Confirmed: Macquarie tips its hand on details of the upcoming proposal

macquarie_logo_2638After hearing some of the rumors about the Macquarie deal, I’ve been watching skeptically to see how much of it is wishful thinking and rumor-mongering. I’m now seeing that almost all of it is completely true. Macquarie had a representative answering questions at the most recent Brigham City city council meeting (skip to 43:30) and he confirmed a lot of what I had previously reported.

Macquarie wants a 30-year contract with the cities to expand and operate the network. There would be no transfer of ownership of the network and the cities would retain the title to all of the assets. Their purpose in doing this is to secure low-risk (in their words, “boring, stable”) investments with a moderate rate of return for pension funds and life insurance pools. Their view is that because they don’t have the typically myopic view of most of the telecom market that requires a very fast, very high return on investment, they can approach differently and see the long-term effects. Macquarie is committed to building out every home (165K of them by their count) to a “service ready” state. I assume that means including all portals and needed cabling so that getting service is as easy as a phone call.

In exchange for the contract, Macquarie would assess a per-address fee to the cities. While they recommend a utility fee with waivers for the financially indigent, the cities are given full latitude to determine how this fee would be collected. They can’t quote specific numbers yet since they’ve just started to receive proposals in response to their RFQ, but I’ve heard numbers between $15 and $25 per month. Macquarie would commit to providing the connection to every address and service providers would offer a free “basic” level of service comparable to high-end DSL or low-end cable. The service providers would not be charged a fee for access to these customers and would only incur the customer service costs. Word is that they view this arrangement favorably since this gives them a way to market 100Mbps and 1Gbps services to those customers.

Cities are actually going to get a pretty sweet deal on those upgraded customers too. Macquarie wants to make sure the cities keep almost all of the funds paid by the upgrading customers. These funds will help pay off the debt service and could be used to reduce the utility fees. I personally also like that the cost of UTOPIA will become a transparent thing. Brigham City is planning to leverage this universal buildout to switch to smart meters that will pay for themselves within 2 years and greatly reduce the operating costs of the city electrical utility.

Macquarie is doing a good job at keeping their ear to the ground locally. They were on top of Sen. Valentine’s attempts to amend SB190 from the floor and worked vigorously behind the scenes on both that and the original ill-conceived bill. They’re keenly aware of the perception of UTOPIA being forced on city residents and want to focus on showcasing the benefits of the network. They also took a moment to slam some of the woefully uninformed comments from the previous meeting by pointing out that they’ve been doing business in the US for two decades and have over 5,000 employees here.

The devil is always in the details, but so far this looks like a very solid proposal that’s win-win. The cities get world-class infrastructure and money to pay the bonds, the citizens get at least a free baseline of Internet service (with cheap upgrade options), and the rest of the state gets the potential to get gigabit everywhere else too. Macquarie also gets their toehold on what they believe to be a great long-term investment for low-risk portfolios, potentially spurring other companies into an overbuilding gold rush. I have yet to see anything giving me pause.

PS As a bonus, note that Ruth Jensen spends most of the council meeting continuing to concern troll on both smart meters and the free tier of service. She also comically states that DSL and cable are “good enough”, parrotting the standby line of the “you’ll take it and like it” incumbents. Jensen also goes so far as to insinuate that people actually LOVE their existing options, apparently unaware of how poorly they have been performing in customer satisfaction rankings for well over a decade. Her near-automatic gainsay reminds me way too much of the Monty Python argument clinic sketch.

Brigham City on Macquarie: Yes, please

On Thursday night, the city council in Brigham City voted to move forward on a predevelopment agreement with Macquarie. This is a positive step towards bringing $300M in investment to UTOPIA, completing the buildout in all member cities, and contributing money towards the UTOPIA bond payments. Unfortunately, the meeting wasn’t without theatrics and hysterics with plenty of incoherent rants and untruths during the public comment period. We even got a special Hitler reference from one of them.

