UTOPIA
UTOPIA is a taxpayer-backed broadband project deployed in several Utah cities. Several service providers ride the UTOPIA system to provide video, telephone, and fast Internet services.
When UTOPIA was unable to obtain financing in the private markets on its own, it sought and obtained government backing from municipalities and, later, the federal government. In the 2004 session, the Legislature determined that (1) cities actually had to set aside taxpayer funds that were pledged as security for UTOPIA’s financial obligations (rather than just have the funds exist as a potential obligation on paper), (2) UTOPIA could not have one exclusive provider (it was going to give AT&T an exclusive), (3) cities needed to hold a public hearing before pledging taxpayer funds, and (4) no additional cities could join until July 1, 2007.
Now, 3 years later, it seems we should have enough data to see how the project is going. But, it sure does seem like UTOPIA is very reluctant to answer simple questions.
Jesse Harris, an insightful blogger, devotes Free UTOPIA to, of course, UTOPIA issues. On one post, I ask 2 questions that were dodged in recent legislative hearings: (1) can UTOPIA survive its anemic financial numbers (they are north of $5,000 per potential subscriber (using a very generous 50% take rate) a point where most bonds would be called and where few, if any, companies have survived to tell stories), and (2) why is UTOPIA now cherry picking affluent neighborhoods and shunning poorer neighborhoods in non-pledging cities, if its original purpose was to counter the awful practice of cherry picking?
Jesse is out of town – and will get blog space here when he returns, if he wants it. But I can’t find anyone else who wants to move beyond broad philosophical statements, the-other-guys-are-bad arguments that have nothing to do with my two questions, and ad hominem attacks to answer my questions. In fact, in the comments to that post, Pete Ashdown, founder of UTOPIA service-provider X Mission, seems to dare me to have a UTOPIA discussion here.
Because I hide from controversial topics on this site, I guess. (See Voucher posts ad nauseum).
It is worrisome when topics are deemed out of bounds. It usually works out that those are the topics that should be explored. My two questions are valid. They are not whether municipal broadband is good or bad, whether competitors in the market place are good or bad, or whether I understand the importance of connectivity to our economy. My simple questions concern the performance of one municipal broadband company – the one that has obligated millions of dollars of taxpayer money. Specifically, (1) how does UTOPIA plan to make it financially and not leave taxpayers holding the bag, and (2) why is UTOPIA now cherry picking, if it once claimed that cherry picking was awful and was the reason that it needed to exist?
I would think that backers of municipal broadband, as much as anyone else, would want these questions addressed. If UTOPIA fails and brings down a city or two with it and/or, in order to play the string out longer, UTOPIA embraces the vile practice it swore to oppose, isn’t that a problem for future attempts to deploy municipal broadband projects in Utah and the broader United States? If the numbers are as bad as they seem, do UTOPIA and its backing cities need State assistance now? It’s better to face bad news now than to shout down tough questions and simply hope against hope that things will work out.
Disclaimer: in my legal practice, I represent a broadband company in Washington County (Baja Broadband). In an interesting reversal of the 2004 activities, UTOPIA is arm-in-arm with Qwest and other avowed cherry pickers down here, arguing that build-out requirements (ubiquitous service) should be eliminated and that providers should be allowed to cherry pick who they want to serve and who they want to ignore. I fully realized in 2005/2006 that Qwest had neither the desire nor the financial ability to upgrade its existing system to anything close to state-of-the-art capabilities; I fully bought into UTOPIA's prior arguments that cherry picking was bad and that uniform and equal services for all residents was required; unlike UTOPIA, I still believe that.
When UTOPIA was unable to obtain financing in the private markets on its own, it sought and obtained government backing from municipalities and, later, the federal government. In the 2004 session, the Legislature determined that (1) cities actually had to set aside taxpayer funds that were pledged as security for UTOPIA’s financial obligations (rather than just have the funds exist as a potential obligation on paper), (2) UTOPIA could not have one exclusive provider (it was going to give AT&T an exclusive), (3) cities needed to hold a public hearing before pledging taxpayer funds, and (4) no additional cities could join until July 1, 2007.
