The city of Santa Cruz seemed well on their way to a productive partnership with Cruzio as the two entities hammered out an agreement for a Fiber-to-the-Home (FTTH) citywide open access network. We recently learned that both parties have stepped back from the partnership, leaving the multimillion-dollar vision in a dark limbo.

The Plan

The $45 million infrastructure was to be owned by the city of Santa Cruz and Cruzio would operate it while also offering high-quality Internet access to the community. For the first ten years, Cruzio was to have an exclusive contract after which the network would become open access. There are approximately 62,000 people living in the community situated near Silicon Valley and this project was one of the larger public-private partnerships (P3).

In July, Cruzio announced that it would begin deploying fiber in one of the city’s downtown neighborhoods by Thanksgiving, ahead of any agreement to use city-owned fiber. The deployment will bring FTTH to approximately 1,000 homes; Cruzio’s plan is self-funded.

Now What?

There is nothing that prevents the two parties from picking up where they left off and reaching an agreement some time in the future, but they would need to rebuild trust. Sadly, they lost over a year as the two parties negotiated while residents and businesses across the city happily anticipated better Internet access.

These events remind us that P3s are fragile unions that are the apex of many interlocking pieces. Like a house of cards, when one segment falls, the entire structure can come tumbling down. As more local communities consider P3s to bring high-quality Internet access to residents, businesses, and local government, they need to stay realistic, consider the long term, and keep risk in their sights.

South of California’s Bay Area with its buzzing tech startups and expensive housing, Santa Cruz County has been overlooked by the big Internet Service Providers (ISPs). The city of Santa Cruz had less than stellar connectivity, and the rest of Santa Cruz County was no better. That’s when county leaders decided to rewrite the rules.

Throughout 2014 and early 2015, the Board of Supervisors for Santa Cruz County developed a broadband master plan, created a “dig once” policy, and streamlined the regulatory permit process. Cutting down red tape at the county level encouraged both small and large ISPs to reconsider investing in Santa Cruz.

Streamlining To Increase Competition

Although large ISPs have enough money and personnel to focus exclusively on permit acquisition, smaller ISPs must find a way to contend with the permitting process with limited resources. Santa Cruz County's new policies and processes enable all ISPs interested in Santa Cruz County to compete on better terms. Under these new rules, ISPs have a more equal playing field.

The policies reduce the amount of time spent on the regulatory process for ISPs building fiber networks. A master lease agreement simplifies the procedure to use county assets for networks. Modified ordinances enable ISPs to easily install or upgrade infrastructure in the county’s right-of-way. (Right-of-way is public land managed for the public good, especially boulevards and medians along roadways.)

We spoke with Santa Cruz County Board Supervisor Zach Friend about the impact of these policies and the Santa Cruz County master broadband plan. He credited the new policies for encouraging providers to offer better services. (Cruzio is building a fiber network in the city of Santa Cruz, and Comcast decided to increase speeds without raising prices in Santa Cruz county.) Supervisor Friend also emphasized that the public discussions brought attention to the need for improved Internet access in the community.

As the city of Santa Cruz and local Internet service provider Cruzio bring their negotiations to a close, the parties have been working diligently to dot all the i's and cross all the t's. Announced in June 2015, this public private partnership intends to build a multi-million dollar fiber network throughout the city.

[W]e’ve been locked away in our Santa Cruz Fiber Project underground bunker with our partners at the City, engaging in high-level cogitation, extreme fine-tuning and the general hashing out of every little detail of the project and the agreement.

Local news station KION covered the benefits of faster Internet service, especially for the small business community in Santa Cruz. The news station also includes a clip from a recent “City Hall to You” community meeting where people learned more about the network.

A Small Business Town

“It's absolutely critical. Without high-speed Internet activity here, we would be dead in the water,”

Explained Susan Pappas, the owner of True Olive Connection, a local olive oil store. She described how her business would fall apart without high-speed Internet access. Everything from printers to inventory would stop working.

At the “City Hall to You” meeting, Santa Cruz Economic Development Manager J. Guevara laid out the facts, emphasizing how Internet access is not just for tech startups. High-speed Internet access makes small businesses function and helps job-seekers find employment. Guevara told KION,

“Over 82 percent of the businesses in the city of Santa Cruz are 10 or fewer employees. This is a small business town and Internet is the infrastructure that makes it all possible.”

Infrastructure from Santa Cruz and Cruzio

When communities decide to proceed with publicly owned infrastructure, they often aim for open access models. Open access allows more than one service provider to offer services via the same infrastructure. The desire is to increase competition, which will lower prices, improve services, and encourage innovation.

