San Francisco Mulls Largest P3 to Ensure Broadband for All

The city of San Francisco is one step closer to its goal of being the first major city to have all its residents and businesses connected to high-speed Internet through fiber optic network.

San Francisco’s Broadband Plans

  • Project Details: San Francisco will be the first major U.S. city to create a citywide fiber optic network through a public-private partnership that will bring ultra-speed internet to residents and businesses;
  • Key Players: City of San Francisco, TBD (finalist to be picked from 3 shortlisted companies);
  • Project Cost: $1.9 billion;
  • Benefits: The city hopes that high-speed internet will bridge the digital divide in the city and promote competition and reduce costs for consumers.

It has shortlisted 3 companies to build the state-of-the-art broadband infrastructure following a Call for Proposals issued earlier this year to garner proposals from interested parties.

San Francisco Mayor Mark Farrell

San Francisco Mayor Mark Farrell

The names of the finalists have not been officially disclosed by the city, although San Francisco-based Monkeybrains is reported to be in the running.

“This is the largest contemplated P3 [public-private partnership] broadband project in the first city in the country so we’re really trailblazing a big new path here,” said Jess Montejano, a senior adviser to Mayor Mark Farrell.

San Francisco’s Digital Divide

Montejano said the impetus for the project was digital divide in San Francisco.

There are 100,000 San Franciscans who lack internet access at home, while another 50,000 have sluggish dial-up speed and 15% public school children lack internet access.

Fiber optic internet is often the fastest, but the least common because it doesn’t use existing cable and phone lines to transmit data. Instead, information transmitted in beams of light through thin, glass or plastic.

Countries like Sweden and Singapore have adopted ultra-high-speed fiber optic technology, but the majority of households and businesses in the U.S. depend on cable and DSL connections. Most internet service providers, or ISPs, would rather upgrade their current systems than to create new fiber infrastructure.

And through lobbying efforts, some states have signed noncompete agreements with telecom industries, preventing or discouraging them from working with other providers or becoming internet providers themselves.

According to a report by the FCC in 2016, a little over a third of Americans had more than one choice of internet provider that provided speeds of 25 mbps or more, which is the minimum as defined by the FCC. And an analysis in 2015 from the Center for Public Integrity found that the price of broadband is in places three and half times higher, when comparing five U.S. cities to five cities in France.

An analysis from the Center for Public Integrity found that the price of broadband is in places three and half times higher, when comparing five U.S. cities to five cities in France.

“We’re doing this to create more choice and competition and to provide more affordable rates for internet service that what exist today,” said Montejano. 

Public-Private Partnership

Montejano said that Farrell, then-supervisor, and the late Mayor Ed Lee had been working on the project for over two and half years looking at the best options for either a public network, where the city would be solely responsible, to delegating it all to the private sector, to the private-public partnership.

The city decided that the best option would be a public-private partnership.

The public-private partnership would mean that the utility would be publicly owned — meanwhile they will share some of the costs and financial and operational risks associated with operating and constructing the network, though the funding and risk allocation portion is still being worked out, according to Montejano.

The partner would be an agreement with the city for 15 years.

In addition, any company chosen would have to agree to net neutrality – the principle that would not allow them to slow down or prioritize certain traffic from sites over another for financial gain – and open access, meaning that any qualifying company can use and lease the network.

The city is exploring a revenue initiative or having some private capital being put up for the project, with the hope that funding can be secured by the end of 2019 and construction beginning at the start 2020.

The network, which will have to cover 46.8 square miles that make up San Francisco, is estimated to take to five years to complete and will cost an estimated $1.9 billion.

The model would be leases that work off of existing fiber networks already owned by the city, known as “dark” fiber. Companies that lease it would be responsible for “lighting” their network, or installing and procuring the equipment.

San Francisco and the P3 partner would also share some of the revenues from “lit” fiber leases to customers and households, while the responsibility for maintaining the equipment and upkeeping the lighting of network falls on the service provider.

“We feel that this is an area where it’s appropriate for government to step in,” said Montejano. “The city and Mayor Farrell views the internet as a 21st century utility and as such it should be affordable and ubiquitous to all of our residents and businesses because of how important it is to our modern daily lives.”

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