Now, 3 years later, it seems we should have enough data to see how the project is going. But, it sure does seem like UTOPIA is very reluctant to answer simple questions.
Jesse Harris, an insightful blogger, devotes Free UTOPIA to, of course, UTOPIA issues. On one post, I ask 2 questions that were dodged in recent legislative hearings: (1) can UTOPIA survive its anemic financial numbers (they are north of $5,000 per potential subscriber (using a very generous 50% take rate) a point where most bonds would be called and where few, if any, companies have survived to tell stories), and (2) why is UTOPIA now cherry picking affluent neighborhoods and shunning poorer neighborhoods in non-pledging cities, if its original purpose was to counter the awful practice of cherry picking?
Jesse is out of town – and will get blog space here when he returns, if he wants it. But I can’t find anyone else who wants to move beyond broad philosophical statements, the-other-guys-are-bad arguments that have nothing to do with my two questions, and ad hominem attacks to answer my questions. In fact, in the comments to that post, Pete Ashdown, founder of UTOPIA service-provider X Mission, seems to dare me to have a UTOPIA discussion here.
Because I hide from controversial topics on this site, I guess. (See Voucher posts ad nauseum).
It is worrisome when topics are deemed out of bounds. It usually works out that those are the topics that should be explored. My two questions are valid. They are not whether municipal broadband is good or bad, whether competitors in the market place are good or bad, or whether I understand the importance of connectivity to our economy. My simple questions concern the performance of one municipal broadband company – the one that has obligated millions of dollars of taxpayer money. Specifically, (1) how does UTOPIA plan to make it financially and not leave taxpayers holding the bag, and (2) why is UTOPIA now cherry picking, if it once claimed that cherry picking was awful and was the reason that it needed to exist?
I would think that backers of municipal broadband, as much as anyone else, would want these questions addressed. If UTOPIA fails and brings down a city or two with it and/or, in order to play the string out longer, UTOPIA embraces the vile practice it swore to oppose, isn’t that a problem for future attempts to deploy municipal broadband projects in Utah and the broader United States? If the numbers are as bad as they seem, do UTOPIA and its backing cities need State assistance now? It’s better to face bad news now than to shout down tough questions and simply hope against hope that things will work out.
Disclaimer: in my legal practice, I represent a broadband company in Washington County (Baja Broadband). In an interesting reversal of the 2004 activities, UTOPIA is arm-in-arm with Qwest and other avowed cherry pickers down here, arguing that build-out requirements (ubiquitous service) should be eliminated and that providers should be allowed to cherry pick who they want to serve and who they want to ignore. I fully realized in 2005/2006 that Qwest had neither the desire nor the financial ability to upgrade its existing system to anything close to state-of-the-art capabilities; I fully bought into UTOPIA's prior arguments that cherry picking was bad and that uniform and equal services for all residents was required; unlike UTOPIA, I still believe that.
posted by steve u. at 11/12/2007
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18 Comments:
KA-BOOM Jesse, Now you are on the Radar screeen.
Why is the state legislature micro-managing local entities' decisions like this?
VoU,
You raise a good question -- and one that creates quite a bit of controversy, in some form or other, every third year or so at the Capitol.
On the one hand, cities are political creatures of the state, deriving their powers and limitations from the State. On the other, they have independently elected officials who know their jurisdictions better than the Legislature could.
While some states have very specific (and voluminous) regulations detailing exactly what cities can/can't do, Utah does not. Instead, Utah follows a model where cities have broad powers and the State steps in when it perceives the need.
Here, the cities possess most of the discretion. However, the Legislature's involvement is appropriate for a few reasons.
Cities are directly competing with private enterprise, where their private enterprise competitors have to negotiate the terms of their existence with those cities. Yes, I understand that cities have reasons for entering into this market, but having entered the market -- and having bet their cities' treasury and their political futures on the success of the project -- there is a great need to make sure that government exercises its powers fairly.
Also, where taxpayer funds are being pledged in a new endeavor (that has been unsuccessful in other settings), the State, in all reality, would end up holding the bag, if things completely went south.
