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Gigabit Networks and Utah: March 24th Luncheon and Webcast

On Friday, April 24th, make plans to attend the Utah and Broadband Breakfast Club Luncheon Event. If you can't make it in person, attend the webcast. The topic: Gigabit Networks in Utah.

From the announcement:

In announcing in late March that Google Fiber will expand to Salt Lake City (its eighth metropolitan area nationwide), the broadband world turned its envying eyes on Utah. With Google Fiber in Provo and now Salt Lake -- and with Gigabit Networks available in the 11 cities served by the Utah Telecommunications Open Infrastructure Agency, or UTOPIA -- Utah is poised to be the first state where a substantial portion of its residents have access to the fastest-possible broadband internet services.

What does Google's investments say about the economic health and technology-savvy nature of Utah? What do cities and citizens get from Google Fiber that they haven't gotten from traditional telecom companies? And, for cities and states seeking to get a Gig, what are the best options to build and enhance Gigabit Networks?

A panel of experts will discuss what Google and Gig networks mean to Utah and its citizens. The webcast is free and the event is $25 for Nonmembers of the Utah Breakfast Club or $15 for Members. Lunch will be served at the Utah State Capitol at 11:30 a.m. MT and the panel discussion will and webcast will start at 2 p.m. ET/Noon MT.

As a bonus, you may now obtain a free three-month trial membership to the Utah Breakfast Club.

Panelists will be:

  • Devin Baer, Head of Fiber Business, Salt Lake, Google
  • Paul Cutler, Mayor, City of Centerville, Utah
  • Justin Jones, Vice President, Public Policy and Communications, Salt Lake Chamber
  • David Shaw, Shareholder, Kirton McConkie; Chair, Government and Utilities Practice Group
  • Moderated by Drew Clark, Of Counsel, Kirton McConkie; Founder, Utah Breakfast Club

Register online for the webcast or buy tickets for the live event.

Municipal Networks and Small ISP Partners to FCC: Title II Not a Problem

A group of municipal leaders and their private sector small ISP partners submitted an ex parte filing with the FCC today stating that they see no reason to fear Title II reclassification of Internet access. The statement, signed by a variety of towns and providers from different areas of the country is reproduced in full:

Dear Chairman Wheeler,

As a group of local governments and small ISPs that have been working to expand the highest quality Internet access to our communities, we commend you for your efforts to improve Internet access across the country. We are committed to a free and open Internet without blocking, throttling, or discriminating by ISPs.

As local governments and small ISPs, we wanted to ensure you are aware that not all local governments and ISPs think alike on matters like reclassification. For instance, on July 18, 2014, the mayors of New York City; Portland, Oregon; and San Francisco called on you to issue the strongest possible rules to guarantee Net Neutrality. Each of these communities is also taking steps to expand and improve high quality Internet access to their businesses and residents.

Our approaches vary but are already resulting in the highest level of service available because we are committed to expanding high quality Internet access to supercharge local economies and improve quality of life. We have no interest in simply replicating older triple play model approaches. We want to build the infrastructure of the future and we see nothing in the proposed Title II reclassification of Internet access that would hinder our ability to do that. As Sonic CEO Dane Jasper has strongly argued, ISPs that don’t want to interfere with their subscribers’ traffic should expect a light regulatory touch.

We thank you for your leadership during this difficult period of transition. We understand that many of our colleagues have trouble trusting the FCC given a history that has, in many cases, ignored the challenges small entities face in this industry. But whether it has been increasing the speed definition of broadband, or calling for the removal of barriers to community networks, we have been impressed with your willingness to take on powerful interest groups to ensure the Internet remains a vibrant, open platform.

We look forward to working with you to ensure that future rules recognize the unique challenges of small providers and innovative approaches to expanding access.

Sincerely,

  • Peter d'Errico, Town of Leverett MA, Municipal Light Plant, Town of Leverett MA Select Board
  • Fletcher Kittredge, President and CEO, GWI, Maine
  • Rick Bates, Town Manager, Town of Rockport, Maine
  • Kevin Utz, Mayor, Westminster, Maryland
  • Dr Robert Wack, Council Member, Westminster, Maryland 
  • R. Brough Turner, Founder and CTO, netBlazr Inc., Boston, MA
  • Pete Ashdown, Founder and CEO of XMission, Salt Lake City, Utah
  • Elliot Noss, CEO, Tucows / Ting
  • Kim Kleppe, Information Systems Director, City of Mount Vernon, Washington
  • Dana Kirkham, Mayor, City of Ammon, ID
  • Levi C. Maaia, President, Full Channel Labs, Warren, Rhode Island

You can also view the PDF of the filing at the FCC website.

