenario, in which the city would lay its own conduit while the telecoms are expanding their networks. At the same time, he said, the city should pursue a "dig once" policy that would offer opportunities for the city and other companies to install conduits as part of Google's potential expansion.
Now, DuBois said, is a "critical time" precisely because of the action in the private market.
"There is a window to talk to these providers before the announcements are made," he said.
While most of DuBois' proposals ultimately won approval after hours of wordsmithing and minor modifications, several of his once-enthusiastic colleagues expressed caution about a potential municipal fiber network.
Councilwoman Liz Kniss, who two years ago attended a conference in Kansas City, Missouri, about the fledgling municipal-fiber industry, said hearing about the lawsuits and other problems that other cities experienced "really poured cold water on my enthusiasm."
Cities, she noted, are not good at being nimble, which makes it tougher to quickly respond to market changes. She also acknowledged the awkwardness for the city hinging its plans on what Google will decide to do but did not argue against pursuing this course.
"Google is the big dog and we're waiting to see if he's going to bark or not," Kniss said. "It'd kind of an interesting situation for us: To be waiting to see what one company is going to do."
By and large, the council agreed with DuBois' argument that a city-owned fiber network would be a strong long-term asset. Few, however, were willing to commit. By the end of the meeting, what was once considered a council "priority" and later proposed as a council "goal" became a "preferred alternative," a phrase proposed by Councilman Pat Burt.
"Really, establishing a goal at this time that we might change in four months, it looks like we're just not committed," Burt said.
Burt and DuBois both took some issues with the recent study that the city commissioned to evaluate the feasibility of "Fiber to the Premises."
The report, written by the firm CTC Technology and Energy, evaluated the market forces and potential models for the city to pursue. It concluded that a municipal system would cost about $77.6 million to construct and recommended that the city find a private-sector partner that would actually operate what would be a city-owned system.
The report highlighted the high level of competition in the private market and argued that the city would need 72 percent of the city to sign up for the operation to have a positive cash flow.
Given these findings, Utilities Department staff recommended that the municipal drive toward high-speed Internet be put on hold until the city has a better sense of the private market and partnership opportunities.
"The city simply does not have the same buying power as the private sector, and it is not particularly skilled at operating a for-choice competitive business," a new report from the Utilities Department states.
"However, it may make sense for the City to deploy, own and maintain the fiber infrastructure, and to engage a private provider to manage the FTTP enterprise's operations," according to the report. "This would allow the City to focus on the long-term fiber investment and to leverage a private partner's operational efficiencies to potentially create a strong enterprise and reduce the take rate necessary to make the enterprise cash flow."
The competition could be particularly fierce in Palo Alto, where AT&T is now in the process of installing its GigaPower service. Comcast is also targeting the Bay Area for its plan to upgrade its broadband Internet offering to 2 gigabits (and ultimately 10 gigabits), according to Palo Alto's Chief Technology Officer Jonathan Reichental.
From the looks of things, Reichental said, Palo Alto will have at least three providers offering high-speed Internet to anyone who wants it.
Joanne Hovis, CEO of CTC Technology and Energy, argued that a partnership with a private-sector provider would be the most prudent path for the city. One of the strongest advantages that the city would bring to the partnership, Hovis said, is a "long-term view and a potential willingness to recover its funds over a considerable period of time, which is not something we see very much with commercial providers where the requirement is to achieve profitability on any investment within a short period of time, sometimes within a couple of years."
The private-sector partner, meanwhile, would bring to the table the "enormous benefits" that come from a large economy of scale, Hovis said.
The council didn't disagree, though some members argued that her report both overstates the costs of building a municipal network and understates its benefits.
DuBois disputed the report's conclusion that the cost would be greater in Palo Alto than in other areas because of the higher cost of labor and equipment. He noted that the cost of equipment has actually been going down and that the cost of labor can potentially be reduced through use of contracted work.
Burt, meanwhile, argued that a municipal network would foster competition and potentially improve service and bring down rates throughout the city. The CTC report noted that in areas where Google has set up its fiber ring, AT&T has dropped its price to about $70 per month. In other areas, the monthly rate is $110. These benefits, Burt argued, should be quantified and considered as part of the discussion.
"I think we need to look at both of those costs the cost avoidance to everyone who lives and works here versus the direct cost to everyone who is operating that system," Burt said. "I think it's a vital one that hasn't been discussed."
Though the vote was ultimately unanimous, the council split 5-4 on one key provision, which directed staff to issue a request for information to explore the construction of a city-owned system by contractors and to consider a potential public-private model.
Proposed by DuBois, the provision squeaked by despite opposition from Mayor Karen Holman, Councilwoman Kniss and Councilmen Greg Scharff and Marc Berman.