And yet, these significant barriers to entry are the reason why private companies don’t step up to try and fix the telecommunications landscape despite the poor customer service ratings of the dominant players in the industry. For those that can actually secure financing, they are often bled to death with Standard Oil-style undercutting and mountains of regulatory red tape. Even in an ideal situation, it often takes 7-10 years for telecom projects to produce black ink, well beyond the attention span of most speculators investors.

Because there seems to be little hope of fixing the regulatory landscape, finding investors who don’t expect unrealistic returns on investment, and undoing the entrenchment of incumbents, having municipally-backed networks fill the gap seems to be the option of last resort to try and establish some semblance of competitive choice. While a lot of muni supporters would be loathe to admit it, a large part of this is because munis have a very large well of money to draw from to survive long-term assaults: the almighty tax dollar. They can simply ride out the storm until incumbents wear down, throw their hands up, and turn their attention elsewhere.

UTOPIA’s current model alleviates some of this unpalatable use of tax money by shifting the costs of construction onto users, and only building when those sections are financially sustainable. In a lot of ways, it is similar to the New Deal-era co-ops for rural electrical and telephone service. The municipal backing, however, grants a lot of advantages when it comes to financing the project, gaining right-of-way, and cutting through regulations, things that a stand-alone co-op would have significant difficulty accomplishing.

That said, the idea of buying a piece of the network and becoming a stakeholder sets the foundation for a future model of assigning ownership back to users. It would be entirely possible for UTOPIA, once financially sustainable, to turn itself into a co-operative with the users in control of the network. This would absolve the city from being required to manage telecom, but it would still put users squarely in charge. For cities considering building a network but worried about the long-term effects, this paves a way for them to seed a network and let it grow itself, expanding to universal service as any profits are reinvested into the network.

Is this something UTOPIA could do? Maybe. There’s a lot of old model baggage that weighs things down, and cities went in with the initial promise of padding city budgets. Still, it’s an interesting possibility for networks new and old.

The first is the obvious municipal network supporter. They’re in favor of the network and are willing to do what it takes to make it successful. Long-time boosters like Dan Snarr and JoAnn Seghini fall into this category. You’ll find them to be few and far between because of the amount of flack so many of them catch.

The second is the opponent who wants to acknowledge reality. They don’t think joining the network was a good idea, but they know the reality is that the decision has been made and they have to make the best of it. In some ways, they are the best option since they won’t pull punches when something isn’t working the way they think it should. John Curtis is a good example.

The last is the opponent who has plenty of complaints, but nothing in the way of solutions. They’ll rant all day long about how the network was a terrible decision, it should have never been done, and no good can come of it. They completely fail to propose any real solutions, and the “just sell it” attitude pays no heed to making the city take a financial bath in order to prove their ideological point. These people are a reckless danger to any city they govern since they are willing to make you, the taxpayer, pay dearly in order to kill off their non-favored programs. George McEwan is a prime example of this kind of low-information irresponsibility (and he was thankfully eliminated from the election for failure to file financial disclosures).

So as you head to the polls in your city, ask yourself which of these candidates is going to make good decisions for the city. Ask yourself who each one of the candidates fits from your list. You’ll know what to do.

For starters, let’s consider the restrictions on who can actually get the service. For some reason, it is only extended to those who can qualify for the federal free lunch program. I suppose you have to set the bar somewhere, but this seems like an odd bar to set. It ends up excluding childless homes and a lot of seniors, the latter of which are the second-largest group of Internet users behind the very young. You also can’t be a current subscriber or have subscribed in the last 90 days, so the current poor who have eked out enough for service are out in the cold. And if you’ve ever been behind on a bill? Forget about it. You (along with those who have unreturned equipment) are right out. You also have to hope that your neighborhood isn’t one of the many redlined by Comcast’s deployment efforts. If service isn’t available right now, no way you can get it, and odds are against Comcast expanding there. These terms very drastically limit who can actually get it.

As for the service itself, it’s a 1.5Mbps/384Kbps service for $9.95 per month. The normal price for the service is almost triple that at $27.95 per month, so this may seem like a good deal. Not so fast. Free Press found that Comcast produces a gross profit margin around 70% on its broadband service, so that $27.95 service costs Comcast about $8.39/mo to actually deliver. Sure, Comcast is cutting profit margins, but it’s on a product that they are unlikely to deliver in any quantity. I’m also left wondering how such margins can be justified given that the actual networks are paid for and the cost of DOCSIS 3.0 upgrades is running about $7 per port. Private companies are entitled to a profit, sometimes even astronomical ones, but there is a lot of evidence to suggest that these margins could be considered gouging, especially with the limited competitive choice available to most consumers.