For more on Title II and how it may or may not affect municipal networks and their private partners, listen to Chris interview Chris Lewis from Public Knowledge in Episode #138 of the Community Broadband Bits podcast.

An Update on Utah's UTOPIA Open Access Network

For the facts on all things UTOPIA, we turn to Jesse Harris at FreeUTOPIA.org. In his latest post, he provides an excellent bullet list of the key factors in Macquarie's Milestone 2 proposal. An excerpt From his post:

  • The final cost per address is estimated at $22.60 per month. Macquarie estimates that re-working the deal to account for five cities bowing out trimmed the cost by $8.57 per month.
  • The revenue split is much more generous than I expected, allowing the cities to keep 75% of wholesale revenue after the first $2M per year. It’s expected to completely cover the debt service by 2021 with just a 24% take rate for premium services.
  • The basic level service has also been improved. Instead of 3M/3M service being included at no extra cost, it’s been bumped to 5M/5M. This matches Google Fiber speeds on the free tier. The data cap stays put at 20GB per month.
  • Almost all of the network revenues are being driven by Veracity, XMission, and SumoFiber. Other ISPs are very small by comparison.
  • The majority of currently connected users are in opt-out cities. This only reinforced that the votes there were “we got ours” selfishness.

Jesse has also managed to obtain a draft copy of the Milestone Two Report and has it posted for your review at his blog.

Recently, the network settled a long running dispute with the Rural Utility Service (RUS), reported the Standard Examiner. UTOPIA was awarded a $10 million settlement in a lawsuit filed in September 2011.

A November Salt Lake Tribune article reported that the RUS encouraged UTOPIA to seek federal loans in 2004 but took 19 months to approve the first payment, generating unanticipated expenses. Later, the agency withdrew promised funding with no formal reason. 

Community Broadband Media Roundup - December 12, 2014

This week in Community Broadband networks... partnerships, cooperatives, and going-it-alone. For a background in muni networks, check out this recent article from FiscalNote. The article highlights Kansas and Utah's fight for improving beyond the minimum speeds. 

Speaking of minimum, the FCC announced its new "rock bottom" for regulated broadband speeds. Ars Technica's Jon Brodkin reports that despite AT&T, Verizon, and the National Cable and Telecom Association's protests, ISPs that use government subsidies to build rural broadband networks must provide speeds of at least 10 Mbps for downloads.

Rural Americans should not be left behind those who live in big cities, the FCC announcement today said. "According to recent data, 99 percent of Americans living in urban areas have access to fixed broadband speeds of 10/1, which can accommodate more modern applications and uses. Moreover, the vast majority of urban households are able to subscribe to even faster service," the FCC said.

The FCC plans to offer nearly $1.8 billion a year to carriers willing to expand service to 5 million rural Americans. 

This is a step in the right direction, but we are alarmed to see a download:upload ratio of 10:1. People in rural areas need to upload as well as download - our comments to the FCC strongly recommended raising the upstream threshold as well and we are very disappointed to see that remain a pathetic 1 Mbps.

And, from TechDirt's own "who can you trust if you can't trust the phone company department," Karl Bode found that a study by the AT&T-funded Progressive Policy Institute concluded that if Title II regulations were passed, the nation would be "awash in $15 billion in various new Federal and State taxes and fees. Bode writes that the study cherry-picked and conflated data:

The reality the broadband industry doesn't want to acknowledge is that very little changes for it under Title II if carriers aren't engaged in bad behavior. The broadband industry is fighting Title II solely to protect potential revenues generated from abusing uncompetitive markets. That this self-serving behavior is being dressed up as concern about the size of your broadband bill is the industry's best comedic work to date.

Cities Pursuing Community Broadband

Nancy Scola reported on the growing collective of "Next Century Cities." 

