& cplSiteName &

Will Santa Fe Strategy Be a Message to Munis?

Jason Meyers
7/18/2014
50%
50%

A relatively small municipal network project in New Mexico has sparked some big local controversy, prompting cries of government favoritism, complaints about misuse of government procurement processes, and accusations of municipal ignorance about local competitive conditions.

Despite its size, the project and the ensuing debate could provide some valuable guidance for municipalities pondering network projects, as well as the network operators seeking their buildout business.

The situation stems from the City of Santa Fe's beliefs that despite the presence of several service providers, its residents don't have enough options for high-speed broadband service -- and that the options they do have are too expensive. The city considers incumbent CenturyLink Inc. (NYSE: CTL) to be a bottleneck that causes Santa Fe residents and businesses to get half the speed that nearby Albuquerque users get for the same price.

The culprit, city officials maintain, is a two-mile CenturyLink fiber route that extends from an optical regeneration and amplification site just outside Santa Fe into the city center. According to the city, the incumbent's control of that route blocks other carriers from buying affordable wholesale bandwidth and passing the lower costs on to customers.

"All of the Internet anyone can buy in Santa Fe goes to CenturyLink," says Sean Moody, special projects administrator for the Economic Development Division of the City of Santa Fe. "We're going to create the conditions for a competitive market to replace that."

The city's proposed resolution was to issue an RFP for a $1 million project the city believes will create more wholesale pricing competition, stimulating faster speeds and lower broadband prices for residents. The proposed project calls for a two-mile fiber pipe to run parallel to CenturyLink's, connecting the central office to a new, neutral co-location point for wholesale fiber providers and retail carriers. The project was authorized by Santa Fe city council as part of a capital improvements bond issue in 2012.

"The goal is to create a viable competitive wholesale market in Santa Fe," Moody says. "It will result in lower wholesale prices, which will create the condition for providers to provide higher speeds."

Controversial choice
Several operators replied to the RFP, including CenturyLink, Plateau, CityLink Fiber Holdings, and Cyber Mesa. The city selected Santa Fe-based CLEC Cyber Mesa as the sole contractor on the project, but only after it halted the procurement process for several months and then used a utility procurement law that allows the city to skip the competitive bidding process when selecting a utility service such as a water or power provider.

Moody said telecom falls into that category. John Brown, president and co-founder of Albuquerque-based CityLink, vehemently disagrees.

"The reason the loophole exists is to help save the city from unneeded costs of procurement, and it makes sense when it's applied as it's supposed to be and not abused, as it's being now," Brown says. "It's highly anti-competitive, and my personal opinion is that the attorney general's office needs to investigate."

CityLink submitted a plan to use the city's money to build a seven-mile fiber ring connecting parks and city buildings, from which it would extend fiber to the premises at its own expense, echoing its architecture in Albuquerque, Brown says. CityLink was told it was one of two finalists, but Brown believes Cyber Mesa was a shoe-in from the start and that the city is biased against his company.

"Cyber Mesa is the local hometown team," he says. "To a certain extent the city is pissy with us because we've threatened litigation to get them moving, and they don't want to have anything to do with us. This is New Mexico politics."

Moody maintains that the selection process was sound and used a three-person selection team of which he was not a member but only a facilitator -- a contention Brown calls "bullshit." "Sean Moody directed, controlled, and steered the entire process," he says.

Moody says CenturyLink told him not to waste money on the project, and Plateau's ideas weren't comprehensive enough. As for CityLink?

"He's selling gigabits to residences. That's a very good program, and I would love to see that in Santa Fe," Moody says. "If John Brown is alienated, it's because he feels he has a better program. He has an excellent program, but it wasn't what we were looking for."

CenturyLink, for its part, declined a request for an interview and would not respond to an email query about CenturyLink's own response to the RFP or directly address the contention that its fiber route into Santa Fe makes wholesale access unaffordable for other providers. David Gonzales, market development manager for CenturyLink in Albuquerque, referred Light Reading by email to the same statement the company provided to the Santa Fe New Mexican -- a statement that seems to at once lambast the city's approach and defend the Santa Fe market as competitive and open.

"While we believe that public broadband networks that compete directly with private industry are not the best use of taxpayer dollars, we support government initiatives to leverage existing infrastructure and extend broadband service to unserved areas," Gonzales wrote. "Consumers and businesses have a variety of choices when it comes to choosing an Internet provider, including cable, wireless and satellite providers. We operate in a competitive marketplace."

What's next?
Cyber Mesa, which won the project from the city, dismisses Brown's ire as "sour grapes" and says it is eager to get started on the buildout.

"We have a contract with the city -- signed, sealed and delivered," says Jane Hill, president of Cyber Mesa. "We're trying to get quotes from contractors and I'm working hard to get the first part of this project under budget. The less we spend, the farther we can extend the fiber."

