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City Run High Speed Internet: Fiber to the home YET AGAIN??

Original post made by Chris, Old Palo Alto, on Mar 6, 2007

Why is it that a few people obsessed with getting the city help them get a hyper-speed internet connection can force their agenda onto an overburdened council year-after-year? (Web Link).

The city has studied Fiber to the Home (FTTH) to death for over a decade. Every analysis leads to the same conclusion: FTTH isn't economically viable as the potential subscriber base is unsustainably small, and is at great risk of competition from technological advances.

Most people in town are worried about how the city is going to pay for its ongoing services and upgrade our crumbling infrastructure.

What's the City Council's response? Even when their most recent request for proposals on FTTH yields only one response from a flaky company, they forge ahead. Even when the city manager says doing so will force the city to postpone or eliminate other projects, they forge ahead.

The plain fact is that if FTTH were an economically doable project, we'd have greedy private companies beating down our doors to let them install it. We wouldn't have to coax shady operators into bidding. We wouldn't have to have another committee to "study" FTTH again and again.

As the article in the link points out, no other city has been able to figure out a way to successfully operate a high speed internet service. Why would any sane person think that a city that can't pave its streets, can't keep homeless people from bothering restaurant patrons in its business district and can't maintain a functional library system can run a fiber business???





Comments (52)

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Posted by pat
a resident of Midtown
on Mar 6, 2007 at 4:32 pm

Chris asks all the right questions. Unfortunately, we never get any answers. The city ignores Carl Yeats, Director of Administrative Services, who provides rational arguments against the proposal:
- we have no idea how many people will subscribe (and how can we know that without having data on product and price?)
- no city in CA has been successful operating a high-speed fiber network.

When 14 of 16 companies do not respond to an RFP, anyone but our city council would have a clue that this was a bad idea. But the FTTH fanatics have convinced Council that this would be a good deal. Can ANYONE show ANY data that supports this position?

180 Connect is an unknown quantity with a bad financial record. They will provide "the bulk" of the necessary $41 million. Exactly how much – in dollars and cents – is "the bulk"? And how much – in dollars and cents – city staff time will be eaten up in this losing project?

Does anyone give a thought to what new technology might available 30 years from now when the city takes over this system? Will it be worth anything?

Mayor Kishimoto will put together a "mayor's committee of lay experts from the community" to advise the council. Is there anything this council can accomplish without naming a committee? I just hope it will at least be a "blue ribbon" committee to follow on the heels of all other such time wasters.

Just how will a committee of "lay experts" be selected when no one on the council or the city staff has expertise in broadband? My guess is that these "experts" will be the same folks who have been pushing FTTH for the last many years. Where's the objectivity?

I don't expect council members to be experts in technology, but it sure would be nice if at least one of them knew how to write a business plan. Or even read a business plan. It's inconceivable to me that this broadband boondoggle has been approved when no one understands it or can quantify its costs – in dollars, in staff time and in other city projects that will be sacrificed.


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Posted by JustMe
a resident of Duveneck/St. Francis
on Mar 6, 2007 at 4:40 pm

JustMe is a registered user.

While fiber would be cool, I can think of some problems bringing fiber to everyone's house:

1) Fiber is expensive to distribute. Fiber tranceivers themselves are much more expensive than copper-wire tranceivers, and you can't gang multiple taps on to one port like you can with copper. Each house will consume two tranceivers and a port on an expensive router. Yuck.

2) Fiber is MUCH less robust than copper. Bend the fiber to sharply and light does not flow. Kink it and you break the center fiber and then you have to replace the cable or splice it with the attendant reliability hit. A little dust or even a fingerprint in the wrong spot will mean calls to customer service. Water could be a killer. Homeowners are used to being able to unplug, re-plug, extend, or fan out their ethernet. It is not easy or cheap with fiber.

3) 10MB/sec or even less is fine for most people at home, far more than they need. Who on earth currently NEEDS gigabit speeds of fiber in their home? It's massive overkill. Why should the city pay big bucks to give everyone something that most don't need?

Sorry, I don't se it.


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Posted by Not so fast
a resident of Duveneck/St. Francis
on Mar 7, 2007 at 8:10 am

I like that a "mayor's committee of lay experts from the community" --that is so Palo Alto. Then after that we can hire some consultants, do telephone surveys, run it up the flagpole and see if the NIMBYists, naysayers and "neighborhood leaders" object (if they do the council will avoid voting on the issue, sinc ethat may cause conflict)--then maybe in a few years it will come up for a final vote.
In the meantime the mayor can busy herself solving global warming, getting all of the city to take part in her "10000 steps" program and psoing for photo-ops with the mayor of Milpitas.


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Posted by Joe
a resident of Barron Park
on Mar 7, 2007 at 10:05 am

I think this is a perfect time to build FTTH in Palo Alto.
It offers the opportunity to reduce commute traffic, can
increase our property values and give us a more choice of
internet, cable and phone services. With all of the new
residential construction, it seems like a great idea for
our community.

The RFP set up some stringent requirements and the council
had two responses. You have citizens who designed, built and
implemented major components of the internet infrastructure
living and working and Palo Alto. People who are responsible
for managing and implementing millions of dollars of networking
equipment every year have volunteered to step forward and help
make it happen.

Your technical objects make little sense. Both the incumbent
phone and cable companies make extensive use of fiber in their
physical infrastructure. Both issue wonderful press releases
about it, but for some reason aren't able to deliver a system
where we would only pay for the 10% of the cable channels we
actually watch or provide competent customer service that's
based in the United States. All the while, both lobby at the
state and federal level to take away local negotiating power
for cable rates and against municipal involvement in building
telecom infrastructure. All in the name of competition, of
course.

Maybe you can't see it because you're not looking?


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Posted by Chris
a resident of Old Palo Alto
on Mar 7, 2007 at 10:18 am

[Portion removed by Palo Alto Online staff.] The reason private companies aren't providing us with the fiber system he wants the city to build for him isn't "for some reason" It's for the very real reason that they are greedy and can't make a profit doing so.

If Joe thinks the same city that can't keep track of its utility employees enough to prevent them from doing private jobs on city time in Menlo Park can run a complex cable system profitably, he's the one who can't see because he's "not looking".

Give up the Ghost, Joe. All those guys you say are lining up to provide us their expertise aren't volunteering the one thing that counts: the funds to pay for this boondoggle. If your experts won't put their money where your mouth is, why should we taxpayers be your sucker?


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Posted by JustMe
a resident of Duveneck/St. Francis
on Mar 7, 2007 at 3:19 pm

I am sorry, but I don't think using fiber in the infrastructure is the same as providing it to residences. Here is what I see for the infrastructure:

They are able to provide a controled environment where they can seal away the cables, encapsulate a clean area for connections to ports and hubs, and basically make sure nothing bad happens to the delicate part system.

Bringing fiber cables into the houae is opening the door to a maintainance nightmare. If someone steps on a fiber cable they can potentially cause a break in the center fiber (It IS only glass, remember) that will be difficult to diagnose. That goes for junior running over the cable with his tricycle and Fido taking a chomp at it. You can easily destroy a fiber cable while leaving no external visible mark.

Any bend in the cable that causes a bend raduius of under two inches is likely to cause transmission errors and a call to customer service. People are used to being able to wrap ethernet cables around tight corners, but they won't be able to do that with fiber.

People are used to being able to move equipment freely, plugging and unplugging as they want. But if oyu unplug a fiber cable, you open the door to contamination, both of the cable and the port it is supposed to plug into, that will also impact transmission reliability. Very troublesome to diagnose, problematic to clean, and expensive to replace. You can't just spit on the end of the cable and wipe it on your shirt.

And again, how many households need this? What are the benefits that make the exposure worthwhile?

The above claim that service providers are greedy because they will only do it if they make money on it doesn't sit well with me either. That's not greed, that's business.


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Posted by Joe
a resident of Barron Park
on Mar 9, 2007 at 1:27 pm

JustMe,

We seem to be talking past one another. Yes, what you're saying about fiber cables and connectors is true. However I don't think anyone is proposing FTTD (fiber to the desktop). City-wide FTTH might be similar to what was done here during the FTTH trial a few years ago. Fiber comes into a house or apartment building to an MPOE (a box in your garage) and gets plugged into the existing TV/phone/network. You don't necessarily sign up for gigabit speeds, but the infrastructure is there to support it.

During the Palo Alto trial, the majority of homes subscribed to service at a level of less than 100 megabits. I don't recall fiber plant problems once the installation was complete. Maybe a participant in the trial can provide more details.

You seem like a technical person. Wouldn't you agree that this setup differs little from what our incumbent phone provider uses to extend DSL service into our neighborhoods? There, the phone carrier's remote terminal aggregates your legacy copper phone line by a fiber backhaul to the central office. In the FTTH proposal, the pipe is wide open all the way to your house or apartment building and isn't owned or controlled by an incumbent provider.

