The golden ray of sunshine in the report is a jump in total revenues of 98.7% over the prior year while expenditures dropped 7.2%. (The UTA chose to focus on just operating revenues and omitted the information about dropping costs.) Saying that this is a huge improvement is an understatement, especially when this doesn’t include any of the new UIA subscribers in the mix. While there was a small drop in total subscribers (a net loss of 210 thanks to the Prime Time meltdown), the period from July 1 to December 31 netted an additional 1400 subscribers via the UIA. This isn’t included in the audit report since 1) the audit report covers the period from June 30 2010 to June 30 2011 and 2) all new residential subscribers are being brought on via the UIA and will be included in a separate audit report beginning next year.

Since the UTA really can’t spin a good story concerning the revenues and expenditures, they chose instead to attack on the assets front. You may recall that part of UTOPIA’s bond structure is to use credit swaps to help stabilize the interest paid on their variable rate bond. Essentially, they purchased bonds with a slightly lower interest rate than what they pay and use the interest revenue to help stabilize fluctuations in bond rates, paying only the spread between the two. When UTOPIA’s audits are performed, it has to take into account all liabilities including the cost of these bonds they own. This creates the perception of decreased net assets even though UTOPIA won’t be selling those bonds until pay off their own bond. In short, it’s a paper liability that doesn’t actually cost them anything until almost three decades from now. The UTA, however, did not talk to UTOPIA to ask about this situation, instead choosing to assume the worst.

According to UTOPIA, they are currently ahead on their projections for revenues and slightly behind on total subscribers, about a wash. The first year of their five-year plan focused most heavily on existing service areas, areas where picking up additional subscribers would be relatively low-cost. Year 2 is going to focus more heavily on getting additional areas hooked up, so make sure you’re registering your interest on their website.

So the short of it is that UTOPIA has posted huge increases in revenues, a modest decrease in expenditures, and it well on-track to sign up thousands of new customers by the time their current fiscal year closes. If that’s not success, I don’t know what is.

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.

If you get any scare messages about UTOPIA wanting to get more money, be sure to set the record straight.

I’d advise UTOPIA supporters in or around Orem to show up to the meeting at 1031 W. Center St. Orem on Tuesday October 25 at 2PM. There will no doubt be disinformation by the truckload that will have to be countered.

UPDATE: Per Chris Nichols, the president of the Utah County Association of Realtors, the Utah Taxpayers Association has been un-invited from the event. He stated that his goal is strictly to discuss the implications of transfer of title when a homebuyer has chosen to finance the installation including how it appears when doing a search on the property. He also made it clear that any attempts to derail the discussion beyond that would be thoroughly unwelcome.

Chris also stated that UTOPIA was invited, but the person whom he named as “someone who has done work for UTOPIA” was not a name I’m familiar with. Granted, I don’t know everyone on their payroll, but if the PR department doesn’t know anything about it, it kind of maybe didn’t exactly go to the right person. Sounds like they both had their wires crossed on that one.

For the record, he was pretty mad at me and spent over 10 minutes chewing me out on the phone. I tried to explain why I formed the opinion I did, but he had no interest in hearing it. The website for the event links straight to the light-on-facts UTA website and lists a smattering of candidates for city council in Orem, both of whom are anti-UTOPIA (though one of them is being a realist about the situation). These combined with questions that appear to imply that the UTOPIA contract causes significant real estate sale issues created a very bad public face. The website itself also has no contact information as to who the responsible party would be.

My take? He wasn’t holding a tight enough leash on his employee Oldroyd who then worked with the UTA to try and sneakily co-opt the event for his own political purposes. My publicizing of it was very embarassing (and understandably so) and he needed to take it out on someone right then and there. Hey Chris? No hard feelings this time, but maybe try to be a bit more understanding of where someone else is coming from next time around. A lot of bloggers wouldn’t be as gracious as I am to heavily update an article to show both sides.

UPDATE 2: For those who are interested, I have a copy of the robocall used to publicize the event. Link is below.