[The group's] early expansion is a signal of what seems to be a shift in the way Americans are thinking about high-speed Internet access: the idea that cities will the battlegrounds for the playing out of the broadband debates. One effect of these cities working so closely with Google as it rolls out its fiber network in places like Kansas City and Austin is a realization that mayors can take broadband into their own hands -- whether that's through a municipal solution like Chattanooga's gigabit network or through partnering with traditional Internet service providers such as Comcast or Time Warner Cable.

Other partnerships are also moving muni networks forward

At the same time as the Next Century Cities announcement, the Department of Agriculture announced $190.5 million in grants and loans for rural broadband and telecommunications infrastructure.

"Modern telecommunications and broadband access is now as essential to the businesses and residents of rural America as electricity was in the 1930s," said Agriculture Secretary Tom Vilsack, in a USDA statement. The funding will go towards providing, “broadband in areas that lack it, help rural-serving public television stations begin using digital broadcasts and support other telecommunications infrastructure improvements."

Jason Meyers with LightReading explains why utility companies (like EPB in Chattanooga) are positioned so well to be home to gigabit networks.  

Several communities are considering local options for networks. Some are just in the earliest study phases: Medina County and Athens in Ohio and Walla Walla, Washington are among them. RS Fiber in Minnesota has approved its updated business plan and financial strategy, meaning it can move forward with its cooperative network, and several communities in Northeastern Oklahoma are pursuing a cooperative plan as well.

It looks like the push for local options in Colorado is having an affect on other communities. Aspen and Pitkin County have submitted requests for proposals-- perhaps inspired by Longmont, Boulder, and the rest of the communities we reported on after the November referenda.  

Meantime, Bruce Kushnick with the Huffington Post reported this week that communities all over the country have been paying for fiber infrastructure upgrades, but have seen almost none of the investment. 

Starting in 1991, the phone companies went state-to-state to get changes in state laws, known as "alternative regulations" to charge customers for the replacement of the copper wires that were part of the state-based utility, like Verizon New Jersey, with a fiber optic wire capable of 45 Mbps in both directions, the standard speed for broadband in 1992.

And though it varied by state, this fiber optic wiring was to be done everywhere -- urban, rural, and suburban, rich and poor communities and cities, and even the schools were to be wired in some states. All customers were paying for the upgrades of this future fiber optic broadband utility so they all deserved to be upgraded.

Check it out and see if your community is on the list. And if you think this isn't the first time you've heard about this Big Ripoff, you're right-- We interviewed him on Community Broadband Bits Episode 28

Net Neutrality

This week, New Jersey's Cory Booker and Maine's Angus King defended net neutrality on CNN. 

The Internet is one of the most powerful tools on the planet. Across the globe, millions of people connect every minute of every day to harness its wealth of information, exchange ideas in an open platform and foster the type of innovation and entrepreneurship that spurs economic growth.

And today, it's never been more at risk in the United States.

Washington Post's Brian Fung reported that there are hints that the telecom industry is preparing for a new Title II reclassification. Verizon's CFO Francis Shammo said, in a nutshell, that the company would do just fine if the FCC imposed the stricter regulations. 

"I mean to be real clear, I mean this does not influence the way we invest. I mean we're going to continue to invest in our networks and our platforms, both in Wireless and Wireline FiOS and where we need to. So nothing will influence that. I mean if you think about it, look, I mean we were born out of a highly regulated company, so we know how this operates.

Despite this very clear statement, we expect to see still more claims from groups like the AT&T puppet Progressive Policy Institute that Title II would somehow cause major carriers to invest even less in networks across the United States. Though, if the market were half as competitive as they claim, any firm that invested less would be in big trouble! How do we know when they are lying? Well, are their lips moving?

Layton Resident Breaks Down the Numbers on UTOPIA Service: Letter to the Editor

Thane Packer, a Layton resident, attended a community meeting this fall to learn what he could about UTOPIA. Packer is like many others who consider his costs for Internet, TV, and phone as an important factor in whether or not to support UTOPIA. After attending the meeting, he considered the presentation and what he described as "some very heated, and some very biased opinions."

He then examined his existing triple play costs and shared his findings in a letter to the Standard Examiner. The rest of his letter is reproduced below (emphasis ours):

The total bundled bill for home phone, Internet, and a TV package was $273.63. That is $93.25 per month for the internet and home phone plus $180 for TV. The telephone service is fine but the Internet is frustrating. The signal fluctuates, is spotty and unreliable.

