Why is it so hard to get TV on UTOPIA? There’s no money in it

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Earlier this week, I sat down with UTOPIA to discuss the Macquarie deal and their general operations. One great part of these sit-downs is that I can get candid answers to some of your common questions. Some of you have asked more than a few times about TV service. Right now, only Beehive Broadband and Brigham.net sell video service to new customers using UTOPIA’s headend and Veracity is using their own. Most providers sell satellite packages to plug the gap. Why? Because video doesn’t make money.

Yes, it’s true. Video is a break-even product at best. Look at the numbers from any cable provider and you’ll see the same story: video and voice make data customers more “sticky”, but it’s the broadband that pays the bills. They’ve quickly become commodity products that help the revenue side but don’t do much on the profit side. The consensus at FTTH conferences is that video isn’t something that most of them want to do.

So what does this mean for you? Right now, you’ll have to fall back on satellite TV or pick one of the providers that does video service. Since Brigham.net is sticking to Brigham City, that means Beehive or Veracity. This doesn’t mean that all hope is lost, though. UTOPIA has been talking to its video partners about an over-the-top live TV service to plug the gap. It would be sold Netflix-style, but it would have all of your favorite TV channels and possibly some good on-demand stuff too. It’s a ways out (I’d guess years), but it’s where we’re all headed anyway.

Not Just Copper: Is CenturyLink slowly withdrawing from the residential wireline market entirely?

CenturyLinkAlmost all of our broadband heartburn comes from uncompetitive markets. Even in areas with at least two wireline competitors (which is only about 95% of the urbanized Wasatch Front), you’re usually stuck picking between faster speeds from Comcast and cheaper speeds from CenturyLink. I’ve already written that it’s looking like CenturyLink is going to let copper die without a replacement, but it’s entirely possible they just want to get out of the residential market entirely. This would be a nightmare for competitive choice in our state.

Do you remember the last time CenturyLink upgraded their ADSL2+ product? I do; it was 2009. The year before, they stopped doing FTTN deployments entirely, occasionally lighting a new FTTN node here or there. Most of the Wasatch Front is still limited to 7Mbps ADSL with real-world performance usually coming in much less than that. I know people in Sandy that struggle to squeeze 3Mbps out of that aging copper. It makes CenturyLink’s claims of doing their own gigabit fiber seem pretty hollow and underscores that their main purpose in deploying FTTN may have been to try clubbing competitors in the kneecaps.

Just look at how CenturyLink has been not responding to competitive threats. In Provo, Comcast very quickly pushed their system to its absolute limits with a 250Mbps/50Mbps tier that price-matches Google. What did CenturyLink do? Nothing. They haven’t uttered a single word about doing any kind of upgrades in Provo at all. Who can blame them? It would cost them tens of millions of dollars to go after a customer base that hates them. The ROI would be so far out as to be disastrous. It’s noteworthy that the only places CenturyLink has announced doing FTTH have been duopoly markets, places with a more-or-less captive customer base. Given their non-response to Veracity rolling their own ADSL2+ using CenturyLink cabinets, this isn’t too surprising.

At the same time, CenturyLink has been chasing down deals to build fiber to cell towers and focusing heavily on their business services through acquisitions like Savvis. These premium services command much greater profit margins and more stable user bases than residential markets, plus they can easily convince businesses to pay the full cost of installing the latest technology. Even when the fiber to cell towers goes into residential areas, CenturyLink has been noncommittal about using it to upgrade DSL users to better speeds or technologies. It seems very strange to not want to use the investment to upgrade other services. I’d usually say they just don’t have the money, but they just approved spending $1B on a stock buyback program, money that would deploy gigabit fiber to as many as 1M homes and businesses.

This all paints a very disturbing picture for the future of telecommunications where open access systems like UTOPIA aren’t or won’t be available: Comcast will be the only real ISP for most users, and cities who go with Google Fiber will be right back into the “fast vs cheap” duopoly they hate so much right now. This is one of the many reasons why I’ve been so sour on both Provo and Salt Lake City for going with Google instead of fixing the underlying anticompetitive problems in the telecommunications space. Why would you expect Google to be any better than Comcast when they no longer really have to work for your business?

UTOPIA Goes for Cheap Gigabit

Remember the rumblings about UTOPIA’s upcoming announcement last week? Well, it’s here, and its’ huge. Starting today, seven providers will be offering gigabit service for as low as $64.95/mo. If you’ve already paid off the connection fee, this makes it the same or less than Google Fiber in Provo on six of them. Here’s the full price list:

Of note is that UTOPIA has added another provider, WebWave. They’ve been using UTOPIA for backhaul to wireless towers in Davis County since May and are now going to be a full-fledged ISP on the network. With nine total providers to choose from, UTOPIA’s offering more competition for your business than ever.

If you’re content on the lower-priced tiers, SumoFiber and XMission have already switched all customers to 100Mbps. Are you planning to pony up a little more for 10x the speed? I know I would.