It seems straight forward, but open access can be more complex than one might expect. In addition to varying models, there are special challenges and financing considerations that communities need to consider.

In order to centralize our information on open access, we’ve created the new Open Access Networks resource page. We’ve gathered together some of our best reference material, including links to previous MuniNetworks.org stories, articles from other resources, relevant Community Broadband Bits podcast episodes, case studies, helpful illustrations, and more.

We cover: 

• Open Access Arrangements
• Financing Open Access Networks
• Challenges for Open Access Networks
• U.S. Open Access Networks
• Planned Open Access Networks

Check it out and share the link. Bookmark it!

Next Century Cities recently hosted "Digital Northwest," a summit for regional broadband leaders. Leaders from member cities all over the country gathered together to learn from one another and discuss digital inclusion, models for success, partnerships, and much more. 

Chris led a panel of mayors and city council leaders from cities with well-known municipal networks in a discussion of their networks and how their communities have benefitted. 

The panel featured: 

• Mayor Jill Boudreau, Mt. Vernon, WA
• Mayor Wade Troxell, Fort Collins, CO
• City Council President Jeremy Pietzold, , Sandy OR
• Councilmember David Terrazas, Santa Cruz, CA

Back in June 2015, Santa Cruz announced a municipal fiber project with Cruzio, a local company that offers Internet access, colocation services, and a range of other data solutions. After finalizing details of the partnership, the city is officially moving forward with the plan. 

This past December, the Santa Cruz City Council voted unanimously to begin the $45 million fiber network. Cruzio intends to complete the project in the next 3 years, bringing next-generation, high-speed Internet access to the home of the UCSC banana slugs.

International Excitement

With the network given the green light, the city was abuzz. The open access Fiber-to-the-Home (FTTH) network will provide new opportunities for entrepreneurship throughout the city. The Santa Cruz Sentinel reported that the project is drawing interest from across the globe:

“Already, we haven’t even built the fiber network and people are already excited to work with us,” said Economic Development Director Bonnie Lipscomb, adding that a delegation from Beijing, China, visited Santa Cruz last week to discuss the project.

The Financial Plan

Through the partnership with Cruzio, the city will take out a financing bond that will be repaid by Cruzio’s customers on the network. Any funding gaps will be paid for 80% by Cruzio and 20% by the city. In the end, the city will own the infrastructure that Cruzio will manage. 

The decision to create the network has not been taken lightly. The Santa Cruz Chamber of Commerce CEO Bill Tysseling, spoke to the years of consideration and deliberation before this decision:

“It feels good to [have it] be passed, we had this conversation several decades actually.”

Santa Cruz, California, and its 62,000 people with poor Internet connectivity near Silicon Valley, could be one of the larger municipalities to develop a citywide fiber network. The Santa Cruz Fiber project, which was announced on June 24, 2015, would be an open-access public private partnership (PPP) with the city constructing the network and a private company, Cruzio, serving as network operator. The plans are preliminary, but the announcement highlighted the project’s emphasis on local ownership: 

“A locally-owned, next-generation broadband network operated openly and independently and built for Santa Cruz, [the Santa Cruz Fiber Project] is uniquely tailored to fit the diverse needs of the Santa Cruz community.” 

Cruzio is one of the oldest and largest Internet service providers in California. Completely locally-owned and staffed, Cruzio is rooted in Santa Cruz County. The company’s name perfectly describes it. Cruz- from Santa Cruz and -io from I/O (Input/Output, communication between an information processing system and the rest of the world).  Our Christopher Mitchell is gushing over the name and says: “I seriously love it.”

Fiber is not a new commodity in Santa Cruz. Since 2011, Cruzio has installed fiber in several of its projects, and the fiber has wooed some 30 entrepreneurs and solo practitioners to stay in the downtown area at the Cruzio Works, a co-working space. Last November, Central Coast Broadband Consortium commissioned a study of the fiber networks in Santa Cruz (paid for with a grant from the California Public Utilities commission). They discovered more fiber under the city of Santa Cruz than in any other city in the counties of Santa Cruz, Monterey, and San Benito. Unfortunately much of it belonged to incumbent providers like Comcast and AT&T who are loath to lease dark fiber or make affordable fiber connections available to local businesses and residents. 

Michael Zwerling, of Santa Cruz’s KSCO 1080 AM, was looking for an expert on broadband so he contacted our own Christopher Mitchell. The June 2 conversation involved questions from Michael, his co-host, and listeners and covered municipal and community broadband, accessibility, WiFi networks, and more. The interview runs about 1 hour.