You know what? You're right. Cities shouldn't get the state to bail them out if UTOPIA calls their pledges. The key word here is if. To date, UTOPIA still hasn't used any tax money despite 18 months of construction delays from the Qwest lawsuit, being illegally obstructed from accessing utility poles and having the RUS pull a switcheroo on the loan money that left them with $11M in related expenses that didn't get reimbursed. That they've managed to suffer through that much adversity without a financial collapse is something else.
Have they made mistakes? Absolutely. Totally eating the installation cost probably wasn't the best idea, public awareness is low and their biggest challenge seems to be rolling out to areas with demand. At the same time, they've slashed the construction costs by about 25% and saved some businesses as much as $2500/mo in telecommunications costs. Cities with UTOPIA (like Murray and Midvale) have been able to attract new businesses because of the fiber optic system and have implemented advanced wide-area networks that speed city operations and save a significant amount of money. It's not all failures, but certainly is a mixed bag.
UTOPIA has learned a lot and a second chance seems appropriate given what they've learned. If they can't make a go of it after the second chance, it'd be time to close up shop and try something different. If every venture closed up shop after the first round of mistakes, nobody would ever open a business; I don't see how this is different.
On install fees: Let's do some real-world comparisons. The company that saved $2500/mo on their telecommunications was quoted $75,000 for installation from Qwest. A connection of similar speed from UTOPIA cost them a mere $3,000 in installation by comparison. We can also do a more apples-to-apples comparison of Qwest's "new" FTTN services and Comcast's DOCSIS 3.0 services.
Comcast wants to charge $150/mo for their DOCSIS 3.0 service running at 50Mbps/5Mbps; there's no word on the installation costs including the cost of the modem, though rumor has it that existing DOCSIS 1.1/2.0 modems can be flash upgraded to DOCSIS 3.0. After one year, you've paid $1800 for your Internet service. Getting 50Mbps/50Mbps service from XMission costs $55/mo. After factoring in the $1000 installation fee, you've paid $1660 for the first year of service, a net savings. It would appear that UTOPIA wins Round 1.
Now let's compare Qwest's FTTN offering. They plan to change $100/mo for 20Mbps/896Kbps for the first 12 months before the rate jumps to $115/mo (assuming, of course, that you also have phone service from them). The first year of service will cost $1200 plus the cost of the new DSL modem to support VDSL2. XMission's closest offering is 15Mbps/15Mbps for $40/mo. The first year, with installation, will run around $1480. Qwest, however, often locks consumers into 2-year contracts to secure promo pricing. In the second year, Qwest runs $2400 in total while XMission on UTOPIA is $1960. UTOPIA is still coming out on top in Round 2.
Bear in mind that both comparisons use Internet-only as their reference. If you include phone service in the mix, the payback from UTOPIA is even faster. It's also worth nothing that Comcast is likely to concentrate DOCSIS 3.0 deployments in Verizon markets where they're getting pummeled by FIOS and that Qwest will only be able to get a theoretical maximum of 40Mbps out of their FTTN project. UTOPIA takes Round 3 on speed and availability for the win.
So what's the real cost if UTOPIA called the loans in the future? Based on the new bonds that cost $500M in principle and interest over 33 years, it's just $107.14 per pledging member city household per year presuming that the full pledge is called. Orem has already managed to save over $50,000 per year on telecommunications costs using UTOPIA, enough to cover the tax burden for 500 households. With around 2100 households and businesses in Orem that I estimate are participating in UTOPIA, that's over $504,000 per year in annual Internet access savings to city residents based on current offerings from incumbents. The Fiber-to-the-Home Council estimates that users with these kinds of connections telecommute an average of one additional day per month, removing 70 vehicle trips from the roads every single day of the month.
Continuing with the comparison: with the completion of the network in Orem and a take rate similar to Provo, you're now up to over 9600 participants saving $2.3M annually and taking 320 vehicle trips per day off of the road. The total savings exceed whatever costs could be incurred even if we presume UTOPIA has to cash in the full pledge amount. This doesn't even take into account the full spectrum of financial benefits to the city including attracting new businesses coming to Utah under the USTAR program. The math simply works when you take a broader view at the secondary effects of UTOPIA.
I had my own reservations about the new bonding plan when it was first announced, but those concerns have evaporated based on the data they presented last night in Midvale. Their plan to bring the RUS cities online and double the size of the network could bring it to a size where large national providers may consider joining the network. The increased marketing should improve public awareness and drive adoption to at or above the levels enjoyed by iProvo. The install costs, while an initial sticker shock, aren't as big of a deal as the papers have made them out to be. I'm confident that the second-chance round of financing will give UTOPIA the boost it needs to succeed at meeting its financial obligations and financing the remaining build-out in its member cities.
I'd urge you to take a much closer look at the telecommunications picture before passing judgment on UTOPIA and municipal fiber. And yes, I'm still up for lunch sometime to try and explain it all.