One of the few silver linings is the computer purchase program, but it’s still not as great as you might believe. The offer is a Windows 7 Netbook for $150. Those systems retail for around $200 right now, and I’d bet Comcast is getting a pretty good price on them. Odds are good that Comcast is taking a minimal loss, if any, on each unit. It works out in favor of those who qualify, but it’s not quite as great as they make it out to be.

Is all of this better than nothing? Sure, and it’s a great deal for those who can get it. That said, the amount of PR hype surrounding it papers over why the base service is so expensive in the first place and how even at deep discounts, it’s not like Comcast is giving away the farm. In a truly competitive market, they couldn’t get away with it. In most areas limited to a handful of choices, it’s what we end up being stuck with.

I think the answer might be yes. Business telephone companies regularly both compete with and buy wholesale services from incumbent providers. Veracity, for instance, does this all the time. This would be a rare occurrence that a company is both, and I find it highly unlikely that CenturyLink would set up shop in Windstream’s backyard (mostly because they don’t have the money, but I digress). Even with what I assume are relatively few accounts on UTOPIA, Windstream may be ready to make the calculated decision to open up an ILEC-on-ILEC war right here in Utah. It may even expand to the residential market now that the merged company is no longer focused on business accounts.

The implications are huge. If Windstream pulls it off, Verizon and AT&T, both of whom are cash-rich, may decide to start picking off bits of CenturyLink’s business. Before long, incumbent territory won’t matter anymore. UTOPIA’s open access model would be ideally positioned to capitalize on the willingness to cross the anti-competitive artificial boundaries and provide quick market access.

The UTA claims that both networks need to “consider all possible solutions”. The reality, however, is that the UTA has pushed only one solution on UTOPIA: to stop existing, take a financial bath, and have absolutely nothing to show for it. Apparently UTOPIA choosing a solution contrary to “commit immediate seppuku” will, in the UTA’s mind, mean that you haven’t bothered to consider all the options. iProvo, however, can choose to pay off the bond with public money and somehow still stay on the good side of the UTA. Huh? Yeah, I don’t get it either.

They then also cite the work of fiction they published in May concerning UTOPIA’s projected and actual budgets. The problem with all of those numbers, however, is that they don’t add up. Go to the State Auditor’s Office, add up the numbers for yourself, and see how none of them match the figures that the UTA is using. Believe me, I’ve tried. I spent 4 hours pouring over them and crunching them to try and get the same totals. I even consulted an accountant to make sure that I was doing it properly. It’s as if the UTA pulled numbers straight out of thin air and nobody had bothered to question it.

There is also the glossing-over of the disastrous Broadweave years, years that left the network in a serious state of disrepair and with a heavily tarnished reputation. They mention a merger of Broadweave and Veracity when it would be better characterized as Veracity absorbing Broadweave and doing the City of Provo a huge favor (especially since the mayor and council had no idea what they were doing). Of course, a private entity running the network and experiencing massive operation problems almost from the get-go doesn’t get into their “the private market is always better” worldview, so it has to be omitted.

I’ve also noticed that they aren’t screaming “sell” at iProvo even though one of the options on the table (and likely to happen) is for the city to maintain ownership of the network and pay off the bond. You know, the same thing that UTOPIA is doing but gets criticized for. So… paying for the network in UTOPIA cities is an unmitigated disaster, but doing it in Provo is “the least bad option”. Are you seeing the same pattern I am?

The worst of it is that the UTA is acting all butt-hurt that UTOPIA doesn’t want to listen to them. On what plane of existence would they want to? They’ve gone up to UTOPIA, thrown a drink in their face, kicked them in the shins, said something nasty about their mother, and then expect a seat at the table as they scream “I wish you’d never been born”? How exactly does that jive with their “water under the bridge” attitude towards iProvo? It doesn’t and it can’t. They’ve shown no indications of being willing to be constructive, just that they’re going to criticize every single move in the most shrill tone possible. After a track record of being anything but constructive, it’s hard to swallow that all they wanted was a seat at the table. The ultimate irony here is that they shut down discussion on their website with voracious moderation, but expect UTOPIA to allow their board meetings to act as a UTA soapbox for tearing the agency a new one.

If the UTA wants to be taken seriously, they need to shut their pie holes unless they have some actual constructive suggestions (and no, selling for pennies on the dollar doesn’t count). These double standards and loads of manure only further weaken whatever remaining credibility they might have had.

(Yes, I know a lot more about iProvo than I’ve written here. I have Veracity’s side straight from the horse’s mouth and will be meeting with Mayor Curtis on Monday to get their perspective. Expect something good and meaty next week, kids.)

