City of Beverly Hills Investing in Fiber to Every Premise

David Schirmer, what is motivating the City of Beverly Hills to invest in information technology, citywide connectivity, and fiber to the Premise? 

David Schirmer: We’re very focused on eGovernment: making municipal services available to our customers—our residents, visitors, and businesses—without making a trip to City Hall. The idea is to move as much transactional activity onto the Web as possible. We are reinvesting in our website, and we also want that functionality to be available on mobile platforms.

We’re fortunate that the City Council has encouraged us to be as technologically advanced as we can be. They want to compete out in the world among municipalities and be able to hang their hat on the technology that we provide. The Council has given us strong direction and prioritized technology very highly every year.

Additionally, we just want to do more with less. We want to make our field crews more efficient and effective, providing them the tools in the field so they don’t have to make a trip back to find out where the valve is, for example. We want to put that information in their hands.

A mobile workforce is important to us. EGov is important to us. All of these strategies that we’re working on and all the things we’re hoping to accomplish require a network. The network is the foundation of all of the applications we want to layer on top of it, like eGov and wireless. So, the focus of late has been on extending the network as far as possible. Our Fiber to the Premise initiative intends to extend the network to every premise in the city.

Could you explain the role of the city’s Technology Committee?

David Schirmer: They’re a group of residents interested in technology. They provide advice in Council and can also champion, from a resident’s perspective, the technologies they are interested in and want to see. They help present that voice to our City Council.

Is it fair to say that the city’s universal fiber access and connectivity initiative was informed and is being championed by the Technology Committee?

David Schirmer: Yes. They’ve been instrumental in bringing this project to fruition. It started back in the mid-90s, but it’s really gotten traction in the last eight years.

AJ Willmer, you’re on that committee. Could you describe its role and agenda?

AJ Willmer: The committee’s agenda is primarily to provide support to the City of Beverly Hills’ Information Technology Department. We intentionally do not report as a commission nor as a committee to City Council. We wanted the flexibility to work directly with the Technology Department.

Chief Information Officer David Schirmer and the Technology Department will come occasionally to us with an issue that they think is important and want to find out whether the community and City Council support it. We also advance issues that we feel are very important to the community.

The committee pushed the Fiber to the Premise issue very hard over a number of years. It originated with interest in the community and in the committee more so than at the level of the Information Department. Over the last four or five years, all city councilmembers have become very supportive of this. 

Google, almost a decade ago, put fiber to the premise on the national agenda. Did Google’s interest motivate the Technology Committee to press the issue in Beverly Hills? 

AJ Willmer: Candidly, we were sure that after Google put an RFP out, Beverly Hills would be picked. It’s that typical Beverly Hills ego! We knew we had one of the top IT departments in the country. We saw that Google was doing this alone in a lot of communities, so we suggested a partnership, including some financial input. We were chagrined, if not shocked, to find out that we were not picked.

Elaborate on what was attractive about that original Google Fiber for cities RFP?

AJ Willmer: Google was actually accomplishing something that was not yet affordable and achievable according to the consensus opinion at the time: picking out large portions of a community and putting fiber connectivity to every single residence that was interested. It really had not been done before, and there was no financial modeling of whether it was affordable.

After not getting any feelers from Google, we paid a great deal of attention to how they were implementing it. Working our way through the financial issues that they dealt with, we began to realize we could do it on our own in a manner that we feel is actually better. We talk a lot about establishing what “world-class” is. Our goal has been: Let’s not match what is state-of-the-art; let’s create state-of-the-art. 

David Schirmer: There’s constant tension between what is a public activity and a private activity. Google represented the path of least resistance: Let the private sector build it, and we could partner with them to provide value-adds. I think that was just a logical opportunity to jump onto.

With Google Fiber having selected other cities, like Kansas City and Austin, for their gigabit offering, have these cities’ subsequent experience informed Beverly Hills’ fiber initiative?