Hill believes a fiber-to-the-home project like CityLink proposed shouldn't be the domain of a municipality anyway.

"Google can do that, but I'm not sure a government entity is well-suited to that kind of a project," she says. "The idea here is to start in a way that will bring in competition and offer better wholesale rates, and hopefully that will stimulate more development."

Beyond the fiber run, Cyber Mesa is also putting in a data center to give non-CLECs access to the network and put competitive providers closer to end customers, she says.

Under the conditions of the contract, the city has created a wholly transferable entity called Santa Fe Fiber to sell wholesale capacity. After four years, Moody says, the city has the right to designate an entity other than Cyber Mesa to operate Santa Fe Fiber.

"All of this was to fit into existing law and not compete with providers," Moody says. "We will never be a telecom provider and we will never be a CLEC."

Moody describes the solution as a "light touch" that is intended to encourage market-based solutions. Other municipalities have taken similar approaches, opting for public/private partnerships to promote competition and economic development rather than providing services themselves. (See Taking a Different Path to 1 Gigabit.)

"I want to keep intact the incentive for a fiber provider to build out their own network, or connect to anchor institutions, or increase broadband speeds using LTE or fixed wireless," he says. "I don't want to step on any market forces that are doing their jobs. It's the least thing I could do that I thought would create a viable market."

Time will tell whether the city's approach will indeed bring more broadband offerings to Santa Fe and drive market pricing down -- or if any of the jilted providers decide to file a lawsuit against the city, as Brown of CityLink believes will happen. ("I suspect at some point CenturyLink will take litigation action against the city over this," he says.) And depending on the outcome, one relatively minor municipal project could end up providing valuable lessons for municipalities about vendor selection processes, evaluating competitive bids, and how -- even if -- a municipality should get involved in the world of broadband competition.

— Jason Meyers, Senior Editor, Utility Communications/IoT, Light Reading

(9)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Ray@LR
50%
50%
Ray@LR,
User Rank: Blogger
7/22/2014 | 1:12:22 PM
Re: Politics of technology
I contacted some of Jason's freinds, and at least one of them said he is a thing of beauty...

Here at Light Reading the editors all have 'beats', which identifies the topics they spend muich of their time delving into -- you can see a full list of beats along with editor profiles on the About Us page

About Us

And one of Jason's beats is Gigabit Cities, and the move towards faster fixed broadband infrastructure.

But all editors are required to write about anything at any given time, if it is interesting and important. 
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
7/22/2014 | 8:36:33 AM
Re: Politics of technology
When I hear "IoT" the first thing that pops to mind is ... Jason Meyers. Which is weird, because Jason isn't a thing at all. He's just like us, mostly. But he is Light Reading's IoT POP.
nasimson
50%
50%
nasimson,
User Rank: Light Sabre
7/22/2014 | 12:16:13 AM
Re: Politics of technology
My bad Jason. Somehow I had associated your name with IoT. My mistake. My apologies.
jasonmeyers
50%
50%
jasonmeyers,
User Rank: Blogger
7/21/2014 | 8:28:19 AM
Re: Politics of technology
nasimson - definitely not related to the Internet of Things - that is one of several areas I am covering. 
nasimson
50%
50%
nasimson,
User Rank: Light Sabre
7/20/2014 | 2:02:06 AM
Politics of technology
There is more politics here than Technology. Or should I say the politics of technology. The develpoing world is ripe with such examples. Jason I don't see how this piece is related to Internet of Things.
brookseven
50%
50%
brookseven,
User Rank: Light Sabre
7/18/2014 | 4:40:50 PM
Re: Separation and the City
Mitch,

I think the only question that I have is why did it have to pay to have it done?  If there is so much business, why didn't the competitive market solve the problem?  The concern I would have is that the city just gave $1M to a local company.  I would think it could have bid the job and have companies pay for a job like it.

Just a question.

seven

 
Mitch Wagner
50%
50%
Mitch Wagner,
User Rank: Lightning
7/18/2014 | 4:18:25 PM
Re: Separation and the City
If Santa Fe -- or any locality -- isn't getting the service it wants from the private sector, it should be free to start its own. 
sam masud
50%
50%
sam masud,
User Rank: Light Sabre
7/18/2014 | 2:26:28 PM
Re: Separation and the City
Bravo for Sante Fe. Talk of fast lanes and the Netflix-Comcast brouhaha, has convinced me that the idea of municpal/state-owned networks need to be seriously reconsidered. Such networks built and operated for the benefit of residents (and not just people viewed as customers) can be both profitable and provide better services.
jasonmeyers
50%
50%
jasonmeyers,
User Rank: Blogger
7/18/2014 | 11:37:01 AM
Separation and the City
Should municipalities get into the nitty-gritty of broadband competition -- especially in regions with a lot of competing providers already -- or should they take a backseat and focus on running their cities and towns? Setting aside concerns about how this project was bid out, the Santa Fe example seems like a relatively hands-off approach, though I'm fairly sure the existing providers won't agree with that assessment. 