UCAR UTOPIA Robocall

The good news about this addition is that it’s coming from a company with a performance record. UTOPIA has increased standards significantly for new and existing providers to try and prevent the kinds of problems we saw with Mstar and their resulting trail of wreckage. If anyone signs up for service, let us know how they do.

(Thanks to reader David for pointing out the addition.)

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.

The real trick with the install costs is to do a quick run-down of what you’ll be paying in the long term. Assuming a savings of $25 per month, the up-front payment for installation will pay itself back in just over nine years. Under all plans, the cost of installation will eventually go away, but Qwest and Comcast will still be charging you for that “free” installation. Odds are pretty good you’ll be subscribed to Internet service for the next two decades (and if you don’t think you will be, why are you reading this?) and there are multiple choices for service if for some reason one of the providers cheese you off, so I don’t think there should be a lot of concern about not using the infrastructure you paid for.

If you live in a UTOPIA member city and want service, make it easy on the sales guys and let them know ahead of time that you’re interested.

My review of the minutes shows that in 2009, Payson did not attend nine of the monthly board meetings. In 2010, eight meetings were missed. Neither of the 2011 board meetings with available minutes show that Payson was in attendance, and I’m willing to bet that the others that I don’t have minutes for would show a similar pattern. Making it to just five meetings in over two years is abysmal, especially when there’s the option to participate via phone.

Given the large amount of stranded investment in the city and Payson’s large financial commitments to the network, this seems like a total abdication of their responsibility to city taxpayers. Shouldn’t they be making an effort to get the network covering both operational costs and debt service? Wouldn’t it be prudent to set aside money for participating in the UIA, money that is guaranteed to be paid back by subscribers and utilize infrastructure already in the ground? Why would Payson do an ostrich impersonation in the face of the harsh fiscal realities?

If I were a resident of Payson, I’d be out for blood. Contact Councilman Brad Daley and let him know that if he’s going to be on the board, he has a responsibility to show up to meetings and do the people’s work, especially since he voted for UTOPIA in the first place. If he won’t do it, it’s time to pressure Mayor Rick Moore to find someone who will.

The network currently has about 9,000 subscribers out of 56,000 marketable addresses. The plan calls for adding on 5,000 new subscribers each of the next five years. Under the UIA model, this would cover all operating expenses of the new subscribers and the operating expenses of the existing subscribers while potentially providing a small offset of the current pledges (though significant offsets aren’t scheduled until 2015). Existing subscribers will be given the chance to participate in the UIA model, either to buy their connection outright or finance it over 20 years, either of which will eliminate the built-in network construction costs from the old model. This would also provide a significant influx of cash to UTOPIA to help with construction. There’s also a lot going into identifying potential subscribers in areas with the network in the ground that aren’t currently signed up.

Those of you living in cities that chose to participate in the UIA will be able to sign up under the new model, but the ability of UTOPIA to build depends on group participation and proximity to existing network. If you’re next to one of the anchor institutions being wired with stimulus money, it’ll be easier to hook you up. That, in turn, makes adjacent neighborhoods easier to hook up, and so on. If you live in a small pocket without service available, talk to your neighbors and get that interest registered on UTOPIA’s website.

Now allow me to inject some reality in here. I think UTOPIA’s plan is doable. Adding 5,000 new subscribers a year, if split between new construction and existing areas, would run under 10% marketshare per year. UTOPIA can conceivably hit 35-40% of the markets they serve as iProvo did. If you’re like me and want UTOPIA to succeed and really REALLY want to get service, you’d better be prepared to work. I keep on saying it, but it bears repeating: you’re in the driver’s seat. Don’t sit back and wait for service to come to you, be the squeaky wheel that gets the grease.

If the expansion is citizen-driven and UTOPIA properly executes on the plan (which has been a sore point before), it’ll only be a few years before there’s money to pay the bonds. I have better confidence this time around because unlike Brigham City, the money is already approved and waiting for construction. (Seriously, getting the bonds passed and figuring out what to do in the areas with lower take rates cost at lest 3-4 months.) Now get out there and do your part to make this thing work.