Santa Cruz will be Silicon Valley’s first fully fiber city

by Steve Blum • , , , ,

Homes and businesses in Santa Cruz are one step closer to full fiber-to-the-premise broadband service. The Santa Cruz city council voted unanimously last week to move ahead with negotiating an FTTP/FTTH partnership with a local independent Internet service provider, Cruzio. As envisioned, the city would own – and finance – the network, Cruzio would operate it and the two would work together to build it.

Cruzio’s proposal to the city also leaves the door open for other ISPs to join the project – that’ll be one of many details that the forthcoming negotiations will address.

The cost to build a fiber network that would reach every premise in the City of Santa Cruz will be about $52 million, according to an estimate prepared by Columbia Telecommunications Corporation. That includes the citywide distribution network, laterals and drops to reach homes and businesses, and the electronics on both ends needed to run it.

There’s significant risk in any municipal FTTH venture, but the Santa Cruz project has several unique aspects that should work to reduce the uncertainty. First and foremost, it involves a partnership with a longstanding and successful incumbent service provider. Cruzio is one of the largest surviving independent ISPs in California, has been delivering Internet service in Santa Cruz for 25 years and has about 3,000 subscribers inside the city limits alone – roughly 15% of the market.

There’s also Santa Cruz’s dual nature: a Californian beach community fueled by Silicon Valley’s economy and entrepreneurial vibe. Silicon Valley boasts many tech savvy and affluent cities, but none have embarked on a full scale FTTH project yet. Santa Cruz, with one eye on high tech innovation and the other on a high quality lifestyle, could well be in the sweet spot that makes it possible.

A lot of questions still need answering, not least the details of the project’s financing, which nominally would involve city-sponsored bonds

Constructing Santa Cruz Fiber requires the issuance of revenue lease bonds to cover the capital investment as well as two years of debt service while the project is being constructed and brought online.

At this point, no commitments have been made, except that Cruzio has pledged up to $45,000 to pay for the costs of getting to a final operating and financing plan, which will need the approval of the city council and, likely, voters. If all goes to schedule, Santa Cruz’s fiber network could be up and running in three years.

Tellus Venture Associates is assisting the City of Santa Cruz with its FTTH project. I’m not a disinterested observer. Take it for what it’s worth.

City of Santa Cruz fiber project staff report

Cruzio FTTH proposal to the City of Santa Cruz

CTC costs estimates for a Santa Cruz FTTH system