Ars Technica, November 8, 2013
Los Angeles wants to bring fiber-based broadband to all of its residents and businesses and build a citywide Wi-Fi network at the same time. The best part for LA is that the buildout won’t cost the city a dime. Free broadband for all, and gigabit for those who can afford it.
That’s because LA is going to issue an RFP (request for proposal) asking vendors to build out the network themselves at an estimated cost of $3 billion to $5 billion. Despite the vendor bearing that cost, it would also be required to make the network open to any other service provider on a wholesale basis. Longtime watchers of the broadband industry say Los Angeles seems to be asking for the impossible.
Feld’s views were echoed by Christopher Mitchell, director of the Telecommunications as Commons Initiative at the Institute for Local Self-Reliance. “I was looking back over the LA thing to make sure I didn’t miss anything. It’s kind of a mystery to me,” he said. “As I understand California law at this point, LA would be asking someone to do something that they could do now. LA doesn’t appear to be giving them any specific inducement to do so. And a lot of providers, if they were going to do this they would just pick a part of LA and do it there. There’s no reason they would choose to do it everywhere.”
The offer of a contract to provide data center hosting and other services to LA isn’t enough to lure a vendor to build out the whole fiber network, Mitchell said.
One more realistic, albeit slower, approach LA could take is to install fiber or conduit (essentially a placeholder that makes it easier to install fiber in the future) each time the city rips up the road for another project.
“If you’re already digging up the streets to fix the road or put in water pipes, the cost of adding conduit and/or fiber can be about 1 percent of that project cost, so it’s incredibly affordable,” Mitchell said. “Santa Monica has done this over a period of more than 10 years, and they’ve built a substantial network.”
Just how much fiber does Los Angeles have already? Blumenfield said it’s not clear. “DWP [LA’s Department of Water and Power] has a fair amount of fiber in the ground, some of the research institutions have fiber in the ground, the movie studios have some fiber. I don’t know, frankly, if anybody has done a complete catalog of what’s out there.”
Feld and Mitchell wondered if more details on LA’s current fiber would be available once the RFP is issued, but it doesn’t appear that this will be the case. “The opening RFP is going to be pretty broad; it’s going to come out in the next couple of weeks,” Blumenfield said.
Citywide fiber rollouts have been achieved elsewhere in the US, if not in metro areas the size of LA. EPB, the community-owned electric utility in Chattanooga, Tennessee, started building a fiber network in 2008, served its first fiber Internet customers in 2009, and had the whole network done by 2011.
Installing 8,000 miles of fiber optics cost about $97 million, EPB communications VP Danna Bailey told Ars. The Internet service, which has 60,000 customers out of a potential 170,000 homes and businesses, offers 100Mbps connections for $57.99 a month and gigabit connections for $69.99 a month. TV and phone service are offered as well. The network spans Chattanooga and the surrounding rural areas.
It’s already turning a profit. “It absolutely has paid for itself and is putting money back into our electric system as well,” EPB Chief Operating Officer David Wade said. “This year our fiber communications portion of the company will probably put about $20 million back into our electric system.”
EPB modernized its electric system with 170,000 smart meters at the same time that it installed fiber.
“I think we would have welcomed the incumbents to come into town and to have done some of this work, but frankly no one was interested in doing it,” Bailey said. After the network launched, incumbents Comcast and AT&T finally started upgrading their services, EPB officials said. The project thus benefited nearly everyone, not just people who signed up for EPB Internet service.
It would be easy to conclude that LA should follow a Chattanooga model, building out the network itself. Mitchell said that this would provide the city the advantage of having greater control over the quality of service for one of its most important assets.
With 3.5 million residents, LA is very different from Chattanooga, however. The huge city may well be able to entice vendors to build something, if not something as ambitious as what the planned RFP proposes.
For EPB’s part, Bailey said, “we are very excited that LA is looking into building a fiber-to-the-home system.”
An “opening gambit?”
We’ll find out soon enough whether broadband companies will submit bids to LA. Mitchell speculated that LA’s RFP is “an opening gambit to see how the industry responds.”
“I understand, big cities simply don’t want to do something if they don’t have to, and I think some big cities haven’t understood they have to get involved to a greater extent,” Mitchell said.
Feld said the proposal seems more like LA is “laying out their priorities and agenda rather than a serious RFP.”
“The cities that have fiber have funded it themselves,” he said. “The typical city experience, when they want to do a commercial fiber network and can’t attract FiOS or something like that, is they put together a municipal corporation and fund it themselves through a bond offering or something. So the city becomes the ISP.”