The Palo Alto Fiber to the Home Trial

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					     The Palo Alto
Fiber to the Home Trial

     A Work in Progress

         Ken Poulton
   Palo Alto Fiber Network
• Background
• The Palo Alto Fiber to the Home (FTTH) Trial
   –   Network Plan
   –   Finance
   –   Marketing
   –   Lessons Learned
• Challenges and Opportunities
   – Inexpensive Fiber to the Home
   – Open Networks

          The Setting: Palo Alto
• Mostly affluent
• Adjacent to Stanford University
   – Long-standing emphasis on education
• City-owned utilities (electricity, gas, water)
• High proportion of engineers and other Silicon
  Valley types
• Palo Alto Internet Exchange (PAIX)
• City-owned dark-fiber ring (completed in 1997)

Existing Palo Alto Fiber Ring: Route Map



           The Setting - Problems
• City-owned dark-fiber ring
   – Fell short of (unrealistic) cost recovery goals
• Subscriber-owned local cable TV company
   – Long history of financial problems
   – Being sold to AT&T
• City government
   – Very cautious staff and city council
   – “Process-Rich” (i.e., slow)

    Origins of the Palo Alto FTTH Project

The Naïve Question:
  “Why can‟t I just hook up that fiber to my house?”
                               -- Residents

The Visionary Statement:
  “Fiber to the Home is not a question of if, but when.”
                                -- Brian Reid

          Palo Alto Fiber Network
•   Volunteer organization of FTTH enthusiasts
•   ~200 members
•   ~20 members working actively on FTTH
•   Functions:
     – Education of city staff, city council, the public
     – Providing networking expertise to staff
     – Organizing the political effort
     – Assisting with marketing effort

    Palo Alto Fiber Network Goals
• True high-speed network access for everyone
   – Scalable (user choices and future expansion)
   – Affordable
• Open Network
   – Promote competition
   – Support a variety of services
   – Encourage local content providers and services

• A fiber connection to every building in the city
   – Homes, schools, businesses
                  A Simple Plan
• Build a small trial first
• Focus on a data-only network
• Use inexpensive, proven, off-the-shelf technologies
   – 10/100 Mb/s Ethernet
   – multimode fiber
• City to build and own the network
• Hire an existing ISP for operations

• Cable TV, phone, other services in the long run
   – may be added sooner if they help the economics
            Why Fiber to the Home?
The biggest Internet bottleneck is the Last Mile to the home.
   • Use is growing: More users, more uses, more frequent use.

   • Richer content: graphics, sound, video, bloat-mail.

Fiber can deliver an unbeatable price/performance ratio.
 Data Services in Palo Alto   Medium         Speed (kb/s) Cost $/month
 Telephone Modem              Twisted pair            56            20
 ISDN                         Twisted pair           128            55
 ADSL                         Twisted pair           384            49
 ADSL- Business Grade         Twisted pair           384           125
 Cable Modem                  CATV coax              500            50
 Cable Modem - Premium        CATV coax             1000           200
 T1 (HDSL)                    Twisted pair          1500           900
 Fiber To The Home @10Mb/s    Fiber Optics        10000             70
 Fiber To The Home @100Mb/s   Fiber Optics       100000            180
Consumer-Level Internet Access Technologies vs. Year
Speed per User (bits/sec)

                              10,000,000                                                 xDSL
                                            Per-user limit with                          Cable
                               1,000,000    existing wires                               ADSL

                                        1985      1990      1995   2000    2005   2010

                                                          Year Available
                            Any technology will need considerable new infrastructure
                                 investment to go much beyond 2 Mb/s per user.
                              But only FTTH allows inexpensive further upgrades.             11
Cost of Construction vs. Year of Construction
 Construction cost ($1000s)
                              1200                                Total
                              1000                                Labor
                               800                                Materials
                               600                                Engineering
                               400                                Electronics
                                     Year of Trial Construction

The construction cost factors favor doing it right now.                         12
                       Why Now?
• FTTH construction cost no longer dropping rapidly
   – Electronics now only 5% of system cost for 10 Mb/s
• The market is ready
   – Telephone modems have reached the 56 Kb/s limit
   – Users starting to move to medium-speed (~1 Mb/s) services
• There is a window of opportunity
   – Most attention focused on squeezing out the last dregs from
     existing copper infrastructure
   – FTTH is a natural monopoly - it will be uneconomic to
     duplicate this infrastructure.
       The first provider to build an open Last-Mile fiber
        infrastructure in a given area will be the last for decades
Palo Alto FTTH Trial Topology

     Typical Pole to Home Wiring

Home installation is similar to cable modem but uses fiber.
              FTTH Trial Costs
            10 Mb/s Service to 100 Homes
                                 Engineering Taxes
     Construction Cost              11%       3%
          Estimate:           Electronics               Cables
                                  5%                     35%
  $630 per home passed
 +$830 per home connected
(+$380 for 100 Mb/s)
                                         46%    Total: $350K

              Operations Cost Estimate:
$7/month for physical maintenance
$25-50/month for Internet Access, support, ISP services          16
                                      Per-User Capital Cost
                                      vs. Participation Rate
Cost Per Subscriber ($)

                                                Target for Trial: 24%
                                 10   20   30       40    50     60     70   80   90   100
                                            Participation Rate (%)
What are the Building Blocks of a Network?