You can watch the work session and city council meeting online (skip to 33:00 to begin public comment). The work session includes a very informative history of how private industry failed to build the infrastructure the city needed to keep businesses. Some quick facts from the work session and council meeting:

  • In Brigham City, a total of 1600 people signed up for the SAA and about 1300 are current subscribers to the service, about 26% of the city.
  • Brigham City is currently not contributing any payments towards UTOPIA’s operational shortfall of about $2.1M per year.
  • UTOPIA’s revenues raised much faster when they started primarily targeting business customers.
  • January’s income is much higher than expected.
  • Anything beyond the current plan to slowly grow the network to profitability would be a much more expensive option. But we already knew that, didn’t we?
  • Reissuing the bonds would be very expensive because of the way the current bonds are issued.
  • The network will remain the property of the member cities. Macquarie is primarily interested in a return on their investment, not ownership. To break even, they’d need to bring in $10M per year over the life of the contract.
  • Per Ken Sutton, owner of UTOPIA ISP Brigham,net, if the network doesn’t make a profit, Macquarie doesn’t get paid. Period.
  • The woman who canceled the RUS loan to UTOPIA is now an executive at Frontier, the incumbent operator in Tremonton. Isn’t that special?
  • Per their IT director, Box Elder School District depends on UTOPIA for 55% of students to get Internet access. They have no other fiber options available to them.

As expected, Ruth Jensen was combative for much of the work session, fitting her previous history of more-or-less unhinged opposition to UTOPIA. She even went so far as to propose suing UTOPIA, calling it “enslav[ing] the people”. The city attorney promptly smacked her down, saying that it would be the city effectively suing itself. (Skip to ~38:00 in the work session video to see it for yourself.)

So far, West Valley City, Layton, and Tremonton have also signed on. Centerville and Murray are considering it this week. Payson, as usual, is hoping that the whole thing will just go away and is ignoring anything UTOPIA-related. Word around the campfire is that all of the other cities want to move forward on a full study.

Want the fastest broadband in Utah? Brigham City has you covered

Ookla, the company responsible for running Speedtest.net, has recently released new results on the state of broadband speeds around the world and Brigham City has taken the top spot in Utah by a wide margin. Their average speed of 20.59Mbps handily bests second-place Pleasant Grove by almost 60%. Considering that over a third of the city accesses the Internet using a UTOPIA service provider, this doesn’t come as much of a surprise; almost all of the increase has been in the somewhat recent future. Neither is it surprising that two of the top three ISPs (as ranked by speed) are UTOPIA providers Xmission and Integra Telecom.

I think the moral of the story is crystal clear: if you want top-notch Internet service, get UTOPIA.

Utah Infrastructure Agency Moving Forward

Remember UTOPIA’s new plan to shift the cost of the network from the cities onto subscribers? It’s been moving forward in the form of the Utah Infrastructure Agency, a way for cities to bond for construction without having to put taxpayers as a whole on the hook. So far, West Valley City, Lindon, Midvale, Layton, and Orem are on board with Perry and Tremonton deciding to sit it out. Other cities are still considering signing up for it and need to hear from you.

So what exactly does this do? In short, it’s the next evolution beyond the SAA used in Brigham City. The SAA model was to  find demand, form an SAA, and then get the funds to start construction. The UIA will, instead, get the money first, find the areas of demand, and then start construction once it becomes feasible. Just like the SAA, the subscribers that get hooked up under the arrangement will be the ones footing the bill. This speeds up the process of connecting customers while still continuing to shift the burden of supporting the network away from cities and onto those who get service.

To be quite honest, I can’t see why a city wouldn’t be all over this. There’s no cost to the cities to participate and increased subscribers will only decrease or eliminate the called pledges. Given the benefits to the taxpayer, that they are taken off the hook, you’d think the Utah “Taxpayers” Association would be all for it. (Fat chance, I know.) The good news is that any city that doesn’t elect to participate now can always reconsider in the future. If your city has already declined to join (or does so in the future), you can still pester them until they reconsider.

Note: While Orem was part of the founding group of the UIA, they haven’t taken an official vote on the matter yet. There will be a public hearing on Tuesday after which the Orem City Council will decide if they will join. They chose the new bond in a 6-0 vote last time around, but the UTA is holding their rally just before the meeting to try and pack the house with opponents and scare council members into reversing course. It’s very important that UTOPIA supporters turn out in force both at the rally and the meeting to thwart these efforts. I hear there’s going to be a fun surprise for the UTA during their BBQ, so show up and be prepared for a laugh at their expense.

UTA Threatening to Sue UTOPIA and Brigham City

Hot off of their misinformation campaign to residents, the Utah Taxpayers Association is now rattling their legal sabers at UTOPIA and Brigham City over the Special Assessment Area (SAA). The UTA is claiming that participants were deprived of due process because the terms were not explained properly and that there wasn’t a public hearing. These claims, however, are a matter of pure fiction. Many of the comments I’ve read indicate that the terms were explained and paper copies of the agreement provided via mail by the city. The initial meeting held in November to form the SAA was a public hearing and was well-attended.

