The Rancho Santa Fe Association board voted to take a big step toward speedier wireless connectivity at its March 5 meeting, approving a consultant contract with Magellan Advisors to work on building a fiber-optic network in the Covenant.
“I think everyone can agree that fast, reliable internet connectivity, or broadband, is crucial to the enhancement of this community,” said board member Philip Wilkinson, who served on the broadband committee. “We’d love to see the Covenant brought into the 21st century.”
Networks made of fiber-optic cable are capable of carrying significantly more information at faster speeds than traditional copper-wire networks. Fiber broadband can deliver as much as a gigabit (1 billion bits) per second.
Wilkinson said it’s more than just allowing people to run their businesses from home, watch movies online or allow children to do their homework with Internet that moves faster than a snail’s pace — there are many services that can apply when you have fast broadband, such as emergency services, data storage and encryption. Wilkinson himself has a Nest thermostat in his home that can be controlled through an Internet connection.
“The world is going this way, and it’s so important to have reliable, fast broadband in this community,” Wilkinson said.
After conducting a feasibility study independently funded by Covenant residents Fred Luddy, Mike Licosati, Alex Kaiser, Eoin O’Shea, Todd Mikles and John Ryan, Magellan recommended that the Association build and own the entire $14 million fiber-optic network, allowing Rancho Santa Fe to maintain control of the technological infrastructure.
It was also recommended that Rancho Santa Fe not be in the business of providing the actual service to homes. Wilkinson said this could be done though Internet service providers, any number of which could participate and give a “door fee” or royalty back to the Association for access to its infrastructure.
Based on current and industry standard fees, the retail broadband provider could generate about $3.1 million a year based on 1,700 homes paying $140 month for the “triple play” (home phones, Internet and TV) and 100 businesses paying $250 a month.
For a 10-year payback, Rancho Santa Fe would need to collect $1.4 million a year.
Another option exists whereby the Association could grant entitlements to a developer to complete and manage the project. This would be at no cost to the Association; the risk would be transferred to the developer and the Association would still receive the revenue.
The board voted to engage Magellan to complete the next steps as a consultant for $100,000 from the Covenant Enhancement Fund. Magellan would identify vendors, gain preliminary commitment from residents to perfect the revenue model, meet with the county and assess right-of-way issues for trenching or coring, write requests for proposals for qualified engineers, and most important, identify the revenue stream and revenue share with providers.
“We can’t make an informed decision until we refine the business plan and determine if it’s something we want to build ourselves and pay for,” Wilkinson said. “We know there’s a need … but we can’t determine if we should own it or someone else should own it until that business plan is defined.”
The network would take approximately 16 months to two years from start to completion.
Wilkinson said Magellan’s feasibility was very positive and helpful. The study confirmed that it would be an expensive venture: $75,000 per mile and almost 100 miles in the Covenant that would need to be cored or trenched to build a backbone for broadband.
Wilkinson said it was important that it be an open system, so multiple providers could be on the same system, and they wanted it to be “future proof,” since technology is ever-evolving.
As part of their study, Magellan also completed a survey in which 500 Rancho Santa Fe residents responded.
The survey found 97 percent of residents have Internet at home, and those residents rated the current service an average of 1.9 on a scale of 1 to 5.
The survey showed 47 percent of residents have home-based businesses and 79 percent said they would be willing to pay a premium for quality services.
“If we had sent the survey to the banks and real estate offices in town, we would have 100 percent positive response in ‘need for broadband in the community,’” Wilkinson said.
Companies like Time Warner and Cox have said they would do the project for $30 million — the Association would pay, and they would come in and get the subscribers and all of the revenue.
Broadband committee member Kim Eggleston said doing the project on their own is a way for the Covenant to no longer be “held hostage” by these large companies who don’t like Rancho Santa Fe’s sparse population demographics. For less money, the Association could build its own system and own it, or lay off the development rights and still participate in the revenue.
“It’s a complete no-brainer to do it,” Eggleston said.
“As a community, we’re castigated in the San Diego area as being ‘behind the times’,” said Eggleston. “This would allow us to leap-frog over the rest. We would be the community at the forefront of technology … people would want to locate here for that reason alone.”