In Provo, because there is competition from a fiber optic network, this exact same package, which includes, total Internet, home phone and the TV package is available from a provider for only $99.94 a month.

This means that even if I didn’t use a fiber network like the one in Provo the competition price from the provider would save me $178.69 a month. That means that without the competition from a fiber system like UTOPIA, the provider stands to make, (from me) a total of $2,144.28 a year and in 25 years (the pay-off time for the current bond, for which we receive nothing) is over $53,000

If I were able to switch to fiber system here in Layton a much better service would cost even less and I can certainly find a better place to use my $53,000.

So ask yourself this question. What is your current service costing you, how much extra are you paying, and what are you getting for it? For me the advantage of saving at least $178.69 a month and getting better service for it is obvious.

So please Layton, find a way to make this or something like it work for us. A very vocal minority should not be able deprive the rest of us from better cheaper service.

Utopia at a Crossroads: Part 3

This is the final installment of a three part series, in which we examine the current state of the UTOPIA network, how it got there, and the choices it faces going forward. Part I can be read here and Part II here

In Part I of this story, we laid out the difficult situation the open access UTOPIA network finds itself in and how it got there. Part II gave the broad outlines of Macquarie’s preliminary proposal for a public-private partnership to complete and operate the network. The numbers we deal with here are mostly from the Milestone One report, and assumed the participation of all 11 cities. It should be noted that since five of eleven UTOPIA cities opted out of proceeding to Milestone Two negotiations, the scope and scale of the project is subject to change. The basic structure of the potential deal is mostly set, however, allowing us to draw some reasonable conclusions about whether or not this deal is good for the citizens of the UTOPIA cities.

Let’s first turn to why Macquarie wants to make this investment.  This would be the firm’s first large scale broadband network investment in the U.S., allowing it to get a foothold in a massive market that has a relatively underdeveloped fiber infrastructure. To offset network build and operation costs, it will also be guaranteed the revenue from the monthly utility fee, which my very rough calculations put between $18 and $20 million for the six cities opting in to Milestone Two (or between $30 and $33 million per year for all 11 cities) depending on whether the final fee ends up closer to $18 or $20 per month.

Jesse Harris of FreeUTOPIA puts Macquarie’s base rate of return between 3.7% and 4.7%, which is slim enough that they should have the incentive to make the network successful and truly universal, boosting their share of the revenue from transport fees in the process.

The monthly utility fee is a difficult pill for UTOPIA cities to swallow politically, and has allowed opponents to paint it as a massive new tax.  But this claim ignores the costs of the existing $500 million debt (including interest), which will have to be paid regardless of whether the network is ever completed or any more revenue is generated.

The existing debt adds up to about $8.50 per month per address over 30 years, without accounting for ongoing operating losses (or bond prepayment penalties if the network goes dark) or necessary network maintenance and upgrades. Without completing the network, there is no hope that it could return to self-sufficiency, meaning it would likely require operating subsidies in perpetuity.

Again, Jesse Harris has paved the way by doing an analysis of what is in the best interest of taxpayers from a purely self-interested perspective (ignoring indirect benefits of the network) here and here. As he sees it, it all depends on the take rate: if Macquarie can reach a 38% take rate in the newly expanded network coverage area, the entire deal will cost the same for taxpayers as simply selling off the network. A higher take rate would mean the cities actually spend less to get a completed network than they would to sell it off. But that’s only a narrow look at the balance sheet.

Even at the point where the deal is a wash financially, cities still get a completed network with an included basic level of service for every resident. Comcast and CenturyLink will slash their prices substantially in response to the competition (at least 50% in Provo) so that every citizen benefits regardless of if they use the network. Even for someone with a very basic Internet connection that wouldn’t use the network, they would be paying no more than $11.48 to potentially save at least $15, a net gain. The cities also get a $100M annual revenue stream at the end of the 30-year contract, effectively making the worst case scenario break even after less than seven years of ownership.

Opponents, especially those from the CenturyLink-funded Utah Taxpayer Association (UTA), have focused on the extra cost from the new utility fee to the small segment of the population that neither has nor wants a telecommunications connection. However, some studies have also shown that a fiber connection increases the value of a property, so there really may be some gain for everyone under this deal.