The skinny is that Netflix has decided to break up the entry-level tiers into “streaming only” and “one DVD at a time”, each priced at $8/mo. The tier that includes both of these will cost $16/mo instead of the previous $10/mo. Some of the other tiers will see pricing changes as well. I’m not saying that I’d be happy with the increase either, but nobody is taking the time out to actually understand why it’s happening.

In short, blame the programmers. All of the studios conspired to shut Netflix (and Redbox) out of the new release DVD rental cycle while giving an exclusive to Blockbuster, a dying company. (Why there hasn’t been a restraint of trade suit about that is beyond me, but I digress.) On top of that, streaming prices have been going higher and higher with even more restrictive terms of use. Netflix made a pretty smart decision here: split out the streaming and disc rental so you only pay for what you want and use while trying to recoup some of these increasing costs.

Of course, this rational thinking and parsing of the news from the last several years just isn’t flying with some people. OUTRAGE! ANGER! HULK SMASH! CANCEL MEMBERSHIP! Except that for all of the carping, do you think you’re really getting a bum deal with Netflix? Hulu charges 25% more than Netflix for a streaming-only package, yet they arguably deliver a lot less content. Amazon Prime? Sure, it’s pretty cheap ($6.58/mo), but with just 5,000 total titles (including TV episodes), the price for the selection isn’t really worth it. Unless you were already buying a bunch of stuff from them with one-day shipping (and be realistic, you were using the freebie shipping the same as the rest of us), you’re not getting a lot for it.

Where the anger should be directed is at a video market so dysfunctional that instead of adapting to the kinds of business models that Netflix introduced, they instead try to figure out how to get a few more precious drops of blood from the turnip of selling overpriced discs of movies long ago monetized and renting movies for a hundred times their actual cost to deliver. Netflix can only do so much to control the upstream pricing before the content producers pick up their toys and go home. In a way, this is the same dilemma that every video distributor, including cable, satellite, and IPTV companies, faces on a daily basis. Where’s the outrage that they jack up your prices semi-annually while Netflix held the line for several years?

Netflix is still offering a pretty dang good deal. If I had the time to watch the discs and could stream on my first-gen Apple TV, I’d still have my subscription. Sure, be angry, but be angry at the right people.

The numbers seem to bear this out. Every quarter, the cable companies report a loss of video customers, the telcos report a loss of voice customers, and both report adding broadband customers. An increasing number of people are turning to Netflix, Amazon, iTunes, and Hulu for their video needs while relying on cheap VoIP or cell service for making calls. The incumbents got lazy figuring that they were the only way to get those services, and now they’re ill-prepared to reverse the flow of customers.

It’s been kind of sad to watch them flail about as they try to figure out ways to keep customers without really rocking the boat. Comcast has tried to expand its VOD offerings, but for $10 a month and the cost of a Blu-ray player, you can use Netflix and even rent the occasional movie from Amazon. CenturyLink can’t even get a video product going, hopelessly mired in its bubble of debt from going on an acquisition spree, and care barely get any meaningful deployment of ADSL2+. Neither of them to have the will (or in many cases, the capability) to really roll up their sleeve and create new products to stop the slide.

So what does this mean for service providers? It means looking way beyond the traditional triple-play, a package that started dying three years ago. A breakdown of UTOPIA’s customer base shows that almost every customer is taking broadband, and less than half are adding another service on top of that. Ask yourself what kinds of new services you can offer or resell to saturate that pipe. Maybe it means hatching a deal with OnLive or XBox Live to go for the gaming market. It could be offering remote storage and file hosting for backups and remote access. Offering special QoS packages or VPN access to home might entice some customers.

The point is that if you aren’t finding new services to offer, the only thing you’ll be selling a few years down the road is a low-margin bit bucket from which you can barely eke out a living. That doesn’t sound like a good future, does it?

Nobody lists pricing on a 100M tier, but all of the residential providers do 50M/50M service ranging from $70-85 per month. XMission is the only one to list a cap, and it’s twice what Comcast allows, plus they’ll actually let you buy more if you need it, something Comcast won’t do. Veracity even tosses in voice service for that price. All of these deals blow Comcast’s 50M/10M tier right out of the water.

So what about the 105M/10M tier? The last public pricing information I’ve seen on 100M/100M was from Fuzecore going for $100/mo. Assuming that price would hold, this would mean that the everyday price from a UTOPIA provider matches the promo price from Comcast, but you don’t have to buy more services in order to get it. Once the promo price disappears, the pricing gap grows even wider.

