Mon 29 Jun 2009
Defining UTOPIA’s Success
Posted by Jesse under Essays, UTOPIA
[7] Comments
One of UTOPIA’s biggest mindshare issues is defining how it is successful. We seem all too eager to jump immediately to the bottom line of if it is or is not producing revenues above and beyond operating expenses plus debt service while ignoring many other important metrics. Even when focusing on the financial aspects, we make the same mistakes that Provo made in not considering the entire net financial effects of the network rather than just the balance sheet. I think we all need to take a step back and redefine what “success” really means for UTOPIA.
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.
These two items alone can make up for any revenue shortfalls UTOPIA may experience, yet they are rarely discussed. This doesn’t even take into account the potential savings for any city-owned utilities such as Murray’s city power. Provo utilized their network to chop a significant amount of response time from outages and had planned to implement remote leak detection for the water system. Other cities can take similar measures to not only better utilize the network, but also to expand it further. To not include these items in the financial picture might work well for anti-UTOPIA groups like the Utah “Taxpayers” Association, but it has no basis in reality.
This leads into another metric for defining success: the level of competition in served areas. UTOPIA was born from the frustration that incumbent providers felt no pressure to deploy next-generation broadband services. With Qwest on financial life support and Comcast focusing on hotly-contested FIOS areas, Utah was destined to get the short shrift from both of them. UTOPIA put the pressure on both to offer substantive discounts to UTOPIA areas, something that has been independently confirmed by several people I know. Both have also been scrambling to do system upgrades to try and offer competitive speeds. Even a non-UTOPIA cutomer in a UTOPIA area benefits from the service being available.
UTOPIA can also define success by how many companies its member cities either attract or retain because of the network. During the rebonding hearings last year, I heard many stories from homeowners and small business owners that they chose to stay where they are or move into the city because UTOPIA service is available. Many more lamented that getting similar services outside of UTOPIA areas was prohibitively expensive and often not available. One company in Orem went from driving around portable hard drives filled with data to sending electronic copies from one office to another. As our production of and need for digital data increases, so does the need to easily share it between remote locations. Businesses recognize this and will choose cities that meet those needs.
Based on these metrics, can we say that UTOPIA is successful? I would argue that yes, it is. Be wary of those who would say otherwise as they are likely ignoring key pieces of the picture to support some ulterior motives.
June 29th, 2009 at 1:24 pm
Excellent points!
I would guess success could be defined differently for different groups.
Some benefit at no cost to them, just by UTOPIA and iProvo providing some competition to the duopology. Sort of showing the duopology that they CAN be challanged and should be careful to provide good service at a reasonable cost. These might be residents of other cities that have no financial risk. I personally believe this is much needed and little seen.
Perhaps little seen because there are other groups that actually do pay the cost? There is little doubt that there will be some financial cost to the cities that have guaranteed UTOPIA’s bonds. I myself would accept my city paying something to insure the competition.
I myself have been more concerned with UTOPIA not being upfront that cities would have to pay something and giving the public the numbers….about what will they have to pay? for how long?….but I have been more concerned with UTOPIA failing to admit the likelihood of payment and share details…that the fact that payments would be required.
Of course…some people would say they don’t believe their tax dollars should do this at all….I’m not one of those.
June 30th, 2009 at 8:20 am
I’m a supporter of open, publicly backed network infrastructure and I want UTOPIA to be successful. I live in Centerville and expect that UTOPIA will be asking the city for money. I’m OK with that but I do expect something in return: access to UTOPIA. Does anyone know the status of UTOPIA in Centerville?
June 30th, 2009 at 9:05 am
Some would say there is a problem with going back and re-defining success at this point.
What UTOPIA sold to the public as the standard of success was a vision of them being financially successful and the subscribers supporting the network.
I think we would have to first accept that UTOPIA failed to deliver upon the vision they sold. Then UTOPIA could pitch a “new vision”, which could include the likelihood of on going financial support from the cities. Outline how much support they expect to require and then have the cities decide if they are willing to provide that support or if they would rather just take their loses and try to sell the network.
In order to make an informed decision, UTOPIA would have to determine the likely value the network could be sold for so the cities would know the amount of the loss they would take and then decide if it’s better to take the loss and move on or if they are better off continuing to support the network.
I would suggest that UTOPIA’s best hope of going forward is that the cities have no option as they are just in too deep and the network has little sale value. If there were ANY chance for ANY city to just walk away “whole”, they would jump at that chance.
It just seems somewhat unfair to spend over $100 million dollars, incurring a debt of over 1/2 a billion dollars….and THEN set your goals (define success)?
June 30th, 2009 at 10:29 am
CarlW: UTOPIA is in a limited footprint since additional money just isn’t there right now. That’s part of the problem with restricting cities to bonding for only half of the construction costs; 50% (or more) of the covered area comes up short until the revenue exists to expand.
Capt: Whether or not the vision was improperly sold to member cities is a separate issue. If the cities feel mislead and feel that current leadership isn’t doing the right thing, they have the ability to demand a change via the board. I would argue that cities are not and have not been kept out of the loop. Todd Marriott meets with each city council once a month to keep them apprised of what’s going on.
Selling is an unlikely option. Without a built-in customer base, the network has little value. Provo had it easy by containing 85%+ of the customer base to a single provider that could then be, er, “persuaded” to “sell” to another party. There’s also the problem of getting all of the cities to agree to sell their interest. Each of them owns a share of the backbone, NOC, headend, etc. that is required for the piece of the network in their city to be usable.
The choice presented at the time of the rebonding was simple: pay the full bond amount right now or extend some additional financing to regroup and hopefully pay less later. The goal was always to do their best to not call the bonds. I do not recall any time in any meeting that I attended where representatives said that calling the bonds later was not an option or possibility. Anyone who claims it was sold as such either knows something I do not (unlikely), is greatly mistaken, or is intentionally misleading to promote their own agenda.
June 30th, 2009 at 10:52 am
Jesse, I would be excited if 50% (or 30% or 10%) of Centerville had access to UTOPIA. I’m not aware of a single household in Centerville that is connected.
BTW, I enjoy this site and your opinions on telecommunications issues.
June 30th, 2009 at 11:52 am
There are real benefits from UTOPIA. Like Carl said — if a City is getting a benefit from UTOPIA, it is a lot easier to justify the subsidy. For the Cities (like Centerville and Perry) that have no UTOPIA subscribers, it makes the payment of taxpayer dollars very very painful.
July 1st, 2009 at 2:36 pm
Brigham City lost the Flying J corporate offices because of a lack of broadband (this was the #1 reason they cited in the decision to move their headquarters).