Anaheim’s Golden Loop : City Power Utility Lays the Groundwork for Fiber-Optic Future

Fiber-optic cable promises much for those who want clearer and faster voice and video signals, but it soon may deliver even more to the City of Anaheim.

The city, the only Orange County municipality to operate its own power utility, hopes to reap up to $10 million a year in revenue by leasing space on 50 miles of new fiber-optic lines that it is laying to connect its 12 power substations.

Anaheim’s effort, unfettered by state regulations that restrict investor-owned public utilities, is an ambitious project aimed at using its fiber-optic grid to link its five libraries and its residents to the information superhighway.

Already, more than 60 companies, from small telecommunications firms to Pacific Bell, are interested in bidding on the city’s extra fiber-optic capacity to reach high-paying corporate customers.

The Anaheim Public Utilities Department, the city’s power utility, is dangling the carrot of corporate customers in front of bidders to find those willing to help the city reach individual households as well--a process that also could lead to lower telephone rates.

“My concern is that, if the superhighway gets built without adequate competition among the private companies, the toll to drive down it is going to be too high for the average citizen,” said Edward Aghjayan, the department’s general manager.

Anaheim’s far-reaching plan is drawing the attention of large power companies as well as the other 32 cities in the state that operate their own utilities.

Officials in Los Angeles and Burbank, especially, are monitoring the effort closely. The two cities, which operate their own utilities, already have installed fiber-optic cable throughout most of their areas but aren’t pursuing such an aggressive business plan as Anaheim.

“The more competition we can bring to an area, the better,” said Leslie Kalasky, manager of the Los Angeles Department of Water and Power’s leasing efforts.

Large power companies, such as Southern California Edison, which has nearly 1,000 miles of fiber-optic cable, are looking at ways to capitalize on the excess capacity on their lines.

But they are waiting to see if such arrangements are profitable before launching their own full-scale projects, said David Cain, a manager at the industry-funded Electric Power Research Institute in San Francisco.

“They all have something going on,” he said. “Some see it as a sword to get revenue, and others see it as a shield to defend themselves if deregulation means they face more competition” from other power providers.

Under less pressure to make big profits, municipally owned utilities are pushing to use the new technologies to expand their services. Anaheim’s public bidding method could serve as an example for other local governments, said Bob Lane, a senior policy adviser for the California Public Utilities Commission, which regulates stock-owned utilities, such as Pacific Bell.

An early pioneer among municipal-owned utilities is the Glasgow, Ky., city-owned power company, which has won national attention for a system that competes directly with the local cable TV company. In addition, the utility has begun offering the city’s 14,000 residents access to the Internet through city-owned lines.

“The bigger utilities won’t do this kind of work because they’re still left with the question, ‘How do you make a buck on this?’ ” said William Ray, the utility’s general manager, who has advised Anaheim and several other city-owned utilities in California.

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Anaheim began distributing its own electrical power 100 years ago last month. As technology advanced and substations were built to serve the growing city, the utility had to come up with ways to protect the substations and regulate the amount of power being delivered to customers.

It laid thinner copper lines to the substations to act essentially as a communications line. From a central location, it uses those lines to operate switches in the substations that regulate the flow of power and can shut down the system in a split-second if problems occur.

“Each substation transformer is worth $500,000, and it’s important to have a safeguard system that can interrupt service in a fraction of a second,” said Brian Brady, the utility’s assistant general manager.

When those thin copper cables began to decay, the city set aside $6 million to replace them with fiber-optic lines, a common purchase for utilities now. Fiber-optic cable not only does the same job more efficiently but can allow more automated activity and have enough space left over to handle much more.

Power companies, for instance, can use fiber-optics to monitor peak electrical flow to individual homes, allowing the utilities to set rates that would encourage residents to use heavy appliances at night when demand is low and power cheaper.

The opportunity grew out of Anaheim’s need to replace its communications lines.

The standard fiber-optic line contains 96 hair-thin strands of glass that transmit information as pulses of light--quickly and clearly. Anaheim needs only 36 strands for utility purposes, leaving 60 strands available for leasing to telephone and telecommunications companies.

The city has half the cable laid already and expects to finish the job by the end of the summer, Brady said. When completed, the fiber-optic grid will provide a loop around the important commercial and industrial areas and a trunk for branches that can reach the rest of the community.

“Five years from now, I’d like to see a situation where a citizen can walk into a library and be connected to all the information services that are just abstract now,” Aghjayan said.

Like many planners, Aghjayan imagines a plethora of services that could be available, but whether any would be offered will depend on the agreements the city can reach with the providers of those services.

The fiber-optic lines are so fast that banking over the lines will be done essentially in real time instead of in long gaps between, say, ordering a transfer of funds and getting the bank’s computer to do it.