Another thing to consider is the cap. A friend of mine watches the traffic on his Comcast connection and found that broadcast traffic gobbles up several gigs a month in traffic, even while the connection is idle. That valuable cap space disappearing just as a result of Comcast’s shared network topology, something a point-to-point network like UTOPIA does not suffer from. It’s also of note that only one of the residential providers operates with a cap, it’s twice as much as Comcast’s, and they’ll let you purchase additional transfer at the relatively rock-bottom price of $0.25/gig. For people who plan on having consistent or occasional heavy use, this can be a life-saver compared to a rather vague and unspecified penalty for overages on Comcast’s network.

When it comes down to it, UTOPIA providers are delivering a better product at a better price than Comcast despite the cable giant having most of its network costs already sunk. You tell me who’s focused on value.

Sprint’s CEO Dan Hesse, who I’ve admired for both turning around Sprint and taking a bold lead on both network investment and flat-rate pricing, has hinted that this consolidation could lead to his company being purchased by CenturyLink, now the third-largest ILEC in the country. This would mean that all of the largest wireless carriers would also be the largest wireline carriers and would no doubt use their combined assets to drive smaller providers out of business. After all, they control almost all of the transport options to towers, and they are sitting on a horde of unused wireless spectrum that a potential competitor can’t even get at.

We’re already seeing the first salvos of this anti-competitive landscape playing out. Sprint is the lone holdout amongst the big four to not buck unlimited data usage. ETFs on phones have skyrocketed, often totaling more than the subsidized handsets. Not content with locking a phone to a specific carrier, many now prevent you from installing applications that interfere with their business model. Does this sound like a market responding to consumer demand, or one that knows they have you over a barrel?

If the consolidation in the wireless space continues, it will be just as bad, if not worse, than the telco and cableco duopoly currently plaguing wireline service. Unfortunately, regulators are all too used to rubber-stamping proposals and demanding very little in return. The mergers will be approved, the unused public spectrum will continue to be squandered, and the free market loses another round.

• Put together a strong proposal to make your case. Make a brief 5 to 10 minute presentation that explains how the UIA works (see post here) and why joining would be beneficial, then summarize those remarks in a 3-4 paragraph letter. Brevity is key, so stick to the main points and be prepared for questions. It’s better to have your arguments together first and then find someone to present them to. Don’t know where to start? I’m happy to help.
• Get organized. There’s strength in numbers, so make sure you start finding other people who want UTOPIA, especially in a concentrated area like a neighborhood or particular block. You’ll also want to get business owners and leaders on board since they often carry a disproportionate amount of weight in city government. If you want to lead an effort in your city, I’m happy to setup a subdomain (i.e. yourcity.freeutopia.org) for you to post on. You may also want to consider setting up a Facebook group or an email list (which I can also host).
• Identify city council members who would be interested. Look for those with a background in technology, research, real estate, or construction. They’ve likely had to work with sending or receiving large amounts of data that took forever to finish or can best understand why UTOPIA matters. Make contact with those most likely to support membership in UTOPIA before presenting to the city council as a whole. Don’t forget the try the mayor’s office while you’re at it.
• Ask for an agenda item at your next city council meeting. Believe it or not, you too can speak to the city council about whatever you want. Find out who’s in charge of city council agenda items in your city and ask them if you can do a presentation on UTOPIA. More often than not, you can get about 5-10 minutes to speak. I’ve managed to get a slot at a legislative committee hearing, so it’s not that big of a deal. Some cities hear about it so much that they limit any discussion on the matter. West Jordan, for example, will only have UTOPIA as an agenda item once a year. Find out when the last time was and try to plan appropriately.
• Be ready for an intense Q&A session. The city council will hammer you with financial questions. Make sure you’ve prepared to explain that the UIA assesses all costs of network construction to those who sign up for service, that the city will need to issue a bond for the money, and that no money is released until there is enough demand in a compact area to cover all costs of the bond plus some of the shared network costs. A city may also need to conduct a feasibility study on their dime to determine if sufficient demand exists. Above all, don’t be afraid to defer questions to a UTOPIA representative if you don’t know the specifics. Some Q&A sessions can last a half hour or longer depending on the council.
• Plan for follow-up presentations. Cities don’t jump into these things based on a single presentation no matter how slick it might be. Plan for future city council meetings as representatives from UTOPIA, Qwest/CenturyLink, Comcast, and the Utah Taxpayers Association may be invited. Make good use of the public comment periods and make sure as many supporters as possible do so as well.
• Above all, thank the council for their time. They’re pretty busy folks who are sacrificing as much time as you are to hear what you have to say. You’re also asking them to put some money (and their future election prospects) on the line. They need to know what you appreciate their hard work and sacrifice.

Still getting stuck? Feel free to e-mail me for help. I’m glad to put together and even conduct presentations to help spread UTOPIA as far as possible. I can also put you in touch with some representatives at UTOPIA who are happy to give your council members a tour of the facilities and provide their own presentations.