Technically, the trial showed that FTTH could work reliably in Palo Alto. Financially, there are still lots of questions that need answers. But, I'm a FTTH supporter. Certainly nothing that's been raised on this thread would make me change my mind.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 10, 2007 at 1:03 pm

Chris, a resident of the Old Palo Alto neighborhood, is incorrect regarding his remarks of 3-6-07.

In 2002, the city did a survey, as part of the city's "FTTH Business Case," that showed that enough people would subscribe to FTTH services to make the system financially viable.

The city's recent FTTH01 RFP received two bids. (Staff recommended and Council decided that one was unresponsive; I was disappointed by that decision.) The FTTH01 RFP essentially asked bidders to volunteer to build the system, pay for most of it, make it a success, and then hand it over to the city. I talked with one potential bidder who didn't bid because he thought that if a company built the system, paid for it, and made it a success, they ought to be able to keep it and use it to make money.

The "plain fact" is that citywide FTTH has become economically viable for municipalities but hasn't yet become economically viable for private companies because municipalities can accept a lower return on investment.

The cited article quotes the city's Carl Yeats as saying he doesn't know of any muni in California that is successfully operating a high-speed fiber network. It doesn't say that Loma Linda, CA, is successfully operating such a network. (Why doesn't Yeats know about it? I told Council and the UAC about it in 2005.) The article doesn't say that Ontario, CA, will start operating such a network within a few months; it passes 31,000 homes. It doesn't say that more than 40 munis in the U.S. but not in California are successfully operating such networks.

The UTOPIA consortium contracts the running of its FTTH system to a private company with the necessary expertise. Palo Alto contracts its garbage collection service the same way. Palo Alto used to run its own electric plant, but now they contract with suppliers, so at the moment they don't have the expertise to run an electric plant. But if they needed to acquire the expertise, they could.


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Posted by Dave
a resident of Crescent Park
on Mar 10, 2007 at 1:24 pm

There is something very fishy about an economic analysis that starts with the proposition that municipalities can accept a lower rate of return on an investment than a private company will accept for the same risky investment opportunity.

That simply is another way of saying that the FTTH advocates want the city to subsidize their hobby horse. The city is out of money, as the many threads currently active on this forum mane clear. To the extent the city has "extra" money for investment in anything, they need to assure they get the highest return possible...so they can do government things like fix potholes and build libraries.

Fiber isn't a 'government' thing - no matter how much you wish the city would give it to you.

Jeff says FTTH isn't "yet" economically viable for private companies - implying, it seems, that it someday will become so.

Jeff, when that day comes, get back to us. Or better yet, go straight to some VC who knows how to evaluate a profit making enterprise better than the best bureaucrat we have down at city hall ever will.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 10, 2007 at 2:52 pm

Chris, a resident of the Old Palo Alto neighborhood,

I'd like to reply to your comments of 3-8-07 on "Council's FTTH-related conflicts of interest" (which I thought were off-topic for that topic). <Web Link>

It's well known that municipal utilities often have a lower return on investment than private enterprises hope to have, because they exist to serve their customers, not to get the highest possible return on investment.

The following municipalities have functioning muni FTTH systems: AL: Sylacauga; CA: Loma Linda; CO: Glenwood Springs; FL: Quincy; GA: Amerifield; GA: Dalton, North Oaks, South Dungapps; IN: Auburn; KY: Jackson, KY: Murray; MI: Cobblestone-Holland; MN: Windom; NC: Asheville; OH: Doylestown;
OK: Sallisaw; OR: Douglas County; OR: Indepencence, Monmouth; PA: Kecksburg, Kutztown; TN: Jackson; TN: Madison County; UT: Provo, UTOPIA (a consortium of 14 cities); VA: Bristol; VT: Burlington; WA: Bainbridge County, Chelan County, Clallam County, Douglas County, Grant County, Kitsap County, Mason County, Okanogan County, Pend Oreille; WI: Berkseth Baldwin, Eau Claire, Baldwin, Reedsburg. Which should we talk about first? My heroes are Provo and UTOPIA.

The following munis are considering muni FTTH: CA: Truckee-Donner, Lompoc, Fontana, Ontario, Palo Alto; FL: Jacksonville; GA: Sylvester; IL: Naperville, Peru, Princeton, Rochelle, Rock Falls, Rockford; IN: Crawfordsville; KY: Bristol, Morristown; LA: Lafayette; MA: Concord; MN: Crosslake; MO: Marshall, North Kansas City; NH: Hanover; NV: Churchill County; NY: Ontario County, Monroe County; OR: Bandon, The Dalles-Minet, Monmouth Independence, Portland; SD: Miller; TN: Bristol, Clarksville, Morristown, Pulaski; VA: Danville, Lenowisco; VT: Burlington; WA: San Juan County, Seattle; WI: Antigo; WV: Parkersburg; WV: Philippi; WY: Rock Springs-Green River.

This source tries to keep an up-to-date list of munis providing and considering FTTH: <Web Link>

From time to time, a "sock puppet" (sponsored by the telecom incumbents) reports that muni FTTH invariably fails. This article cites a recent example by the Reason Foundation and also cites the muni's rebuttal. <Web Link>

In 2004, the American Public Power Association published a report, "Community Broadband: Separating Fact From Fiction," which systematically debunks sock puppet FUD (fear, uncertainty, and doubt). <Web Link>


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Posted by Jeff Hoel
a resident of Midtown
on Mar 10, 2007 at 3:42 pm

JustMe, a resident of the Duveneck/St. Francis neighborhood,

These days, it's no more expensive to pass homes with fiber than with copper. So the only reason that fiber isn't everywhere is that the incumbents have an investment in their copper networks that they want to milk for everything it's worth.

In 2003, UTOPIA paid $225 per home optronics box. Since then, generally, optronics costs have come down. So I don't think that's a showstopper.

Each home will need one home optronics box, which has one fiber optics port (e.g., 100BASE-BX-U) (and multiple 100BASE-T electrical ports for connecting to equipment in the home). At the other end of the fiber will be a fiber optics port (e.g., 100BASE-BX-D) on an Ethernet switch (i.e., probably not a router).

Fiber optics cables can be damaged if abused, so installers should know how to avoid abuse. For the kind of FTTH system proposed, the fiber infrastructure is installed once and then left alone, while the intra-home wiring is electrical, and the homeowner could reconfigure it if desired. Note that electrical wiring is not indestructible either. Water is less of a problem for fiber than for copper.

As for how much bandwidth people "need," I predict that it will increase exponentially over time, basically because it can -- like Moore's Law increases integrated circuit speeds (but for a different physical reason). These days, if you're implementing FTTH, the "sweet spot" choice is between 100 Mb/s and 1 Gb/s. You can't save money by choosing slower than that. (FTTH opponents seem to be about equally divided into two camps: one says few people need more than a tiny fraction of the designed bandwidth and the other says the system will be obsolete by the time it's built. I disagree with both camps.)

Check UTOPIA's services and prices and see if you "need" them. <Web Link>


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Posted by Jeff Hoel
a resident of Midtown
on Mar 10, 2007 at 4:23 pm

Dave, a resident of the Crescent Park neighborhood,

Consider Palo Alto's existing utilities. For these services, the city's policy is to charge what it costs plus something for the General Fund. Do you think that's "fishy"? Would you be willing to pay what the market would bear, so that the city could maximize its return on investment? If the city fails to charge what the market would bear, is it "subsidizing" users of electricity, water, and gas? Are these services "hobby horses"? (Or were they "hobby horses when they were initially introduced, before they became "necessities"?)

(Actually, the city does charge you a punitive price if you use "too much" electricity, to motivate conservation. And the city has rate stabilization reserve funds so that if its costs suddenly shoot up or down, it doesn't mean that prices have to suddenly shoot up or down to match. But the underlying philosophy is to charge what services cost plus something for the General Fund.)

Despite the city's policy, utilities bring in a large chunk of revenue each year. FTTH could do the same.

(I misspoke when I said without qualification that FTTH is not economically viable for private companies. Verizon is implementing it in several places, but they're not implementing it here, and they're using inferior technology, and Wall Street isn't sure it approves. Surewest implemented an EP2P system. AT&T implemented a system at Mission Bay as an experiment. FTTH is more economically viable for new developments than for existing neighborhoods, because you don't have to worry about digging up and then repairing the streets, and you can assume 100% take rates. But Palo Alto is mostly existing neighborhoods.)

Venture capitalists never fund municipal utilities. So what?


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Posted by Dave
a resident of Crescent Park
on Mar 10, 2007 at 7:28 pm

Jeff's economics not only are 'fishy' they're wrong.

His analogy to the city's provision of utilities is a case in point. The residents have two roles with respect to utilities: we're the owners of the utility capital stock, and we're the customers. Whatever bargain we give ourselves in the form subsidies for lower rates, costs us as the reduced transfers to the general fund lower the implicit asset value of the capital stock. What we put in one pocket, we take out of the other.