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Residents would be able to order almost any movie they want and see it immediately on their televisions, instead of getting only what cable TV has lined up on pay-per-view arrangements. And two-way communications--called interactive video--would be used for such events as cross-town training sessions of firefighters and for home shopping programs.

Companies could use the lines for video conferences, which provide real-time video of meetings that occur in different locations. And they could use the fiber-optic lines to help them record sales, changes in inventory and other computerized business functions instantly.

Ideally, Brady said, a home or a business could have one fiber-optic line going into the building with a device to branch out wires inside for different purposes, such as cable TV and telephones.

But engineers disagree about how much fiber-optic rewiring is necessary to offer basic and expanded services to every home and business in the city. Some believe connections to the rest of the community are needed. Others suggest the loop itself will be enough.

Whichever method works best, Anaheim officials hope that the cost for telephone service would go down and the cost of the new services wouldn’t put off customers. That’s what makes the competition for the city’s excess fiber-optic lines important.

Interest in leasing the utilities’ capacity comes mainly from a set of companies known as competitive access providers, or CAPs, which already carry much of the region’s long-distance business telephone traffic.

With federal and state restrictions on services that cable TV and telephone companies like Pacific Bell can offer, the smaller CAP companies try to lure the lucrative local business market by using their own fiber-optic lines to undercut the prices charged by major telephone companies.

“All the small players are pushing like crazy to get into the market, so you can see where Anaheim thinks its lines will be popular,” said John King, a UC Irvine computer science professor.

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One CAP company expected to bid on the Anaheim system, MFS Communications Co. Inc. in Omaha, Neb., already is building a 293-mile loop that will connect 211 commercial buildings in Orange and Los Angeles counties later this year.

Teleport Communications Group, a New York City company owned by four major cable television companies, also is expected to bid on the Anaheim lines. It has been working with the city’s cable television operator, Multivision Cable TV Inc., to support links to cable TV customers. Multivision already has 50 miles of its own fiber-optic lines throughout Anaheim.

“Everybody’s trying to beat the curve, to have enough cable in the ground so they’re taken seriously,” said Bill Snyder, Multivision’s regional director of technical operations. “You have a city building a backbone loop, and everybody else wants to fill that loop out.”

Such CAP companies as MFS and Teleport can use the city’s lines to undercut Pacific Bell, the regional telephone carrier, by offering connections to long-distance carriers that avoid higher Pacific Bell charges. That, in turn, could put more pressure on Pacific Bell to raise rates for home users.

On the other hand, Pacific Bell expects to make its own proposal for Anaheim’s lines.

The success of Anaheim’s strategy to seek competitive bids will depend also on how much money the bidders think they can make from businesses and residents. If they determine that demand for the advanced services they provide would be low, they may barely bid enough to let Anaheim cover its installation costs, said King, of UC Irvine.

But many are willing to bet on good returns later. The city sent letters requesting bids to more than 600 telecommunications companies nationwide. More than 40 companies attended a recent meeting in which city officials explained their plan.

With municipal utilities and, perhaps, stock-owned utilities looking to sell their excess capacity on new fiber-optic lines, the issues facing the industry have changed.

“Several years ago, the question was how were we going to get the information superhighway,” said Lane, the state PUC’s policy adviser. “Then it became, who’s going to build the information superhighway?’

Now, it’s clear that telephone and cable networks will coexist, and two bordering towns could strike deals with different networks altogether, he said. “You’ll have to start asking, ‘Which information superhighway?’ ”

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How Fiber-Optic Differs From Copper

Copper - Transmission: Electrical pulses - Size: 3-inch cable carries 600 pairs of copper wires - Capacity: 1.5 million bits per second; equivalent to 62.5 pages of information per second* Fiber-Optic - Transmission: Light pulses traveling through hair-thin strands of glass - Size: 3/4-inch cable carries 96 protected fibers - Capacity: 3 billion bits per second; equivalent to 125,000 pages of information per second*

How Fiber-Optic Works 1) Conversion: Optical transmitter converts phone conversations, computer data and images from electrical pulses to light pulses 2) Transmission: High-speed pulses of laser light are sent through glass fiber 3) Reconversion: Light-sensitive receiver changes light back to electrical pulses

Fiber-Optic Advantages - Economy: Light travels faster, farther than electrical impulses before costly amplifier is needed to boost signal - Quality: Unaffected by electrical or radio interference or lightning - Capacity: More data or images can be transmitted through fewer cables in less time * Typical single-spaced printed page contains 24,000 bits of information. Source: City of Anaheim, Pacific Bell

Researched by JANICE L. JONES / Los Angeles Times