David Schirmer: The roll out experience in Google’s selected cities wasn’t the silver bullet that we imagined. One of our requirements was that big broadband be available to every premise in the city. When you’re cherry-picking particular neighborhoods—which is what Google did—it creates the haves and the have-nots.

We’re fortunate that, geographically, Beverly Hills is just five square miles. The area is manageable. And we have an active and enlightened citizenry that’s very supportive of this. 

AJ, delve into the underlying assumptions of why connectivity and greater broadband are essential for Beverly Hills.

AJ Willmer: Everybody wants to be connected.

Anybody who goes out to buy a television set now buys a high bandwidth one. Whether it’s Netflix, YouTube, or Hulu, you want to deliver that very high definition video. It’s cheaper than buying television content. We actually end up saving our clients a significant amount of money when this video over the top begins to happen.

What will people do at home if they have this bandwidth? If you are doing media work, like post-production audio or video, you could do it from home now. You won’t have to walk or drive to an office where expensive bandwidth is being purchased. We have a lot of healthcare professionals in town. That CT scan could come to you in real time and not have to be delivered by a DVD or a CD.

But again, we don’t want to prejudge what the different opportunities may be. I have seen 3D video conferencing, an extraordinary technology that requires half a gigabit just to execute. When the bandwidth is there, we think connections will be made very differently.

We’re going to connect every single home and every single business into City Hall. Now we have to provide that big pipe—that bandwidth that actually delivers all this Internet. We need that to be failsafe. That itself will be a loop. So we will make more than one connection. We will have a connection that goes down Wilshire Boulevard and another that goes south to El Segundo. That’s two big loops.

We’re going to pick where those loops go very carefully, because those are automatic business partners and points of presence for us. We’ve had a discussion about making sure our loop goes by the new NFL stadium in Inglewood—just because it would be a mistake not to be connected with that type of media.

This is a very preliminary discussion, but there’s a social service piece, too. We may make sure that our loop goes through underserved communities in Southern California. We really do believe we have a model that makes this connectivity affordable. The cost is cheaper than you pay for these services in South LA. We should look very seriously at the services we can provide to underserved communities, because we now have a model that works. By the time we finish our installation, we could present our whole infrastructure and say to another community: “It’s affordable. We can prove it.” 

AJ, elaborate on the business model for the city’s fiber initiative.

AJ Willmer: The capital and operating expenses over four years total $31 million. Assuming—with very conservative assumptions—as few as 30 percent of households want to take this up, we become a net cash flow positive project for the city in about year four. Again, just sticking with 30-percent uptake, by year 15 or a little bit later, we are net cash positive, and we have paid back the capital expenditure and the initial operating expenses.

What are the assumed revenue streams?

AJ Willmer: The ongoing revenue stream will be the purchasing of Internet.

To bring the Internet into the home and tell people that they’ve still got to go back to an incumbent to get their content and their television is not going to work. That’s another lesson we learned from Google. As a result, we are going to offer Internet, television and video, and telephone.

From all appearances, Beverly Hills wishes to be a public utility, regarding Internet, voice, and data. 

AJ Willmer: Yes, we want to be a public utility, but we also don’t want to prejudge the possibilities of what the utility can do.  It's very important that every single premise be connected, so that we can see how the uses might materialize.

I can toss out some very simple aspirations: We have extraordinary fire, paramedics, and police departments. We could connect every fire alarm and smoke alarm in a home directly to the Fire Department, which would chop many minutes off of response times. We could do the same thing with burglar alarms. We have Cedars Sinai Hospital in our backyard, and we’re talking to principals there. You could have medical monitoring in a home in direct communication with paramedics—you could send a signal when a Pacemaker went wrong, or you could put sensors in homes to notify people automatically if seniors fell down or weren’t active for a while.

We have all these blue-sky ideas. We don’t know which ones we have not thought of yet. We know that there’s a lot we don’t know.

The immediate enticement is the gigabit to the premise, but that’s not the real goal. The real goal is the connection.