(In fact the case is a little more complicated - and ugly. Lower income residents likely are lower consumers of the utilities and thus have lower subsidies than the heavy users -- more wealthy residents with big houses and pools, and businesses. If we assume that the 'ownership' of the utilities is divided equally among residents, but the subsidies go disproportionately to the wealthy, the current system actually is regressive.)

The same is true with whatever businesses the city enters in order to subsidize its residents. The city could decide to buy a Mercedes dealership, and accept a lower rate of return to offer its citizens cars at lower prices than other dealers charge. Those in town who bought a bargain Mercedes would be subsidized by the rest of us, who are earning less than they otherwise could on their share of the city's investment in the dealership.

Fiber is no different. Every scenario has only a fraction of the city's residents subscribing. To the extent that we're accepting a lower rate of return than the market on our fiber investment, the non-subscribers are subsidizing this hobby-horse for FTTh advocates.

Let's stay out of this until some of the private companies Jeff says are investigating it can figure out a way to make it profitable.


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Posted by David
a resident of Professorville
on Mar 11, 2007 at 1:10 pm

It's the Palo Alto way; find a way to get somebody else to pay for your hobby.

Dick Rosenbaum, former councilmember (and, boy do we miss him) was right on the mark when he referred to FTTH as bandwidth welfare.


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Posted by Carol
a resident of Old Palo Alto
on Mar 12, 2007 at 10:20 am

We checked out fiber at the request of a tenant in a mixed commercial and office building we own. No, it's not going to work. Turned out that the tenant didn't want to bear any part of the cost (substantial), wasn't willing to discuss splitting with other tenants, etc. Other owners who had fiber installed during a trial program were not finding tenants more easily, and were not earning higher rents: in short, their buildings were worth not a penny more with fiber than without. I do not think you will find support for this in the commercial real estate community.

Whatever may happen in Loma Linda, doesn't happen here.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 12, 2007 at 12:55 pm

JustMe, a resident of the Duveneck/St. Francis neighborhood,

I'd like to reply to your 3-8-07 comments to the "Council's FTTH-related conflicts of interest" topic ( <Web Link> ) here (because I think they're not about conflicts of interest).

Re your question: "Why do we want citwide municipal FTTH?" The iPaloAlto website <Web Link> provides an introductory answer. Is that what you were looking for?

I want citywide municipal FTTH because I think it's the only way to provide "world-class" telecommunications services to Palo Altans anytime soon, and I think Palo Altans should and in fact do aspire to receiving "world-class" telecommunications services, and I think the experiences of other municipalities "prove" that it can be financially viable here (i.e., that it will make money for the city, just its other utilities do). When I say "world-class," I'm talking about price as well as performance.

I'm pleased to hear you say that you aren't anti-FTTH. Do you have an opinion about citywide municipal FTTH?

When you tested OC192 transceivers, who employed you?

OC192 is a standard for a 10-Gb/s optical interface. The standard was created by the International Telecommunication Union (ITU), an organization of the phone companies, by the phone companies, and for the phone companies. I don't trust the ITU to look out for the interests of munis. In its 802.3ae specification, the Institute of Electrical and Electronics Engineers (IEEE) specifies a number of 10-Gb/s optical interfaces. These interfaces use the Ethernet protocol, not the phone companies' SONET and ATM protocols. Industry observers often observe that Ethernet equipment is a lot more cost-effective than SONET/ATM equipment. Municipalities like Loma Linda use 802.3ae-compliant 10-Gb/s optical transceivers for their backbone links.

What do you mean by "bedeviled"? Perhaps we can find out whether municipalities that are implementing citywide FTTH are "bedeviled" by the same issues.


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Posted by Dave
a resident of Crescent Park
on Mar 12, 2007 at 1:19 pm

In no real sense does the utilities department "make" money for the city or its residents. We are both the owners and the customers of the city-owned utilities. If the utilities are priced at less than their costs, there is a transfer out of the city's other funds to the customers in the form of subsidy. Eventually, the taxpayers must make up the difference. If the utilities are priced at more than their costs, there is a transfer from the customers to the general fund in the form of overpayment. This is indistinguishable from a tax. (Indeed, the city could price the utilities at cost and implement an increase in the current utilities tax and achieve precisely the same result.)

So if utilities are priced at less than cost, we have to tax ourselves to make up the difference. If they're priced at less than costs, the city treasury has more money to spend, just as if they took it in taxes.


To refer to a fiber telecommunications system as a "utility" stretches the meaning of the term to its breaking point. We might as well call the hypothetical example of the city-run Mercedes dealership "Citywide transportation."

As former Mayor Rosembaum said, this is nothing but a welfare program for electronics hobbyists. We can't afford to be entering into risky enterprises right now.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 12, 2007 at 2:15 pm

Dave, a resident of the Crescent Park neighborhood,

Re your 3-10-07 comments, it's interesting that you think that Palo Alto's existing utilities (and, apparently, municipal utilities in general) are subsidizing the well off at the expense of the less fortunate. I think the vast majority of Palo Altans would disagree with you. Suppose there were a poll that asked residents whether they'd be willing to pay higher prices for utilities so that more money could go to the General Fund. What do you think the results would be, for the various income groups? I think the idea would be universally unpopular.

Are you one of those people who says the city shouldn't have public schoole because not everybody has kids? That we shouldn't have public libraries because not everybody reads? That we shouldn't have golf courses because not everybody golfs? That we shouldn't have paved streets because not everybody drives on them equally?

By the way, IF we had to divide up the ownership of utilities, rather than just owning them as a community, why do you assume ownership should be divided equally, rather than, say, according to how much each resident had paid for them? (Obviously, I favor ownership by the community, so I ask the question only as a thought experiment.)

The difference between things like utilities (including FTTH) and a Mercedes delearship is that things like utilities tend to look like monopolies, so that if the provider charges what the market will bear, residents are not well served. In the case of the car industry, sufficient competition already exists, so the city doesn't have to participate as a competitor. (As you probably know, Palo Alto's car dealerships have threatened to move out of Palo Alto, taking their sales tax revenues with them, unless the city helps them move the dealerships to places that are conspicuous and easily accessible from Highway 101. Where do you stand on this issue and why?)

If Palo Alto implemented citywide muni FTTH and enough people signed up for services to make it financially viable (as I predict they would), then both subscribers to FTTH system services and subscribers to the services of other telecom providers would benefit from lower prices (the result of a more competitive market), and all residents would benefit from the money that went to the General Fund.


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Posted by Geoff
a resident of Professorville
on Mar 12, 2007 at 2:35 pm

Whether the current rate structure of utility fees subsidizes the well-off is an empirical question. You may be quite right about the result of a hypothetical poll. That is totally meaningless in the context of discussion the economics of the situation. You raise no counterargument to that, so I assume you must agree with my analysis.

I don't have kids in public schools right now, but I agree with your inference that those without kids subsidize those with kids. We have pretty strong support for that in the community, but that doesn't take away its accurate description as a subsidy.

Finally, you contradict yourself in your last two paragraphs. First you say that FTTH is a utility because it looks like a monopoly. Then in the very next paragraph you assert that subscribers to the "other telecom providers" would benefit from the competition of FTTH. Which is it? A monopoly or a competitive market. (Hint: I can get high speed internet from Comcast, from at least a half dozen DSL companies in addition to ATT, from Sprint and Verizon's wireless service, and (we must assume )from WiMax and other yet to be developed technologies in the near or medium term future. Yeah, I know they're not as fast as fiber, but for most people they're good enough. Same with the existing TV and voice services...anyway, you were the one who said they're competitors.)

Palo Altan's may be willing to subsidize your kids' schooling, your library card, and maybe even your golf game. I doubt if they're willing to risk money we don't have so you can have an expensive hobby like FTTH.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 12, 2007 at 3:05 pm

David, a resident of the Professorville neighborhood,

Re your 3-11-07 comments, Dick Rosenbaum still serves as a UAC commissioner. In that capacity, on 3-18-04, he quoted an unnamed muni FTTH opponent as having coined the term "bandwidth welfare." ( <Web Link> ). He thought that only a few Palo Altans would need more bandwidth than the telecom incumbents were already providing, so he feared that not enough Palo Altans would sign up for services to make the system financially viable. As a commissioner, it was his job to be skeptical. Nevertheless, on 3-18-04, the UAC voted 3-2 in favor of taking the next step toward citywide muni FTTH.

In view of the actual experiences of the muni FTTH systems in Provo and UTOPIA over the last three years, I wonder if Commissioner Rosenbaum would be willing to reconsider his assessment.

When Commissioner Rosenbaum insisted that staff and consultants do a study to see whether FTTH or HFC (hybrid fiber coax) was better, I thought the study was unnecessary. The study confirmed that FTTH was clearly better. When Rosenbaum wondered whether wireless over the years was going to be good enough for most people, I thought it was clear that wireless wouldn't be good enough. I still do.

When Commissioner Rosenbaum insisted that the city's "FTTH Business Case" be revealed to the public and the UAC before the UAC could think about approving it, I was in complete agreement! ( <Web Link> )


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Posted by David
a resident of Professorville
on Mar 12, 2007 at 4:00 pm

Jeff,

Your credibility would be helped if every now and then you got a fact right.

