When L.A. city officials cut their landmark cable franchise agreement last month with fiber optic company Western Integrated Networks, it marked a major step in their long-running attempt to bring competition to L.A.'s cable market. But they also hope the Western Integrated deal will bring new life to the city's long-stalled effort to expand its own fiber optic network.

To help jump-start the network, L.A. negotiators got Western Integrated to agree to hook up selected facilities in specific cable franchise zones to its citywide network.

"It provides a big boost for expansion of the city's network," said Paul Janis, assistant general manager of the Information Technology Agency.

Specifically, the deal calls for Western Integrated to provide four fiber optic wires to each designated city facility. That fiber is to be laid simultaneously with Western Integrated's other work in each of the 15 cable franchise zones so as to minimize the disruption. L.A. also has the option to require Western Integrated to lay additional fiber in certain areas for the exclusive use of the city.

For years, Los Angeles has been seeking private sector investments in its fledgling fiber network that surrounds some facilities. With ever-increasing needs for data storage and transfer, city officials want to link up all facilities with fiber optic cables and thus reduce the need for duplicative voice, video and data transmission wires.

"With every facility hooked up to fiber, we estimate we could save $8 million a year in telecommunications costs," Janis said.

Avoiding use of tax dollars

Yet officials have been reluctant to commit taxpayer money to the effort, which could run into the hundreds of millions of dollars. Instead, since the mid-1990s, they have tried to convince private sector fiber providers to fund the effort, either through leasing existing parts of the network or through agreements like that just reached with Western Integrated.

The strategy has proved painfully slow. Besides the Western Integrated agreement, there has been only one lease of the city's network: a small 15-mile stretch from downtown to the harbor area leased to WorldCom Inc.'s MCI group operating subsidiary in February for a total of $950,000 over the next five years. Half of those funds are to be plowed back into expanding other parts of the city network, which translates into an investment of merely $95,000 a year.

Furthermore, there is considerable skepticism about Western Integrated Networks' financial ability to complete what it committed to in its franchise contract. It only has $850 million in available funds to begin a job estimated to cost around $2 billion. If further financing doesn't come through and Western Integrated is forced to drop its fiber program, the company has agreed to pay the city $29 million. However, most of that money would be earmarked for fixing any street cuts left unfinished; expanding the fiber optic network is a much lower priority.

Prev

For reprint and licensing requests for this article, CLICK HERE.