Macquarie’s Milestone 2 proposal has been finally released to the public. Here’s a quick run-down of the most important details.
- The final cost per address is estimated at $22.60 per month. Macquarie estimates that re-working the deal to account for five cities bowing out trimmed the cost by $8.57 per month.
- The revenue split is much more generous than I expected, allowing the cities to keep 75% of wholesale revenue after the first $2M per year. It’s expected to completely cover the debt service by 2021 with just a 24% take rate for premium services.
- The basic level service has also been improved. Instead of 3M/3M service being included at no extra cost, it’s been bumped to 5M/5M. This matches Google Fiber speeds on the free tier. The data cap stays put at 20GB per month.
- Macquarie will still be in charge of operating the network for opt-out cities.
- A public vote will determine if the project moves forward in the opt-in cities.
- Cities are free to determine what, if any, opt-out provisions will be available.
- Users won’t be charged a utility fee until they connect to the network or six months after the network connection is available, whichever comes first.
- UIA and SAA users will not pay any utility fee. If you’re already paying for (or have paid) your network connection, there’s no utility fee for you.
- The UTOPIA NOC would be closed and all NOC operations moved to a Fujitsu facility in Texas. Keeping a primary or secondary NOC in Utah would raise the utility fee by between $1.50 and $1.79.
- Almost all of the network revenues are being driven by Veracity, XMission, and SumoFiber. Other ISPs are very small by comparison.
- The majority of currently connected users are in opt-out cities. This only reinforced that the votes there were “we got ours” selfishness.
Overall, this still looks like a great deal for the cities who are moving forward. It could still be a great deal for cities that haven’t figured out what to do about the network yet (looking at you, Orem).
If you want to read the full report, I’ve attached a PDF copy.
Download (PDF, 1.68MB)
In a 4-0 vote (one council member was not present), Perry opted to move forward with Macquarie’s Milestone Two proposal for UTOPIA. This brings the final total of addresses participating to just shy of 53%. Each city who opted to get the full proposal will still need to vote to accept it once it’s completed. All UTOPIA pledging cities have had a chance to vote on the proposal before the June 27th deadline to respond.
Orem voted 6-1 to reject Macquarie’s proposal for the UTOPIA network. Orem represents 18.7% of the total addresses covered by the network. Midvale, West Valley City, Layton, Tremonton, and Brigham City have all voted yes while Payson, Lindon, Centerville, and Murray have voted no. A vote from Perry is expected tonight as well and they are expected to move forward, though the city accounts for slightly less than 1% of passed addresses. The total addresses that will be covered under Milestone Two stays at 51.8%, though Perry could nudge it close to 53%.
While the deadline for response to the Macquarie proposal is Friday the 27th, cities may still be able to work on a deal with Macquarie to get fiber infrastructure in their cities. It’s very likely, however, that the cost will be higher and they will be at the end of the line for construction. Macquarie has enough cities interested in Milestone Two to move forward with the proposal which should take about two months to complete. At that time, the cities who opted in will have the chance to review and vote on it. Upon acceptance, Macquarie is going to stick to an aggressive 30-month build plan.
Centerville followed Murray in rejecting Milestone Two tonight, this one on a 4-1 vote. Only Perry and Orem are left to vote, but so far over half of the addresses covered by UTOPIA are opting to move forward with getting more information from Macquarie on the true cost to build, operate, and maintain the network for 30 years. Despite what you may hear, this is enough to have the Macquarie deal move forward if the Milestone Two cities accept the finalized proposal.
Most disappointing is that Centerville has 93% coverage in their city, so the vote appears to be a “we got ours” kind of statement. Tremonton and Brigham City both voted yes despite similar levels of coverage, recognizing that this is the best offer on the table and a better one is unlikely to come along.
Murray joins Payson and Lindon in declining to move forward with the proposal from Macquarie. The council voted unanimously to pass despite not really having any other workable options on the table. Of course, they’re now in a heck of a pickle: Murray has attracted numerous businesses to the city (including a new location of the Moran Eye Center) with UTOPIA, but they’re running the risk of the network going dark if they won’t cover any operational shortfalls.
Centerville is also taking a vote tonight in a special council meeting. I’ll post when I have results from there.
