The Need for Speed: UTOPIA bumping 100Mbps tiers to 250Mbps

moarWord is coming in that UTOPIA customers on the 100Mbps tier are about to get a very nice present: a free bump to 250Mbps. SumoFiber has already updated their website to reflect the change and other providers are expected to follow suit soon. This counters the fastest tier that Comcast has been able to offer (before their fabled 2Gbps vaporware tier materializes) with 5x the upload and blows way past the horrifically antiquated ADSL2+ tiers that CenturyLink hasn’t updated in many, many years.

This highlights the power of using a fiber network. When you need more speed, you flip a switch and maybe upgrade some electronics. CenturyLink is still years from offering any significant fiber deployments (outside of heavily cherry-picked areas willing and able to pay big bucks) and Comcast is still having trouble getting DOCSIS 3.1 rolled out in any significant volume to deliver anything approaching what UTOPIA is doing now.

If you’re on UTOPIA, have you already gotten the speed bump? Sound off in the comments.

The Macquarie deal isn’t dead; it’s resting

Now a year late on delivering MS2, most people have assumed that the Macquarie deal is dead and buried. With no real news (other than the leak of the draft MS2 proposal from earlier this year), there’s been no evidence that the deal is alive at all. So is it dead? No, but it’s not exactly moving forward either.

As part of the deal, Macquarie wants a binding public vote on the MS2 proposal. This makes a lot of sense over a council vote. Some of the shenanigans in Orem with public referenda probably woke Macquarie up to how an irate minority can put their thumb on the political scales. A public vote can’t be overturned in a similar fashion.

Unfortunately, it’s also something that can’t be done. State law does not currently allow for a binding public vote on the city entering into a contract. The legislature has also not been in much of a hurry to change this. No action was taken in the previous legislative session, and there’s unlikely to be any action in the upcoming one. I can’t help but imagine that Comcast, CenturyLink, and their Utah Taxpayers Association lackeys have worked hard to shoot down the idea.

The short version is that if you want some finality on the deal, you need to bug your legislator to come up with some kind of fix allowing a public vote. Until that happens, this deal is effectively dead.

A UTOPIA Update: More network, more money

utopia-logoI had the opportunity last week to speak with Gary Jones and Kim McKinley from UTOPIA to get an update on where things stand. It seems like the main reason UTOPIA has been out of the news is that nobody wants to report on boring good news. Here’s a quick bullet list of the things you should know (with, you know, my standard commentary):

  • UTOPIA has been growing revenues at the rate of $10K/mo for over 3.5 years now. Most of that has come from the board mandate to aggressively pursue business customers. Almost every business service area in UTOPIA cities now has the network available, so most growth will now have to come from residential footprints.
  • Residential footprints are getting built out in Layton, Midvale, West Valley City, and Tremonton using a combination of RUS settlement funds and the remaining $24M from the existing $65M UIA bond. Priority is being based on footprints with strong demand. When two footprints have the same demand, the city with the lowest amount of completed network gets priority.
  • All new construction is covered by subscribers footing the bill just as it has been for the last several years. This shifts debt burdens away from taxpayers as a whole. Most footprints are seeing around a 25% take rate for services, exceptional considering that they have to bear the cost.
  • There’s nothing official yet, but operational expenses are very close to a break even point. UTOPIA will announce when that point is hit. Once that happens, there will be money to start paying bond interest. That may prompt cities to consider bonding for more construction money to be paid for entirely by subscribers.
  • Cities are finally past the “raking UTOPIA over the coals” stage and are starting to be more active in figuring out how to improve operations. Murray undertook an effort to reconnect homes that, while it didn’t accomplish its intended purpose, did improve revenues from that portion of the network. Payson has even started showing up at board meetings again with regularity. Even Orem, a city with some, er, “colorful” comments from candidates and elected officials seems to be turning a corner and is likely to elect at least one member who is ardently pro-UTOPIA.

This is the kind of boring, steady improvement that doesn’t make newspaper headlines. Heck, the Utah Taxpayers Association has been mum because they haven’t figured out a way to spin it into a new hit piece. (Also, because Royce Van Tassell is out and he seemed to have some kind of personal beef with UTOPIA.) These small careful steps are likely to be the future of the network, not some crazy moonshots.

Macquarie cities, it’s time to make a decision

macquarie_logo_2638Maybe it’s just me, but I’m starting to tire of waiting for the cities who opted into Milestone 2 of the proposal from Macquarie to finally act. After missing the original August deadline to complete the report, there’s been almost dead silence. Nobody seems to want to talk about it, UTOPIA itself is kept in the dark, and aside from a draft that leaked months ago, there’s been absolutely nothing for public review. After the tumultuous ride that we’ve all been through on UTOPIA already, does this seem like a good way to win over the public trust?

I get that this is a very complex deal. With only half of the cities on board representing only slightly more than half of the network, it creates a lot of complexities. It’s also no small matter to try and re-work the costs to stay as low as possible for those who stayed in. No doubt the deal is being engineered to also try and entice in some of the cities who decided to pass.

