Monday, June 2, 2014

Will 11 Utah cities agree to Australian firm’s takeover of UTOPIA network?

Broadband • Municipal network’s 11 member cities have four weeks to accept new terms.

One way or another, June will be a historic month for Utah’s biggest experiment with what is called “municipal broadband.”
Eleven Wasatch Front cities involved in a project called UTOPIA have the next four weeks to opt in or out of an Australian investment company’s plan to take over, finish and operate their struggling high-speed fiber-optic network for them, in exchange for a share of its profits.
Officials from Brigham City to Payson continue to comb through a detailed business study of the financially troubled grid compiled by Sydney-based Macquarie Capital Group as a June 27 deadline to sign on approaches. But they’ve also brought in another suitor, Utah-based broadband provider First Digital Telecom, to proffer its own proposal to finish and run the UTOPIA network.
Leaders in Midvale and West Valley City already have approved the Macquarie bid, authorizing it to do a full analysis of extending high-end data, video and voice capacity to all homes and businesses within their city limits. The global firm specializing in large public-works projects will bring back its detailed business, legal and technical analysis for final approval by year’s end.
Lindon, Murray, Layton, Tremonton and Centerville have scheduled public meetings in the coming weeks to debate being part of Macquarie’s vision. Other cities, including Murray, Lindon and Orem, are also polling residents to gauge sentiment on key elements of the plan, including its proposed $18 to $20 monthly utility fee on all households to help defray network construction costs.
Referred to as an “availability fee,” the charge is drawing opposition to Macquarie’s plan in some quarters.
The per-household fee would entitle residents to basic Internet service with speeds of 3 megabits per second, but all households would pay the charge whether they take the service or not.
“I love the idea of fiber and want every citizen to have it,” Orem Mayor Richard Brunst said. “But I don’t want to force it on them.”
As debate over UTOPIA’s future moves to various city halls, a Macquarie official said the company remains “very hopeful” that members cities will choose to participate.
“Our big push is to get all the cities and we feel we’re making good progress,” said Nick Hann, senior managing director with Macquarie.
While drawing as many of the 11 cities’ estimated 160,000 combined households as possible “certainly gives the transaction scale and critical mass,” Hann said, “we don’t need all 11 to create a viable project.”
Short for the Utah Telecommunications Open Infrastructure Agency, UTOPIA was envisioned 12 years ago as an economic-development tool, meant to connect businesses and homes in member cities with Internet access at speeds of one gigabit per second, up to 200 times faster than download and upload rates typically available from private vendors.
But UTOPIA has struggled over the years, due to a combination of mismanagement, heavy debt, opposition from private-sector telecommunications companies, construction problems that left the UTOPIA grid partly finished, and low sign-up rates from potential customers.
While UTOPIA’s finances have improved recently, its member cities continue to subsidize the quasi-public agency’s budget losses, as well as pay millions of dollars a year in city sales and business tax revenue to cover UTOPIA’s massive debt obligations. That debt burden on taxpayers would persist even if the UTOPIA network was shut down or sold off in pieces.