Bill Watch: SJR18 asks the governor to work on streamlining broadband construction

Sen. Howard Stephenson

Sen. Howard Stephenson

Wait, the legislature has a pro-broadband position in the works? I’m as shocked as you are. Best of all, it’s coming from Utah Taxpayers Association President Sen. Howard Stephenson. SJR18 encourages the Governor’s Office of Economic Development (GOED) to work with municipal governments to improve the process of building broadband infrastructure in our state. As a joint resolution, it doesn’t have any teeth, but I’ll take it.

There’s actually some decent ideas behind this one. Permitting processes for construction can vary pretty widely between cities, pole attachments are often messy, and Google has made these issues part of their chief criteria for determining which cities they want to expand to. I also like the idea of laying conduit while the city has an open trench for other purposes, often the most expensive part of any build.

Of course, we shouldn’t expect too much from the actual implementation. Given the source, the rhetoric matches up perfectly with the incumbent pattern of “give us tax breaks and less regulation so we can do what we already were going to do, just with higher profit margins”. I wouldn’t expect that higher standards will be imposed upon providers looking for a streamlined process, nor would I expect said streamlining to benefit anyone beyond those with existing networks or an expressed intent to build them. The fantasy that it would bring in additional overbuilders is just that.

See Sen. Stephenson explain it himself and watch carefully for the code words.

Hat tip to reader Chris for sending this my way.

Was HB60 an inside play by the Utah Taxpayers Association? All signs point to yes

Utah Taxpayers AssociationOnce HB60 hit the wires, I was quick to file a GRAMA request to find out what kind of communication Rep. Curt Webb had been receiving on the bill. Most of it is angry emails from Utah residents, many of whom were not accepting Rep. Webb’s cut-and-paste boilerplate reply about “transparency”. Here’s what he wrote along with my comments on each part:

Somehow the bill has gotten mischaracterized in the public eye. I have met with lobbyists and industry people over the past few days. I believe that much of the misunderstanding has been cleared up, and you may see a few minor amendments to provide that clarification. If it did what is being said of the bill, it would violate all of my conservative free market principles and run contrary to my voting record.

Actually, Rep. Webb, we understand the restriction all too well. You’ve been had. Just own the turkey and move on.

The bill does not prohibit infrastructure expansion. In fact it addresses no other entity than UTOPIA. UTOPIA is government entity created by an interlocal agreement and the public asks for and deserves transparency and accountability of them. The bill requires that any city into which UTOPIA expands become a member city. HB60 is not designed to damage UTOPIA is any way, but rather to provide clarity and accountability to citizens who may be involved in that expansion.

When UTOPIA builds in a non-member city, it has to negotiate a franchise agreement with that city like any other telecom builder. It’s already on a level playing field. Non-member cities can enforce transparency and accountability via this agreement. The only distinction with a member city is that the franchise agreement has been negotiated in advance for the entire municipality. By prohibiting UTOPIA from negotiating franchise agreements except on a citywide basis, you’re making them play by a different set of rules. That is, at the very core, damaging.

Why? Example: We must keep in mind that UTOPIA is an entity composed of member cities. If an expansion were installed in a non member city, and problems with the network arose; who would the citizens in that area turn to? That user is not a citizen of the proviing [sic] entity. Their own non member city could say “We are not UTOPIA.” If they turned to UTOPIA for help, those member cities could say “You are not our constituent”.

We’ve already established that the franchise agreement gives the non-member city power to establish and enforce terms with UTOPIA. It seems like Rep. Webb either doesn’t understand franchise agreements or is convinced that unless cities increase their involvement with UTOPIA, they won’t enforce the provisions of them. The former is most likely as the latter is simply outlandish. Unless, of course, he’s conceding that cities don’t properly enforce the terms of franchise agreements with operators like CenturyLink and Comcast. That, however, seems unlikely.

The bill only applies only [sic] to government entities as providers, (iProvo no longer applies), and requires as a matter of government accountability to users, that expansion areas become member cities. Some already have.

The cities are and have been accountable to their citizens, member or not.

Email between UTA and Curt Webb on HB60

Email between UTA and Curt Webb on HB60

So I find myself wondering how his confused logic spawned this bill in the first place. Then I came across the one email not between Rep. Webb and someone furious at this bill: an exchange between himself and none other than Royce Van Tassell of the Utah Taxpayers Association! Most telling, Rep. Webb emailed Van Tassell directly and out of the blue to solicit their talking points on the issue.