But we’re past the point where the complexity of the deal justifies, well, much of anything. The cities need to stop discussing the minutiae to death and start accepting that they, in fact, are not in the position of power when it comes to negotiations. UTOPIA is a half-built network that’s barely about to cover its operating expenses. Even supporters of the network hate the way it’s been run, say nothing of people who still continue to try and find a way to kill the network no matter the cost. Macquarie got pretty well blindsided by the complex politics involved and the cities have a kind of fearful fatigue in discussing the issue any further when any position will draw wrath and ire from some vocal minority.

None of this justifies the complete and total lack of public discussion. In fact, it makes it worse. People want to know what’s going on. If you don’t tell them, someone (probably the Utah Taxpayers Association and their big donors Comcast and CenturyLink) will toss whatever speculation they want out there to see what sticks. By waiting to talk about anything until every little tiny detail is sewn up, Macquarie and the cities are leaving an opening to be derailed early and left constantly playing defense. This has basically been UTOPIA’s entire PR playbook as far back as I can remember and now the name is so toxic that everyone agrees it’ll have to die no matter what happens with Macquarie. That’s not exactly a winning move.

Macquarie and cities, start talking to us. The more you wait, the worse this looks.

Macquarie Milestone 2: What you need to know

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)

Layton holding additional public meetings on UTOPIA and Macquarie

LaytoncitylogoIf you still have questions about UTOPIA and Macquarie, Layton wants to make sure you get some answers. Per a letter they sent to residents, they’re holding two public meetings next week.

The meetings are as follows:

  • Tuesday July 15, 6:30PM @ Layton High School Auditorium, 440 N Wasatch Dr
  • Wednesday July 16, 6:30PM @ Northridge High School Auditorium, 2430 N Hillfield Rd

If Macquarie wants to win over cost-wary cities, they may need a new plan

macquarie_logo_2638In all of the city council discussions over the Macquarie deal, the conversation has been dominated by the potential cost of the utility fee. Even with the extremely high probability of generating enough revenue to cover the utility fee and reduce the bond payment, it’s all about what how much money is going to be collected from the cities. This has sunk the deal in about half of UTOPIA cities and looms as a threat over the ones that opted to get more details under Milestone Two. If Macquarie wants this to pass, they need to quash this main opposition talking point.

My projections are that this Macquarie deal creates a whole lot of money, both for Macquarie and the cities. Macquarie is operating in a very risk averse fashion despite this. They need to put more skin in the game in order to get current UTOPIA cities to take the deal and expand it across the state and the nation like they want. With their size and the low break-even point (35%-ish take rate), that should be easy to do.

Macquarie could alter the deal to eliminate or sharply reduce the direct utility fee. In its place, they should stipulate that they take 100% of the wholesale revenues until what would have been the utility fee is covered, then go back to the revenue split for any money beyond that. This would remove the possibility of cities having to pay anything for the deal and creates a small (and very remote) risk of them taking in less money than what it costs them to operate the network. There would be no way to scaremonger that the cities would be creating a huge tax on residents.

This is still a really good deal for cities. They eliminate all operational and maintenance costs associated with the network. If it doesn’t work, the only money they have to pay is the original bonds that they would have had to pay anyway. If it does work, they lower the bond payments. Either way, the network gets done, they eliminate the operational costs, and they get a completed network back at the end of 30 years.

There’s still downsides to this approach. Macquarie had planned to bond for 80% of the money needed to complete the build. The utility fee ensured that they could secure the best possible rates to do so. Without that kind of security, they would have to find alternate financing options or direct money internally to the project (and away from other projects). It could be harder for Macquarie to pull together the money and it will definitely mean that the revenue split for cities would be much smaller. It also means that Macquarie could end up not meeting their required ROI.

Maybe what Macqaurie could do is offer the cities three options and let each city pick the one that works for them. Option 1 would be the current utility fee with a maximum amount of revenue sharing to the cities. Option 2 would be no utility fee, but the cities have much lower odds of getting any kind of wholesale revenue split. Option 3 would be a lowered utility fee with a lowered share of wholesale revenues going to the cities. This would allow a lot of flexibility in how cities can opt in. It also allows Macquarie to at least partially take advantage of lower interest rates for the cities who take Option 1.

So far, Macquarie hasn’t played the politics of the situation very well at all. Despite a few big successes in the beginning, they’ve gotten their clocks cleaned in most of the cities that voted later and they haven’t been willing to accept that this is a full-scale war, not some alley fight. I’m hoping that they’ve paid attention and are willing to look at ways to keep this a good deal all around while defusing the biggest arguments against taking the deal.

BREAKING: Perry says yes to Macquarie by a unanimous vote

Perry CityIn 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.

BREAKING: Orem votes no on Macquarie’s Milestone Two for UTOPIA

Orem city logoOrem 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.

BREAKING: Centerville follows Murray, is out on Milestone Two

Centerville LogoCenterville 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.