March 23, 1999

A TALE OF TWO CITIES GOING ONLINE

by Andy Oram
American Reporter Correspondent

CAMBRIDGE, MASS.—In most cities one finds people who want fast Internet access, and many cities are leveraging municipal electric utilities or other resources to build their own data networks. One can understand the impulse to build in small towns that don’t show up on the business plans of telephone or cable companies. But Palo Alto, California? The nerve center of Silicon Valley, home of Sun Microsystems (whose computers are said to serve up much of the Internet’s content), a city with three major providers of telecommunications capacity and four smaller competitors?

Palo Alto is not content to wait for private enterprise to offer high-speed data access. Its appetite is too great. Its utilities department released a report late last year regretting that “Pacific Bell has substantially scaled back its original upgrade plans.” The other large provider of telephone cables to large businesses, Metropolitan Fiber Systems, doesn’t currently offer residential service and “it is not known if they will choose to do so.”

In most affluent communities, cable modems offer formidable competition to telephone lines in the area of data access. But Palo Alto is having bad luck there: its cable company, Cable Co-op, fell into serious debt and has no resources to even consider a major expansion. In fact, it is looking more and more like a target for a take-over.

So the city is going broadband on its own. In 1996 and 1997, it built a fiber ring. But this was just a backbone—a relatively small set of connections that are cost-effective only for expensive, high-bandwidth access. Therefore, its only customers have been a few large businesses. The city is now considering a more extensive network that would be economical for residences to hook up to.

When one examines the city’s business plans, a residential network seems a risky investment. The fiber backbone cost 1.9 million dollars and has earned only $300,000 so far.

I think that’s a pretty good return for just a year and a half of operation, but it leaves the utilities advisory commission a bit worried. The city planned to recoup all investment within five years, and growth would have to increase by $300,000 each year to meet that goal. (Still, the committee’s report stresses the positive: “staff continues to believe that the fiber backbone was a good decision and that it will meet its financial goals.”)

To make full use of the largely unexploited fiber, residences have to be brought online. That shouldn’t be hard with a population that works in high-tech and is used to screens at the office that repaint themselves instantly. The city is considering a fiber-to-the-home trial in a small area, but there is disagreement as to whether it would be financially feasible. Proponents have organized into a group called Palo Alto Fiber Network.

Pacific Bell, of course, deplores competition from the city, pointing out that the city is also a regulator and thus has unfair access to key telco planning information (such as which neighborhoods the company wants to expand into). But aside from corporate turf-watching, many people would question an investment in telecommunications infrastructure, at least in a community where the median home value is $457,800. Why should governments invest in what is essentially a cheaper or slightly faster way to get a service that all its residents could get from private sources?

Indeed, one participant in the debate believes the reluctance to build a network is less financial than political. According to Brian Reid, a proponent of the network, the city council would be embarrassed to fund a gold-plated service for its residents when a huge population of the dispossessed live across the county border in East Palo Alto.

East Palo Alto is almost an exact complement to its better-known neighbor, the clay mold that nestles against the finely glazed Palo Alto glass. According to the November 1998 issue of Metropolitan Magazine, 13% of East Palo Alto residents are unemployed and 80% of families receive public assistance. While Palo Alto is 92% White or Asian, East Palo Alto is 87% Black and Hispanic (with a growing number of Latin American immigrants). The median income per capita there, according to Reid, is $6000.

Reid suggests that the Palo Alto city council might be willing to fund a plan that wires surrounding communities, but this is prevented by California law. Of course, I believe it is no coincidence that the working class lives in a different city, even a different county, from successful professionals. Living in the Boston area, I have been well educated in all the fine arts of legal segregation.

East Palo Alto has not been totally abandoned, though. It has a community center called Plugged In, wired first by cable and then by a DSL line donated by Pacific Bell. Executive director Magda Escobar says they offer Internet access from 9:00 in the morning to 9:00 at night. Their services reach all ages: an after-school program for pre-teens, a work program where teenagers get paid for developing Web sites, and a self-directed learning center with 52 workstations for adults.

Plugged In is supported by corporations, foundations, and individuals. Escobar says, “Our mission is to bridge the gap between East Palo Alto and Silicon Valley.” Since most residents of East Palo Alto cannot afford a computer in the home, residential Internet access is not the urgent, citizen-driven “call to action” that it is in Palo Alto—but it is still an important goal.

Does Escobar resent the prospect of a city-funded, high-bandwidth network in Palo Alto? Not at all. She takes no position regarding the debate, and simply says she “applauds their enthusiasm.”

“The political issues for the Palo Alto network are more of a local nature,” says Michael Eager, the President of Palo Alto Fiber Network. “The city is concerned about even a small financial risk in an area where it has little prior experience.” Neither East Palo Alto nor any other city has not been cited as an issue in discussions about fiber to the home.

The Palo Alto plan is far more than a way to invest in a lucrative industry, or even a desire to make Palo Alto real estate more appealing to affluent telecommuters. According to Reid, the question is whether an infrastructure becoming more and more central to social development—a data network—will be able to support the many innovative ideas that people will bring to it. Reid calls the city’s planned network “a publicly available platform for communications possibilities that nobody has thought of yet.”

Reid points out that many utilities have been built by government, while even more have been taken over by government after private companies built them. He believes that government ownership of basic utilities does not close off possibilities, but rather opens them up. “Bicycles were not a serious means of transportation until roads were built for cars. It’s a good thing the bus companies don’t own the roads, because effective bicycles wouldn’t have happened.”

So Palo Alto isn’t just a garden for the overworked and overpaid. The city network plan is worth watching, partly for issues it raises with regard to competition and financial feasibility. Beyond these immediate questions, less privileged communities everywhere may learn from it whether a city can direct its future through a bundle of glass fiber.


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