Unshockingly, the UTA has the same fundamental misunderstandings of how franchise agreements work as Rep. Webb expressed in his missive. Van Tassell also alluded to the push coming straight from UTA’s president, Sen. Howard Stephenson. Don’t take my word for it: read the email yourself.

This is just the latest in the long and disturbing trend of incumbent providers funneling money into a sitting senator’s company to influence the legislative process from the inside while keeping their hands “clean”. How the voters of Draper can tolerate it is beyond me. It’s my hope that they’ll wise up to it and send Stephenson packing.

Local groups whipped Oremites into an unhinged frenzy

Tuesday night, the Orem city council approved a property tax increase to plug some budget holes. A lot of the people present (some council members included) chose to pin the blame squarely on UTOPIA even though that’s less than accurate. I wasn’t there, but the recap from Twitter made it abundantly obvious that the crowd had a lot more anger than information.

Who do we blame for creating an unhinged and uninformed angry mob? Precisely the people who tried to walk away with a non-chalant whistle: The Sutherland Institute and Utah Taxpayers Association. Both groups have been painting a picture of apocalypse from the tax increases while trying to pin the entire thing on UTOPIA. Neither of them discussed the shift from sales to property taxes that dozens of cities are currently involved in, nor did they try to inform the public with alternatives to raising taxes. This purposeful attempt to leave citizens uninformed created some of the wackier and downright dangerous suggestions of the night, things that both organizations need to now own as a byproduct of whipping the citizenry into a fenzy.

And what were these suggestions of fiscal suicide? Some people suggested either that the city wasn’t directly responsible for the bond or that they should just stop paying it. Anyone with any financial know-how knows that you can’t unilaterally declare that you don’t owe money on a loan or that you’ll just stop paying bills you don’t like. If the city chose to do that, it’s credit rating would be worse than junk and it would be a true financial catastrophe for the city. More than a few people suggested that the city declare bankruptcy over it. They obviously don’t know that UTOPIA’s payment comprises a scant 3.2% of Orem’s total budget, nor do they seem to get that the consequences would be roughly the same as not paying the bond. It would be akin to burning down the house because you found a piece of rotten timber.

Another popular suggestion is to sell the network, but this, too, is divorced from financial reality. At the end of the payments, the cities (and presumably the subscribers who paid for installation) end up owning the network free and clear. The only way a sale makes sense is if the sale price would exceed the estimated value of the network at the end of the payments. Anything less would mean a wider loss, and there is no sale that will cover the price of the bond. Evidence suggests that a sale would go poorly anyway. American Fork “sold” AFCNet, but the company that “bought” it hasn’t been current on its interest-only payments and will likely not have the required $500K lump-sum payment when it comes due in a few months. Provo tried to sell iProvo twice without success. Both of those networks cover their respective cities whereas UTOPIA does not have a contiguous service area. Odds are good that any sale would result in a substantial loss of value.

The core problem is that both UTA and Sutherland (the latter of which I expected better from) presented cherry-picked facts and fabrications designed explicitly to incite anger. This was done in lieu of presenting a full slate of facts (like the trend in dozens of cities of moving from sales taxes to property taxes), their proposed solutions, and a rationale for the conclusion. When you take that approach, you create a mob mentality problem rather than seeking solutions. When you call them on it, they back off with a weak “well, we didn’t mean that” which comes off as trying to weasel out of the situation they created.

You can see an obvious common thread from the suggestions and actions. None of them actually think through the full consequences of the actions proposed, they’re “shoot from the hip”, and they’re emotional responses to try and undo a decision that’s over, done with, and now has to be owned. These folks (citizens and think tanks alike) could learn more than a few things from mayors like Mike Winder and John Curtis who, despite not supporting municipal broadband, have accepted that their job is to make the best of the situation.

(You can read more from the Daily Herald here.)

UTOPIA’s 2011 Audit Report

UTOPIA’s 2011 audit report (PDF) has come out, and the Utah Taxpayers Association wasted no time in butchering their “analysis” of it. (If you need a good piece of fiction, go find their January 2012 newsletter; I won’t grace it with a link.) Their overeagerness to once again trash UTOPIA, however, means they ignored basic math and did zero fact-checking, but we’re all used to that by now, aren’t we?

