Photo by Debra DiPaoloIT SEEMED LIKE SUCH A SMART IDEA. AT ZERO COST to the taxpayers, Los Angeles' Information Technology Agency (ITA) sought to partner with a private carrier to create an advanced citywide fiber-optic network that would free the city from the escalating cost of data services and serve the interests of strategic industries — entertainment, for one. A Statement of Work for the new network was issued January 7; on March 18, the ITA was set to announce the telecom carrier selected for the first phase of the Four Civic Centers Network.
But in an apparent about-face, the ITA now plans to withdraw the proposal and start over. According to Jim Crain, assistant general manager of ITA's Enterprise Infrastructure Bureau, although the city's plan had strong political support, industry enthusiasm was mild at best. “The responses we got were not in keeping with our expectations,” says Crain, who runs telecommunication services for the city from his 14th-floor office in City Hall East. “There will be no contract award. We intend to cancel the current Statement of Work within the next week or two and issue a new Statement of Work around midyear.”
The initial proposal described plans to wire City Hall East downtown, the West Los Angeles Municipal Building, San Pedro City Hall and Van Nuys City Hall with a fiber-optic network supporting enormous growth capability and an initial OC-48 SONET application — an extremely high-speed data pipe. Web pages would bring city services to residents' home computers; internal communication between city departments would be streamlined. Outside interests of strategic importance to the city would be served, too: In a letter written last December, Dr. John Hwang, general manager of ITA, convinced Mark Ridley-Thomas, who represents the 8th Council District, that “The entertainment industry is united in the view that the traditional telephone companies, with rare exceptions, do not understand their needs, and to date have not delivered the required services or pricing.” Ridley-Thomas, who serves as the council's Information Technology & General Services Committee chairman, won the City Council's approval for the plan the very next week.
The Four Civic Centers Network, as the ITA dubbed its first private-public project, would have helped defray the cost of the city's telecommunication services, which have been on a steep upward curve for years. ITA, with its 730 employees and an annual budget of $90 million, has become a grab-bag agency for managing information networks and systems for city departments such as police and fire; all told, the city has 700 facilities with basic telephone service and more than 16,700 networked workstations. All departments are clamoring for high-speed Internet access and e-mail. As a result of the 1994 earth-
quake, virtually every city department has been relocated while the city completes its seismic retrofit of city hall in downtown. The geographically dispersed work force has led to a dramatic increase in the need for high speed leased data lines between city facilities. Meeting this need has thrown ITA over budget for the past four years. During this fiscal year, which ends June 30, ITA is expected to run $4 million over budget for externally contracted services. The primary beneficiary of those funds is Pacific Bell, which last fiscal year received almost all of the $17 million spent for services from outside vendors. In the year 2005, the city has projected a budget of $17 million for externally contracted telecommunications services. Based on present demand, however, those costs are expected to soar to $36 million.
There has been a lot of talk from the Riordan administration about the need for private-public partnerships to improve the efficiency of city departments, which are nearly feudal in the protection of their fiefdoms. In Los Angeles, both the Department of Transportation and the Department of Water and Power have built extensive fiber-optic networks for their own internal use. The DWP's 150-plus miles of fiber is the city's most extensive network, and in fact, to the consternation of Pacific Bell, DWP has so much fiber it has sold some of its excess capacity — its unused “dark fiber” — to private carriers. But because there was no coordination between ITA and the DWP, the current proposal does not include the use of DWP fiber. ITA came up with a plan to trade city assets to a private carrier that would help to build the Four Civic Centers Network.
THE ITA PREMISE WAS SIMPLE: IN EXCHANGE FOR free title to 36 strands of fiber, the city of Los Angeles would solicit a pre-qualified telecommunications carrier to spend approximately $24 million building an advanced fiber-optic network to city specifications. The city would provide right-of-way access to miles of streets that could be trenched, and more miles of abandoned oil and gas pipeline that could be filled with fiber-optic cable. The permit process would be simplified. The carrier would get all the excess capacity it needed to build to sell its own services to the public, and the city would get a backbone network that would carry it into the 21st century.
But only Pacific Bell and telecommunications carrier MFS Network Technologies responded to ITA's Master Request for Proposals, and neither was wholeheartedly behind the project. Tom Davidson, regional manager of networks for MFS, thinks ITA miscalculated. “Use of pieces of abandoned pipelines are not worth the $24 million the city is asking us to spend to build their network,” he says. Because the plan allowed the city to retain ownership of the backbone, it failed to appeal to competitive telecommunications carriers, who are anxious to own their own wires. Davidson thinks the city should either pay for the network themselves and fix their costs or allow the carrier to recoup their costs first and then have a revenue sharing relationship on the excess capacity. Some people in the industry are dubious that the plan was even in the city's best interest. “Why would the city want to do this project?” asks a Pacific Bell representative who does not wish to be identified. CALNET, a public and private network, already awarded a seven-year contract to Pacific Bell in December 1998 for a laundry list of telecommunication services. The CALNET contract states explicitly that as of July 1, 1999, all California cities and schools can purchase discounted Pacific Bell services from the state. What's more, it's hard to see how partnership with the city serves a giant like Pacific Bell. “This is our core business,” the Bell source told me. “Customers want reliability, and ITA is unproven at running an advanced network.”
ITA's Crain doesn't dispute the Pacific Bell rep's claim about CALNET. “The ITA Department has approved use of the state contract for our telephone and voice-mail services,” he allows. “But even with the discounts, an OC-48 linking our Four Civic Centers will cost $600,000 per year. We don't believe that's competitive pricing. Our goal is to stimulate competition among carriers in Los Angeles to lower the cost of telecommunication services to the city.”
With that in mind, ITA seeks to encourage carriers such as Qwest, Level 3 and Metromedia Fiber Network to respond to a revised proposal, to be issued sometime this year. Crain promises that the new Statement of Work will give industry more flexibility to own and control parts of the network. But he also says that the telecommunications business has just begun to look competitive locally. “Our timing was off on the first Statement of Work,” says Crain. “Metromedia, for example, thought they would be in Los Angeles by now with their nationwide fiber network. But they started their West Coast network in Seattle and built through San Francisco first. They'll be here soon.”
Despite the delayed network plans, ITA is forging ahead and expects in the next two months to replace T1 lines leased from Pacific Bell with a fiber-optic public-safety network linking the 18 geographic areas of the LAPD. The project has received federal funding through COPSMORE, a Department of Justice program, and is also the first use of abandoned city gas pipelines to run fiber to San Pedro. MFS was awarded the COPSMORE contract, but is still sour on the pipeline situation. “At every intersection, pieces of the pipe were missing,” Davidson says. “We had to dig the street up anyway to find the obstructions.” COPSMORE may not be the ideal solution, but it might be the safest and surest for now: In Anaheim, where the city government had an idea similar to ITA's, initial euphoria has turned to lawsuits after First World Communications, Inc., a private carrier that pledged to spend $45 million on the city network, failed to live up to the terms of the deal. The fiber wars have just begun.