As it stands today, 2,100 miles of fiber have already been built, 70% of it underground. 40% of UTOPIA addresses are passed by the network (meaning they are able to purchase a connection upfront or on a payment plan), but only 10% are actually connected. Some cities are almost completely covered, others less than 20%. Some neighborhoods have one side of a street where connections are offered and the other where services are unavailable. The result of constant funding constraints, frivolous incumbent lawsuits, and poor planning, these pieces of stranded infrastructure can still be reclaimed and capitalized on with additional investment. 

Essentially, UTOPIA city taxpayers are on the hook either way. They can either get something for their troubles with the Macquarie deal (and maybe even end up paying less), or they can call it quits and pay to shut it down. They‘ve taken out a mortgage and built most of the house, but run out of money before they put a roof on. They can either restructure the debt and get on a payment plan to finish the roof, or they can watch the house rot and pay the mortgage for 30 years anyway. 

It is important to note that UTOPIA has a unique dynamic because the network has struggled financially (unlike the vast majority of community networks, most of which use a different business model and learned from the early mistakes of UTOPIA). We have not yet seen any communities proposing to establish a utility fee from the start, but it is an interesting proposition and we will explore it at length in a paper later this summer.

Media Roundup: Blackburn Amendment Lights Up Newswires

Rep Marsha Blackburn (R-TN) and her love for large corporate ISPs was all over the telecommunications media this week. She attempted to kneecap the FCC as it explores options to restore local telecommunications authority to communities. Blackburn introduced an amendment attacking local options as the House took up general appropriations bill H.R. 5016.

The amendment passed 223-200, primarily along party lines, with most Republican Reps voting with Blackburn and all but two Democrats opposing the amendment.

Democrats voting to support the amendment included Georgia's 12th District's John Barrow and Jim Matheson from Utah's 4th District. If either of these gentlemen represent you, take a moment to call their offices and point out their voting mistake.

Republicans that voted No were Mike Rogers and Mo Brooks from Alabama's 3rd and 5th Districts. Charles Boustany from the 3rd District in Louisiana and Chuck Fleischmann from the 3rd District in Tennessee (includes Chattanooga) also opposed the restriction. If these elected officials represent you, please take a moment to contact them and thank them for breaking ranks to support local authority.

Coverage this week was fast and furious.

Sam Gustin from Motherboard reported on Blackburn's efforts. Gustin checked in with Chris:

"Blackburn's positions line up very well with the cable and telephone companies that give a lot of money to her campaigns," said Mitchell. "In this case, Blackburn is doing what it takes to benefit the cable and telephone companies rather than the United States, which needs more choices, faster speeds, and lower prices."

Mitchell says that he's sympathetic to the arguments against "preemption"—after all, he works for an organization called the Institute for Local Self-Reliance—but points out that while Blackburn opposes the federal government inserting itself into state law, she apparently has no problem with the states telling cities and municipalities what they can and cannot do.

"The argument that Blackburn puts forth is not coherent," Mitchell said. "It's just politics."

Gustin and the International Business Times were only a few of the many reporters that connected the dots between Blackburn's campaign balance sheet and her concern for big ISPs. From IBT:

Blackburn’s top campaign donors include private telecommunications firms that do not want to have to compete with publicly owned ISPs. Her state is home to EPB, a taxpayer-owned power company in Chattanooga that also provides local residents some of the fastest Internet speeds in the world at market-competitive rates. EPB is now aiming to expand its services beyond Chattanooga.

However, to go forward with its expansion plan, EPB needs the FCC to enter the fray, applying its authority to preempt a Tennessee law backed by the private telecom industry that restricts the utility’s ability to move into new regions.

According to campaign finance data compiled by the Center for Responsive Politics, two of Blackburn’s largest career donors are employees and PACs affiliated with AT&T (NYSE:T)  ($66,750) and Comcast (NASDAQ:CMCSA) ($36,600). Those are two of EPB’s private-sector competitors in Chattanooga. Blackburn has also taken $56,000 from the National Cable & Telecommunications Association, the lobby for the big telecoms.

Ars Technica's Jon Brodkin also notes that EPB has turned away local communities that repeatedly request help in areas where broadband is not available. Tennessee law prevents EPB from serving beyond its electric service area. As Brodkin reports, Blackburn is not willing to look beyond the State Capitols.