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.

Re-writing Reality: Utah Taxpayers Association Spins on iProvo

It’s almost become too easy to pick on the Utah Taxpayers Association when they get a story so very, very wrong. The latest work of fiction is their tortured stance on iProvo, one in which they perform twists of logic to support how things have unfolded with iProvo and yet continue to vilify what UTOPIA does. As usual, this requires a point-by-point breakdown of where they lack any kind of consistency and twist or invent facts to support their weak sauce arguments.

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Salt Lake Tribune Employs Cable Industry Shill to Review UTOPIA Plan

The Salt Lake Tribune ran an article today about UTOPIA’s new business plan in which a Mr. Ron Rizzuto continually discounted it. The article cites that Mr. Rizzuto is a professor at the University of Denver; this is true. What is omitted, though, is much more telling. Mr. Rizzuto is a senior fellow at The Cable Center, an organization funded by the cable industry. Not only that, Comcast’s Executive Vice President, David L. Cohen, is a member of the organization’s board.

It’s not surprising that a cable industry shill would attempt to trash UTOPIA in the press. It’s not even surprising that he would attempt to portray himself as a dispassionate and disinterested third party. Both of these have been done time and time again, like when Heartland Institute’s Steven Titch did consulting work for Qwest and claimed it had no bearing on his harsh criticisms for iProvo and UTOPIA. If anything, I automatically expect some kind of conflict of interest to emerge from parties opposed to UTOPIA as so many of them will always act in their own financial best interests. (Utah Taxpayer’s Association, I’m looking at you.)

What is surprising, shameful, and downright embarrassing is that the Salt Lake Tribune didn’t spend the entire 2 minutes on Google required to find all of this out. Even if they did, they chose not to disclose it in their article. One of two things happened: they were either negligent in their journalistic duties or (and this is more likely) they are continuing to advance the position of the editorial board that UTOPIA cannot succeed. Whichever it is, I am deeply unimpressed.

Utah Taxpayers Association Spews More Lies

Several UTOPIA member cities are gearing up to start taking votes on the new Utah Infrastructure Agency designed to help fund new construction of the network. The Utah Taxpayers Association is trying to get people to show up at these meetings to protest the UIA and try and kill it. In their effort to do so, they continue to distort, twist, and outright lie in their efforts to rile people up.

First off, the UIA bonds are not an unconditional loan. They are funds that will be secured by payments from subscribers. If there aren’t enough subscribers to secure repayment, the money doesn’t get touched. You would think that such an arrangement would be acceptable to an organization that purports to represent taxpayers as it clearly shifts the burden from the taxpayers as a whole to the subscribers. Attempting to characterize the UIA as a big grab-bag is a big lie.

Secondly, the UTA says that UTOPIA is running a $20M deficit in “operating expenses”. The problem, however, is that their version of “operating expenses” is entirely unclear. I’m betting that they chose to include equipment depreciation and possibly even the bond payments in that figure in order to paint a much more dire picture than actually exists. For all of the accusations by the UTA that UTOPIA doesn’t disclose enough information, it’s hypocritical and extremely irresponsible of them to distort the numbers for the purposes of supporting their arguments.

Remember the last time the UTA tried to organize an anti-UTOPIA protest? UTOPIA and its supporters showed up and ended up turning half of the attendees into subscribers. Let’s show them it can be done again. Centerville meets tonight (October 19) at 7PM, Orem is October 26 at 6PM, and Payson is October 27 at 6PM. All meetings are at the respective city hall. Let’s show the UTA that lying won’t get them very far.

iProvo, the Media, and Fake News

Both the Salt Lake Tribune and Daily Herald have run articles about closed-door meetings between Provo Mayor John Curtis and members of the municipal council. These meetings included only a few council members at a time so as to avoid the requirement to hold open meetings. An e-mail from the mayor indicated that these meetings were to discuss a “plan B” for iProvo. There’s just one small problem: Veracity (or at least the C-level executive there I talked to) apparently had no idea the meetings had taken place until I called to find out what’s up.

