This is the transcript of episode 265 of the Community Broadband Bits podcast. In this episode, Lori Sandoval the telecom and regulatory administrator of Pasadena, California, joins the show to discuss the city's fiber network and business climate. Listen to this episode here.
Lori Sandoval: We saw an opportunity, and it was sort of the first hints of bringing in competitive carriers and trying to get more competition locally. We started thinking about how Pasadena could implement a fiber network here.
Lisa Gonzalez: This is episode 265 of the Community Broadband Bits podcast, from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. Lori Sandoval from Pasadena California talks with Christopher in this episode about the community's fiber-optic network. In addition to serving the municipality's needs, the network offers dark fiber connectivity, and is branching into other services for local businesses and entities. In this conversation, Lori explains how Pasadena got started in fiber-optics, how they funded the investment, and where they're headed next. As a reminder, this great conversation with Lori is commercial-free, but our work at ILSR does require funding. Please take a moment to contribute at ilsr.org. If you've already contributed, thanks. Now, here's Christopher with Lori Sandoval from Pasadena, California.
Christopher Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell with the Institute for Local Self-Reliance, and today I'm speaking with Lori Sandoval, the telecom and regulatory administrator for the City of Pasadena. Welcome to the show.
Lori Sandoval: Oh, thank you. I'm glad to be here.
Christopher Mitchell: For people who only know of Pasadena in terms of beautiful weather, and thinking about the lovely beaches and whatnot of Southern California, how would you describe it?
Lori Sandoval: Pasadena's a really interesting community. It's a little bit city, and a little bit suburbia. We are located north of downtown, have some world-class institutions here: CalTech, JPL, Rose Bowl, of course, ArtCenter School of Design, and a very vibrant local economy and social scene. It's a fun place to be.
Christopher Mitchell: And you have a municipal electric utility, I understand.
Lori Sandoval: We do, both water and power. We do other things, like we have one of the few city health departments in California.
Christopher Mitchell: Excellent. Well, let's talk a little bit about how Pasadena got involved with fiber-optics. Where did that come from?
Lori Sandoval: You know, there were a couple of different things that came together. Back in the mid-90s was the initial consideration. Our electric utility was using copper communications lines to link its facilities for a variety of monitoring purposes, and finding that they needed to do more, and that those copper lines weren't really meeting their needs. At the same time, we saw an opportunity, and it was sort of the first hints of bringing in competitive carriers and trying to get more competition locally. We were beginning to see some of the first municipal networks or muni-sponsored network initiatives, at least in our part of California. Those things came together. We started thinking about how Pasadena could implement a fiber network here.
Christopher Mitchell: Well, let's just pause for a second. I mean, I've really looked into Santa Monica, and I was just fascinated at the level of community involvement, and the CIO at the time was just really interested in thinking about this. Was there any specific people that were driving this forward, or was this something that was just kind of -- Was it bursting out of CalTech for instance, or how did it come about?
Lori Sandoval: No, I think it was more of a behind-the-scenes or quieter initiative, with a variety of city folks driving it, looking at how this could bring benefits to the community certainly, so it wasn't solely focused internally from that perspective. But then we started reaching out to identify, were there folks at CalTech or JPL and other local institutions and businesses who were interested. We did end up garnering quite a bit of support from those quarters during that outreach.
Christopher Mitchell: Were there kind of public meetings about it then, or was this more of like, "Hey, we're thinking about doing this. Let's just get together and chat about it"?
Lori Sandoval: We did a formal business plan, not the traditional community meetings, but lots of one-on-one interviews and discussions. Then we did present the business case for the network to the city council, so that was a public forum for discussion. Less community-focused than some initiatives, but that was an element there.
Christopher Mitchell: What was the business plan then? What was the focus that you were proposing to do?
Lori Sandoval: What we were looking at, from a business perspective, could we make an investment in this infrastructure and create a return on investment, and satisfy some needs of the city internally? There was definitely a cost offset aspect to it. A big factor underlying that business plan was the assumption that we would be leasing fiber to the private sector, to a competitive carrier, and that that would bring revenue in for the project, but it would also foster competition locally and support what we were hearing from the business community about needs that may not have been met.
Christopher Mitchell: You were looking primarily at connecting some municipal anchor institutions and hitting some key areas of town, but you weren't proposing to actually go to residents an things like that, right?
Lori Sandoval: That's correct. What we ended up doing was a 25-mile network that passes along some major corridors of the city, primarily in commercial areas, and of course picks up all of the power substations, for example, across the city, but it did not have a residential focus.
Christopher Mitchell: Well then I would guess that you probably do a fair amount of water monitoring too. I think people like us up here in Minnesota tend to forget that water's pretty important to keep track of down there.
Lori Sandoval: It is; however, unlike power, revenue on the water side is more constrained. I would have to say, on the water side we're doing less from a fiber-connected perspective than we do on the electric side.
