Broadband Communities

AUG-SEP 2013

BROADBAND COMMUNITIES is the leading source of information on digital and broadband technologies for buildings and communities. Our editorial aims to accelerate the deployment of Fiber-To-The-Home and Fiber-To-The-Premises.

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COMMUNITY BROADBAND Palo Alto Revisited An article on the feasibility of a muncipal FTTH network in Palo Alto, Calif., inspires a follow-up discussion. T he May-June 2013 issue of this magazine featured an article by Stephen Blum, president of Tellus Venture Associates, about Palo Alto's debate over FTTH. In the article, Blum, a consultant to the city, said that even though Palo Alto owned a proftable dark fber network and had successfully operated an FTTH pilot project, it had not yet been able to make a business case for building out fber to the home citywide. Because residents already had above-average Internet access, Blum said, there was not enough demand to justify a user-fnanced buildout, even with revenues from the dark fber network. In addition, no political consensus existed for putting public funds at risk. Blum's analysis prompted a lively debate in the form of letters to the editor, blog postings and comments on the Tellus Venture Associates blog. Excerpted here is a portion of that debate, specifcally between Blum and Christopher Mitchell, director of the Telecommunications as Commons Initiative of the Institute for Local Self-Reliance and a frequent contributor to BroadBand Communities. Original comments are on and Christopher Mitchell: [Te article states] "overall, 79 percent of households would have to pay $3,000 apiece to fully fund FTTP construction costs." Yikes! Cue the foreboding music! Palo Alto has something like 25,000 households. If 20,000 of them paid $3,000, then the city would have $60 million in addition to its present $14 million dark fber reserve – a staggering $74 million of theoretical money that has nothing to do with anything. I know of no network that has been built in this manner. Tis is an absurd measure for whether a network is feasible. Networks are not fnanced in this way, partially because, as the author adroitly notes, it doesn't appear likely to work. Community-owned networks are fnanced using a few common methods, most often revenue bonds issued by the utility. Palo Alto's past studies of this approach refected a desire to avoid that path, and the results of those studies in no way determine whether a city-owned FTTH network is feasible in 2013 given the present assets and environment. 96 | BROADBAND COMMUNITIES | Te user-fnanced model remains a peculiarity and quite possibly will have a role to play in the future (though almost certainly not to fnance the entirety of a system). Palo Alto would be crazy to hinge its decision of whether to invest solely on the feasibility of each homeowner's paying the full connection cost up front. Stephen Blum: My scope of work for the city was narrowly focused because specifc questions were being asked. Mitchell is right in saying the business model being considered – an FTTP buildout based on subscribers opting in and paying a pro-rata share of construction costs – has never been tried. Tat was the point of the study [that Tellus conducted for the city]. We seem to agree that the user-fnanced model is a hard, maybe impossible, business case to make. As Mitchell correctly points out, the numbers are ridiculous. Mitchell: Parts of the article can only be called cable and DSL boosterism – such as repeating | August/september 2013

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