In the case of UTOPIA, it seems the balance between the State and the municipalities has been good. The State's involvement led to actual money being set aside in case of default, no exclusives, and no commingling of enterprise funds. As for the moratorium until 7/1/07, it does not seem UTOPIA could have performed in any other cities in any event, given its construction history in its member cities.
"If things went completely south." Four years into the 20 year business plan of UTOPIA and zero tax dollars spent, and the legislature has already deemed things are headed south. Qwest and Comcast whispering to the committee heads outside of meetings has nothing to do with it. What part of "small government" does interfering with municipalities qualify as?
Cost per customer on any major infrastructure is always going to be high in the early years. I can just imagine the Stevensons and the Urquharts of 1960 complaining that the Federal Highway Act was costing taxpayers too much to deliver services to rural farmers. This is the reason businesses like Qwest and Comcast do not do ubiquitous fiber service. Yet again, ZERO Utah tax dollars have been spent on UTOPIA. Thank you for your concern, but your concern is needed elsewhere.
Where we diverge Steve, is that you believe UTOPIA is merely competition to established businesses and I believe UTOPIA is the right way to deliver digital services where anyone can compete. I watched 4th South in front of my building get ripped up dozens of times in the 90's so fly-by-night fiber providers could lay their pumped stock in the street. Then I saw other countries' governments take a handle on the situation and lay the fiber for everyone to use. I watched as GSM was dictated as the international standard for mobile service worldwide and then saw the mess of standards that the USA left up to the private sector. Sometimes there is a better, more efficient way to provide services to the public than every business for itself.
What angers me is that the legislature is sticking its nose needlessly into the affairs of local municipalities. Coincidentally right after the sunset of your own SB66! You deem UTOPIA privately contracting with private developers in non-pledging cities as "cherry picking" in the same form as Comcast and Qwest not serving low-income areas of Salt Lake County and you don't appear to understand the difference. You accuse UTOPIA of abandoning it's "ubiquitous service" model when in fact it hasn't in pledging cities and Senator Stevenson QUESTIONED the need for "ubiquitous service" in committee. As I recall, his statement was to the effect of, "Why don't people who want fiber move?" I thought you of all people understood the need for UTOPIA. I guess I was bamboozled.
Then on top of all of this, you ice the cake with me having an ulterior profit motive in my advocacy of UTOPIA. Yet I've yet to see a profit come out of my significant money spent on UTOPIA and my competition has far more subscribers than I do on the network. What is that? A level playing field? Do you think my motives are more self-serving than Qwest and Comcast? I hope you level the same accusations against your peers who are planning to spend billions of tax dollars (not guarantees on bonds) on subsidizing nuclear power businesses in Utah.
You believe the government should be run like a business. I believe the government is there to facilitate business and to fill in for what business does poorly or refuses to do.
Pete,
I am getting on the road, and don't have more than a second.
Please give me a little more credit that just whispering to people in the halls. I ran the numbers all by my little old self. They are my work, and they appear to spell trouble.
Of course, taxpayer money hasn't been tapped yet. The RUS funding clearly helps pay off early obligations. The question is whether one credit card is paying off another. I'm stunned you have no concern whether they do or do not spell trouble.
I think your business motive and that of other establishments is to make a profit. I have no problem with that.
Again, municipal broadband might be the greatest thing on earth. Again, what does that philosophical conclusion have to do with an inquiry whether UTOPIA will make it financially?
It's wonderful Sen. Stephenson has his opinions on ubiquitous service. I disagree with him. Apparently, contrary to advertisements, UTOPIA does agree with Sen. Stephenson that ubiquitous service is a quaint idea.
I just can't see how lobbying governments to move from an ordinance requiring ubiquitous service to one allowing cherry picking is something other than favoring cherry picking?
Present the evidence for your accusation Steve. I see no indication that ubiquitous service is not still the mission of UTOPIA in member cities. Nor do I see how serving private developments with private money strays from that mission in non-member cities.
My whispering comment was not in regards to your actions. I've been to two committee meetings so far and I haven't seen you at one. I wasn't even sure you were on this committee. If you don't think there are breaches of public trust going on with Qwest and Comcast, then you need to read a little more of Jesse's blog.