• Customers
   – Residential, Commercial, Academic, Civic, Special Interest

• Services
   – e-Mail, Content, Web Hosting, e-Commerce, Education
• Internet Access                                                     Possible
   – Internet Access and Transport

• Network Operations
   – Routing, Traffic Control, Security, Billing, Customer Support
• Physical Infrastructure                                             Monopoly
   – Wiring, Poles, Easements, Splices, Switching Equipment

  Trial              Who Does What?                             City-Wide
  ~100      • Customers                                           5,000-
   homes       – Residential, Commercial, Academic,etc             homes

Any ISP     • Services                                           Any ISP
               – e-Mail, Content, Web Hosting, e-Commerce

 Single     • Internet Access                                   Qualified
  IAP/         – Internet Access and Transport                    IAPs
Network     • Network Operations                                 Network
Operator       – Routing, Security, Billing, Traffic, Support    Operator

  City      • Physical Infrastructure                           City/
               – Cables, Poles, Easements, Switch Sites            Private

For the trial, use a single                           City-wide system will
IAP/Network Operator to be                             be an open network.
cost-effective.                                                           19
     Financial Model For the Trial
• Ownership:
   – City builds and owns the physical network
   – City chooses an ISP to provide operations and services
• City Council‟s Financial Choices:
   – Recover construction costs within 5 years
   – Subscribers commit to repay 2/3 of the cost before
• Resulting Offer to Residents:
   – $1200 installation fee
   – $45/month to city + $25-50/month to ISP
   – 2.5-year commitment to the service
              Marketing Results
• August „98 Survey:
  – A single utility-bill insert and a few ads
  – Yield: a 4% city-wide signup rate in just 4 weeks
    (compared to 4% use of cable modems in 4 years).
  – 19% in two areas with neighbor-to-neighbor campaigns
• September „99 Trial-Area Signup:
  – 2 letters from the city (with ISP rates still not certain)
  – Yield: 9-15% signup rate
• December „99 Trial-Area Signup:
  – Will have ISP rates defined and neighborhood campaign
  – Goal: 24% participation
     Timeline for FTTH in Palo Alto
•   Fiber Ring built                           1997      $2M
•   Begin Trial construction                   Q1 „00   $0.4M
•   Begin Trial operations                     Q3 „00
•   First evaluations                          Q1 „01
•   Decide on a city-wide system               2001
    –   Is FTTH worth doing?
    –   Should the city be involved?
    –   Should private partners be involved?
    –   Can sufficient political will be mustered?
• Deploy city-wide system                       2002    $25M
   Hurdles (and how we passed them)
• Right-of-way ownership
    Have the city be the builder and owner of the network
• Need for fairness among neighborhoods
    Expand the focus from one neighborhood to citywide survey
• Negative, incorrect, initial staff report
    Wrote a technical and budgetary plan using staff numbers
• Council desire for zero financial risk to the city
    Small trial, users commit up front to pay for the system
• Not enough subscribers without firm ISP cost numbers
   Going back to finish signups after ISP signed up

                Lessons Learned
• We found huge grass-roots enthusiasm for FTTH
   – High speed
   – Open network
   – New services
• City ownership is very attractive to residents
• City ownership is scary to city staff and council
   – Educate citizens, city staff and representatives.
   – Advocates must remain engaged with city staff.
• Cities do not run on Internet time

                   Fiber Choice:
  Current Costs vs. Long Term Flexibility
• Lowest cost today:
   – neighborhood switch sites serving ~1000 homes, distances
     up to 2000 meters
   – multimode fiber (cheaper splices and converters)
   – data only (10 Mb/s Ethernet, 100 Mb/s in a few years)
• But we may need single-mode fiber for CATV and
  1000 Mb/s over >500 meters
   – Single-mode splices and media converters add ~$1000 per
     subscriber to the current costs
   – CATV electronics add another ~$1000
           Technical Opportunities
  Taking FTTH From Attractive to Irresistible

• Cheap (~$50) single-mode fiber media converters for
  Ethernet and CATV
• Cheap wave-division multiplexing components
• Pole-mountable, non-air-conditioned switches and
  media converters
   – could be within 500m of homes, so multimode is enough

