BACKGROUND:
During the January 2022 City Council Strategy Session, the Council identified improving fiber optic broadband as an important City goal. Over the last several months, staff has been exploring various options to accomplish this goal of bridging the digital divide through expansion of city-wide broadband infrastructure. The City has been engaged in discussions with SiFi Networks (SiFi) to explore the investment of private sector dollars to construct a city-wide fiber optic network. The 100% privately funded network would significantly improve internet connectivity, speed, and accessibility for citizens, businesses, and government.
Once viewed as an enhancement to our quality of life, access to the internet and all of its services and capabilities are now an essential service to reduce the gaps of disparity and socioeconomic differences which exist in cities in California and throughout the nation. The COVID-19 pandemic has highlighted the importance of affordable, reliable, and high-capacity internet services to provide for basic human needs such as educating our youth, access to jobs and ability to work, ordering food, and access to healthcare.
Although there have been many debates regarding the growing socioeconomic gaps caused by the Digital Divide, there is little doubt that the global pandemic has intensified the disparity between those with and those without reliable and affordable internet services.
The current model of providing internet services relies on individual Internet Service Providers (ISP’s) to invest and expand services in communities like Cathedral City. And in many cases, subscriber numbers may not warrant and/or support capital investments required to increase and expand services. Partnering with the private sector to finance, build, and operate an “open access” network provides a new and different model which could benefit Cathedral City now and many years into the future.
Open Access is a high-speed broadband network with unlimited capacity which all ISP’s can tap into, access, and share. This enables ISPs of all sizes to compete in the Cathedral City market by removing the cost prohibitive barriers of constructing individual broadband systems. More internet providers equates to greater consumer choice for Cathedral City residents and businesses. Potential benefits to our community include improved internet services, improved customer support, and competitive pricing.
SiFi is an international fiber optic network developer who privately funds, builds, and operates citywide open access fiber networks for cities in California and across the nation. They are in the business of building high-capacity broadband networks to deliver ultra-fast internet as well as connectivity for next generation services.
Participating agencies within California, where SiFi’s FiberCity networks are being constructed and will serve over 1.2 million people include: Rancho Cordova, Lancaster, Palmdale, Fullerton, Placentia, Yuba City, Pico Rivera, Lynwood, Pittsburg, Downey, Corona, and Simi Valley.
Fiber optic broadband is the fastest and most reliable method of delivering high quality internet services. It is about 10-20 times faster than cable internet services, which is what most of the community experiences today. Providing a faster, more reliable, and sustainable broadband network supports the City’s goal of eliminating barriers to affordable and reliable internet services for Cathedral City residents and businesses.
At the April 13, 2022, Study Session, SiFi introduced and shared information regarding their company, their business focus, and the proposed FiberCity broadband infrastructure project for Cathedral City. This included a description of the FiberCity model as compared to existing internet technology products available in the market today. SiFi described how their multimillion-dollar private investment to construct, maintain, and operate a 350-mile Open Access network throughout the City would be privately funded as well as their communication and outreach strategies to keep residents and business fully aware of the networks ongoing construction and availability.
DISCUSSION:
On April 27, 2022, City Council conducted a follow-up Study Session to preview and discuss a draft License Agreement which provides the required access rights and City commitments necessary for SiFi to proceed with project financing, design, and construction. The draft License Agreement included the following primary business points:
•Thirty (30) year initial term with automatic fifteen (15) year extensions as long as SiFi stays in material compliance with the Agreement;
•The project is a 100% privately funded Fiber Optic Network which will be owned, operated, and maintained by SiFi;
•Provides rights for SiFi to enter and occupy City’s right-of-way (ROW) to install, operate, and maintain said system;
•City has final approval authority over the construction of the Fiber Optic System through review and approval of permit applications; and, •City required to meet specific timeframes for review, approval, and issuance of permits.