Provo is making money on FTTH? Then why is it unable to pay its bills? Why has it "borrowed" one million dollars in each of the last two years from the city general fund? Why did it start out claiming that it would be cash flow positive at 10,000 subscribers and why does it now say that 15,000 is the magic number?

It must be obvious by this point that it will never break even as the carrying costs of its debt mount each year.

How can you claim that UTOPIA makes a profit when it has never published a financial report?

You list a whole bunch of municipalities which are considering muni FTTH. But if you seriously investigate them you will find that most of them are dead as doornails. Why? Because the economics don't make sense!

You hold up the current Palo Alto utilities as examples of profitable municipal services forgetting to mention that they are MONOPOLY services.

You claim that commercial companies will not provide high speed connections. Verizon was granted a statewide charter for TV services last week. They have stated there intention to overbuild everywhere and they are doing it in other states. ATT is reliably reported to have begun Lightspeed deployment in and around Palo Alto.

And, by the way, if you REALLY want 100 megabits to your house you can get it right now. Yes, it will cost you a fortune as well it should because the market is so small.

And furthermore a muni FTTH system will only create a 100 megabit island in a 5 megabit world. Do you think that the NY Times front page will download 20 times faster? Do you think that their servers are located in Palo Alto?

Come on, Jeff. Face reality.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 12, 2007 at 4:33 pm

Carol, a resident of the Old Palo Alto neighborhood,

I'd be interested in more information. What costs were quoted to you for fiber-to-the-office? Why didn't you know before you looked into it that the tenant wasn't willing to pay anything?

The point of doing citywide municipal FTTH (i.e., making fiber-based services available to all homes and businesses) is that the cost per premises can be a lot less if all premises are passed. One reason why it costs a lot for a business to connect to the city's current dark fiber facility is that each connection requires a separate engineering exercise.

Are you saying that in the timeframe of the city's FTTH Trial (2001-2005) -- but not as part of the city's FTTH Trial -- some owners of office buildings added fiber capability but it didn't make the buildings more leasable? How was the capability advertized? If prospective tenants thought they would be responsible for providing and operating the optronics, and for finding a service provider willing to connect to the other end of a dark fiber and provide customized retail services only for them, perhaps they thought they didn't have enough knowledge or patience or money to do that successfully. However, if the city had a UTOPIA-like citywide FTTH system, with multiple competing retail service providers, the building's owner could have advertized a turnkey connection and a choice of services at competitive prices. Ask your tenant if he would have been willing to sign up for one or more of these services: ( <Web Link> )

800 High Street is an example where the developer found a way to make FTTH work despite the fact that the city isn't offering it. (It does make use of the city's dark fiber.) By bundling basic services as part of the monthly association dues, the developer got a 100% take rate. This can work for new construction, but not so easily for existing neighborhoods.


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Posted by David
a resident of Professorville
on Mar 12, 2007 at 4:43 pm

In a previous post I said that UTOPIA, Jeff Hoel's example of a successful municipal FTTH system, has yet to publish any financials.

I was wrong. I found their financial report for last year. They had revenue of $1.5 million and expenses of $8.8 million for an operating loss of $7.25 million.

Now I know that the system is just starting up and claiming that it is a financial disaster is unfair.

But to claim as Jeff does that it is proof that muni FTTH can succeed is ridiculous.


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Posted by david
a resident of Professorville
on Mar 12, 2007 at 5:23 pm

Jeff Hoel writes:

"800 High Street is an example where the developer found a way to make FTTH work despite the fact that the city isn't offering it. (It does make use of the city's dark fiber.) By bundling basic services as part of the monthly association dues, the developer got a 100% take rate. This can work for new construction, but not so easily for existing neighborhoods."

So in other words by requiring that everyone in 800 High subscribe to FTTH they got a 100 percent take rate. Now that's what I call marketing!

Actually, that might be the only way to make FTTH financially successful in Palo Alto: simply pass a law that everyone must subscribe to it and bundle it with electricity, gas, water and garbage so nobody actually knows what they are paying for it.

Too bad it's against the law.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 13, 2007 at 1:02 pm

Geoff, a resident of the Professorville neighborhood,

Since this is the first post to this topic by a Geoff, to what analysis are you referring? Is it perhaps the analysis by Dave, a resident of the Crescent Park neighborhood? Are you, in fact, Dave, a resident of the Crescent Park neighborhood?

If you think the question of whether the current rate structure of utility fees subsidizes the well-off is empirical, how would you propose to answer it? Do you think the UAC agrees with you? Would you accept that the infrastructure of the existing utilities is mostly paid for? That might make the analysis easier. Are rich people and poor people paying more for the utilities they use than it costs the city, according to the same formula, more or less? (In the case of water, upcoming earthquake-proofing of Hetch-Hetchy infrastruture will cost a lot. In the case of electricity, building a new high-voltage connection to the grid would cost something. Do we have to get involved in a discussion of whether rich people and poor people both have comparable interests in investing in infrastructure?) I think you should assume that I do NOT agree with your analysis -- and won't until you show me how the existing system is transferring money from the poor to the rich.

(I acknowledge that businesses pay different rates for electricity than residents. Staff claims that businesses require less attention per kilowatt than residents. Businesses are sometimes willing to have their electric service cut off during emergencies, while residents aren't required to be willing to do this. The UAC has oversight. Do you want to ask them whether they think the city is being fair?)

Let me uncontradict myself. There is currently one wire-based infrastructure for local phone service. If the city did FTTH, there would be two. There is currently one wire-based infrastructure for TV service. If the city did FTTH, there would be two. There are currently two wire-based infrastructures for Internet services. If the city did FTTH, there would be three. If there is one provider, it's a monopoly; if there are two providers, it's a duopoly; if there are three providers, it's a triopoly; if there are a few providers, it's an oligopoly. So I guess I should have said "oligopoly."

Wireless is good for mobility, but as an alternative to wired, wireless doesn't change the market power of wired competitors very much.

On the other hand, car dealerships are not an oligopoly.

As of last year, the phone company was not required to permit competitors to use its infrastructure, so don't count on CLECs remaining a competitive force. Do you think WiMAX -- or BPL (broadband over power lines) -- can provide meaningful "facilities-based" competition? I don't. At some point in the future, FTTH will make wired telecom alternatives uncompetitive because they won't be fast enough; at that point, FTTH really will be a monopoly; and at that point, I'd like the FTTH provider to be the city.

I don't have a golf game. But if the city's golf facility pays for itself, I don't mind that the city has one. I don't mind paying my share for schools even if I don't have school-aged kids.


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Posted by Simon
a resident of Barron Park
on Mar 13, 2007 at 1:57 pm

Not sure about all this mono-, duo-, tri-, quadro-, olig-, etc.-, poly stuff. Economics isn't my bag. But even if the economics work out, I don' think I want to let the city be the monopolist.

We tried that with Cable Co-op. It didn't work out too well.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 13, 2007 at 2:38 pm

David, a resident of the Professorville neighborhood,

I didn't say iProvo and UTOPIA had already made more money than they cost to build. I didn't even say that they were already cashflow-positive. They are my heroes because I think they have an excellent chance of making more money than they cost to build in a timeframe that is reasonable for utilities, while providing world-class services to their residents at reasonable prices.

If the skeptics required, as proof that citywide muni FTTH was sometimes a good investment, that some citywide muni FTTH systems had already made more money than they cost to build, that would require waiting a long time. I'm sure that if we waited that long, some skeptics would say that it would have been a good investment, but we waited too long, and now we've missed the window. (Suppose that nobody had ever bought his own home before, but then all of a sudden something happened that made it possible for people to buy their own homes, and some people started buying homes, using 30-year mortgages to finance them. Would it take you 30 years to be convinced that buying a home is sometimes a good idea?)

Re your specific question about iProvo's estimate of how many subscribers it would take to become cashflow-positive, they thought the average customer would spend more on services than the average customer has spent, at least so far. They were too optimistic. I don't think it's fatal, but we'll see. What in this iProvo report don't you believe? ( <Web Link> )

Verizon doesn't have enough money to build everywhere at once. They are using an inferior FTTH technology which I don't want, and they would want to charge what the market would bear in a market characterized by inadequate competition. So I hope they don't build in Palo Alto before the city does. AT&T's Project Lightspeed isn't even FTTH, so it's not what I want.

Lafayette, LA, recently got the legal go-ahead for citywide muni FTTH. Lafayette Utility System (LUS) says that for "intranet" communications within the city, customers will get to run at 100 Mb/s, regardless of what Internet service speed they sign up for. LafayetteProFiber blogger John St. Julien thinks that might enable residents to invent new applications. ( <Web Link> )

I don't know exactly how Internet caching works, but it's conceivable that the New York Times would download faster for me if someone else in town had already downloaded it.

What I want for Palo Alto is a community where world-class telecom services are available to all at reasonable prices. I don't want world-class telecom services only for the rich.


