Beeline to Anaheim? : City Hopes to Cash In on a New Fiber-Optic Loop

By ROSS KERBER

May 14, 1995 12 AM PT

TIMES STAFF WRITER

ANAHEIM —

Fiber-optic cable promises much for those who want clearer and faster voice and video signals, but it may soon deliver even more to the city of Anaheim--more of a national role model than you might expect.

The city hopes to reap up to $10 million a year by leasing space on 50 miles of fiber-optic lines it is laying to connect the 12 power substations of its municipal electric utility.

Already more than 60 companies--from small telecommunications firms to Pacific Bell--are interested in bidding on the extra fiber-optic capacity as a means of reaching high-paying corporate customers.

And the Anaheim Public Utilities Department, the city’s power utility, has grand ambitions: It hopes to help spur competition in the local telecommunications industry and thus eventually bring cheaper phone and cable TV services to residents.

The state Public Utilities Commission is opening the cable and phone businesses to competition, and Anaheim hopes to eventually trade access to its fiber loop for a commitment to offer service to small businesses and households as well as corporate customers.

“My concern is that if the information 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, general manager of the Public Utilities Department.

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

Officials in Los Angeles and Burbank, especially, are closely watching the effort. The two cities, which operate their own utilities, have also installed fiber-optic cable to help manage their power networks, but they are not pursuing such aggressive plans in the telecommunications business.

“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 also looking at ways to capitalize on 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 PUC, which regulates stockholder-owned utilities such as Pacific Bell and Edison.

An early pioneer among municipal-owned utilities is the Glasgow, Ky., power company, which now offers cable television service and experimental telephone service to the city’s 14,000 residents.

“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 Glasgow utility’s general manager, who has advised Anaheim and several other city-owned utilities in California.

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 power flow 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 optics, a common purchase for utilities now. Fiber-optic cable not only does the same job more efficiently, but has space left over to handle much more information.

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 is cheaper.

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 for leasing to telephone and others.

The city has half the cable laid already and expects to finish the job by the end of this 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.

Interest in leasing the utilities’ excess 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.

One CAP company expected to bid on the Anaheim system, MFS Communications Co. of 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 firms, also is expected to bid on the Anaheim lines. It has been working with the city’s cable operator, Multivision Cable TV Inc., to support links to cable TV customers. Multivision already has 50 miles of its own fiber-optic lines in 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.”

Currently, the CAP companies mainly provide a cheap way for businesses to connect to long-distance carriers. But when the state’s proposed local phone deregulation plan takes effect next January, they will be able to offer the full range of local phone services, either via their own facilities or by leasing lines from established carriers.

Phone companies and cable TV providers, moreover, all see a big opportunity in offering advanced new services such as movies-on-demand, interactive television, home shopping and on-line games. Offering such goodies, though, will require high-capacity communications lines--such as the fiber-optics that Anaheim is installing.

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 bid barely enough to cover Anaheim’s 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, stockholder-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 PUC policy adviser. “Then it became, who’s going to build the information superhighway?”

And Anaheim hopes it will be able to help the locals get aboard.

“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,” said Aghjayan, the Anaheim Public Utilities Department’s general manager.

How Fiber Optic Differs From Copper

Copper

Transmission: Electrical pulses

Size: Three-inch-diameter cable carries 600 pairs of copper wires

Capacity: 1.5 million bits per second; equivalent to 62.5 pages of information per second*

Fiber Optics

Transmission: Light pulses traveling through hair-thin strands of glass

Size: Three-quarter-inch-diameter cable carries 96 fibers

Capacity: 3 billion bits per second; equivalent to 125,000 pages of information per second*

Advantages of Fiber Optics

Economy: Light travels faster and farther than electrical impulses before costly amplifier are needed to boost signal.

Quality: Unaffected by electrical or radio interference or lightning.