As part of his pitch to Google to partner with UTOPIA in Google's gigabit network experiment, Jesse Harris gives some of the history of the UTOPIA project.
Jesse Harris continues his monthly podcast show with an interview of Ken Sutton from Brigham.Net - a service provider from Brigham City that recently started offering services on the UTOPIA network.
Brigham.Net has developed a very loyal customer base -- an impressive feat as it was dependent on leasing loops from Qwest, its biggest competitor. In that part of Utah, Qwest still has to share its lines with third parties but Qwest still goes out of its way to make life difficult for those third parties. Qwest poached customers from Brigham.Net - a common practice if one talks to any ISP that has leased lines from Qwest to resell.
By getting on the open access network, Brigham.Net has expanded its customer base - it is on track to double the customer base in Brigham City when the UTOPIA network is fully available to residents.
The discussion is interesting and shows why unbundling requirements are inferior to a publicly owned network operating on an open access basis.
In 1999, the city of Spanish Forks in Utah began building a $7.5 million publicly owned cable network to offer broadband and cable television services. Since then, the network has created some $2 million in community savings from the lower rates created by competition. In February of 2009, Spanish Fork Community Network received the "Business of the Month" award from the local Chamber of Commerce.
Last month, they announced that they will be adding telephone services to the network by contracting with a private provider that will actually offer the service.
When most people think of Utah and broadband networks, they think of UTOPIA, the open access network that has had a variety of problems. The Spanish Fork Network has been quick to note their successes (I suspect they are also frequently attacked by the incumbent-loving Utah Taxpayers Association group):
Bowcut gave his budget report and said SFCN had over $400 thousand in retained earnings. "We are not going under."
He also added that they built the network at a time when private providers refused to invest in the community.
Hat tip to FreeUTOPIA for noting these stories.
The good folks at Broadband Properties Magazine recently ran an article I wrote about Brigham City's use of a new financing model for FTTH networks. You can read it there in the nice layout and formatting, or here:
The UTOPIA project, an ambitious fiber-to-the-home network developed by a consortium of 16 Utah cities, has encountered difficulties that delayed its original buildout schedule. However, it is now building out fiber in Brigham City, one of the original cities in the consortium. Brigham City found a local solution to UTOPIA’s slow deployment schedule and created a model to speed buildout in willing communities.
Brigham City, a city of 18,000 in northern Utah, decided to form a voluntary assessment area – sometimes called a special assessment area – to finance the network buildout that will pass all homes and connect residents looking to subscribe. As with all wired networks, upfront costs are steep and typically require a heavy debt load. Brigham City’s unique approach may catch the interest of deployers unwilling or unable to shoulder that debt.
For several months, a group of canvassers organized by UTOPIA went door to door in Brigham City to talk to residents about UTOPIA and ask if they were interested in subscribing to the network. Supporters organized some 30 block parties and invited UTOPIA to attend with a mobile home to demonstrate the superiority of full fiber optic networks. Residents who wanted service were requested to ask the city to create a voluntary assessment area. Creating this special district would allow participants to finance their connections themselves.
Residents who wanted to subscribe could either pay the connection cost up front or agree to pay up to $25 per month (the exact amount would depend on how many joined the program) over the course of 20 years. This amount does not include the cost of services; rather, it is the cost of connecting to the network and having the option of subscribing to UTOPIA-based services (see sidebar for current services). Those uninterested are not levied.
In other UTOPIA cities, when residents subscribe to services on the UTOPIA network the connection costs are included in the service fees. Those connection costs will be deducted for Brigham City residents who have paid the full cost of their connections, meaning that the...Read more
Utah's UTOPIA network has refreshed its web presence and Jesse Harris has completed another podcast with a provider on the open access network. His interview with Veracity Networks is embedded here.
Listen to this 1 hour podcast from Free UTOPIA that discusses recent progress in Brigham City, notes that Orem City is saving some $50,000/month from telecom expenses thanks to UTOPIA, and recaps some of the early history of the UTOPIA project. Most of the discussion is an interview with triple-play UTOPIA provider Prime Time Communications.
In two articles, Jesse Harris offers some insight as to how one can evaluate UTOPIA as a success or failure. In the first article, "Defining UTOPIA's Success," he looks at some of the indirect benefits from the network.