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Posted by pete
a resident of Midtown
on Mar 13, 2007 at 2:57 pm

I'd like a fiber connection o too. But, with due respect, Jeff, I think you are being a little bit picky. If Verizon or ATT, or someone else will build a system and take the risk that things will not pan out as expected (like the provo example you talk about), then I say we should let them go and do it. And not just say "I don't want that" to anything that does not meet some theoretic standard of perfect technology. I am no expert like it looks like you are. But I know that things change so fast in this area that what is the cat's meow today will look like yesterday's news in a year or two.

Just my 2 cents.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 13, 2007 at 4:12 pm

david, a resident of the Professorville neighborhood,

The condos at 800 High Street all "needed" some kind of infrastructure to support phone and TV services. It wasn't unreasonable of the developer to pick FTTH. If a potential buyer felt strongly that these services should not be provided using FTTH, he/she didn't need to buy a condo there.

In many communities, you can't sell a home unless it has connections to the electric, water, and sewer utilities.

In Provo and UTOPIA, no law says you have to connect to FTTH. They seem on the road to success to me.

In Loma Linda, CA, there's a law that if you build a new home or office building, you have to wire it for FTTH. The city then provides the infrastructure that passes these premises. But you don't have to connect. I'm not advocating that for Palo Alto, but if you think it would help....

In Clarksville, TN, the city plans to pass and connect all homes and businesses with FTTH, so that the city can use the infrastructure to do automatic meter reading (AMR). They think it's a way to provide better and more reliable electric service. I'm not advocating that for Palo Alto, but if you think it would help....


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Posted by Jeff Hoel
a resident of Midtown
on Mar 13, 2007 at 4:46 pm

Simon, a resident of the Barron Park neighborhood,

If you don't want the city to be the FTTH monopolist, what entity would you prefer? If I'm right, whoever provides FTTH will be a monopolist. If it's the city, you can take your complaints to City Hall. Otherwise, you can't take them anywhere.

Provo and UTOPIA have "open access" systems, meaning that the city permits any number of competing retail service providers to sell retail services to customers. Do you like the idea of competing retail service providers? OK, just make sure the FTTH infrastructure provider likes it too.

As for Cable Co-op, it was a private entity, not a city project. The city didn't want to take the risk. If your only concern was that the investors get their money back, never fear -- the investors got their money back.


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Posted by pete
a resident of Midtown
on Mar 13, 2007 at 4:53 pm



Does this whole thing depend on Jeff Hoel's speculation about "if I'm right"?

Jeff seems like a smart guy and no disrespect intended, but if that's the standard, I think I want a second opinion before the city spends millions of $$.


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Posted by Simon
a resident of Barron Park
on Mar 13, 2007 at 5:40 pm

Jeff,

Under your rationale, should we have the city take over phone service (one providers you say), cable TV (one provider you say), and Internet service (two providers you say)? I don't see why we want these monopolists running our lives with services we already all use, than we want them running FTTH, which we might or might not use. I'm not trying to be cute, by the way. I really don't get it.


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Posted by Chris
a resident of Old Palo Alto
on Mar 13, 2007 at 6:55 pm

Jeff Hoel, while an ardent advocate for his cause, clearly has been blinded to the facts by his true believer status.

I started this thread, asking why a city that is having trouble doing things cities normally do and having budgetary problems besides should be starting a fiber business. Implicit in that idea (I thought) was the assertion that even if a fiber business were theoretically viable (and even Jeff Hoel admits that is not a certainty), the city cannot be counted on to run it efficiently enough to make it worth the risk.

All the back and forth about theoretical economics and who is or is not a monopolist by Dave/Geoff/Jeff, etc. are interesting - and maybe even relevant to some aspect of fiber, just not to my post. We do get one statement about some 2002 survey by the same city bureaucracy I denigrate in my post allegedly showing some "business case". Perhaps I'm being unduly harsh in my judgment, but is that something you really want to spend a lot of money relying upon? After all, private companies don't rely much on "how much would you be willing to pay" studies nowadays.

Jeff tries mightily to dismiss as irrelevant the notion that the lack of private entrants into the fiber business here means anything about a publicly-owned service because (somehow) the city can accept a lower return on its (nonexistent, by the way) capital. I respectfully disagree.

First, government bureaucracies tend not to be good financial managers and are particularly unqualified to evaluate investment opportunities with highly variable expected returns. And second, even assuming that this is not so (I.e. that the city bureaucrats can evaluate investment opportunities rationally), implicit in Jeff's statement that the city can accept lower returns on its capital is that the city has a higher tolerance for risk than private investors or companies. This is self-evidently untrue. (And if you have to ask why that is so, you need to move on to another thread.)

Thus the lack of private investment in local fiber is highly relevant to the question of whether the city should be thinking about this at all.

That they would even think they might be capable of investing in and running a fiber system demonstrates the core incompetency of those in city hall who keep analyzing it.

If Jeff wants to address the question as originally posed in this thread, he might specifically answer it as initially put forth: "Why would any sane person think that a city that can't pave its streets, can't keep homeless people from bothering restaurant patrons in its business district and can't maintain a functional library system can run a fiber business?"

Jeff makes a lot of statements about what he wants ("reasonably priced world class telecom for all"), and what he doesn't want (Verizon's crummy system, or AT&T). He's entitled to want anything his fertile desire factory manufactures. But he's not entitled to have us pay for it.








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Posted by David
a resident of Professorville
on Mar 13, 2007 at 11:45 pm

Jeff Hoel writes:

"I didn't say iProvo and UTOPIA had already made more money than they cost to build. I didn't even say that they were already cashflow-positive."

Hey Jeff, they can't even pay their bills on a daily basis. They are running up debt on a credit card backed by city governments. You think the situation will turn around? I don't.

and then:

"you don't want the city to be the FTTH monopolist, what entity would you prefer? "

a completely irrelevant question. There will not be a communications monopolist. Fiber will have to compete with all sorts of modalities.

and then:

"there is currently one wire-based infrastructure for local phone service. If the city did FTTH, there would be two. There is currently one wire-based infrastructure for TV service. If the city did FTTH, there would be two. There are currently two wire-based infrastructures for Internet services. If the city did FTTH, there would be three."

This is unbelievably silly. I get my TV service by satellite. So it isn't wire based? Do I care? There are at least 5 ways of getting residential TV. There are a half dozen ways of getting Internet service. There are more ways of getting telephone service than I can count. So they are not all "wire based?" Does anybody care if it provides the desired service?

and then:

"Verizon doesn't have enough money to build everywhere at once. They are using an inferior FTTH technology which I don't want, and they would want to charge what the market would bear in a market characterized by inadequate competition. So I hope they don't build in Palo Alto before the city does. AT&T's Project Lightspeed isn't even FTTH, so it's not what I want."

Ah, so now it is not just a question of providing good service, it has to meet Jeff's standards for the "right technology."

And, by the way, Project Lightspeed is far more technologically ambitious than the municipal fiber systems you are so fond of. It is the first large scale implementation of IPTV. The muni fiber systems follow the old broadcast model of sending every station down the pipe and letting the set top box provide channel switching. Lightspeed gets rid of the box and moves the switching point to the central office, providing unlimited channel possibilities. This is a much more elegant solution.

I am tired of this and will stop posting on this thread. But I will continue to do everything in my power to make sure that Palo Alto doesn't go down this catastrophic path.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 14, 2007 at 2:04 pm

pete, a resident of the Midtown neighborhood,

Re your comment of 3-13-07, I'm not asking anyone to accept my opinion without thinking about it. I'm asking the community to think about it. Here's a second opinion: ( <Web Link> )


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Posted by Jeff Hoel
a resident of Midtown
on Mar 14, 2007 at 2:57 pm

Simon, a resident of the Barron Park neighborhood,

Re your comments of 3-13-07, I wouldn't want the city to "take over" the services of the telecom incumbents. (For example, I wouldn't want the city to try to buy them out.) But I would want phone, TV, and Internet services to be provided over the FTTH infrastructure, in competition with the services of the telecom incumbents. My preference would be for the city to have an "open access" FTTH system, where the city provides the "wholesale" service of moving bits around and any number of retail service providers use the wholesale bit-moving service to provide retail services like phone, TV, and Internet.

That's how it works in Provo and UTOPIA. (In Utah, there's a state law that in effect prevents munis from offering retail services, so "open access" is their only alternative. California has no such law, but I prefer "open access" anyway. A recent feasibility study for citywide municipal FTTH in San Francisco recommended "open access.")


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Posted by Jeff Hoel
a resident of Midtown
on Mar 14, 2007 at 4:48 pm

Chris, a resident of the Old Palo Alto neighborhood,

In your comments of 3-13-07, you invited me to answer this question: "Why would any sane person think that a city that can't pave its streets, can't keep homeless people from bothering restaurant patrons in its business district and can't maintain a functional library system can run a fiber business?"

Palo Alto municipal government isn't perfect, but it's not as bad as you imply, and giving up on it entirely is not an option.