Good work on the numbers. Now run similar numbers for the FHA after three years. Realize that for me, UTOPIA is a compromise. I think that ubiquitous fiber is of equal importance as roads and I would rather see all the taxes (or borrowed taxes as the Fed runs it) spent on infrastructure in Iraq spent on infrastructure in America. I don't see a lot of hollering about the lack of a business model over there. Some complain about a mosquito bite while their severed arm continues to gush blood.
I have UTOPIA at my house, and have had nothing but problems. MSTAR blames UTOPIA and UTOPIA blames MSTAR.
I do not know where I stand on this issue, but do not like the way Provo has done it, but not so sure about Orem, etc.
Is this letter the basis of your evidence? I am not a lawyer Steve, but I can't help but think that is pretty flimsy. What member city in Washington County is Mr. Schuler presenting as evidence of lack of ubiquity? Oh yeah, there aren't any. "Let me give you that answer to: yes." "Now let me feed you half-truths and misunderstanding to justify my answer."
Mr. Schuler claims that UTOPIA provides video and telephone service when in fact, it doesn't. It is the providers on UTOPIA who are able to do that. Mr. Schuler claims UTOPIA blocks competition, when that is the reason UTOPIA exists. Ask your boss how much his infrastructure costs and why if they do things so well, aren't they tied into UTOPIA for a much larger customer base to sell to?
Furthermore, UTOPIA never approached private investors to make a municipal entity. They went after municipal bonds from the start. Yes, Wall Street understands telecom, that is why the 90's produced so many long-lasting Internet businesses like pets.com.
I have never heard UTOPIA argue that ubiquity needs to be abandoned. They aren't approaching the legislature to lobby for this. They're on the defense because SB66 has sunset and Qwest/Comcast (and apparently Baja) want them eliminated.
P.S. Utah Conservative, give XMission a call. Not only will I give you good service, I won't surrender your info to people who don't agree with your first amendment rights.
Pete,
Am on the road. Will pull up letter later. But, please, you're smarter than this. I've said non-member cities a dozen times here and at jessie's. Non-member. Okay? UTOPIA is cherry picking in non-member cities.
So, it's not really against cherrt picking. MADD doesn't throw keggers. The ACLU doesn't support torture. But UTOPIA vehemently opposes cherry picking, unless it gets to pick the cherries. Where, Pete? Non-member cities.
I've qualified my statements about the so-called "cherry picking" private developments with "non-member cities". So do you admit that ubiquity is still happening in member cities? If we're past that, tell me why a private developer can't choose to use UTOPIA or Qwest or Comcast or Baja and pay for it? Qwest (and maybe Baja) has been paid by private developers to setup greenfields, why do you believe UTOPIA should be restricted from doing so?
I have no problem with developers choosing whatever provider serves their homes. It appears that Baja wants UTOPIA restricted from doing this and I'd like to know why.
This is somewhat interesting to follow, but Utopia isn't in Cache County. Why should I care? What's the policy issue for the Legislature?
Pete,
In member cities, it seems that UTOPIA is sticking to its commitment to ubiquitous service, though I’d be wondering what was wrong with me, if I were in some of the less affluent areas of Orem or West Valley. Given your statements against cherry picking in 2004, I’m surprised you’d ask what’s wrong with UTOPIA working to get cities to abandon build-out requirements so that it can go in some developments and ignore others. I’ve explained it in my latest post.
Steve: I've got a response up for you. Hopefully it fully answers both of your questions.
Let's say we don't find a way to make Utopia work. Perhaps Utopia is the wrong way to go from a financial perspective (which seems to be what I'm hearing from Senator Stephensen and Rep. Craig Frank).
If we dropped Utopia then what is the other solution for broadband in Utah?
Comcast CEO Brian Roberts says there IS NO competition. They are the fastest but provide no guidelines on what is acceptable use. The company will terminate your Internet Account if you use it too much. Again, what is acceptable???
There are many other's in the Salt Lake Valley who have had to go with a slower service in order to get Internet at all after Comcast terminated their accounts. A couple just down the block from me were outraged when they received "The Call" from Comcast.
The company will not answer the question and why should they. No Government regulations and no competition. This is why I've been pushing for Utopia. Broadband providers don't have to worry about competition. There isn't much around.