 
From The Founder
Either we perform a complete 'factory reset' on the way the telecom industry creates and deploys virtualization, or we face the consequences.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Huawei Video Resource Center
Mobile Operators & Video

4|25|17   |     |   (0) comments


Ovum's Ed Barton discusses the latest mobile operator strategies for mobile video.
LRTV Custom TV
Infinera Introduces Instant Network

4|20|17   |     |   (1) comment


Mike Capuano, vice president of marketing at Infinera, discusses the advancement from Instant Bandwidth to new Instant Network capabilities, which include Bandwidth License Pools, Moveable Licenses and Automated Capacity Engineering (ACE).
Women in Comms Introduction Videos
Vodafone's Eubank on Sponsors, Mentors & Moving On Up

4|19|17   |   4:25   |   (0) comments


Vodafone America's Head of Operations Kimberly Eubank breaks down the difference between a sponsor and a mentor and shares why both made a big difference in her career.
LRTV Custom TV
NYC Auto Show: Are We Smart Yet?

4|18|17   |     |   (0) comments


The auto industry is facing some big transformations as electric vehicles, autonomous technology and connected cars are seen as the future of the industry. During the much-anticipated NY international auto show, there was an emergence of new technology and mobility service on the show floor. Aside from performance, brands like Lincoln, Hyundai, Honda, Mercedes and ...
LRTV Huawei Video Resource Center
The Impact of Video

4|18|17   |     |   (0) comments


David Mercer from Strategy Analytics discusses the impact of video on current strategies.
LRTV Custom TV
Pardeep Kohli Discusses Network Transformation & the Market Opportunity for the 'New' Mavenir Systems

4|13|17   |     |   (0) comments


In a brief discussion at MWC 2017, Heavy Reading analyst Adi Kishore talks to Pardeep Kohli, CEO, Mavenir Systems about the creation of the 'new Mavenir' and some of the key challenges facing operators in today's market. A key theme of the discussion centers around operator need for software-only, virtualized solutions and how they will need to adapt to ...
Women in Comms Introduction Videos
Tech Maverick Shares Her Tips for Gender Inclusivity

4|12|17   |   7:28   |   (0) comments


Wendy Hall Bohling, a corporate escapee, author and gender exclusivity consultant, tells her story of sexism, bias and progress along the road to gender equality in the workforce.
LRTV Huawei Video Resource Center
Huawei at MWC 2017

4|11|17   |     |   (0) comments


At Mobile World Congress 2017, the biggest mobile industry gathering of the year, Huawei showcased its new innovations and solutions with the theme "Open Road," which focuses on cloud, 5G, operation transformation, videos and consumer-oriented products. Its campaign has been recognized by three awards given by GSMA.
LRTV Custom TV
China Telecom NFV Infrastructure on RSD

4|6|17   |     |   (0) comments


Lynn Comp, senior director of market development of Intel, is joined by Chong Zhang, storage engineer at Inspur and Ou Li Yan, architect for technology strategies of China Telecom, for a discussion of what NFV brings.
LRTV Custom TV
Nokia's IMPACT Software Demo

4|6|17   |     |   (0) comments


Khamis Abulgubein of IoT market development at Nokia demonstrates IMPACT (intelligent management platform for all connected things), a software solution with a horizontal approach to managing any device on any application.
LRTV Custom TV
Nokia Introduces Virtual Service Router for More Rapid Service

4|6|17   |     |   (0) comments


James Cumming, product line manager for virtualized service routers at Nokia, demonstrates how the virtual router based off the Nokia ecosystem changes the network function experience.
LRTV Custom TV
The Keys to SD-WAN Success

4|6|17   |     |   (0) comments


Versa Networks CEO Kelly Ahuja talks about the key requirements for service provider-managed SD-WANs.
Upcoming Live Events
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Brazos Hall - Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Time for a Telecom Reboot
Steve Saunders, CEO and founder, Light Reading, 4/19/2017
Surprise! AT&T Markets 4G Advances as '5G Evolution'
Dan Jones, Mobile Editor, 4/25/2017
Did Verizon Outbid AT&T for Straight Path?
Dan Jones, Mobile Editor, 4/25/2017
First Year TIPs the Scale Toward Success
Denise Culver, 4/24/2017
Unlicensed: It's What's Next for US Mobile Operators
Dan Jones, Mobile Editor, 4/19/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
One of the nice bits of my job (other than the teeny tiny salary, obviously) is that I get to pick and choose who I interview for this slot on the Light Reading home ...
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.