Palo Alto's library system isn't perfect, but it isn't non-functional either. I don't think we have to go into the details on this thread, do we?

Palo Alto is behind on its maintenance of streets, according to a report from the City Auditor. When streets aren't maintained in a timely way, it costs much more to fix them later, so timely maintenance not only pleases the public but also saves money. Palo Alto government has to improve so that it gets this right. It's one of Council's "priorities" this year (I think). Foregoing muni FTTH would not hasten this necessary improvement. The money for FTTH would come from a different place than money for streets, so one doesn't interfere with the other.

The city's treatment of the homeless isn't perfect either.

I don't accept that Palo Alto's library system, treatment of the homeless, and streets have to be perfect before it makes sense for the city to take on FTTH.

The city has a "bureaucracy," City of Palo Alto Utilities (CPAU), that provides our utilities, including dealing with electric, gas, and water suppliers. It requires a lot of expertise. They are overseen by the Utilities Advisory Commission (UAC), which also has a lot of expertise. If you haven't attended UAC meetings over the years, you might be surprised. Over the years, what Palo Altans have paid for utilities is a lot less than what residents in neighboring cities have paid.

UTOPIA outsources the day-to-day running of its FTTH system to a consultant which has the expertise. Provo runs its own FTTH system. Both approaches can be considered. I don't suppose Provo started out with the expertise to run an FTTH system, but they acquired it.

Provo and UTOPIA have "open accesss" systems, where the municipality takes care of providing the wholesale bit-moving service and retail service providers (independent companies) take care of providing retail services. So the muni isn't required to master the skills required to offer competitive retail services.

If you haven't read the city's 2002 FTTH Business Case and 2003-2004 FTTH Business Plan, I don't know why you seem to have an opinion about them. I have read them and have sent lots of messages to city representatives, pointing out deficiencies and suggesting improvements.

As you may or may not know, the city is talking with a consortium led by 180 Connect Networks about its bid to build a citywide muni FTTH system for Palo Alto, pay for most of it, make a success of it, and eventually hand it over to the city. This consortium, a collection of private companies, apparently is willing to invest in muni FTTH. Let's see how the negotiations go. The devil is in the details. (Critics worry about what might go wrong in the 30 years before the consortium turns the system over to the city.)

It is not true, let alone self-evident, that accepting a lower return on investment is tantamount to accepting a higher risk. You are not empowered to decide who may contribute to any given Town Square thread.

I don't see what legitimate purpose is served by rhetorical turns of phrase like "blinded to the facts" and "true believer status."


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Posted by RS Sampson
a resident of Midtown
on Mar 14, 2007 at 7:35 pm

The available information about the 180 Connect proposal indicates that the company and the City will share the cost of a fiber system, and then 180 connect will run it for 30 years before turning it over to the city.

I don't worry about what will happen in the 30 years before it is turned over to us nearly as much as I worry about what will happen - and what we will get - after the 30 years are up.

Consider the progress and changes in this technological area in the last 30 years. In 1977, there was no Internet, no personal computer, no satellite TV, no cell phones, no bi directional Cable TV, no DSL, let alone no WIMax....and so on.

Anyone but the most wild-eyed fantasist knows with near certainty that in 30 years, in a 2007 era fiber system we are likely to have something so technologically obsolete as to be laugable and virtually unusable. (One non-hyperbolic analogy: Ever try using a rotary dial phone to connect to the Internet?)

So what 180 Connect is proposing is that we help buy them a system which they'll control for all of its useful life before they turn over the keys to a buggy whip factory to us.

Jeff is adamant about not wanting a privately owned system - like the one Verizon is installing elsewhere as we dither about this. Maybe Verizon's system isn't what Jeff, and the other experts who don't have their money on the line, say it is. But if they were to put in their monopoly system (Jeff's formulation), they'd pay for it. Jeff apparently wants us to help 180 Connect to pay for its monopoly system.

Let's can this whole unworkable idea before the city starts spending more money we don't have on it.


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Posted by Wally
a resident of another community
on Mar 15, 2007 at 10:24 am

I don't have a 'dog in this hunt', as I don't live in your state, let alone your marvelous town. I have enjoyed following the discussion, and wish every place had such intense civic engagement.

I do have some thoughts about this subject that may be of interest and use to you all. I don't know much specifically about fiber communications, but I do know a little about finance.

If I understand him/her correctly, one poster above said, in essence, that an investor who is willing to accept an expected return on an uncertain income that another investor rejects as too low has a higher risk tolerance. This is tautologically correct, and flows arithmetically from every asset pricing model and portfolio theory of which I am aware. I don't think it's controversial.

I'm less certain about the assertion that a public entity should, or does, have less preference for risk than private entities. That's probably correct in most instances when speaking of purely economic investment, but I think it misses the essential point of what you seem to be considering.

Government entities make all sorts of economically non-optimal expenditures - "investments", if you prefer, that aren't expected to result in full payback, let alone positive returns. Food stamps are one example. And so are parks and libraries.

In each of these cases, there is a subsidy to those who take advantage of the government expenditures by the larger community which includes users and non-users.

It's not common (or common sense) to speak of a "business case" for the expenditures in these cases. So it's not clear to me why both the proponents and opponents of your fiber system seem to spend so much time discussing a hypothetical business case for your fiber system. That makes no sense to me.

It's definitional that if you have public expenditures that come from the whole community that are taken advantage of by one subset of the community , the users are subsidized. But no more than park goers, or library users.

Shouldn't the discussion be more whether this fiber system is something your community wants and can afford?


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Posted by Jeff Hoel
a resident of Midtown
on Mar 15, 2007 at 5:14 pm

David, a resident of the Professorville neighborhood,

Re your comments of 3-13-07:

As most people know, nearly all startup businesses go through a stage where they can't pay their bills on a daily basis, at least not with revenues. We disagree about whether Provo and UTOPIA will emerge successfully from this stage. Most people think it's too soon to know with certainty. I like their chances.

FTTH will have an easy time keeping up with exponentially increasing bandwidth expectations over the years. Other modalities won't.

According to this GAO report, ( <Web Link> ) when cable companies compete, it lowers cable prices by 15%; when cable competes with DBS, it lowers cable prices 15 cents per month. The GAO was trying to correct the FCC's misimpression that the presence of wireless alternatives to cable TV made the market competitive. Note that the traditional "over-the-air" analog TV alternative will cease in 2009.

Let's say I agree with you that traditional phone service won't require exponential increases in bandwidth over time, so IF you're satisfied with the connection quality, reliability, coverage, and security of wireless alternatives (both cell and VoIP), then they could remain competitive, especially since they offer the advantage of mobility. But it won't cost very much -- incrementally -- for FTTH to provide traditional phone service, so FTTH phone service could remain competitive too. Note that although the feds originally allocated enough electromagnetic spectrum to support six competing cell phone companies, they have since allowed some cell phone competitors to merge and keep both of their spectrum allocations, thereby diminishing the number of possible competitors.

When the FCC ruled that incumbent phone companies no longer had to let CLECs use their infrastructures to offer Internet services, that pretty much doomed the competition CLECs could offer. Nowadays, if a CLEC is able to offer Internet services at all, it's because the incumbent thinks the CLEC isn't being competitive enough to hurt the incumbent.

In other words, I think that the "convergence" of telecom services made possible by Ethernet technology will result in a "convergence" of market power. Conceivably, the federal government could regulate the industry in the public interest, to mitigate this increased market power, as it did in the 1968 when required phone companies to permit anyone to plug any equipment into the phone network as long as it didn't physically damage the network. ( <Web Link> ) But the current FCC doesn't seem to be inclined to impose this kind of regulation.

I want the "right technology" precisely because it can offer the best services over time. And, yes, I think that should be the standard.

I agree that IPTV is an elegant solution. Provo and UTOPIA already offer IPTV (and no other kind of TV), which is one reason I am asking Palo Altans to learn from them. If AT&T is still trying to make IPTV work, then it's behind the curve for that reason ( <Web Link> ) as well as because its FTTN technology is already obsolete. ( <Web Link> ) It's true that some munis chose FTTH systems that offer RF analog TV. I wish them well, but they'll have to make the transition to IPTV eventually. (Palo Alto's 2002 "FTTH Business Case" said IPTV wasn't yet ready for prime time; on 10-1-02, I pointed out that it was working in Provo; staff and consultants didn't listen.)

IPTV (whether Provo's or UTOPIA's or AT&T's) requires a set-top-box functionality at the home, to convert the IP-based digital video stream(s) into a form an ordinary TV set can use, and to convert channel-change requests in to IP-based digital form. It's possible that someday TVs may have this functionality built in, but that might not be the best approach if set-top-box functionality changes more rapidly than TV display functionality. (A current hot topic is whether the encoding should be MPEG-2 or MPEG-4 or something else.) As of 2003, a set top box cost a Provo retail service provider about $50 -- not a showstopper.

Thank you for volunteering to stop posting to this thread.

