Broadband in Palo Alto

1. Broadband in Palo Alto • “It is the thrust of PA-Comnet to learn to use the power of this new technology for productive civic engagement, by tapping the creative energies of citizens and community groups in the Palo Alto area.” • “We hope to find and show a way to build a sustainable local infrastructure to support community dialogue, learning, and engagement that will lead to a revitalization of our community.”

2. Broadband in Palo Alto • The goal: Ubiquitous broadband in Palo Alto • lowest long term cost • optimized use • least risk to public funds • most flexibility in terms of market responsiveness (able-to-compete) • as-near-to-immediate access, for *as many* citizens as possible • i.e….”more communicative capability, for less cost, for *everyone*”

3. Problems with the Uptown Plan • Page 7, last paragraph; page 9, middle – pricing assumptions are without merit in distributed data and media services markets. • Doesn’t take into consideration the pricing realities – relative to elasticity and competitive disruption - of distributed data and media markets • There is no groundswell protest to *replace* Comcast service. (FTTH surveys are too focused on price).

4. Problems with Uptown Plan • Page 10, last paragraph - *accentuates* digital divide! – “able” households are the target for FTTH. • Who will use the bulk of FTTH services first? Certainly, in terms of percentages, it won’t be the ‘low end’ demographic; the plan admits this. • Page 13 – bottom – lack of content control portends a beginning trend in this direction. This, in addition to a rise in new distributed content. (i.e. MTV isn’t in current headend list) • Consider that new, easier-and-cheaper-to-produce video and wireless content is changing media and data comsuming patterns

5. Problems with Uptown Plan • Additional Conundrums: • Bundling – CPAU is advised to use bundling as a tactic, however, VoIP may be excluded as a service offering. What happens when ‘data’ gets competitive (recent Federal Court decision re: cable sharing data capacity)? • “Equal or better service at equal or less price, so long as long range capitalization and operations costs are met, even to the point that transfers to the General Fund would be zero in some years.

6. Problems with Uptown Plan • The current Palo Alto FTTH plan appears to be “cable on steroids”. The plan points to video as a ‘savior’, in order to “permit” data services.(e.g., Bob Moss: “Any system that can't provide lots of video capacity is DOA competitively”) • Assumptions don’t include forward risks (i.e., intense competition leading to price disruption, wireless developments, store-and-forward content models, consumer behavior, price elasticity of demand, etc.). • Makes a too-simple case for “better price and service” in a competitive sector that will require a utilities to act very differently than they currently do. In this sector, CPAU must learn to operate more like a private company. (“Novel governance?” – Craig McAllister) • Most immediate benefits accrue to Palo Alto’s higher-end demographic, and marginalizes others; this *doesn’t*, and *shouldn’t*, have to be the case.

7. Problems with Uptown Plan • Uptown’s research focuses on what people *say* they want to do, rather than what they *actually do* • Opportunity costs should be made clear in *any* municipal business case that requires spending public money. They are not in the plan. • Costs for limited development estimated at $9M-$12M. There is too much ‘slop’ in the plan (per Bob Moss). (i.e. $40M current projection). This indicates a lack of solid forward planning and fiscal discipline. • Ignores possibilities for scaled and/or hybrid deployment.

8. FTTH: A solution looking for a problem? • FTTH will realize as a high-priced cable/VOD deployment that is *way* ahead of the market. As currently construed, it’s “Cable Co-Op in glass clothing”. • Deploys when deployment costs are too high (why not wait a few years?) • Will be most heavily used by the upper-end demographic in Palo Alto.

9. Financing: Corporate Stakeholders? • Stanford University: 5,000+ • Hewlett Packard Co.: 5,000+ • Space Systems/LORAL, Inc.: 3,000 - 5,000 • Varian Associates: 1,500 - 2,000 • Palo Alto Unified School District: 1,636 • Alza Corp: 1,500+ • Palo Alto Medical Foundation: 1,500 • Roche Bioscience (formerly Syntex Corp.): 1,000 - 1,500 • Veterans Affairs Palo Alto Health Care Systems: 1000+ • Stanford University Medical Center/Hospital: 750 - 1000

10. Financing:Private Placement? • Estimated mean household income in 2000: $103,700* (* Source: "Projections `98" Association of Bay Area Governments) • $40M needed • 40 people - $1M@ • 80 people - $500K@ • 160 people - $250K @ • *********************** • 320 people - $125K @ • ************************ • 640 people - $62, 500K @ • *********************** • 1080 people - $31,250 @ • 2160 people - $15,625 @ • 4320 people - $7663.00 @ • Etc. • Partners?: HP, Wilson, Sonsini, Stanford, etc.

11. Hybrid: FTTH/Wireless • Roll out limited, scaled FTTC, or FTTN, with *required* (beginning with city-core), high-speed, fixed wireless network. • Deploy fixed wireless network first, and follow with FTTC/FTTN only as neighborhoods demand it, *and* deployment costs have dropped. We can have our cake (data) and eat it (cable) too. • Utilize what we have, as per Craig McAllister's ideas about networks in community. Learn from that, and grow from there.

12. Hybrid: FTTH/Wireless • High speed wireless install (coincidental with limited fiber deployment) would • Prove demand for data/phone, and more importantly, broadband. • Give *all* Palo Altans an *immediate* chance to participate in data/phone services. • Give CPAU an opportunity to find out how broadband ‘works’ in Palo Alto, and organically grow operational processes. • Make FTTH an ultimately more flexible, and adaptable entity. • Create a wireless infrastructure that could serve many immediate communication needs, serving many, cheaply, with no truck rolls.

13. Some ideas: Bob Moss • " The existing fiber ring cost about $2 million to add fiber to the existing loop.  Another $3 to 4 million would provide enough added fiber and nodes to allow a contractor to start installing home connections at relatively low added cost.  That is the best model for getting a FTTH system up and running.“ • "Second, the $35 million estimate is for a full buildout with fiber to everyone.  That also won't happen since some people just won't want the broadband connection.    Actually connecting fiber to each home will cost $700 - $1100 more, depending in how far the home is from the node.  I don't figure those costs because it's such a variable.“ • "Incremental FTTH attachments…Put in fiber nodes for every 10 or 50 or 100 homes.  Then make the last few feet connections when someone asks for the service.  Charge a modest connection fee so that people won't ask for it if they really aren't interested."

14. Some ideas: Craig McAllister • “You buy what you need when you know why you need it, not because its said to be available, and you can replace it later when you know more…” • “…Just because something can be done doesn't always justify that it should be done.    Otherwise its buying into a certain cost, but not a certain benefit.  Its actually more practical as a general solution to meter the growth as a function of DEMAND (when enough is there, then open bids to competitive suppliers to obtain lower costs and faster breakevens for the users ---- let the suppliers bid a price on their internal economics, NOT what the market will bear).”  • “Novel governance?” 

15. Hybrid and/or better broadband: How? • Municipal incentives that permit wireless deployment by private vendors. • Take advantage of what’s already here (i.e. LocalNet’s. Telophase, etc. model – or combination thereof). • Cooperative, creative funding with local (and/or other) stakeholders. Involve local corporations, schools, etc. • A straightforward municipal wireless build, from the center, out. Build a scaleable network, and learn how to use it. Simultaneously, or slowly follow with FTTC/FTTN/FTTH deployments. • When is the time right? When Palo Altans, made aware of what FTTH can deliver, with all opportunity costs and risks better understood, can *vote* on the proposition to have FTTH deployed. If presented at the right time, with low risk financing and a rational business case that can be sold, it will win.