The materials presented at the April 27 th Study Session generated a number of questions and comments from City Council and City Attorney. These items along with how the draft License Agreement was modified are summarized below:
•Definition of Primary Premises in Section 1 raised concerns regarding the potential for economically disadvantaged areas of the City to be excluded from service due to the cost to serve remote or difficult to reach areas – language was added to the Primary Premises definition to establish a different economic threshold for “a census tract, neighborhood, or area of City that qualifies as, or is deemed to be, disadvantaged under California Public Resources Code section 39711(a)(2)”
•Concern expressed regarding the vagueness of the Exclusivity Provision in Section 2.1.1 (SiFi License to Use Public Way) – language was added to clarify the non-exclusive term does not apply to specific locations occupied by SiFi facilities (fiber optic trenches, cabinets, chambers, shelters)
•Concern regarding confidentiality requirements and potential financial liabilities to City for breaches of obligation by City representatives required by Paragraph 5.3 (Treatment of Trade Secret and Privileged Information) – Substitute language was provided by the City Attorney and changes were accepted by SiFi. •Concern raised regarding the Insurance Coverage Limits contained in Section 6 (Insurance) – Coverage limits reviewed by City Risk Management. No changes made to existing language; however, SiFi did agree to adding an additional umbrella excess insurance with single and aggregate limits up to $5,000,000. This was above and beyond any executed agreement SiFi has with the other cities currently under contract. This was also acceptable to Risk Management.
•Concern expressed regarding Indemnification provision (8.4 – Indemnification) – Modifications drafted and inserted into paragraphs 8.4.1 and 8.4.2 •Concern expressed regarding Limitation of Liability provision – Deletions and modifications added to Paragraph 8.5 Limitation of Liability •Concern expressed regarding impacts to staff resources and concerns of SiFi receiving preferential plan review and processing treatment due to requirements stated in Section 2.3 Efficient Permitting Process and Related Compensation – as required by paragraph 2.3.2, the City will provide staff solely dedicated to meet the plan review and permit issuance requirements outlined in Section 2.3. All staff costs to provide these dedicated services will be paid by SiFi. This will be an additional staff resource, not a re-assignment or re- purposing of existing staff. The additional workload resulting from the SiFi project will not take away from, supersede, or take priority over other daily staff activities. The SiFi project will not impact existing staff resources and will not impact the pipeline of non-SiFi projects in the City’s development queue.
Over the last week, staff and the City Attorney’s Office have worked with SiFi to finalize an agreement that that protects the City and provides a state of the art service to our community. Staff recommends approval of the proposed License Agreement with SiFi Networks Cathedral City LLC to construct a citywide fiber optic network. SiFi’s commitment to finance, build, operate, and maintain an ultra-fast, high-capacity broadband fiber optic network in Cathedral City will benefit residents, businesses, and government now and many years into the future.
The “open access” network provided by SiFi will enable ISPs of all sizes to compete in the Cathedral City market. More ISPs mean greater consumer choice, improved services, and competitive pricing. Open access networks should also minimize future damage and disruptions to City streets and to residents and business by eliminating the need for individual ISPs to construct their own systems.
Unlike many existing ISPs and telecommunication companies who have pre-existing rights to access the City’s ROW, SiFi requires City permission which provides the City with an extra layer of control and leverage through the License Agreement.
Accordingly, potential risks and liability to the City from SiFi is no different and may be less than risks presented by existing ISP’s and telecoms who already construct, own, operate, and maintain facilities in Cathedral City.
FISCAL IMPACT:
The SiFi FiberCity Project is a 100% privately funded Fiber Optic Network and will not require City contributions or taxpayer subsidies. As required by the License Agreement, the City must provide a Project Manager during the project development and design phase. Contract staff will be retained to provide these services and SiFi will reimburse the City for the cost of these services.
The License Agreement also requires the City to provide a Single Point of Contact (SPOC) responsible for permit plan review, permit issuance, and construction monitoring during construction of the SiFi System. Contract staff dedicated to the project will also be retained to provide these services and SiFi will reimburse the City for the costs of these services.
There is no fiscal impact to the general fund for this project.