You say you are willing to do everything in your power to make sure Palo Alto doesn't go down this "catastrophic" path. Are you willing to reveal your full name -- or do you think semi-anonymous criticism is more effective? If Palo Alto should decide to implement citywide municipal FTTH despite your objections, at what point would you be willing to stop naysaying and start helping to make it succeed?


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Posted by David
a resident of Professorville
on Mar 15, 2007 at 8:36 pm

Wally from another community writes:

"I'm less certain about the assertion that a public entity should, or does, have less preference for risk than private entities. That's probably correct in most instances when speaking of purely economic investment, but I think it misses the essential point of what you seem to be considering."

Investors in private (non-governmental) enterprises assume risk in the hope of profiting. They do so voluntarily. They receive a prospectus outlining all the risks. They risk only the the total amount of their investment. None of that is true with governmental enterprises. Citizens cannot "opt out." And their entire assets are at risk.

Also:

"It's not common (or common sense) to speak of a "business case" for the expenditures in these cases. So it's not clear to me why both the proponents and opponents of your fiber system seem to spend so much time discussing a hypothetical business case for your fiber system. That makes no sense to me."

As you imply, the decision to enter or not enter the communications business is a political decision. The proponents of FTTH present it as a profitable enterprise which will recoup its cost and return a profit to the city. If instead they presented it as a city service which would lose money and be subsidized by either taxes or surcharges on electricity, water and garbage, it would be a different story. I would applaud their honesty.

However, they know that it would never get through the political process (That's putting it mildly; they would suffer the 21st century equivalent of being run out of town on a rail.)

Also:
"Government entities make all sorts of economically non-optimal expenditures - "investments", if you prefer, that aren't expected to result in full payback, let alone positive returns. Food stamps are one example. And so are parks and libraries."

The analogy to food stamps amused me; indeed, let's have bandwidth stamps! Parks and Libraries are different. There is no competing "park provider" or "library provider." There is massive competition in telecommunications. Every one of the claimed wonderful services of FTTH (and more) are available right now at prices which are actually less than the current prices in Utah at the ne plus ultra of muni communications.

and finally,

"It's definitional that if you have public expenditures that come from the whole community that are taken advantage of by one subset of the community , the users are subsidized. But no more than park goers, or library users. Shouldn't the discussion be more whether this fiber system is something your community wants and can afford?"

You state that you do not live in Palo Alto; I do and have for more than 40 years. The state of the parks and libraries is disgraceful. The city's infrastructure is crumbling from a half century of deferred maintenance. It is not a question of parks and libraries and fiber but parks and libraries or fiber.


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Posted by David
a resident of Professorville
on Mar 15, 2007 at 9:40 pm

Jeff Hoel writes:
"Thank you for volunteering to stop posting to this thread. You say you are willing to do everything in your power to make sure Palo Alto doesn't go down this "catastrophic" path. Are you willing to reveal your full name -- or do you think semi-anonymous criticism is more effective?"

Well, I am going to break my promise.

Are you implying that I am afraid to use my full name? Is this some sort of macho thing? I started posting here using my full name but noted that most people didn't so I just adopted what looked like the accepted convention.

Of course you know who I am.

And by the way, I really doubt that the iProvo/Utopia are IPTV. If you do IPTV you don't need fiber and if you do fiber you don't need IPTV. Perhaps you are confusing VOD and IPTV. They are separate issues.

David Lieberman


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Posted by Jeff Hoel
a resident of Midtown
on Mar 16, 2007 at 3:14 pm

RS,

Details of a contract with 180 Connect haven't been negotiated yet, but, yes, city ownership in 30 years is their first-cut proposal. That wouldn't be my first choice, but Council didn't like my first choice.

If you worry that the system would be totally obsolete in 30 years, I would think you'd also be worried that it would be providing less than satisfactory services well before then. Whatever.

I don't buy your premise that one can't know anything about what telecom will be like in 30 years. In 30 years, we'll still need to have telecom. I think that over the years speeds will grow exponentially but not so fast that singlemode fiber can't handle them. IF in 30 years the fiber infrastructure were the only part of the FTTH system that wasn't obsolete, that would still be of considerable value. If in 30 years another wired medium had obsoleted fiber, I'd be very surprised. I haven't heard of any futurists predicting it. Some people seem to think that wireless might eventually be good enough that eventually it wouldn't make economic sense to install any more fiber, but I don't think even they would say that the fiber already installed would be obsolete. In order for wireless to be even remotely competitive on performance, it would have to start doing all the things you have to do to have a one-on-one conversation with someone while in a crowded football stadium: stand quite close to each other, talk in each other's direction, listen in each other's direction, filter out considerable extraneous noise, and be willing to repeat yourself when necessary. Can wireless do all that in 30 years? We'll see. It's pretty clear that standing in line to use the stadium's PA system isn't going to cut it.

When optronics becomes obsolete, I think it should be replaced and the business plan should plan for it. So I don't think we have to know exactly what optronics will be like in 30 years.

In 1977 there was no commercial Internet, but there was an ARPANET ( <Web Link> ) (originally conceived in 1962), email had been around since 1971 (spam wasn't invented until 1978), home computers made their debut in 1977 (according to this source) ( <Web Link> ), and Moore's Law had been around since 1965. So the future possibility of a commercial Internet wasn't entirely unpredictible.

Anyhow, the city's 2002 FTTH Business Case and 2004 FTTH Business Plan thought that citywide FTTH would pay for itself in something like 13 years, even if the only services it offered were traditional TV, phone, and Internet. So I wish we were having a discussion about whether the system would be obsolete in 13 years.

I would like to think that Palo Altans are unwilling to be mesmerized by allegations of the utter unknowability of the future. As Alan Kay said, in 1971, when he was working in Palo Alto at Xerox PARC, "The best way to predict the future is to invent it." ( <Web Link> )

Fort Wayne,IN, got Verizon to implement (obsolete) FTTH by proposing "tax incentives, an investment partnership and an urban investment strategy." ( <Web Link> ) (So it wasn't exactly without risk or cost to the city.)

In 2004, Marvin Lee challenged Palo Altans to pledge to pay $1200 to the city in exchange for the city's connecting them to FTTH. (He used an old and inaccurate city estimate of how much it would cost.) I sent in my pledge. I also proposed as an alternative that the city specify how much the pledge should be, based on a better estimate of the cost to connect a home plus the cost to pass a few homes, to cover the cost of passing homes that didn't want to connect initially. (I proposed a scheme whereby the early adopters got back the money they invested in passing other homes as those homes got around to connecting.) The city didn't go for either of these proposals. One problem with this kind of pledging was that, since the city was unwilling to describe the FTTH services residents would get, it would have been hard to talk residents into connecting on faith.


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Posted by RS Sampson
a resident of Midtown
on Mar 16, 2007 at 3:53 pm

Jeff Hoel:

"I would like to think that Palo Altans are unwilling to be mesmerized by allegations of the utter unknowability of the future. As Alan Kay said, in 1971, when he was working in Palo Alto at Xerox PARC, "The best way to predict the future is to invent it."

Well if Al Gore can invent the Internet, I guess it's not too far a stretch to think that Dena Mossar and Frank Benest can invent the future.


"Fort Wayne,IN, got Verizon to implement (obsolete) FTTH by proposing "tax incentives, an investment partnership and an urban investment strategy." ( ) (So it wasn't exactly without risk or cost to the city.)"

So Fort Wayne wastes (or 'risks') its money? That means we should copy them and waste ours? Sorry I don't get it.

"Anyhow, the city's 2002 FTTH Business Case and 2004 FTTH Business Plan thought that citywide FTTH would pay for itself in something like 13 years, even if the only services it offered were traditional TV, phone, and Internet. So I wish we were having a discussion about whether the system would be obsolete in 13 years."

So under the proposal, 180 Connect gets us to pay part of a system that they own for 30 years - which pays for itself in 13 years, leaving 17 years of pure gravy for them. I shoulda' bid too! Let's face it: all of these cost and reveue estimates have so much slop in them that nobody knows what the financial structure looks like.

"Palo Alto is behind on its maintenance of streets, according to a report from the City Auditor. When streets aren't maintained in a timely way, it costs much more to fix them later, so timely maintenance not only pleases the public but also saves money. Palo Alto government has to improve so that it gets this right. It's one of Council's "priorities" this year (I think). Foregoing muni FTTH would not hasten this necessary improvement. The money for FTTH would come from a different place than money for streets, so one doesn't interfere with the other."

Well, that's not exactly right. In fact it's dead wrong. The city has limited resources and the bureaucrats have limited attenton spans. In fact at the very meeting where the 180 Connect proposal was discussed, the city staff admitted that even anlyzing the 180 Connect proposal (let alone implementing it) would mean the city would have difficulties in other areas: "The council action will require city staff to postpone or eliminate other projects, City Manager Frank Benest said. He said he will prepare a report to inform the council how its decision will affect other city work."

Palo Alto is having big-time budget problems. Do we really need this distraction right now?











