The meeting was called to order by Mary Jo Levy at 7:38 AM. We began with a brief report from Richard Adler and Marvin Lee on the meeting last Wed. Sponsored by Joe Villareal to discuss the future operations and functions of PA-Comnet. Margaret Cooley summarized the proposed 4-part structure. The details are on the home page. The areas of responsibility would be administrative, advocacy, sponsorship, and resources.
Jay Thorwaldson introduced Carol Jansen who formerly was Manager of Economic Development for Palo Alto, and now is a consultant after retiring from the City. She described her experience setting up an economic development operation for Palo Alto, and defining what the office should do, determining what are the features of Palo Alto that make it special and desirable to draw economic development. There was no precedent so she had to figure out what to do as she went along. It was clear that the high level of computer literacy, high tech. companies, the university, educated residents, community activism and high level of community services provided something unique. Former city manager Bill Zaner suggested marketing the B cable from Cable Co-op that had never been used. It had been installed as part of the original franchise agreement but not activated for a number of reasons. She went to various organizations and spoke to them about that and other advantages of moving business into Palo Alto. Finally DEC asked about using the B cable to connect 5 buildings they occupied downtown.. That didn't work out because of various technical issues, concerns about confidentiality, etc. Finally it became clear that the City had capacity in conduits available and could provide the facility for DEC to tie the buildings together. In comparison Pacific Bell wanted $250,000 for installation plus $12,000/month rent to do the connection. Palo Alto charged $6000/year and about $50,000 total for installation. In return DEC offered to make Palo Alto the first city on the Internet.
There was no real understanding or appreciation of the importance of this by staff and council. The repercussions of this connection to the Internet were huge. There were 900 hits on the site the first hour that it was active. The Governor announced it before the Council knew that any of it was happening. The mayor was informed of the Governor's announcement shortly before it was made and rushed to participate in the event. One of the first hits on the site was the mayor of Sunnyvale asking How did you do this before us? Carol hired a Stanford student to prepare the report on exploring how Palo Alto might use existing conduit and/or other Utilities Department capabilities to provide telecommunications infrastructure and/or service throughout the city. The result was a presentation to the City Council recommending hiring consultants to explore possibilities and cost effectiveness. Other departments weren't interested in the topic or were unclear on the concept. The former Assistant City Manager, Bernie Strojny, was most aware of the advantages of being connected to the Internet and helped facilitate things.
Staff's goal is to be able to answer any questions before items are brought to Council, even if the answers aren't fully complete. There was a lack of understanding and ability to explain the topic of presence on the Internet. They had little appreciation of the future or even present value of Internet connections. Therefore they were uncomfortable bringing it to the Council. Consider the difficulty of trying to tell public officials about the future impact and financial return from TV in 1938 when it first was demonstrated to the public. Imagine telling them that in 60 years advertisers would pay $1.5 million for a minute of advertising during the Super Bowl. The present Council also doesn't have a real understanding or vision of what this Internet and high speed access is and how the city can be involved usefully.
Several years ago there was a proposal for a public relations RFP to market the city to prospective commercial investors, with little Council direction on the subject. It was written by the City Clerk's office and was very general and non-specific. This resulted in a disparate group of responses costing from $18,000 to $80,000 and with a wide range of activities. The RFP for communications can end up the same way unless the council and staff have a clear idea of what they want and what the city role will be in the longer term.
Private sector money and push are needed to establish a comprehensive data network. The $40/month rate spoken of for data services isn't going to do it. Also the City doesn't want to put any money into operating or upgrading such a system. They are very reluctant to invest in anything that they don't understand fully. Palo Alto is small so use of the fiber ring for data services is more doable in the limited area, but even with all the other cities joining, there still are only 56,000 locations to serve. Stanford isn't a big market for these services because they have their own very extensive advanced fiber ring.
There are big players here like DEC, H-P, Sun, etc. They can provide the capital and build the infrastructure, but they don't want to get involved with programming, deciding who gets how many channels, what's carried, etc. Palo Alto can become a KQED equivalent - we have the talent, resources and ideas that can create such a system. Currently the cable system has suffered from many problems over the years and developed a stigma that has created problems with the council partnering with Cable Co-op. The city decided not to provide the cable service itself in the 1980s, but it didn't want big outsiders coming in and running things ignoring community desires. Things are changing dramatically now and that reluctance to deal with big outside players may not be true in the future.
