The Times Picayune

S&WB plumbs high-tech pipe plan

Sewer rehab melded to fiber-optic network

Tuesday October 21, 2003

By Martha Carr

Staff writer

The same agency that brings you your drinking water and takes away your sewage may soon be entering the high-tech world of fiber optics if a far-reaching proposal endorsed by Mayor Ray Nagin becomes reality.

The Sewerage & Water Board last week voted to begin negotiations with a company that has proposed using the city's extensive sewer rehabilitation program as a vehicle to lay the small underground pipes needed to bring fiber optics into thousands of homes and businesses.

The underground fiber-optic network would be connected to the outside of sewer pipes throughout much of the city, allowing the board to generate money by leasing the space to telecommunications companies, Nagin said. That money could be used to offset future rate increases as the city continues to grapple with its aging sewer and water infrastructure, he said.

But there are questions about whether the 26 telecommunications providers that now do business in New Orleans need or want more space to run their fiber-optic lines.

Two of the city's largest providers, BellSouth and Cox, said they would be willing to look at the proposal but have already invested heavily in building their own fiber-optic networks.

Several communities nationwide have built their own fiber-optic networks, but never before have they attached fiber optics to sewer lines. New Orleans would be the first major city to experiment with the process, patented just one month ago by Renaissance Integrated Solutions of Armonk, N.Y. The company is the only one now marketing the marriage of fiber optics and sewer services, according to chief executive Stephen Paletta.

'Incredible potential'

Nagin, a former head of the local Cox Communications franchise, said the plan has several benefits:

-- The city would get all-new sewer lines for about the same cost of repairing and replacing them under the current program, because of a "trenchless" construction process the company says will reduce the need to dig up streets.

-- The water board could earn as much as $15 million a year leasing the small pipes, or conduits, through which the fiber optics would be threaded.

-- The city could use the fiber-optic network to attract technology companies and other businesses to the city.

-- Residents, schools and businesses in poor neighborhoods would have a new way to hook in to the latest technology available, bridging the city's digital divide. "We have something at our fingertips that has incredible potential," Nagin said at the Oct. 15 water board meeting. "Telecommunications companies will tell you that the last battle is getting fiber optics to the home."

Some telecoms hesitant

Though local companies say they are willing to consider the proposal, several say they don't necessarily foresee a need for another way to run the fiber-optic lines.

Cox spokesman Brad Grundmeyer said his company has tried to stay away from leasing conduit, preferring to own its fiber-optic infrastructure.

"Our network is done," he said. "I think we would consider rentals that would make good business sense for us, but it would have to be on a case-by-case basis."

MCI spokeswoman Linda Laughlin said her company has already built an extensive fiber-optic network along highways and other major roads that facilitates MCI's long-distance service. The company is not looking to expand, she said.

"Our network is already embedded in ground, and we are not adding much in terms of expansion," Laughlin said. "With that said, we will certainly keep our eye on technology and new opportunities."

Direct line into homes

Mayoral aides and Renaissance executives acknowledge that many companies do have fiberoptic lines in the city but that most do not offer fiber connections directly into homes, like the proposed water board network would do. Instead, their fiber optics transmit signals to copper wire or coaxial cable, which are connected to homes and businesses.

"Fiber in New Orleans connects to 5 percent of businesses and 1 percent of homes because of the extensive cost of digging up the street," Paletta of Renaissance said. "Obviously over the last couple of years the telecom market has been a bit of a bust, but the main reason for that is because they cannot get connectivity to customers in a cost-effective way."

With a total fiber-optic network, residents will be able to get an Internet connection 10,000 times faster than high-speed Internet. The technology also would allow companies to provide services such as video on demand, live conferencing and real-time gambling.

Grundmeyer said Cox thinks its existing network provides plenty of capacity to offer those services without home fiber-optic connections. Cox now offers phone, high-speed Internet, digital cable and HDTV.

"Our bandwidth for our network is wide enough to support what we have currently and what we want to offer in the future," he said.

'Pipe bursting' avoids digs

The Renaissance proposal works this way:

-- Instead of the water board's current method of lining broken pipes with resin-soaked felt or digging up the street and replacing an old pipes with a new ones, the board would use a technique called "pipe bursting" to lay a high-density polyethylene pipe surrounded by eight conduits in the ground. With pipe bursting, a rocket-shape machine blows out the remnants of the old pipe and drags in the new pipe without digging up the entire street.

-- Cuts would then be made in the pavement to connect shorter feeder pipes with conduits attached from the main line to the property lines of the homes or businesses. Pipe bursting could then be used to push the smaller pipes toward property owners' sewer connections.

-- Companies could then lease the right to thread their own fiber optics through one of the conduits for a proposed fee of $1.25 a foot. Special manholes and underground connection boxes would be built to access the conduits.

-- The water board and Renaissance would then split the lease revenue 75 percent to 25 percent. The company would help manage the leasing of the network.

-- The water board would be responsible for upkeep and repair.

Acting water board Director Marcia St. Martin said parts of the city where sewer repairs have been completed would not be ripped up again to install the fiber-optic conduits. That includes all of Lakeview, most of Gentilly and about 60 percent of the Central Business District. Most of Uptown and Mid-City, plus all of Algiers, Southshore, eastern New Orleans, the 9th Ward and Carrollton areas, could be included in the program, she said.

St. Martin also said water board staffers and officials from Montgomery Watson Harza, which serves as project manager on the sewer rehabilitation, will have to meet with Renaissance executives soon to determine the feasibility of using the pipe bursting technique on a more extensive scale. Many areas may be hard to do because the sewer pipe has totally disintegrated, leaving no pipe to burst through.

"I don't know if 100 percent of what is left is a candidate," she said. "It's a challenging and exciting concept."

Morgan Stanley in on deal

The water board's 14-year sewer rehabilitation program is part of a consent decree with the Environmental Protection Agency that was hammered out in 1998 after the agency threatened to enforce a $29 million fine against the city for letting sewage from thousands of broken pipes get into drainage canals and Lake Pontchartrain. First estimated to cost $200 million, the program's price tag has nearly tripled as engineers have discovered extensive damage to the miles of clay pipe. The estimated costs should not exceed $650 million.

Renaissance approached the city as part of a strategic alliance with Morgan Stanley, which issued a proposal to restructure the agency's $401 million in debt to free up more cash for infrastructure improvements. The board voted to enter into negotiations with both companies, but there has been little public discussion about what the firms will be paid. Morgan Stanley will likely make the bulk of its money on the refinancing of bond issues. Paletta said his company will ask for a professional services fee during construction, but that most of its money would come from sharing in the fiber-optic lease revenue.

Morgan Stanley last week said the Securities and Exchange Commission staff had recommended legal action against the company for its failure to disclose incentives related to mutual fund sales, according to a report in the New York Times.

Morgan Stanley also disclosed in an SEC filing that it received a subpoena in July from New York State Attorney General Eliot Spitzer related to possible late trading and market timing involving its mutual funds.

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Martha Carr may be reached at mcarr@timespicayune.com or (504) 826-3306.