EFF Logo

Brian Fung, who offered our community networks map for his Washington Post article, delved into the history of the issue. He noted growing support in D.C. for local telecommunications authority. Multichannel News also reported on the opposition to the amendment voiced on the House Floor by New York Representative Jose Serrano. Serrano said:
Whatever happened to localism or local control? This amendment means the Federal Government will tell every local citizen, mayor, and county council member that they may not act in their own best interests. Any such amendment is an attack on the rights of individual citizens speaking through their local leaders to determine if their broadband needs are being met.

The Electronic Frontier Foundation wrote about consumer concerns - the lack of competition and state policy that maintains large corporate monopolies and duopolies:
Projects like community mesh networks and mayors’ attempts to bring fiber to their cities should never be illegal or stifled by misguided state laws. On the contrary, they should be encouraged. That’s because community and municipal high-speed Internet projects provide users more options.
Municipal and community broadband projects offer alternatives, so when companies like Comcast and Verizon are behaving badly, users have somewhere else to go. But right now there are 20 states that have laws that make it make it hard or impossible for communities to take their Internet into their own hands.
The National Journal also published a brief account.
Karl Bode at DSLReports.com summed up the legislative formula that brings us to this point in political time:
The underlying argument from Blackburn and friends continues to be that municipal broadband is the devil -- but letting local massive corporations write state telecom laws (laws that often completely eliminate your right to choose for yourself what your town does or doesn't do, while also resulting in less competition, higher prices, and worse customer service) is perfectly ok.
And my snarky favorite came from Brad Reed, who offered a little sarcasm at BGR.com with "Congresswoman bravely stands up for ISPs’ rights to deliver inferior service with no competition":
Either way, we’re still glad to see that some patriots in this day and age are still standing up to protect our freedoms from the municipal broadband menace. As certain historical figure might have said were she alive today, “Let them eat dial-up!”

Utopia at a Crossroads: Part 2

This is the second of a three part series, in which we examine the current state of the UTOPIA network, how it got there, and the choices it faces going forward. Part I can be read here and Part III here.

With the status quo untenable, no easy exit strategy, and political opposition mounting, UTOPIA appeared besieged in early 2013. Then along came Macquarie, which started studying the network and putting together a proposal for a partnership. The full Milestone 1 report from Macquarie is here,  but in case you aren’t prepared to read 100 pages the broad outlines are as follows:

  • Macquarie will invest $300 million of its own capital to aggressively finish the network build out in 30 months, finally reaching every address in every participating city without a connection fee (UTOPIA had been charging residents in some areas who wanted service around $3,000 to make the expensive last mile connections to individual addresses).
  • Macquarie would be responsible for network maintenance and periodic upgrades, as well as meeting performance benchmarks. Cost overruns in any of these areas would be paid by Macquarie.
  • Sharing of network revenue (from charging ISPs for transport) between Macquarie and UTOPIA, which could be used to pay down the existing bond debt.
  • At the end of a 30 year period of operations run by the public-private partnership, the network would revert fully to public ownership.
  • All homes would be eligible to receive "free" basic service, with 3 mbps download/upload speeds and a 20GB monthly data cap. For all other services, businesses and homes could choose from any of the 8 ISPs currently operating on UTOPIA, all of which offer affordable gigabit speeds. With a larger, complete network, it is likely that UTOPIA would attract new service providers as well.
  • Imposition of a monthly $18-20 utility fee, assessed to every address in the UTOPIA area over the next 30 years, regardless of whether or not they are network customers. This is why we put the "free" basic service in quotations. The utility fee would be structured with a 50% discount for apartments or other multiple-unit addresses, a 100% premium for businesses, and an option for each city to offer a hardship waiver for the indigent or discount for seniors.

In sum, this is a huge infusion of capital from a private company that could remove the risks associated with running, maintaining, and upgrading the network from the member cities, while potentially offering them a source of revenue to pay down the existing bonds. It also offers universal basic internet access, and the chance for everyone to purchase high speeds and premium services (voice and video) in a truly competitive market running on state-of-the-art infrastructure. The downside, of course, is the monthly utility fee, which is already proving contentious, as well as ceding control of the network to Macquarie for 30 years.
   
In the third and final article on this Macquarie series, we’ll look at the political implications and weigh the costs and benefits of the utility fee compared to what these cities are already paying.