Jay Thorwaldson said we're interested in having the technology serve the people and the community, not vice versa. On the issue of market forces we haven't seen anyone who is willing to use the City's fiber ring that also is willing to market high speed data services to the whole town yet. How can we share the PA-Comnet vision of providing high speed services to all the community? How and who do we approach to say it isn't enough to just serve businesses, we want everyone to be served. Whom do we speak to at City Hall?
Carol said the service won't come from government., it has to be provided by private industry. There really are no visionaries on the topic at City Hall. Brian Reid at DEC is such a visionary, but with the sale of DEC to Compaq it's not sure what role DEC can play. Compaq isn't in the kind of data-handling business that DEC has been. Supposedly Compaq wants to keep that capability and maybe expand it, but no one really knows.
Stan Smith asked about the political issues of limiting advanced communications only to the city of Palo Alto. Joe Villareal said extending data services elsewhere was a Cable Co-op issue. Bob Moss said it was a very desirable goal to provide service to other areas such as East Palo Alto and Menlo Park. Left to themselves it will be years before those areas are served. Jay said it was never PA-comnet's policy that he could recall to restrict its interests to providing high speed Internet access just to Palo Alto City boundaries.
Carol said it was difficult to put a general service area together because Palo Alto city officials only can address Palo Alto needs, desires and support. Another problem is how do we get all of the interested parties to co-operate. Menlo Park and East Palo Alto have sued and been sued by Palo Alto over various issues in the past few years. It is hard to get 9 council members to agree on creating a telecommunications systems by working with nearby communities. Palo Alto has the potential to be a leader in this field, but it's a slim opportunity, probably only good for a year or 18 months.
Jay asked how do we wire homes for advanced data services so they can do what we do for major businesses on Page Mill Road? If we deliver data everywhere, there will be many Page Mill Roads all over town in homes. How do we deliver these services while avoiding having corporations push their own interests in preference to those of the community?
Carol said that we really need an industry mentor to convince council members about the advantages of such a system, and must provide convincing arguments to show the advantages of the universal system for the entire community.
Carol said that the bidders to operate and lease the fiber will be providers who service or want to service the area now, and will want Palo Alto contributions also. The City can't afford to put in the infrastructure that's needed and desired by themselves so they want public participation. Other bidders likely will be small outfits that will offer some of the services but will demand city financing of some of them. The model for data services doesn't include high speed to all homes for many possible bidders. She doesn't expect the RFP to result in the kind of replies that are hoped for. There isn't a clear Council direction on this topic.
A question was asked of Jay and Carol, how many local residents have computers or Internet access? Van Heimke estimated previously that 80% have computers in their homes. Jay said that Stanford Health Services surveyed their patients and found that 65% had e-mail as of 2 years ago.
Carol said there are no leaders on the council or among staff on the communications issue. There needs to be a council member as champion of the universal access to the Internet and high speed data. If Palo Alto doesn't take the reins and move forward now it won't be the leader in the future and the window of opportunity to retain or grow the lead is small. This is an extraordinary opportunity, with enormous potential, but in a year or 18 months Palo Alto no longer will be a leader if we don't act.
At 8:24 we thanked Carol and turned to the next speaker. Stan Smith introduced Seth Fearey to discuss the Cable Co-op proposal for partnering with the cities and providing high speed data services to everyone. Seth is secretary of the Cable Co-op board and works in high tech. He discussed what the Silicon Valley Communications Authority (SVCA) proposal from Cable Co-op is and offered to answer questions. The sale of all Cable Co-op assets to the new JPA cities using revenue bonds will provide a locally owned and operated communications facility. PA-comnet is important to the task of getting high speed 2-way Internet access for everyone. Their support is important to help form the functional goals, and define the requirements of the system. Support for some type of joint powers arrangement is needed. Seth asked how many of the attendees had home businesses. About 7 of the 17 present have home businesses, about 4 are cable subscribers, 2 already have cable modems. This is the kind of group that would be served by high speed 2-way access. Copies of the proposal to form SVCA which were given to council members and staff were circulated.
