Palo Alto Eyes Own Fiber-to-Home Plan

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A municipally built fiber-to-the-home project is
circulating in Palo Alto, Calif., that would put the city in competition with major
telephone companies, data-delivery firms and even its own cable company.

Even though the proposal has not had a public airing before
the City Council, the project is already generating opposition in the telecommunications
community.

A letter circulating from one executive from Pacific Bell,
which is now a part of SBC Communications Inc., branded the concept "not financially
viable."

Pacific Bell external director Randy Okamura added,
"Cities should not compete with their citizens," noting that a fiber ring
previously constructed by the city for commercial use is not meeting its payback targets.

Palo Alto -- home to Stanford University and on the edge of
Silicon Valley -- is not without data options.

PacBell and a smaller firm, Covad Communications Co., both
offer digital subscriber lines. The municipally owned cable operator, the Cable Co-Op of
Palo Alto, markets cable modems. And RCN Corp. intends to deliver voice and data to the
community.

Assistant city manager Emily Harrison said two FTTH options
-- prompted by a community panel's review -- are in the hopper.

City Council members will decide whether to approve an FTTH
trial of about 60 to 75 homes in one neighborhood, at a cost of about $400,000, which will
provide the informational basis for a request for proposals; or to proceed directly to an
RFP for an FTTH project throughout the city at a cost of $25 million to $30 million.

While engineers consider sending fiber all the way to the
home to be "gold-plating" the last mile, the city's advisory group believes
that data use is changing, and that the need for a "fatter pipe" into homes will
intensify in the near term.

Harrison confirmed Okamura's assertion that the
city's $12 million commercial fiber ring is behind schedule financially. After five
years, it has four commercial customers. She said the project had one employee to manage
and market the service. The city may have also been "too aggressive" with its
pricing, she conceded.

As for competition with the city's own cable company,
"The Co-Op is not precluded from responding to the RFP," Harrison said.

Calls to the cable operation were not returned.

The proposal will be discussed at the council's April
5 meeting.

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