With fiber expansion approved, Palo Alto looks to compete — and negotiate — with AT&T

Palo Alto’s effort to light up every nook and cranny of the city with high-speed Internet is slated to roll out this year, with the city preparing to spend more than $30 million to dramatically expand and upgrade the fiber network.

The fiber deployment, which the Utilities Advisory Commission will discuss on Aug. 2, is set to unfold in phases, with the first phase targeting 7,160 utilities customers and 875 businesses, according to a map released by the Utilities Department in advance of the discussion. Encompassing roughly 20% of the city, this phase will cost about $20 million to implement.

But before the city can fulfill the promise of bringing “fiber to the premises,” the Utilities Department has to overcome numerous hurdles that staff say could significantly delay the project. These include negotiating with another Internet provider, AT&T, over use of utility poles that Palo Alto and AT&T co-own under an agreement that dates back to 1918, according to a report from David Yuan, strategic planning manager at the Utilities Department.

Yuan noted in his report that with the city preparing to expand the fiber network and implement full-scale upgrades to its electric grid over the coming years, the agreement may not be feasible to accommodate the increased volume of pole transactions.

Citing the potential for “significant delays” that the AT&T negotiations may spell for the fiber project, Yuan is recommending that the city consider joining the North California Joint Pole Association (NCJPA), a nonprofit that requires its members to abide by cost-sharing methodology for poles.

“In the past, CPAU (City of Palo Alto Utilities) operated without membership with the NCJPA because the volume of pole replacements was manageable by staff and there were additional costs associated with becoming a member,” Yuan wrote. “Given the anticipated increase in pole work, NCJPA membership may be necessary to ensure pole work related to the long-term fiber and electrification projects is conducted in a methodical, timely and cost-efficient manner.”

The AT&T negotiations aren’t the only factor that could slow down the project. The city still needs to conduct an environmental analysis for the fiber expansion, including an evaluation of how the project would impact air and water and whether these impacts could be mitigated.

And it needs to find ways to align the fiber expansion with another massive project: a grid-modernization effort that includes in its first phase upgrading more than 100 miles of the existing overhead electric system as well as various substation transformers. The goal is to “help minimize utility engineering pole make-ready work, pole replacements, noise disruption, and construction activity in neighborhoods” over the next 18 to 24 months, Yuan wrote.

“Given the hundreds of miles of overhead and underground construction activity between FTTP and electric grid modernization, staff is exploring various construction phasing options to minimize disruption, construction activity, and construction costs within neighborhoods while avoiding prolonged deployments,” Yuan wrote.

The fiber project has two major components. One is the construction of a new $26-million “fiber backbone” that would primarily be used for municipal purposes like smart meters and enhanced monitoring of the city’s electric, gas and water services.

The other is a $20-million extension of the fiber ring to local homes and businesses, as long envisioned by local “fiber to the premises” advocates. If things go as planned, the fiber network will turn a profit that would be used to launch future phases in other parts of Palo Alto, ultimately covering most (if not all) of the city.

The city’s fiber plan, according to Yuan, will include installation of about 83 miles of fiber optic cables, which include 48 miles of underground installation and 35 miles of overhead cables that would require use of 6,000 existing utility poles.

The construction of a new fiber backbone and the first phase of “fiber to the premise” will require passing by 1,750 existing poles, attaching cables to 1,300 poles, replacing 100 others and coordinating with third parties to move their equipment lower on another 325.

The city is also beefing up staffing to accommodate the implementation and, ultimately, operation of the expanded fiber system. The current budget adds four positions in Utilities Department dedicated to the effort: an assistant director for customer support services, a manager of information technology and two telecommunications managers.

Even though the first phase of the fiber project falls well short of the city’s ubiquity ideal, it represents a dramatic expansion for the city’s fiber backbone, a small but profitable network that the city installed in the late 1990s and that today consists of 56.3 miles of fiber cable, with 34.6 miles underground 21.6 miles overhead, according to the capital budget that the City Council approved last month.

The neighborhoods that would be included in the first phase of the system’s expansion were chosen based on factors that include lower cost, less competition and higher interest from customers, as gauged from survey responses and the $60 deposits that fiber supporters contributed to the cause well before the project was approved.

In north Palo Alto, the areas chosen for the first phase include a portion of the Downtown North neighborhood just north of Lytton Avenue, between Bryant and Webster Streets; a western section of Old Palo Alto, roughly bounded by Alma Street, Bryant Street, Churchill Avenue and California Avenues, parts of Evergreen Park and College Terrace just south of Stanford Avenue; and the Mayfield neighborhood just east of El Camino Real and north of Oregon Expressway.

In south Palo Alto, the expansion would include a portion of the Barron Park neighborhood east of Bol Park; a small area in the western portion of Midtown and portions of Loma Verde, Charleston Meadows, Palo Alto Orchards and St. Claire Gardens neighborhoods.

Most of the buildout in the early phase would occur in neighborhoods surrounding the city’s two major north-south arteries, El Camino Real and Alma Street. With the exception of a few blocks in Downtown North, the eastern section of Palo Alto is wholly excluded from the first buildout, with no hookups planned anywhere east of Waverley Street, according to a map that is included in Yuan’s presentation.

The upcoming expansion will represent Palo Alto’s biggest investment in its fiber utility since its debut about 25 years ago. The fiber optics fund, which pays for system improvements, had budgeted expenditures of $1.8 million in fiscal year 2023; $500,000 in budgeted expenditures in fiscal year 2022; and $1.5 million in 2021, according to budget documents. The budget for fiscal year 2024, which began on July 1, includes $33.1 million in expenditures.

In addition to the $20-million fiber expansion — which is being partially funded by the electric utility — the newly adopted capital budget also includes $12.6 million to rebuild the fiber optics network system. The rebuild includes installing substructures and additional fiber backbone cables to increase capacity of section of the network that are currently at or near capacity to meet customer requests for service connections, according to the budget.

The main project areas are Stanford Research Park, the Palo Alto Internet Exchange at 529 Bryant St. and the downtown business district.

Despite the high costs and the prospect of fierce competition from incumbent telecom giants, the council agreed in December to advance the fiber project after more than two decades of debate and numerous false starts. Lydia Kou, who was serving as vice mayor at the time and is now mayor, said she wants the city’s municipal system to provide a “competitive edge.”

“In a way, I think of incumbents as monopolies, and we can provide something similar, or even better,” Kou said shortly before the vote. “I want to make sure everyone in this community does have connectivity. It’s an essential service that people do need.”