Christopher Mitchell: Well, yeah. I'm not too surprised to hear that because it seems that that's true of a lot of places, and sometimes I hear people complaining that the tools uses to try and track the water aren't nearly as good as have been developed for the electric side. But I guess I'm curious, would you say that that network that you moved forward with, I mean, it's going on 20 years, was that a success?
Lori Sandoval: I would say so, yes. We've accomplished much of what we set out to accomplish in that initial kind of business plan, and in terms of facilitating self-reliance for city operations, but also filling some needs that were not being met in the community. That ranges from bringing that competitive carrier in and making a wider variety of services available to businesses locally, but also meeting some of the dark fiber needs of our local institutions, and offsetting a variety of expenses at the city level, or improving connectivity by moving to fiber and off of copper.
Christopher Mitchell: To clarify, when you talk about the competitive carrier, that's a company that basically wanted to try to deliver services to some of the businesses in your community but it needed access to municipal fiber to do it because they didn't want to build their own fiber. Is that right?
Lori Sandoval: That's correct. Yeah.
Christopher Mitchell: Okay. I think it's always worth noting that, because those of us advocating for municipal networks are sometimes accused of being anti-business, which I find deeply ironic since the reason most local governments have gotten into this is specifically to support local businesses and give opportunities to other businesses to try and connect them.
Lori Sandoval: Yes.
Christopher Mitchell: One of the reasons that we wanted to have you on was to talk about where the network is going, because as you said, the network has succeeded, and now it sounds like you're getting a little bit more ambitious.
Lori Sandoval: Yes. I think we initially installed our network in 1998 and 1999, and we built incrementally but very slowly over another 15 or so years. But starting in about 2015, we've really tried to expand our view of what the network can do and where we can go. This falls in a couple different areas. One is just a recognition of the number of things, or targets, that we might connect to fiber that would be of benefit to city operations, and that reflects a evolution of technology. We're doing a lot more connecting of devices in the field, and we need to get fiber to more places to do that. The other aspect of it is that competitive carrier meets some, but not all, needs in the community, and there was an opportunity for us to use fiber in a creative way, as a creative tool to facilitate economic develop and to assist with business attraction and retention. That's sort of the area that we're moving into now, with a focus on a lot of new fiber installation over the past two years.
Christopher Mitchell: One of the things that we've seen with cities that started off like yours is that the focus on dark fiber gets you so far. There's some businesses, often more data-intensive businesses, that they are looking for dark fiber, but a lot of businesses are just thinking, "You know, I just want a basic connection." Is that what you're doing more of now is you're starting to offer some of that -- I guess in some ways you might think of it as -- It's obviously a lit service, but I think of it as more just a basic connection to folks that don't want to have to deal with dark fiber.
Lori Sandoval: That's correct. We are looking now more at how we can provide a transport service, so we're leveraging a DWDM, or dense wave division multiplexing, network that we have up and running to meet city needs. We're leveraging capacity in that to carry traffic from businesses that may not be getting what they need from other providers, and partnering with an ISP that has a local data center, so really providing an alternative Internet connectivity for businesses, particularly those that may not be able to get that currently from another provider.
Christopher Mitchell: Are you also seeing the need for businesses that aren't even really looking for Internet, they just want to connect themselves to different branch locations maybe?
Lori Sandoval: We typically have provided a dark fiber solution in those instances, and aren't seeing as much of a need for a lit connection, but to create a campus network. We tend to be serving entities like CalTech and JPL and the local ArtCenter College of Design with dark fiber.
Christopher Mitchell: One of the things that I'm always curious about is some of the numbers around this in terms of the revenues that you have been seeing from leasing the dark fiber and the cost of expanding the network.
Lori Sandoval: I'm going to go back to the beginning of our network development. Something that was important for us was that we didn't go out, and didn't issue bonds to finance the network. We looked at some internal reserve funds that were essentially loaned to the project. It was very important for us to, when we did the dark fiber lease to that competitive carrier, to be able to pay back that loan. Our initial budget was 1.8 million. We were able to pay back that internal loan within about 13 months of leasing the fiber. Our revenue stream was very heavy on the front end, and at this point we are bringing in revenues of about 480,000 annually. It's a fairly steady revenue stream right now. We are looking at some of the things that we've just talked about of growing that revenue stream over time again.
Christopher Mitchell: What kind of expenses are you seeing to do the connections that you were talking about adding on to it today?
Lori Sandoval: We've budgeted about 600,000 a year for a network expansion program, where we're looking at essentially a five-year program that will increase capacity within our existing ring, and then also extend fiber to places that it isn't currently within the city. That covers really the kind of backbone and mainline installations. Then we really budget on a connection-by-connection basis when we bring on new commercial buildings or additional city facilities and the like.
Christopher Mitchell: When you bring on a new building, let's assume it's a commercial building, do you charge that to them right away up front, or do you try to make it up over time? How do you work that out?