Beverly Hills excellence is important to us. Rodeo Drive, and the excellence presumed there, is what this city stands for. We want to make sure that the connectivity piece has the same reputation as Rodeo Drive. We will make it better than anybody else’s in the world. When we find another community that has created connectivity approaching or better than ours, we will then turn ours up a notch.

Elaborate on how existing providers of Internet, connectivity and broadband—AT&T, SCE, Time Warner—responded? Why, in your opinion, haven’t the aforementioned competed successfully with Google and now with the City of Beverly Hills itself for provision of universal, high-speed fiber?  

David Schirmer: To date, it has not been significant. I suspect the incumbents are disappointed, but we have not heard a large reaction to this. But it’s still early; we’ll see.

AJ Willmer: Frankly, I think it’s inherent within their structure.

Our initial approaches to this were:  How do we absorb some of the cost to make it affordable for an AT&T or a Time Warner to enhance their infrastructure? We talked about laying dark fiber and leasing the dark fiber, or laying empty conduit and letting them pull fiber through it.

I think they have a business model that does not enable them to accomplish it. They already have infrastructure in place and they’re not sure that the demand is going to be there. But the primary issue, I think, is that they need a return on investment. They need to look at the time-value of money. Putting aside $30 million for a 15- or 18-year investment is very difficult for them, because the time-value of money is probably double that. They probably look at that $30 million as a $60-million investment, and that’s before they’ve given a return to their investors.

I think it’s important to differentiate between connectivity and just delivering Internet. Connectivity is much more like roads, water, sewers, and streetlights now. We need the City of Beverly Hills to deliver this connectivity without having to interface with a third party who might have a different agenda.

What is the city’s timeline for rolling out fiber to every home?

David Schirmer: About 75 percent of the engineering work is complete. We’re just finalizing the design work and preparing packets to go out to bid for the construction phase. We anticipate that being complete by the end of this spring, with construction potentially starting as early as late summer or fall.

What may your constituents expect in the next year or two?

David Schirmer: We do a lot of outreach and present a lot of information about the project in very clear terms. The basic offering for the resident is going to be one gigabit of Internet service for about $50 per month with no contract. That’s locked in—it’s not going to increase.

We need to do a lot of outreach, and we’re beginning that process now. Once we get a little farther down the path, then we’re really going to ratchet that up. 

David, you’ve been a part of the Municipal Information Systems Association of California. How does Beverly Hills’ initiative rank? Are others around the state copying it? 

David Schirmer: Everyone is talking about providing fiber services and network services to residents. All of my peers are in various stages of rolling this out to their communities. Some are a little bit ahead of us as it relates to providing services to business communities, but no one that I know of is contemplating ubiquitous fiber to every single premise—apartment and single-family, as well as commercial.

What do your city IT colleagues confront that you’ve been able to surmount in Beverly Hills? 

David Schirmer: Our geography helps us.

We’re fairly fortunate that we have resources to do these sorts of things. There are a lot of competing priorities that would love to have access to these dollars. We’ve made a compelling case that this is the right thing to do: Let’s invest in 21st-century infrastructure.

In closing, if we gather together in two years’ time, what will we be talking about regarding this initiative?

AJ Willmer: Half to two-thirds of the homes will be connected, maybe more. Probably in two to three years, any business that wishes to be connected and has worked it out with their landlord or their property owner will be connected. I am convinced that we will have a unique relationship with Cedars Sinai Hospital. They have a lot of physicians and medical offices in Beverly Hills. I think that we will work out ways to enhance the healthcare services in our community through connectivity.

I think we will be very appealing to young professionals, especially in the media professions. We will be aggressively looking at what it is they want and providing their infrastructure.

A major agenda for the incoming mayor, Vice Mayor John Mirisch, is the east side of Beverly Hills. East of Robertson on Wilshire and Olympic is very underdeveloped. It’s adjacent to residential neighborhoods that don’t want any sort of business development that generates traffic. We think the businesses that will find this connectivity very appealing are media businesses that don’t generate a lot of vehicle traffic and who would be happy setting up offices in a relatively small building.