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Posted by Jeff Hoel
a resident of Midtown
on Mar 19, 2007 at 12:29 pm

David,

Thanks for using your full name.

At the 3-6-07 meeting of Palo Altans for Government Effectiveness (PAGE), Palo Alto Weekly publisher Bill Johnson responded to a question about whether posts to Town Square should be allowed to be anonymous by saying that the research showed that if you put too many requirements on posters, they wouldn't post. Then Redwood City's City Manager Ed Everett said, "You'll never form community anonymously."

I think Everett is right. It has nothing to do with being macho.

Some people are more inclined to be polite when they are not anonymous. Some people are more inclined to check their "facts" when they are not anonymous.

Yes, I guessed who you were, but that's not the point. The point is that the community know who you are.

I first met Paul Venturella in 2002 at a conference on FTTH put on by World Wide Packets (WWP), an optronics vendor. (I paid for the airfare and hotel myself.) Paul was then the Director of Telecom at Provo. Since then, I have asked him lots of things about iProvo's system, and he has been happy to answer my questions. When Provo was doing its 300-home FTTH Trial, Paul was skeptical about whether IPTV would work, so he required WWP to provide optronics and fiber infrastructure that could do both IPTV and analog RF TV. WWP complied with an ad-hoc system that wasn't officially in their product line. IPTV worked so well that Provo dropped the analog TV requirement, allowing WWP to use standard products in the citywide system. (Paul recently took a new job as Director of Video Services at MSTAR, one of iProvo's and UTOPIA's retail service providers.)

In 2003, I asked DynamicCity, the company that runs UTOPIA's FTTH system and is supervising building it, what kind of TV they thought was best. They said IPTV was more cost-effective, both initially and in the long run.

iProvo serves as UTOPIA's "headend" for TV; so their IPTV systems are compatible.

Some industry observers have said they think that Project Lightspeed -- with its up-to-24-Mb/s VDSL2 technology -- isn't fast enough to do IPTV, especially HDTV. Of course, AT&T says it is fast enough. ( <Web Link> )

In this article ( ) a pundit suggests that the relatively new MPEG-4 video compression standard is "useless" because you can't do IPTV on DSL even with MPEG-4 and on fiber you can do IPTV even using the older MPEG-2 standard. The article mentions that IPTV takes more bandwidth than is commonly believed, especially for sports programming. (I don't think the pundit really meant that MPEG-4 was totally useless, just that using it wasn't absolutely necessary, so you shouldn't have to pay a huge premium for it.)

I don't understand your claim that if you do fiber you don't need IPTV. On fiber, if you want to do TV at all, you can do it with analog RF TV, IPTV, or both. (Other approaches are technically feasible but not seen in practice.) To do analog RF TV, you need to incur the expense of extra transmitters and receivers, to transmit the analog RF TV signal on a separate optical wavelength. You might also need erbium-doped fiber amplifiers in the system. This extra equipment adds expense. If you used analog RF TV for "basic" TV service, it's likely that most homes would want IPTV for high-end programming, so they'd need a set top box in any case. If all TV services are IP-based, the network can be much simpler.

VOD (video on demand) is easy to implement as an IPTV service. With IPTV, it's easy to assure that people don't watch what they haven't paid to watch.

Look, for the last 5 years, I have been spending at least 20 hours per week on this stuff (that's a guess -- I don't punch a clock). (Maybe I haven't always made the most efficient use of my time.) But of course I make mistakes from time to time, as any human being does, so if you think you've discovered one, please let me know.


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Posted by Jeff Hoel
a resident of Midtown
on Mar 19, 2007 at 12:43 pm

Town Square omitted one of the URLs I tried to provide in a previous post. To find the article, Google "useless & MPEG4 & Davies & broadbandproperties".


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Posted by fred
a resident of Barron Park
on Mar 19, 2007 at 12:54 pm

fred is a registered user.

Good heavens, what a thread this is!

It may be the FTTH is a good idea. It may not. The idea that we would spend a lot of time and energy on it, with basic city services in flux - libraries, police station, street repair, sewar system - as well as issues of tax base, retail development/zoning, and pending capital expenditure for school expansion and other effects of growth -- it seems ill-placed.

How does it happen that a relatively small number of vocal activists can set the agenda for the Council or the School Board? Does that seem appropriate to all of you?


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Posted by Geoff
a resident of Professorville
on Mar 19, 2007 at 1:20 pm

fred, this ties in well with your thread on city governence. The sad truth is that the council (and the school board for that matter) can't say "No" to anyone.

The examples are myriad, as anyone who's perused these threads or observed the city at all knows well.

I am not optimistic that a change in our governmental structure would help as you seem to think. But I guess there's not much harm in trying. HOw much worse can it get after all?


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Posted by Jeff Hoel
a resident of Midtown
on Mar 19, 2007 at 2:43 pm

RS,

As you know, the proposition "if A then B" is true whenever A is false, regardless of whether B is true or false. ( <Web Link> )

Until recently, Dena Mossar thought she had a conflict of interest on FTTH-related issues, so by her own admission she has not thought about these issues. Frank Benest seems to oppose FTTH. (So I don't know why you think either is an appropriate choice for spearheading FTTH.) Recently the possibility arose the Mayor Kishimoto might appoint a few citizen-experts to help staff think about FTTH. That might be helpful if staff were willing to listen.

Stanford engineering professors Marx and Wing were instrumental in bringing municipal electricity to Palo Alto ( <Web Link> ), and perhaps their fields of expertise were helpful. Lewis K. Billings, who was instrumental in bringing muni FTTH to Provo, studied engineering and technology in school. ( <Web Link> )
Joey Durel, who led Lafayette to choose muni FTTH, wasn't a technologist but a businessman. ( <Web Link> )

Perhaps you're right that I shouldn't have talked about "inventing" anything. Municipal FTTH has already been "invented." Instead, how about Thomas Paine's advice: "Lead, follow, or get out of the way"?

I thought my point about Fort Wayne was clear, but let me try again. On 3-14-07, you claimed that if Verizon put in a citywide FTTH system (in any given city), they'd pay for it. I cited an example where that wasn't completely true.

It is impossible for Palo Alto not to take any risks. Re citywide FTTH, implementing the system with a private partner has a risk, implementing the system without a private partner has a risk, and doing nothing has a risk.

I think we should definitely NOT "copy" Fort Wayne by enticing a private company to implement citywide (or less-than-citywide) FTTH (and own it indefinitely) by offering them tax incentives, etc.

Re "I shoulda' bid too," if that's how you feel, why didn't you?

Re distractions, I think the city has to be able to walk and chew gum at the same time.


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Posted by RS Sampson
a resident of Midtown
on Mar 19, 2007 at 3:06 pm

As long as we've reached the silly season in this thread in which we take quotes from the Founders (in context or out) to support our sides, I will take my turn with Thomas Paine:

"That government is best which governs least." Whether our city "Has to be able to walk and chew gum at the same time" or note, ours clearly can't, by its own admission, study fiber and do some of the other things we expect it to do at the same time. We need to be governing less so that which we are doing is done well.

I'm not sure that you understood that my invocation of Mossar and Benest were intended to point out the absurdity of thinking that Palo Alto or anyone in it are going to be inventing the future. I'm not at all sure of the point you mean to make with list of people and their affiliations associated with FTTH in other cities, and the electrical system in Palo Alto.

But Milton Friedman, who used to be at the Hoover Institution at Stanford once said,

"Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property"

Which is why the city's attempt to run a "business", even with a "plan" is problematical, to say the least.

Just existing entails risk. That does not mean it's wise for us all to skydive without taking lessons. Why the city, already in a financially precarious position, should take on the added risk of trying to "run a business" in a competitive market is pretty much beyond my philosophical capacity to understand, no matter how silly the season.



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Posted by David Lieberman
a resident of Professorville
on Mar 19, 2007 at 6:12 pm

And while we are being silly,

Jeff Hoel writes:

"how about Thomas Paine's advice: "Lead, follow, or get out of the way"?

Jeff, can't you even recognize a bogus 20th century misattribution? You saw it on the Internet so it must be genuine?

So here is a bogus quote for you to think about:

"Stop! You are going the wrong way!" Julius Caesar.


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Posted by Anonymous
a resident of Midtown
on Mar 22, 2007 at 8:29 am

There are ways to reduce risk. For instance, when Boeing wants to build a new airliner, it lines up committed customers. When it has enough to reduce the financial exposure, the company launches the design and manufacturing.

The city ran a pilot FTTH project. It knows how much it cost to install on average to a home. It knows how much it cost to run the program. Take those costs, add a percentage, and line up orders. Put a flyer in the monthly utility bills for a few cycles and take commitments to pay the installation and monthly fees when FTTH is installed. When the city receives enough commitments to cover, say half, of the investment, then it should proceed with a greatly reduced risk.

It's likely that a large scale FTTH project might cost less per address. I'm sure future customers will appreciate the lower costs. But the city should not build into future financial commitments lower costs which may not materialize.


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