Dont just stand there--do something!

Feb. 1, 1998

Don`t just stand there--do something!

Stephen M. Hardy

Editor in Chief

[email protected]

Last month, Lightwave hosted a luncheon seminar at a utility show in Tampa, FL. The subject of the seminar was telecommunications opportunities for public utilities, with (naturally) a slant on the role that fiber optics can play to help such opportunities come to fruition. Besides being the charming host, I prepared a case history on how one organization, the City of Palo Alto Utilities (cpau--Palo Alto, CA), decided to enter the telecommunications field. As I think you`ll agree, the cpau provides an excellent model for public utilities to follow.

In May 1995, the Palo Alto city council authorized $135,000 to create and implement a telecommunications strategy that would best serve the citizens and businesses of the community. The resultant study entailed five phases: situation analysis, market analysis, preliminary alternatives assessment, comparative analysis of alternatives, and business plan development. Note the logic of this arrangement. The city first sought to determine where it stood in terms of its inherent ability to enter the telecommunications field, then it performed market research to discover how much opportunity was available, and finally, it examined its telecommunications options for the purpose of deciding which one would best meet its goals. Underpinning this effort was a clearly stated set of objectives: Accelerate the deployment of advanced broadband telecommunications services, decrease costs for these services, ensure the quality of the services, enhance competition among service providers operating in the city, and limit the financial risk to the city.

The city council received a preliminary report after the third phase. The situation analysis had determined that the city possessed valuable rights-of-way and infra- structure via the city`s electric utility, in addition to a favorable regulatory climate. Meanwhile, the market analysis showed that the demand for telecommunications was strong--as great as the electric utility`s current market at the time of the study, and expected to grow to a size equal to the combined markets of the electric and gas utilities by 2002.

Even more interesting was the preliminary discussion of telecommunications alternatives. The preliminary report cited four options:

Lease the city`s existing infrastructure.

Develop a network and lease access to it.

Develop a network and use it to com-

pete directly with other service providers.

Do nothing.

The city council rejected the last option because it would undervalue and underutilize the city`s existing assets and give the council no control over the quality and quantity of services within the city. The direct-competition option also was discarded because of the expense and risk involved. So the city council accepted the preliminary report`s recommendation that the first two options be studied further in the fourth phase.

In the course of this next phase, the city looked at several network options it could choose to build. These included a dark fiber ring, a similar ring with dark fiber extensions to be used by a potential partner, a competitive access provider network (essentially, a fiber-to-the-building approach) for use by a potential partner, and the provider network without a partner. The researchers looked at the risks and rewards for each of these options, as well as the alternative of leasing the current infrastructure to someone else.

The result of the study was the recommendation that the city build a dark fiber ring. This option was considered the best balance of risk and reward, as well as the alternative that most closely met the objectives stated above. Today, the cpau is putting the finishing touches on a 28-mi dark fiber ring that contains anywhere from 144 to 288 strands of singlemode fiber. The city already has two customers--a carrier looking to use the backbone to provide service, and a local business planning to link its facilities via a private network.

As the cpau`s telecommunications manager told me, public utilities are currently in a unique position to make a mark in the telecommunications field by leveraging existing infrastructure, rights-of-way, and core competencies. Each utility must make its own decision, he said, but the worst decision is to do nothing.

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