      Open-Network Challenges
• Technical Implementation
  – No clean solution to multiple-ISP network yet

• Network Business Model
  – So far: Ownership = Control = No competition
  – Opening monopoly networks via regulation ineffective

             Open-Network Paths
• Public Ownership
    Most direct way to ensure an open network
   – Risk to public funds
   – Political battles to get started
• Private Ownership
    Can move more swiftly
    Existing networking expertise
   – No proven model that benefits from maintaining openness
• Public/Private Partnerships
    Could have the best of each
   – No proven models yet                                  28
• FTTH is coming sooner or later; sooner is better.
• Open networks are a major benefit to the public.
   – FTTH is a natural fit for open networks
   – Public vs. private ownership choices
• Room for innovation to make FTTH more competitive.

• We found lots of support for publicly-owned FTTH in
  Palo Alto.
• We hope to demonstrate viability of FTTH in the
  coming year.
                       Thanks to...
• Palo Alto Community Network
   – For starting the discussion
• Brian Reid
   – For vision and inspiration
• Residents of the Community Center Neighborhood
   – For leading the way
• Palo Alto Fiber Network
   – For volunteers supporting FTTH throughout the city
• Palo Alto City Council
   – For funding
• City of Palo Alto Utilities Department
   – For doing the work and taking the heat

•   Palo Alto Fiber Network site:
     –   Major Contributors: Mike Eager, Ken Poulton, Peter Allen
•   City of Palo Alto FTTH site:

•   Slide: “Do U.S. Homes Really Use the Internet?”
     – See for results of a FIND/SVP survey estimates
          and projections. This corresponds to the following government survey:
     –   See for details on the “The Digital Divide, Net II”
         survey released 7/28/98 by the National Telecommunications & Information Administration.
•   Slide: “Why Fiber?”
     – Snapshot from 11/99 of each listed service provider‟s price structures.
•   Slide: ”Palo Alto Fiber Backbone Route Map”
    Slide: “Typical Pole to Home Wiring”
     – Source: City of Palo Alto Utilities
•   Slide: ” FTTH Trial Costs”
    Slide: “Cost of Construction vs. Year of Construction”
     – Source: City of Palo Alto Utilities, „Fiber To The Home Trial Cost Estimates.‟
     – Analysis: Ken Poulton, „Palo Alto Fiber To The Home Trial Technical and Budgetary Report.‟
•   Slide: “What are the Building Blocks of a Network?”
    Slide: “Palo Alto Fiber Network Trial “
     –   Source: Peter Allen
  Palo Alto FTTH Network Phases

• Build the Backbone (1997)                     $2M
• FTTH Trial      (Q3 2000)                     $0.4M
  – Refine cost estimates and design
  – Measure user satisfaction, participation rate
  – Make recommendations for a city-wide system
• City-wide Rollout                             $25M
  – Market competition
  – New services

Consumer-Level Internet Access Technologies vs. Year

             with existing wires

   Any technology will need considerable new infrastructure
        investment to go much beyond 2 Mb/s per user.         33
     But only FTTH allows inexpensive further upgrades.
          Detail of Costs for Services

                                             Speed Wires ISP
Data Services in Palo Alto   Medium          (kb/s) $/mon $/mon
Telephone Modem              Tw isted pair       56     12    20
ISDN                         Tw isted pair      128     35    20
ADSL                         Tw isted pair      384     39    10
ADSL- Business Grade         Tw isted pair      384     39    86
Cable Modem                  CATV coax          500     25    25
Cable Modem - Premium        CATV coax         1000    100   100
T1 (HDSL)                    Tw isted pair     1500    900    -
Fiber To The Home @10Mb/s    Fiber Optics     10000     45    25
Fiber To The Home @100Mb/s   Fiber Optics    100000     90    90

         Expected Results of the Trial

•   Demonstrate that FTTH is practical and pays for itself.
•   Refine the construction and operational cost models .
•   Work out operational details and user support.
•   Measure user satisfaction and willingness to pay.
•   Enable new applications that are currently bandwidth-starved.

• Increase awareness, demand and financial justification for a
  city-wide FTTH system.
• Reduce uncertainties and risks of a city-wide FTTH system.

                 Why Ethernet?
• It‟s the standard - used in most offices in the world
   – 10 Mb/s is the least expensive kind of network now
   – Familiar to all ISPs
• It‟s easy to upgrade later
   – Many companies are creating new Ethernet products
   – 100 Mb/s will be cheap in 3 years, 1000 Mb/s in ~8
• It meets the whole spectrum of data service needs
  - now and into the future
   – 10 Mb/s provides enough speed for >90% of home uses
   – 100 Mb/s option can support virtually any use today
   – Room to grow as demand grows                          36

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