UTOPIA at a Crossroads: Part 1

This is the first of a three part series, in which we examine the current state of the UTOPIA network, how it got there, and the choices it faces going forward.

At the end of a month of public meetings, hearings, and city council votes, just over half of the cities that make up UTOPIA have chosen to take the next step in their negotiations with the Macquarie Group. The massive Australian investment bank has put forward an offer to become a partner in the troubled network in exchange for a $300 million capital infusion to finish the long-stalled FTTH buildout.

Of the 11 member cities that have debt obligations for the network, six (comprising about 60% of all 163,000 addresses in the UTOPIA area) have voted to proceed to “Milestone 2,” which means digging into details and starting serious negotiations on the terms of a potential public-private partnership. Macquarie outlined their opening proposal in their Milestone 1 report in April.

Macquarie has about $145 billion in assets globally, and is no stranger to large scale infrastructure projects. Their Infrastructure and Real Assets division has stakes in Mexican real estate, Taiwanese broadband networks, Kenyan wind power, and a New Jersey toll bridge, to name just a few. For their UTOPIA investment, they would be working with Alcatel Lucent and Fujitsu, highly capable international IT companies. So there’s some serious corporate firepower across the negotiating table from the UTOPIA cities - and in this case, that’s not actually a bad thing.

Jesse Harris of FreeUTOPIA has an excellent overview of the whole messy history of UTOPIA and the limited options the network’s member cities now face. While the network offers true competition, low prices, and gigabit speeds through an open access FTTH network, UTOPIA has faced a slew of setbacks over the years, from incumbent lawsuits and astroturf activism to mismanagement, poor expansion planning, loan disputes, and restrictive state laws. As a result, the network remains unfinished, with just over 60,000 of 163,000 addresses having been passed by fiber, while member cities are on the hook for about $500 million in long term debt and interest payments to go with annual operating losses in the realm of $2.4 million.

The UTOPIA cities have some choices to make. They could simply shut the network down, eliminating the operating costs - but also depriving the area of its best chance at ubiquitous and affordable high speed internet access, losing the revenue from current customers, and doing nothing about the long term debt. This would essentially guarantee that the cities would continue to make bond payments for the next 30 years while receiving nothing. It would also leave the many local businesses  that depend on the network’s reliable speed high and dry.

Or the cities could choose to sell the network, as nearby Provo did with its fiber network after state restrictions requiring an infeasible business model took their toll. Any proceeds from a UTOPIA sale would be dwarfed by the outstanding bonds, however, leaving the cities with most of the debt left to pay and little to show for it, handing over control of a local infrastructure asset to the highest bidder. This did not work out especially well in Provo, where the public sector held onto the network’s debt while a private provider (Broadweave) struggled to operate it. They have had better luck with a subsequent sale to Google, but still retain the public debt without community ownership. This is a fate UTOPIA cities should avoid if at all possible.

Stay tuned for the rest of this series. In Part 2, we’ll break down the main points of the preliminary Macquarie proposal. In Part 3 we’ll weigh the pros and cons, showing why this deal has the potential to make the best of a difficult situation for UTOPIA-area residents and businesses.

FreeUTOPIA Destroying Myths About Macquerie in Utah

Jesse Harris at FreeUTOPIA recently published a piece correcting the many fantastic errors disseminated by the Utah Taxpayers Association. The group continues to spread lies to poison a proposal from Australian company Macquarie that could reinvigorate the ailing network. We spoke with Harris and Pete Ashdown, from Xmission, about the proposal in episode #85 of the Community Broadband Bits podcast.

As can be expected, the arguments are nothing new, but the Utah Taxpayers Association still finds a way to take it to new extremes. Harris' post is worth the read because it offers truths to correct misinformation.

After correcting several points, Harris writes:

Really, their diatribe just goes on and on like that. A lot of it is basic fact-checking stuff that’s flat-out wrong, but they know those kinds of statements will rile people up and get them too angry to consider the real facts.

The best thing you can do right now is to make sure you show up at city council meetings, let your elected officials know you support the deal, and make sure you counter any of the flat-out false talking points the opposition will be trotting out time and time again. We’re really close to having this thing in the bag, and we can’t let up until the ink dries on the final agreement.

In a late-breaking story, he also says he has evidence that CenturyLink is behind this astroturf campaign. Not at surprising, but we should not sit idly by while powerful corporations try to undermine our republic.