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Council Approves Fiber Network

July 16, 2008

By Kristina Peterson, Palo Alto Daily News, Calif.

Jul. 16–Even though it will take more than a point and click to establish an ultra-high-speed Internet broadband network in Palo Alto, residents Tuesday began celebrating a project that took nearly a decade to launch.

After years of rejecting efforts deemed too risky, the city council late Monday night approved a conceptual plan to let a consortium of companies fund, build and operate a fiber network capable of delivering Internet access at a speed of 100 megabits per second. After 25 years, the city can purchase the entire system for $1.

Local software development consultant Michael Eager said Tuesday that the speedy network likely will enable uses he cannot foresee.

“When all the roads were cow paths, nobody was thinking of driving 60 miles per hour,” he said.

But before residents can start downloading full-screen YouTube clips, the city probably will have to fend off lawsuits from Palo Alto’s two major Internet providers, AT&T and Comcast.

“The incumbent providers have a lot of money at stake,” City Attorney Gary Baum said Tuesday. “They tend to be very aggressive in fighting off any challengers.”

According to the conceptual plan, a consortium of companies — broadband specialist Packet Front, network installer 180 Connect and major investor Axia Net Media — will build a high-speed fiber infrastructure open to all service providers. While the prices that residents would pay for the speedy service have not yet been calculated, the system is bound to create more competition for AT&T and Comcast.

Litigation will be one of the biggest risks for Palo Alto, since the city won’t have to make a monetary contribution to the project. Axia has committed to invest at least $30 million in the network, which is estimated to cost a total of $44.2 million. But Palo Alto will provide several city assets, including the use of part of its basic fiber network.

One of the most critical elements of the upcoming negotiations between the city and the consortium is management of the city’s existing fiber customers, many of whom were nervous about the proposal Monday night. Under the plan approved by the council, the city would pay the consortium a fee for managing its fiber customers after the city’s fixed costs have been recovered.

“It’s kind of alarming to hand the dark fiber contracts to the (consortium),” said Geoff Dale, vice president of engineering at Neapolitan Networks, one of the city’s dark fiber customers. “There’s always a chance something might happen.”

Still, the council voted to expedite the project by forgoing review of a full business plan.

Instead, the council unanimously voted to direct city staff to start working on a letter of intent that would nail down only general concepts with the companies who have proposed to create the network.

Initially, the council’s two youngest members, Sid Espinosa and Yiaway Yeh, pressed their colleagues to take the slower, more traditional route of first fleshing out a full business plan.

“There are significant risks we’re taking on,” Espinosa said. “The health of our partner in this venture is critical.”

But Mayor Larry Klein argued that the project’s structure permits the participating companies to keep some of their business ideas confidential.

“It’s not for us to second-guess because they’re putting in their money,” he said.

The council did ask to see a revised budget to permit bringing on additional legal staff and technical consultants to thoroughly review the project’s riskiest aspects.

Baum said Tuesday that during negotiations, the city would be asking for full indemnification, or total legal protection, from third-party litigation.

At least a dozen residents voiced their enthusiasm for the proposal at Monday’s council meeting, including some who have been lobbying for fiber to the home nearly a decade.

Senior center Avenidas board member Richard Adler said the proposal could help bring remote health care to aging baby boomers, and encourage longer independent living.

“This is very exciting for Palo Alto’s older residents,” he said.

City staff will bring an estimated budget for consultants and attorneys to the Aug. 4 council meeting, and a detailed letter of intent is expected to be ready by September.

E-mail Kristina Peterson at kpeterson@dailynewsgroup.com.

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Copyright (c) 2008, Palo Alto Daily News, Calif.

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