Veracity Deploying ADSL2+ in Downtown Salt Lake City

Not content to roll out ADSL2+ in American Fork, Veracity has announced that its ADSL2+ product is going to start landing in downtown Salt Lake City (warning: press release, superlatives ahead). There’s no information on pricing or speeds, but I would anticipate that both will be highly competitive. The initial footprint is supposed to cover 10,000 homes and businesses, though it’s not entirely clear which neighborhoods will see the service or when. It’s not UTOPIA, and it’s not fiber-to-the-home, but it’s definitely an improvement over the staid duopoly offerings currently in Salt Lake.

iProvo to go back to the city, Veracity will lease for 14 months

In an unsurprising move, Veracity Networks will transfer ownership of the iProvo network back to the city of Provo as it has been unable to generate enough revenue to make the purchase feasible. Provo has already instituted a monthly utility charge to all residents and businesses in the city to pay for the current debt load on the network. Veracity will continue to operate the network under a 14-month lease agreement, paying Provo $95,000 per month plus a cut of revenue from future subscribers. Interestingly, all customer revenues are going into an escrow account that will pay the city before Veracity gets its share and the city will be responsible for all network infrastructure costs including installations.

The agreement has been framed as a chance for Provo to figure out what it wants to do, and there doesn’t appear to be anything ruled out. I wouldn’t be surprised to see new providers added to the network, or for the city to seek out new partnerships, either with another private company or a public entity like UTOPIA. The final vote will be on March 20.

Where iProvo is Going From Here

Most of you are already aware that Veracity’s reserve fund for iProvo has reached the point of potentially triggering a default. From the news stories you’ve read, odds are good that you think that Broadweave 2.0 is about to come crashing down on the city. I’ve sat down with Veracity and Mayor Curtis to get the real deal story and I don’t think it’s the apocalyptic scenario that sells papers and glues eyeballs to evening newscasts.

First off, I’ll give you Veracity’s side of things. They went into the network expecting to spend about $2-3M on network upgrades. To date, they say they’ve dropped a good $8M on fixing things up. For that investment, the network can cover both operating expenses and debt service, but there is no money left over for installations, marketing, or network upgrades. Veracity could choose to cross-subsidize the network, but that eats into their budget for expansion. The current strategy has been to try and expand to other markets to leverage the video head end and spread out the cost of the NOC, primarily through building fiber to CenturyLink cabinets, co-locating, and selling services over a U-Verse-like ADSL2+ network. If they pumped more money into iProvo itself, it stunts these growth efforts. It’s a short-term gain for a long-term loss. Neither the city nor Veracity would win under the current scenario.

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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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Despite speed bumps, Comcast just can’t compete with UTOPIA

Comcast is still trying desperately to stay in the high-speed game, but they just can’t quite seem to pull it off. Their fastest tiers are now 105M/10M and 50M/10M, but with more than a few caveats. Both are $100/mo, but the faster tier requires that you subscribe to at least one other service, and the price is only for 12 months. After that, it skyrockets to $130/mo for the next year and an unspecified price thereafter. So how do UTOPIA providers compare?

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Fuzecore leaves UTOPIA, Xmission steps in

I’ve received final word that Fuzecore has decided to leave UTOPIA and has sent its customers over to Xmission. Part of the problem for the Idaho-based provider is that there just weren’t enough customers available on the network to make things work, the same problem Prime Time Communications found itself in. Xmission has graciously provided those customers with a month of free service during the transition and will honor all existing pricing arrangements, though in some cases customers have been bumped up to a higher speed at no extra charge. I applaud Fuzecore for making sure its customers are well-served on the way out the door and leaving with class. Tim McClanahan has always been open with me about what they’re up to and how they’re doing and I’m sure he’ll continue to do well back in Idaho.

Personally, I don’t think the network can sustain a large selection of providers in its current state. The slices of pie get just a bit too thin to make things work, especially with such a large service area to cover. I’m expecting the provider market to pare down to Xmission, Veracity, Brigham.net (though in a limited footprint in Brigham City) and a handful of commercial-only providers. Nuvont has been slowly dying for some time now and is rumored to be down to a scant two employees running the company. I’ve been watching ConnectedLyfe’s filings with the SEC and they continue to bleed cash on an ambitious plan to stream video that I honestly don’t think content companies are ready to embrace. Their last SEC filing in November shows $84K in revenues with $1.2M in losses. Unless there’s an investor with deep pockets or some major breakthrough with a major content company, they are not long for this world.

Honestly, I don’t think all of this is necessarily a bad thing. I’d rather have a handful of excellent and profitable providers than dozens of them waiting to see who dies first. If UTOPIA can get the network construction rolling again (seriously, guys, this is taking forever), maybe some of them will come back and give it another go. For right now, this is probably what’s best for all involved.

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.)