Los Angeles is about to unleash one of the most ambitious city-led broadband projects to date, with the goal of bringing fiber to all of its 3.5 million residents and all businesses.
Next month, the city plans to issue an RFP (request for proposals) “that would require fiber to be run to every residence, every business, and every government entity within the city limits of Los Angeles,” Los Angeles Information Technology Agency GM Steve Reneker told Ars today. The City Council this morning unanimously voted to move forward with drafting the RFP and will vote again in a few weeks to determine whether it’s ready for release, he said.
LA expects the fiber buildout to cost $3 billion to $5 billion, but the cost would be borne by the vendor. “The city is going into it and writing the agreement, basically saying, ‘we have no additional funding for this effort.’ We’re requiring the vendors that respond to pay for the city resources needed to expedite any permitting and inspection associated with laying their fiber,” Reneker said. “If they’re not willing to do that, our City Council may consider a general fund transfer to reimburse those departments, but we’re going in with the assumption that the vendor is going to absorb those up-front costs to make sure they can do their buildout in a timely fashion.”
The new fiber network would offer free Internet access of 2Mbps to 5Mbps (possibly subsidized by advertising) and paid tiers of up to a gigabit. The fiber network would also power Wi-Fi hotspots in public areas.
The winning bidder would not be required to offer landline phone service or television, but it’s likely that they would. “I would think that’s how they’ll justify the buildout, is being able to offer triple play [packages],” Reneker said.
Residential broadband in LA today typically ranges from 5Mbps to 50Mbps from the likes of AT&T, Time Warner, Verizon, Cox, and Charter. Gigabit speeds are available to businesses, but at a higher price than other communities, Reneker said. By expanding gigabit access and hopefully lowering the price, LA hopes to attract new entrepreneurs and keep existing businesses from leaving the city.
Reneker said the network would be open, meaning the vendor would have to sell access on a wholesale basis to other network providers that want to deliver services over the fiber. “We’re not looking at trying to… be monopolistic and try to force anybody out of the market,” he said. The winning bidder should make out well, though, as it would gain lots of new residential, business, and government customers.
The RFP would favor companies that can offer not only fiber Internet but also cellular service and data center hosting. That makes AT&T and Verizon possible candidates. In one potential scenario, the city would pay the winning vendor for its monthly broadband, phone, cellular, and data center needs. Los Angeles has 24 distributed data centers that it would like to modernize and consolidate while boosting disaster recovery and replication, so the data center component alone would be lucrative.
If you took out the cellular component, more companies beyond AT&T and Verizon could offer compelling bids, Reneker said. Time Warner, Cox, and Charter would be among those.
But Google Fiber in its current form wouldn’t be considered. “They would have to change their business model,” Reneker said of Google. “They only run residential. We’re requiring a component for the business. That would be a new market for them. There are two things: would they be willing to change their model slightly, and also would they be willing to respond to an RFP? I don’t believe they’ve responded to RFPs in the past in other communities, but they would need to here in Los Angeles.”
This project was spearheaded by recently elected council member Bob Blumenfield and has the support of Mayor Eric Garcetti, Reneker said. Reasonable pricing for residents is important, as one-third of the city’s population makes less than $45,000 a year. LA schools are also rolling out iPads to 650,000 students and struggling to ensure that everyone who gets one has affordable connectivity, he said. LA wants the winning bidder to make donations of home broadband equipment to nonprofits that distribute them to needy residents.
Once the RFP goes out, the city will take bids for three months. Contract negotiations with the winning bidder could “easily” take six to nine months because there will be numerous services, each with their own service-level agreements, according to Reneker.
It will be a lengthy process, but the time is right to get it started. “It just seems like now is a good time to give it a shot,” he said.