December 13, 2011
Craig Settles, Industry Analyst
Connecting Communities: The Beach is Nice, but the Network is Driving Business in Santa Monica
Santa Monica, California
(Santa Monica City NetSM)
When was the network started?
The network went live in 2004
Who owns the network?
The City of Santa Monica, with the IT Department being directly responsible for all aspects of the network infrastructure's operation, expansion and management. However, private-sector companies provide most of the services businesses receive.
How many miles, what technologies, what speeds?
8.4 square miles
Fiber optics comprises the bulk of the network. There are WiFi wireless hotspots and hotzones in several outdoor public venues throughout the city.
The fiber networks deliver up to 10 gigabits per second of symmetrical access.
What do services cost?
Most of the services are provided to businesses via private-sector ISPs, and subsequently pricing varies. In some special cases, the City has sold unlit dark fiber to individual companies that were not able to get dark fiber from elsewhere.
Who (what organization) was the primary driver of the project?
The City's IT department has always been the main driver of the project, particularly in the first couple of years. As businesses started asking for services such as access to dark fiber, the City's economic development group began to envision a role for the network to help produce economic benefits, including drawing new companies into town.
Summarize the economic benefits of the network has brought
From a city government's perspective, the network has had a sizeable economic impact by eliminating most of the city departments' voice and data communication costs by replacing outdated equipment. The city saved $750,000 in the first year the network was in place. The greater economic impact has been the network's ability to attract 1) companies to Santa Monica that do business with Hollywood studios, and 2) technology companies of all sorts that require high speed connectivity.
Santa Monica's story
When people think of technology innovation and California, they almost immediately think Silicon Valley. But Santa Monica (nestled next to Los Angeles) is far from the Valley both in geography and in lifestyle. In Santa Monica, life's a beach, which is an attraction to entrepreneurs and corporate mavens alike.
The city government's IT department, which built, markets and operates Santa Monica's network, relied on two staples of the Valley to make an economic impact at a crucial point during an economic downturn last decade: evangelism and creativity. City CIO Jory Wolf pursued two tactics, both of which other communities can emulate: 1) engaging property owners in help increase their occupancy rates, and 2) creatively marketing vacant space.
In 2007, Santa Monica was experiencing a severe increase in office building vacancy rates. Rental costs were high, the telecommunication infrastructure was not very robust, and with only one major service provider (Verizon) in the area, there was no incentive to drive better or cheaper broadband services.
"In 2008, we started approaching property owners and tried to encourage them to install fiber cabling into their buildings as a way to entice people to move into these spaces," states Wolf. "They were not receptive to us initially. It was an added expense at a bad time, plus we couldn't show them proof that having fiber would make a difference to potential tenants."
Santa Monica's city manager felt they had limited options to offer property owners since lowering owners' taxes would offset in revenue reduction whatever the city would earn from them increasing tenants. Lowering other fees property owners are charged would have a similar effect. Yet, believing that the demand for broadband was much greater than property owners realized, the city manager put an offer on the table.
"We offered to heavily discount the cost of installing, operating and maintaining 10-gigabit fiber infrastructure into buildings if the owners would pass that savings directly to potential tenants and aggressively market the offer," continues Wolf. He and his staff continuously worked on the property owners until they started taking the offer. The effort turned the corner when property owners discovered their competitors were filling up vacant units two or three months after fiber was lit in a building.
Currently, the broadband amenity boosts occupancy even before the fiber installation is complete. Business owners, particularly those running startups, now see Santa Monica as a prized location because of the fast network, plus the wireless technology riding on the fiber network minimizes parking hassles through wireless parking meter and parking facility management. Tax revenue has increased and building values remain high due to continual near-100% occupancy rates.
Sometimes smaller is better
Santa Monica's second main economic benefit stems from discovering that at least a dozen angel investors live and work in the city. These are relatively wealthy individuals who each provide seed money to entrepreneurs with great ideas and trying to advance to the prototype stage. These startups otherwise might never get off the ground because they often don't qualify for traditional financing or attract traditional venture capitalists.
Angel investors also provide business management counseling, introductions to influential industry contacts and access to vital other resources. They all know each other and often collaborate in their efforts to help companies, an important component of the business ecosystem that supports technology startups.
Wolf says "there weren't any business incubators, which typically are large buildings with dozens of entrepreneurs and offer various business amenities such as conference rooms, shared receptionists and so on. But we did have a lot of vacant properties." The City approached a couple of angel investors with an idea for what could best be described as mini-incubators.
The City proposed wiring fiber into some of the smaller buildings around town, plus adding WiFi networks to the fiber network so there is wireless coverage both indoors and outdoors in the areas around these buildings. The high speed infrastructure contributes to an environment in which three or four entrepreneurs take root and nurture their ideas into real products or services.
Broadband is the communication (voice, data, video) that glues these tech entrepreneurs to each other, to angels and to resources around the globe. "Not only did the angels like our concept, two companies dedicated to creating incubators brought their expertise here."
Throughout the city these mini-incubators are turning out a small but steady stream of startups. As they add one or two people, some startups may move to bigger spaces within their buildings and then on to bigger facilities within this informal network of "fiber facilities." The city's free WiFi around town contributes to entrepreneurs' free-spirit nature, allowing them to work by the beach, from the park, or in a café.
Other communities may not have the allure of the beach and sunny southern California weather, but in the current economy cities and towns likely have a fair number of small and large vacant properties that are idea potential incubators. Angel investors, most being serial entrepreneurs themselves, and startups are creative enough to turn these properties into thriving incubators.
It's important you first bring these individual stakeholder groups together since people in each respective group speak to and influence each other. Then bring property owners, investors and startups together so they learn about each other's needs, which in turn should lead to collaboration and greater success.
Craig Settles is a broadband industry strategist, marketing expert, author and speaker. He helps municipalities and organizations use broadband technologies to improve operating efficiencies and boost local economic development. In addition, he is frequently called upon as source of broadband expertise by leading media outlets.