Comcast Corp. will spend $10 million in Philadelphia to wire more than 200 recreation centers, health clinics, police stations, and other city buildings with high-speed fiber-optic lines, but also earn $32 million in fees over about 15 years to manage the local network.
Verizon Communications Inc. is now the provider of the data services for city agencies and buildings.
City officials say that the network was not a sweetheart deal for Philadelphia-based Comcast and that Verizon rejected the idea of building out a new network during its franchise talks with Philadelphia officials in 2009.
"The goal is to transfer connectivity to Comcast," said Adel Ebid, Philadelphia's chief information officer. "We always had the need [for a network], and we were agnostic as to who provided it."
City Council approved and Mayor Nutter signed a 15-year franchise-renewal agreement this month with Comcast, though some details are still being finalized.
The new "institutional network" - or I-NET - deepens Comcast's economic interests in a city where it employs thousands, is constructing a second skyscraper as part of its headquarters complex, and is earning hundreds of millions of dollars a year in revenue and profit from cable-TV and Internet subscribers.
The deal also boosts a recently launched business unit in Comcast's cable division that offers sophisticated multilocation data services to big corporations and organizations such as banks and hospitals. The unit competes with Verizon, AT&T, and CenturyLink.
City negotiators say they wrung concessions out of Comcast for a network that will save the city about $50,000 a month for data services now provided by Verizon, officials said.
Ebid said Philadelphia now uses Verizon's "leased circuit" technology with speeds of about 1.5 million megabits per second to most buildings. The city renews a Verizon data-services contract annually and will not renew the contract when the Comcast network comes online, he said.
Verizon could not be reached for comment late last week.
The new Comcast network will offer speeds beginning at 100 megabits per second and advance to gigabit speed, or 1,000 megabits per second, for City Hall, the Municipal Services Building, and police district headquarters.
A particular benefit will be the city's recreation centers - many of which are served only with "courtesy" cable-TV lines, Ebid said. "The hope is that we would put WiFi at every place where municipal services are being provided," he said.
Comcast will invest $9 million into the new network over the next two years, and the city will pay the cable giant $202,000 a month to manage it when it's completed, Ebid said. While the franchise renewal runs 15 years, the city will only pay the monthly fee when the network is running. It's expected to be about 13 years.
In seven years, Comcast will invest an additional $1 million to upgrade switches and routers, bringing the total capital investment to $10 million.
The city could pay the $202,000 monthly fee directly to Comcast, or Comcast could take the funds out of the franchise fees it pays Philadelphia for the right to offer cable service, Ebid said.
Comcast, the nation's largest cable company, pays Philadelphia about $17.5 million a year in franchise fees - or 5 percent of total TV-related revenues derived from city cable-TV subscribers.
Councilman Bobby Henon, chair of the public property committee that negotiated the Comcast franchise renewal, said he thought the network could improve public services for city residents "with quick data and quick speeds."