Financial success is the most obvious kind. It’s very easy to look at expenditures and revenues and come up with a bottom line figure. I don’t mean to discount the importance of coming up with a positive number at the end of that statement, but it really isn’t the entire financial picture. (Take a look at my breakdown of Provo’s real and potential savings from iProvo for a good example.) Orem, for example, is saving somewhere in the neighborhood of $600K per year in telecommunications costs by using UTOPIA fiber in their city. None of the other cities have released similar figures (at least not that I am aware of), but I think it safe to say that they are experiencing similar savings. Such an approach also fails to recognize that incumbent providers are forced to offer better service and pricing to attract and retain customers. Based on national figures, a UTOPIA-served neighborhood is likely to save 25% or more off of telecommunications costs.
In the second and longer article, "FUD Alert: Utah Taxpayers Association Continues to Bend and Cherry-Pick the Truth," he directly answers one of the fiercest critics of UTOPIA - the UTA.
His response is well worth a read as a model example of how to respond to these ignorant attacks. We cannot allow lies against community broadband to go unchecked - thank you Jesse for your strong response.
Anyone who tells you that UTOPIA is a "success" or that it is a "failure" is probably minimizing important problems or victories for the network. The Utah Telecommunication Open Infrastructure Agency, like so many other things in life, is a mixed bag.
For those new to UTOPIA, it is a large multi-community full fiber network that operates by only selling wholesale access to service providers. Due to a law designed to protect incumbent service providers under the guise of protecting taxpayers, UTOPIA cannot offer any services itself and is strictly open access.
For a variety of reasons - that have not and likely will not be repeated by other communities - the network has not yet met expectations. The costs have been greater than expected and the network does not yet cover its entire intended territory (some 16 communities and 140,000 people).
However, where it does operate, it is blazing fast. The service providers offer the fastest speeds at the lowest prices (see a service comparison). It has offered a tremendous competitive advantage to the businesses and communities in which it operates.
Last year, Lawrence Kingsley wrote "The Rebirth of UTOPIA" that explored where the network went wrong and how it has also succeeded. Perhaps most notably, he notes that the churn rate (people switching to other networks) is ridiculously low at .5% - a common trait to community owned networks.
Last month, Geoff Daily reported on how UTOPIA is "Transforming Failure Into Success." They have greatly improved their marketing practices - which has historically been a large barrier to success. This is an important lesson for all - even though there are very few competitors in the broadband market, they do fight fiercely for subscribers. Broadband is competitive like boxing, not like a marathon.
But the news coming out of Utah is not all cheery. Jesse, the resident UTOPIA expert, has recently explained some of the current financial problems and their origin.
Perhaps the most important lesson to take away from UTOPIA is that plans always go awry. I have yet to find a community that did not have unexpected problems along the way to building their networks. Communities that take...Read more
Jesse of Free UTOPIA offered an in-depth explanation of UTOPIA's financial situation and some of the financial difficulties they are facing in mid-2009.
I had the opportunity to go down to UTOPIA’s office today to get updated on what’s going on down there. I walked away with a much better feel of what’s going on and a better understanding of what has caused the situation with the bonds. They also comitted to do a better job of keeping me up to speed on what’s happening. Here’s the lowdown on why the bonds are being called.
The bond situation they are in is complex, ugly, and not at all their fault. UTOPIA was required by the financing bank to use variable rate bonds instead of fixed rate bonds. Variable rate bonds obviously create a lot of issues with financial planning since you can end up with drastic and sudden rate changes. As a hedge against this, UTOPIA opted to create sort of a hedge against this volatility using a second type of bond. (If I screw up this explanation, someone send Kirt Sudweeks in to fix my explanation.)
The gist of it is that UTOPIA makes payments on a bond at a fixed 5.65% in exchange for receiving revenues on a type of variable-rate bond that has, historically, been withing 14 basis points (0.14%) of the type of bond they are using for financing. Because the bonds paid to them have historically been about the same as the bonds they are paying, it should, in theory, ensure that they pay no more than 5.65% on the outstanding debt.
Geoff Daily visits UTOPIA and discusses their strategies to get back on track. He notes what they have done to make up for past problems and what they are now doing. They've got a new team and still offer a vastly superior connection than their competitors.
A snippet from Geoff's take:
Whenever anyone tries making an argument against municipal broadband and/or open networks, more often than not it starts by citing UTOPIA as the poster child for failure, the example given for why other cities shouldn't pursue plans to wire themselves.
And in many ways, UTOPIA--the audaciously named, multi-city municipal wholesale-only full-fiber build in Utah--has been a cautionary tale. Started in 2002, the network still doesn't cover any of its pledging cities in total, it's not yet financially self-sustaining, it's already over $150 million in the hole, and it has struggled to attract service providers, especially any big names.
As Paul Larsen, Economic Development Director for Brigham City and member of UTOPIA's Executive Board, put it during my whirlwind trip to Utah last week, twelve months ago they were discussing what color UTOPIA's casket was going to be.