So ok, financials are bad. If not Utopia then Utah needs another solution and soon. We pay far more than any other country and receive a fraction of the service they do.
If the Internet is important to our future economy, then shouldn't we invest in it? Imagine a Utah without public roads. Our economy wouldn't be as robust as we see today.
We can't continue this slide. We're already 16th in broadband penetration and falling fast. I'm curious what solutions our Legislature is investigating to curtail the problem.
I hope this thread is not too dead to be noticed by the prior participants.
I want Utopia in my neighborhood. I believe that Utopia has been cherry picking in participating cities.
In Lindon, only a smaller subset of the population can get Utopia.
When I talk to Pleasant Grove about participation, one reason they give me that they will not participate is precisely the cherry picking.
Admittedly there is also a lot of bad press out there right now about Utopia and cities are worried about footing the bill.
But their first response is that on the one hand Utopia wants them to commit to a huge amount of money in potential liability, like a utility, but on the other hand, a majority of their population (us included) would not be offered the service.
If this is not cherry picking, I don't know what the definition of cherry picking is.
This is not just a few cases where the homes are hard to get to. They only want to deliver to the very low hanging fruit, apparently along the Freeway. Even I will object to using taxpayers money to support a few without requiring a more serious attempt at universal service.
I am all for Utopia and hope it is offered in my city some day.
I love XMission and hope to get that service on Utopia some day.
But the problems have to be dealt with out in the open because all the criticism is there out in the open and the utopia web pages were last updated, apparently, in 2006.
This is not just a few cases where the homes are hard to get to. They only want to deliver to the very low hanging fruit, apparently along the Freeway. Even I will object to using taxpayers money to support a few without requiring a more serious attempt at universal service.
I am all for Utopia and hope it is offered in my city some day.
I love XMission and hope to get that service on Utopia some day.
But the problems have to be dealt with out in the open because all the criticism is there out in the open and the utopia web pages were last updated, apparently, in 2006.
Same here however I am very concerned with what I'm hearing about their rebonding. Is this really a good thing? Does this show some smarts here or financial desperation?
Don't get me wrong. I'm VERY Pro Utopia. After Concast terminated my families Internet I've been learning more and more about the NII and the promises made about fiber to every home in America with 45 megs up / down. Oh and that was in 1994 when the telco's decided to take over $200 Billion (conservative number) in taxes to build this infrastructure.
So if it isn't Utopia then I'm calling upon our Politicians to suggest a better infrastructure alternative. We can't depend on companies like Concast or Qwest to do it. It's like saying we're going to depend on Ford or Toyota to build I-80. Yeah, doesn't make sense does it.
Anyway, this isn't a problem that's going away. We're ALREADY paying taxes for it. Since we're dependent on the Government for infrastructure then I say we expect results.
After all, the rest of the world isn't ignoring it.
Might be why America's economy fell to #2 in the world this past year.
Way to go...
One chunk of the cherry-picking problem is that the cities wanted a free lunch and UTOPIA tried to provide it. As part of that, they structured construction around quick returns and low financial risk. Now things seem to be at a point where the free lunch isn't happening (blame Qwest and the USDA on that one) and cities are being asked to either pay for it or extend the loan in the hopes of maybe getting the free lunch later. If you're frustrated by the delays, it might be time to ask your city to suck it up and pay for the network to get things moving.
One chunk of the cherry-picking problem is that the cities wanted a free lunch and UTOPIA tried to provide it. As part of that, they structured construction around quick returns and low financial risk. Now things seem to be at a point where the free lunch isn't happening (blame Qwest and the USDA on that one) and cities are being asked to either pay for it or extend the loan in the hopes of maybe getting the free lunch later. If you're frustrated by the delays, it might be time to ask your city to suck it up and pay for the network to get things moving.
I'm beginning to wonder if this is something the Government SHOULD be involved in. I mean isn't the Government responsible for infrastructure in general? Or at least they have been in the past 50 years.
So why not now? And other developed countries are building infrastructure (fiber to the home).
I challenge the Government to suggest an alternative solution if not something like Utopia.
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