Orem Mayor Richard Brunst
In what can only be described as an outrageous disservice to the citizens of Orem, Mayor Richard Brunst outright lied about XMission’s intentions to participate in the basic 3Mbps level of service. When asked about it, XMission founder Pete Ashdown had this to say:
I’ve personally also heard or seen statements from SumoFiber, Veracity Networks, and WebWave that they have no problems providing the basic tier, a contractual requirement to remain a service provider on the network.
The mayor also accused XMission of redlining poor neighborhoods which also elicited an angry response:
It’s no secret that Mayor Brunst is a likely no vote against the Macquarie deal, but outright lying about a well-respected local company to try and convince others to do the same is a new low. The Mayor owes everyone at XMission a huge apology for simply making crap up.
Brigham City became the fifth UTOPIA city to move forward with the proposal from Macquarie and seek full details under Milestone Two. The council passed it on a 3-2 vote. Cities who have not yet taken a vote include Centerville, Orem, Murray, and Perry. This means that over 51.8% of homes in UTOPIA cities are now on board with getting full details of the proposal from Macquarie.
Word on the street is that Perry might actually move forward with the deal to not be left behind by their northern neighbors. Given that the city currently has no fiber, this may be the only way for it to make good on its existing bond commitments. They’ll be holding their next city council meeting on June 26th at 7PM.
In a somewhat shocking move, Comcast has recently released a rate table showing that it’s giving every one of its customers in UTOPIA cities (and just UTOPIA cities) a rate hike just days after the deadline to respond to the Macquarie deal. With several cities still set to vote, you have to wonder what they would have to gain by underscoring UTOPIA’s points about a competitive marketplace. You may recall they slashed rates to the bone in Provo when Google Fiber moved in.
One theory is that they may be trying to lock customers into long-term contracts in exchange for lower rates. If that’s the case, it’s the same way they’ve tried to starve out competitors in other markets Standard Oil style. This only underscores how grossly anti-competitive the telecommunications market is.
Here’s a full chart of the rate increases:
In yesterday’s meeting of the Political Subdivisions Interim Committee (listen here), legislators sought to get a deeper understanding of what the Macquarie deal is and how it works. Unfortunately, most of the meeting consisted of the Utah Taxpayers Association spewing out fear, uncertainty, and doubt while the Utah League of Cities and Towns corrected the many, many mistakes they made. West Valley City Mayor Ron Bigelow also spoke and did a great job of detailing how cities are putting an extraordinary amount of effort to solve this problem on their own without state assistance.
Worth noting is that the UTA made many very thinly veiled threats to sue to stop the Macquarie deal. It felt like they were using that potential legal morass as a justification for seeking more legal restrictions. HB60 proponent Rep Curt Webb (who co-chairs the committee) also spoke against UTOPIA and seemed to have learned nothing from the massive amount of national negative press he garnered for his efforts earlier this year. Fortunately, the committee shut down an attempt to work on a bill to hamstring the Macquarie deal. They were directed to speak directly to Macquarie to get answers to some of their questions.
Overall, it seems like the committee is content to watch things play out for now and is truly interested in learning the details of the deal. Since I’m sure they’re already getting plenty of misinformation from the CenturyLink-funded Utah Taxpayers Association, it’s probably time for you as citizens to email them and let them know that you’d prefer they take the hands off approach as well. Click here to email all of the members of the committee at once and let them know how you feel.
In a move surprising precisely nobody, Payson’s city council voted 4-1 to pass on Macquarie’s proposal to UTOPIA. You may recall that this is the same city that passed on rebonding in 2008, didn’t join the UIA in 2011, and didn’t bother to show up to board meetings with any consistency since 2009.
From a fiscal perspective, it’s easy to see why they made the decision. Since joining the network, the population has grown by several thousand, so there are a lot more homes to cover. At this point, there’s less than a decade of the original bond payments left for them to make. I’m sure they’re figuring that the cost to pay off the bond and walk away from their share of the network is less than taking the deal. Unfortunately, it also means that the city probably has little chance of seeing an open-access fiber network. Anyone who’s using the network in Payson is probably also looking at going dark Real Soon Now(TM).