Title
(CONTINUED FROM DECEMBER 18, 2024) - Ordinance to Establish the Network Infrastructure Services License by Creating New Chapter 5D of the Phoenix City Code and to Establish an Effective Date (Ordinance G-7343) - Citywide
Description
Request City Council approval to adopt an ordinance to establish the Network Infrastructure Services License by creating a new Chapter 5D of the Phoenix City Code to allow for companies that desire to provide fiber-to-the-home services for high-speed internet access.
Report
Summary
This proposed City Code amendment will provide the framework for the City to enter into licenses with companies that desire to sell fiber-to-the-home (FTTH) services for high-speed broadband internet access (500 Megabits to 1 Gigabit per second) to end-user customers. The target customers are mostly residential and some small businesses.
City Code currently does not have a specific chapter to allow network infrastructure services to be installed and operated in the right-of-way, and the creation of this code will enable the City to enter into Network Infrastructure Service Licenses with interested providers who desire to install fiber-optic cabling in the City’s rights-of-way (ROW) and sell high-speed internet access to residential customers through a FTTH services network.
The new code section (Attachment A) will establish the framework for the license, the basis for the long-term agreement with these companies, and will outline the financial terms and payments that companies will remit to reimburse the City for services provided in the installation and operation of their networks, and a fee for the use of the ROW. The license will also outline the requirements for all work that is performed within the ROW and requires inspection and conformance with adopted City codes and requirements.
In 2022, the City of Mesa approved licenses for five companies to provide FTTH services for high-speed internet services. In 2023, the cities of Chandler and Gilbert approved similar licenses for the same purpose. During this time frame, representatives from AT&T, Google, BAM Broadband/Desert iNet and Zoom Tech Arizona approached City staff to outline their interest and present proposals to build a FTTH network in Phoenix. In 2024, Flying Bull Internet, LLC dba Novos Fiber also expressed an interest in providing network infrastructure services.
On July 1, 2024, the City Council approved Temporary Network Services Construction Licenses for BAM Broadband and Zoom Tech Arizona that allows the companies to begin the permit submittal process and to commence construction until Chapter 5D is adopted and full-term licenses can be issued in early 2025.
Concurrence/Previous Council Action
- On June 21, 2023, this matter was presented to the Transportation, Infrastructure and Planning (TIP) Subcommittee for information and discussion.
- On June 20, 2024, this matter was presented to the TIP Subcommittee for information and discussion.
- On November 20, 2024, the TIP Subcommittee unanimously approved this item.
Public Outreach
The Street Transportation Department met with various industry stakeholders between May 2022 through October 2024, with representatives of the network infrastructure service industry to discuss the new Code Chapter, applicable fees, and the City's proposed license requirements. Additionally, staff discussed the need to meet current City requirements that do not allow micro-trenching in the ROW and also the pavement restoration requirements for surface treatment. These requirements help mitigate negative driver/user experience while utilizing the ROW and ensure longevity of the asphalt. These are critical because the City has performed $200 million in pavement maintenance at the direction of the Mayor and City Council based upon resident concerns about the conditions of the City maintained streets over the last five years. Based on the feedback from these meetings and the June 21, 2023, TIP Subcommittee, the City adjusted the annual fees for use of the City’s right-of-way.
Google Fiber and Gigapower still have concerns about the three percent, six percent, and Annual Minimum Fee (AMF). However, their most significant concerns are that the City does not allow for micro-trenching and the requirement to comply with pavement restoration requirements. The City is working with Google Fiber to install a micro-trench pilot area to evaluate the impacts to the ROW. The City has offered Gigapower the opportunity to do a pilot installation that utilizes ground penetrating radar instead of traditional boring methods to locate existing utilities.
The Communication Workers of America (CWA) union provided an email with concerns about the quality of work performed by FTTH contractors in Minnesota and Texas. The CWA provided a list of work quality and labor standards that included ROW Contractor Transparency, ROW Contractor Training and Certifications, as well as Monitoring and Penalties. The City verifies that contractors provide proof of insurance and worker's compensation coverage and also verifies that the contractor is licensed with the Arizona Registrar of Contractors. The City inspects contractor work to ensure compliance with all City requirements and has the ability to limit or to stop work by a contractor that is not performing work safely or following City approved construction requirements.
Financial Impact
The new code section proposes a license fee based on a percentage of gross revenues from FTTH customers and an AMF based on the number of residential units passed for use of the City's ROW. In addition, the companies will reimburse the City for plan review and permits, inspections, ROW Management, and other fees for staff time that are directly related to the construction, operation, and repair of the facilities required for the FTTH networks. Staff lowered the upfront AMF from the initial $12 per home, down to $9 and now $6 for each residential unit passed before the three percent or six percent cost structure would become active. This was done because of industry concerns about the upfront installation costs due to not allowing micro-trenching and the pavement restoration requirements. This lower upfront AMF helps reduce upfront installation costs, and the City created a category for FTTH installation concurrent with new subdivision developments that does not require payment until at least 50 percent of the homes in a subdivision are sold.
On October 18, 2024, in accordance with A.R.S. 9-499.15 and City of Phoenix Administrative Regulations 1.98, the City posted on its website and social media page that the new fees in Chapter 5D will be on a City Council agenda on December 18, 2024, or later.
..Department
Responsible Department
This item is submitted by Deputy City Managers Alan Stephenson and Inger Erickson, the Street Transportation Department and the Office of the City Engineer.