What’s interesting, however, is that it was Qwest that initially filed FOIA requests with Brigham City to see the terms of the SAA, yet the UTA is the one making legal threats. My suspicion is that, after getting their butts kicked in court, Qwest wants to use the UTA as their proxy in these fights. The UTA refuses to disclose how much money individual members contribute or what influence any members exercise, ironic considering that they are protesting that there hasn’t been enough sunshine in the process.

The most galling part isn’t the lying and misrepresentation. At this point, it appears to be par for the course. No, what irks me the most is the UTA characterization of Brigham City residents as simple-minded fools just waiting to be duped by the first slick salesman that appears on their doorstep. I’ve met many residents and city employees from Brigham and I can tell you with complete certainty that they’re no dummies. They go to city council meetings, read the papers, and get informed on issues in a way that I wish their urban counterparts would consider trying out. (Seriously, I’ve found rural voters to be some of the sharpest tacks out there, especially when it comes to local politics.) How the UTA thinks it can simultaneously insult the intelligence of and purport to represent taxpayers is beyond me.

Articles on the Brigham City SAA Vote

The Salt Lake Tribune, Deseret News, and Standard-Examiner all have posted their articles on last night’s vote in Brigham City. According to the Trib, only about 70 of the over 1600 participants in the SAA opted to sign the UTA petition seeking to leave the SAA, a scant 4%. One of them admitted to not even reading the contract before signing up despite having been given the opportunity to do so. (There’s one in every crowd, you know?) Unsurprisingly, Ruth Jensen was the lone vote against it and tried several times to delay the meeting.

Brigham City will issue a bond for $3.66M (rated A3 by Moody’s or low risk) and chip in $655K of city money of which either $294K or $482K will be to wire city facilities, depending on which article is correct. The remainder of the $5.45M total construction cost comes from residents who chose to pay up-front. That works out to over 400 residents who opted to front the construction cost, over a quarter of the total participants. A pleasant surprise is that the cost of the SAA went down to $22.50 per participating residence.

From there, there’s a lot of divergence in the details of the articles. The Tribune article takes a decidedly negative slant in line with their recent editorial. The Deseret News claims that 600 participants in the SAA won’t get service because of low participation rates, a claim that doesn’t jive with the other articles at all.

BREAKING: Brigham City Approves UTOPIA SAA

Despite some recent controversy created by the UTA and saber-rattling by Qwest’s legal team, Brigham City has signed off on the UTOPIA SAA and cleared the way to start construction immediately. This will add 1,604 customers to the network and opens the way for additional customers to join the network at a later time. The network will cover the entire city and be available to every residence and business. No word yet on when the construction will be complete, but there is a rush to get it done before the ground freezes.

Brigham City Responds to UTA FUD

Brigham City has posted a thorough rebuttal (warning: PDF) of UTA’s false and misleading mailer sent to residents earlier this week. (h/t: Paul Larsen) It thoroughly shreds the UTA’s positions which are about the same as claiming that dihydrogen monoxide is a dangerous substance. Many of them are the same rebuttal points I offered, some are new or provide additional specifics I did not have. It proved that UTA is, once again, making stuff up to derail UTOPIA while saying they’re looking out for taxpayers. If they really cared about taxpayers, they would stop trying to derail the project and make residents in the member cities pay higher taxes.

Utah Taxpayers Association Uses Fear, Uncertainty, and Doubt Ahead of Brigham City Vote

The City Council in Brigham City will be holding a final vote on the UTOPIA SAA on Thursday December 10 at 7PM. This vote will determine if the SAA will move forward or not. Ahead of this, the Utah Taxpayers Association has decided to start up a campaign of disinformation to try and get residents against it. The following mailer was sent out to all residents of Brigham City (no doubt at a considerable cost to the UTA).

UTA Postcard Side A

UTA Postcard Side A

UTA Postcard Side B

UTA Postcard Side B

In their usual style, it purposefully misrepresents the SAA and plays loose with the facts. Here’s a few highlights.