I have a number of problems with this, not the least of which is the environment of fear, uncertainty, and doubt that this creates. You may recall that Provo had to have a number of meetings in the midst of Broadweave’s impending default to figure out what to do prior to the network being handed back to the city in worse shape than when it left. You may also recall that I had copious amounts of sharp criticism for Broadweave, all of which was based on the company history (or, more  precisely, the lack thereof), hearsay about the internal disfunction at the company, and confirmations that they had to continue to use a line of credit to continue making bond payments. In this case, Veracity is a company with a solid reputation, no reportable internal strife, and a healthy cash flow from other operations. In short, there is little evidence from that side that any kind of network trouble is in the works at all.

Unfortunately, the refusal to discuss the “plan” B and how likely or, in my belief, unlikely it may be in a public venue combined with a media tendency to puff up bad news (love you guys, but you do it way too much) has combined to create nothing more than a cloud of unfounded speculation and innuendo. While Broadweave was always tight-lipped about operations, Veracity has been very open with me and has pretty bluntly stated what they’re doing with the network: cross-subsidizing it while pursuing the only customers really left, the single-family homes. Given their strong presence in other markets, I don’t doubt their capability to do so. Selling millions of minutes of voice a month is much more stable than a thousand double-play customers in an insulated (and competition-free) housing development.

This kind of pessimistic journalism, while no doubt backed up by experience, is not new. UTOPIA regularly faces one-sided stories and unrebutted opinion pieces in all of the major dailies. The only paper that consistently seems to take their job of presenting all facts seriously has been The Davis County Clipper. This is simply unacceptable. There are a lot of people depending on the newspapers to get the story straight the first time, even if it means pushing back the deadlines so you can track down and talk to other sources.

(For the record, I actually agree with Royce Van Tassell on something: more open meetings are a Good Thing. I’ve been hounding UTOPIA for the better part of two years to toss more data out in the public. Provo shouldn’t resort to so much secrecy.)

Rally Fail: UTOPIA Hijacks Utah Taxpayers Association Event

The Utah “Taxpayers” Association thought it would get an upper hand with a BBQ in Orem just before the city council voted on a new construction bond. Unfortunately for them, the plan backfired when UTOPIA made a surprise appearance at the event with their “mobile command center” and started actually talking directly with the meeting attendees, many of whom had no opinion of UTOPIA yet and came to get more information. According to my sources, about half of the 250 or so attendees ended up registering their interest in UTOPIA services, a major coup for the network that upstaged their most vocal opponent.

Apparently what convinced a lot of the undecideds was the UTA’s refusal to disclose who pays their bills. That lack of transparency translated directly into looking like they have something to hide (hint: it’s Qwest and Comcast dollars) and left many looking at their fantastic claims skeptically. I’d like to say that there were some talking points to address, but an eyewitness account called it so much kool-aid drinking, a series of incomprehensible rants filled with insinuation, innuendo, insults, and no concrete addressable facts. In contrast, UTOPIA discussed their new business plan with individual residents and offered demonstrations of how well the service can work. Truth has power and it wasn’t on the UTA’s side.

In attendance were Rep. Mike Morley, UTA VP Royce Van Tassell, UTA President Sen. Howard Stephenson, Rep. Steve Sandstrom, and Sen. Margaret Dayton (who did not speak). UTOPIA openly challenged both Stephenson and Van Tassell to provide outside oversight of their plan, an offer which they declined to accept. Considering that the UTA regularly chides UTOPIA for mismanagement and secrecy, I would think they’d jump at the chance to look at things from the inside. If nothing else, they could fabricate some juicy new attacks from half-truths. This says a lot about the true motivations of the Utah “Taxpayers” Association. If they really wanted to keep an eye on UTOPIA for the benefit of all taxpayers, why would they turn this down?

Please, UTA, consider holding more of these events. As many as you want. You come out looking like fools and UTOPIA gains even more customers and mindshare. I’ll even volunteer for the dunk tank.

Also, see coverage from the Deseret News and Daily Herald. Bonus: I’ve got about a paragraph in the Herald article.

As a side note, I saw it reported that the connections on the new plan will be $50/mo plus service, but I don’t know if that’s accruate and haven’t gotten a reply to an e-mail I sent Monday seeking clarification. It’s also unclear how much a service provider tacks on top of that if that is the case, though it had better be well south of $20/mo for Internet. You’ll know more when I do.

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.