Lori Sandoval: Typically we do try to make it up over time. You know, in order to make this a feasible business proposition for a local customer, they're typically not in a position to pay the full installation cost up front, and so we are recouping that over time.
Christopher Mitchell: Do you have them in a contract then? The reason I ask is this is a common question, because I think one of the things I've seen is cities say, "Well, we'll just expand it at their expense," and then they find that many businesses, even if they have a sense they're going to make that money back, they're still unwilling to make the commitment.
Lori Sandoval: Yeah. We're not going to expand the network by getting customers to pay up front for all of those extensions. Particularly if it's a commercial building where there's the opportunity or the possibility of serving multiple customers, then we would look at, how can we look at this creatively so that we're not essentially killing the deal up front, you know? We want to make it feasible for businesses to proceed with our service. To answer you question about an agreement, we do capture the kind of the terms and conditions under which we're providing the service in a standard city agreement. We know that the revenue stream is going to be there over time, even if we're not getting the upfront costs right at the beginning of the arrangement.
Christopher Mitchell: I'm curious if you've looked into any low-income housing issues, like if you have any public housing or anything, using your fiber to try and connect them at all, or if there's a different solution?
Lori Sandoval: We've looked at it to some extent. The city does not own any low-income housing developments, but we're very active in working with other entities that do. We explored a grant program that helps fund infrastructure development basically to extent connectivity to low-income housing developments. Through that evaluation, I learned that there are locally-managed low-income housing developments that have applied for those grant funds, but there didn't seem to be a direct city role in that process. It really needs to be the owner of the building that leverages those funds.
Christopher Mitchell: Yeah, that makes sense, and most of the activity that I think we're seeing where cities are getting involved in this directly, whether it's in San Francisco or Wilson, North Carolina have done it, it's generally to publicly-owned housing stock. If you don't have that, you're options are certainly more constrained.
Lori Sandoval: One thing that we have focused on, sort of in contrast, is, is there a way for us to leverage fiber and other resources to provide connectivity to the public in general, so not necessarily in housing, but in community centers and parks? That's also an area where we've been trying to do more, and have been gearing up to push out a Wi-Fi service that is backhauled over fiber, but supporting public Internet access in that fashion.
Christopher Mitchell: Great. Well, is there anything else that we should know about what you're working on to improve Internet access in Pasadena?
Lori Sandoval: We also are looking at how we can work earlier in the development process. We are having something of a develop boom here in Pasadena, seeing a lot of new projects being implemented, and so always trying to look for, is there a way that we can get involved in those projects early on to establish paths for the future, both figurative and actual paths? So can we accommodate, or can we incorporate, conduit for potential future fiber links into commercial spaces and institutional spaces so that we're not trying to do that down the road when it's more expensive to do so, and also creating those relationships so that developers and the folks that they have assisting them in projects understand that the city is a potential provider, whether it's for dark fiber or other Internet or Internet-related connectivity. I know that there's one development in particular, and possibly others, in Pasadena that are pursuing wired certification. They're looking for that redundancy and resiliency in their building's connectedness. That's something that we're trying to explore at this point in time.
Christopher Mitchell: Yeah, I think those relationships are important, more important than people sometimes realize. Do you have any requirements in code to, for instance, have a nice demarcation point where you can get into the building once you're ready with the fiber?
Lori Sandoval: No, we don't. We have been working on a more informal basis, so trying to share information, both within departments that interact with developers and others who are implementing new projects, as well as with contacts with the developers themselves.
Christopher Mitchell: Yeah, that's something that I've seen up here in a suburb of Minneapolis where they're working on getting something into code, but in the meantime, they've had really great experience just developing those discussions with the companies that are building properties, in this case mostly apartment building type properties, to make sure that the wiring is good enough to support multiple providers that may be available in the future. Thank you so much for coming on and telling us more about what's going on in Pasadena, and good luck.
Lori Sandoval: Oh, thank you, and I enjoyed the opportunity to share about the Pasadena network.
Lisa Gonzalez: That was Lori Sandoval describing the City of Pasadena's foray into fiber-optics. We have transcripts for this and other Community Broadband Bits podcasts available at MuniNetworks.org/BroadbandBits. Email us at Podcast@MuniNetworks.org with your ideas for the show. Follow Chris on Twitter. His handle is @CommunityNets. Follow MuniNetworks.org stories on Twitter. The handle is @MuniNetworks. Subscribe to this podcast and the other ILSR podcasts, Building Local Power and the Local Energy Rules podcasts. You can access them on Apple Podcasts, Stitcher, or wherever else you get your podcasts. Never miss out on our original research by also subscribing to our monthly newsletter at ILSR.org. Thank you to Arne Huseby for the song Warm Duck Shuffle, licensed through Creative Commons, and thanks for listening to episode 265 of the Community Broadband Bits podcast.