  • Before UTOPIA came to town, private companies would not invest in Brigham City. Both Comcast and Qwest refused to provide broadband service to residents despite repeated requests from the city to do so. After Brigham City joined UTOPIA, both companies started to roll out services. Chasing away private capital indeed.
  • Sure, your house could be sold at a foreclosure sale if you fail to pay your part of the opt-in SAA. The same thing happens when you fail to pay your property taxes, your mortgage, or any other expense associated with owning a house or taking a loan out against it. Yet, for some reason, the UTA doesn’t seem to think those items are unfair. Nice spin, guys, but not paying your bills will, surprise, result in consequences. No duh.
  • The UTA has purposefully inflated and misrepresented the city’s share of the expenses associated with the SAA. Brigham City has chosen to pay to hook up all city buildings with UTOPIA service. That accounts for well over half of the money the UTA is talking about and provides a legitimate service to the city. It is also entirely unknown what costs, if any, the city will have to carry for the bond to go through. This is because it depends entirely upon the number of people who sign up. Unless the UTA has some kind of magic crystal ball that I don’t (which I seriously doubt), they’re just making crap up. Again.
  • The UTA is actually calling it a negative point that you’re paying $25 and don’t get service included at that price. I hate to break this to them, but there isn’t a provider on earth that would provide even a single part of a triple play for just $25/mo., at least not without line subsidies (like Qwest and the USF). This is just a nonsensical argument. It’s like complaining that the taxes you pay for roads don’t include a car.
  • The UTA also points out that the money from the sale of your home will be used to pay off the costs of the SAA. Again, duh? What, does someone expect that the bond magically disappears because you sold your house? It’s another nonsense argument.

The flier is nothing more than a pathetic attempt to derail a project with significant community involvement and backing. The UTA isn’t looking out for taxpayers; they’re covering for their members. Let Brigham City’s residents spend their money how they want to, m-kay?

UTOPIA Moving Forward in Brigham City

UTOPIA has obtained the approval of Brigham City to move forward with the plan to create a voluntary SAA to provide services to over 1,600 residences. Reports from the meeting were that the crowd was almost unanimously in favor of approval and the city council voted 4-1* in their favor. This means that residents who have opted in will be able to receive service in exchange for either a $3,000 connection fee up-front or paid over a period of 20 years via a city-backed bond. Anyone who has not signed up for service will not be expected to pay any part of this bond.

The good news is that with the number of homes participating, the entire city will be covered with service. Residents have until early December to opt to participate in the bond. Anyone who wishes to get hooked up after that will have to come up with the money up-front or join up with enough other residents to form a new bond. Best of all, the city will retain ownership of all portions of the network built under the SAA with the potential to get other portions of the network placed under city ownership in the future.

UTOPIA also picked up a new service provider, Brigham.net. They’re the typical dial-up-come-DSL ISP that’s hit hard times as Qwest plays hardball. (While Qwest will deny it, they’ve been using the list of wholesale line orders from other service providers to poach DSL customers.) While it is unclear if/when Brigham.net plans to expand beyond its home town, it certainly is a good thing for residents of Brigham City to have even more competitive choice. This could also bring an additional 145 customers to UTOPIA beyond the 1600 that have already opted in.

As part of the launch, the long-delayed white label video product will be ready to go. (It’s about time since it was starting to feel like the Duke Nukem Forever of fiber networks.) Apparently the hold-up was Turner. UTOPIA wanted to transport the video signal over a secure fiber network to their headend and Turner was the only programmer who would have none of it. After much negotiation, UTOPIA had to get a dish to bring in Turner networks like TNT, TCM, CNN, and Cartoon Network. The packages are only going to come in a few basic flavors and I wasn’t able to get details on what VOD options, if any, will be included with it. The channel lineups are currently posted on their website if you want to take a look; it appears to be pretty complete to me.

So how is Qwest reacting? Just as you would expect them to. They have filed a GRAMA request with Brigham City to obtain the documents forming the SAA and may take legal action to stop it from forming. The problem here, though, is that UTOPIA is just a contractor in the middle of it all. Qwest will have to sue Brigham City to stop the SAA to, in effect, tell them that they can’t let their residents buy a fiber optic network of their own. (Yes, it’s as dumb as it sounds.) I sincerely hope Qwest will back off on this one.

(*Unsurprisingly, Ruth Jensen was the lone no vote and continued to parrot telecom talking points. She was also reportedly excessively harsh and unprofessional with the UTOPIA representatives at the meeting to the point of being called out by some residents. I’m also a bit concerned that she apparently didn’t know the difference between a voluntary SAA and an involuntary SAA. Isn’t that the kind of thing that a city council member should know?)