Cable Co-op started out with lots of expensive debt, but rates now are much lower and this is a good time to refinance. A major goal is to restructure the present financing. Solomon Smith Barony came up with a proposal for the JPA including schools to issue revenue bonds which would not be obligations of the cities or other organizations.
Marvin Lee asked if other means of financing debt reduction and system buildup are possible.
Seth said the proposal given to the cities is what is being pursued now. The plan is for a 5-year management contract, but the JPA can chose another manager, or fire Cable Co-op after 5 years or even sooner. The city will not be at risk and the bonds will not have any impact on their credit rating because they will be revenue bonds with no city obligations. Need for the JPA is to have a governmental agency to actually issue the bonds.
Jay asked about the issue of exclusivity. The articles in the papers saying that if the deal went through other potential fiber users would be prohibited from using the City fiber apparently were based on comments made by Mayor Rosenbaum. He seldom is wrong, so are the stories untrue? Might not there be some restrictions requiring exclusivity from those issuing the bonds in order to protect the revenue behind the bonds?
Bob and Seth said exclusivity on the fiber for Cable Co-op has never been discussed or suggested by the Cable Co-op board, staff, or any of their advisors. In fact the existing cable franchise is non-exclusive. There are 3 franchises awarded in the area, 1 of which has never been used. There is no truth to the stories as far as anyone knows. It is possible that the bond issuers will have a non-compete clause, but that has not been discussed or requested by anyone involved with the SVCA proposal.
Jay said he would really be interested in knowing that, as that will have a major impact on how people should perceive the Cable Co-op proposal. Seth said he would check into it further.
Seth gave plans for expansion with the refinancing. There will be more video channels available, and a wider variety of specialized services. For data it will expand capacity from serving 2 - 4000 users with high speed data to the ability to serve 16-20,000 users. It also keeps ownership, control, and profits in the community. MPAC and public access will be retained or even expanded. Excess revenue would be available to the JPA members for any desired purpose. Loan payments will rise initially, then level. Revenues will continue to grow, so a significant surplus is projected as shown in the chart in the proposal. First priority for use of the revenue is more capital investment to grow and expand the plant and data capacity. Next priority is to pay off the bonds, third is to put cash back into the community for schools, city operations, public access, etc. It's good for the whole community, and we want your support. Stan asked about plant upgrades, why do we need future spending for upgrades?
Seth said initially it will be to tie into the fiber ring, and to expand the fiber system outside of Palo Alto. The B cable will be activated to add capacity.
Paul Pease asked about capacity on the system, especially 2-way high speed data .
The system is 2-way now with high speed capability over coax, not equal speed in both directions, but it can be done. Ratio now is about 5:1 down vs. up for residential service, similar to T-1.
Jay said it is important to have the high-speed access both ways, particularly with the growing potential for telecommuting and home business operation based on the Internet. He has always wished Cable Co-op well as a locally owned television provider, but doesn't want to see a situation where going for "better than we have now" precludes getting the best system possible? He said Palo Alto, as the New York Times Story showed, is in a world leadership position now, but within a year or so it could lose that position if it doesn't make the right decisions now.
Seth said the technology constantly changes. The best approach is to get what gives the best return on investment now. Future proofing is the dark conduit. Put fiber in whenever and wherever here is a chance. Then the capacity is there and it can be used as needed. The electronics can be improved and upgraded as technology advances. Sunnyvale does this now.
Who will decide how the money is spent? SVCA will decide, and the structure of SVCA isn't determined yet. It will be a political process and will depend on how it is structured. The form of SVCA isn't set - it was left open intentionally to let the cities structure it the way they want.
Hank appealed for better use of the net server based on recent posts. Please try to filter the comments sent to all PA-comnet members. Use it for the intended purpose.
Adjourned the meeting at 8:55AM
Next meeting will be 7:30 AM at Terman Library, Mar. 4. We will try to get Councilman Gary Fazzino as the speaker.