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.
Facilities still not connected
Meanwhile, most of the city’s facilities remain unconnected to the fiber network.
“Time is passing the city by on this,” said Rohit Shukla, president and chief executive of LARTA, formerly the Los Angeles Regional Technology Alliance. Shukla co-authored a report on L.A.’s telecommunications and fiber optic strategy that was commissioned by former Mayor Richard Riordan and City Councilman Mark Ridley-Thomas.
The city has tens of miles more fiber optic cable available for leasing and has even pre-qualified four fiber providers Axxis, MFS Network Technologies, OSP Consultants Inc. and Pacific Bell. But so far, there have been no takers.
“It’s possible that our fiber assets aren’t in the right places geographically for these companies,” Janis said.
He added that the city is exploring other options, such as using wireless technologies to patch facilities into the digital age.
But Shukla said the city is pursuing the wrong strategy altogether. He recommended in the 1998 report that L.A. abandon its quest for its own fiber optic network and instead team up directly with private sector fiber providers to use their networks.
“They’re building a duplicative network, and the private sector has said, ‘We don’t need that network,'” Shukla said.
Then there’s the larger problem of a nationwide fiber glut, which has sharply depressed the fiber market. Right now, Shukla said, there simply isn’t a lot of interest in the private sector in expanding fiber networks that are so underutilized. Western Integrated Networks, he said, is one of the few exceptions, which is why there is so much skepticism about its ability to complete the job.
Janis acknowledged that if the city is unable to leverage its existing fiber network to obtain the private sector funds to expand it, then the city would most likely have to turn to taxpayers to finance the expansion.
“It’s not an urgent situation right now, but with each passing year, we are missing a significant opportunity to make our communications system much more efficient,” Janis said.