California City wants to own fibre network

A high-tech mecca in Silicon Valley wants to get even more connected by rolling out a super fast fiber network for all its residents.

The city of Palo Alto, California, home to many major IT vendors and venture capital firms, last week put out an RFP (request for proposals) seeking a private partner to build a fiber-to-the-home (FTTH) network.

The required speed: 100M bps (bits per second) both downstream and upstream.

And as debate swirls in nearby San Francisco over how much the city should be involved in a proposed citywide Wi-Fi network, Palo Alto’s position is clear: It wants to eventually own the whole fiber network.

The drive by some U.S. cities to build their own broadband networks has been attacked by incumbent carriers and other critics who claim governments have an unfair competitive advantage. Many municipalities have taken a different tack by forming partnerships with private network providers. This approach is now under fire in San Francisco, where the city’s budget analyst is studying the business case for a government-owned wireless system.

City ownership is critical for network neutrality, according to Peter Allen, a founder of the advocacy group Palo Alto Fiber Network. The city understands that having a service provider own a municipal network doesn’t work, he said.

“If UPS owned Highway 1, FedEx would not be able to make competitive deliveries,” Allen said.

Existing service providers that might object to the city’s plan, such as local incumbent AT&T Inc., can compete for the project along with other private applicants, he said.

Palo Alto, a mostly affluent and liberal city of 60,000, already owns several of its own utilities. Its electric utility owns a fiber-optic ring around the city that links to the Palo Alto Internet Exchange, a “peering point” where most major Internet service providers meet on the Internet. In 2000, the city launched an FTTH trial that reached 66 homes and drew rave reviews from users.

The city explored having the electric utility build a fiber network itself but found that its plan to pay for it with revenue bonds wasn’t allowed, according to the RFP. The council eventually settled on seeking a private partner, then transferring ownership to the city after a few years. How that transfer would work has yet to be determined.

At a minimum, the network would provide data, video and VoIP (voice over Internet Protocol) service, according to the RFP. It would be neutral and open to multiple service providers who would buy wholesale access. The city wants services to be affordable and available citywide, though some remote parts of the city might not get the full 100M bps bandwidth, according to the RFP.

A service provider would have to come up with just over US$36 million to build the whole network and operate it until it achieved positive cash flow, according to Neil Shaw, a principal at Uptown Services LLC, a Boulder, Colorado, consulting firm the city hired to study the concept in 2002-2003. That estimate included an upgrade after 10 years to provide even greater speed. Uptown estimated revenue from the network would pay off that capital investment within 14 years. The cost of building fiber networks has gone down since 2003, Shaw added.

Responses to the RFP have to be in by Nov. 28, and the city plans to identify the finalists on Dec. 18, according to the RFP. The timing of its final choice will depend on what responses come in and how long it takes to review them, said Kathy Bradley, the city’s contract administrator.

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