UTOPIA to Use Special Assessment Areas to Extend Reach

UTOPIA has been holding a series of open houses in Brigham City and revealed a new tool in their toolbox for extended their reach: the Special Assessment Area (SAA). The short of it is if you can get around 35% of your neighbors to opt into an SAA, a bond will be created for the cost of deploying UTOPIA to that area and each participant will get an equal portion of the cost of deployment attached to their property tax assessment. This allows you to pay for the cost of installation over a long period of time (20 years or longer) while taking advantage of municipal bond rates, typically around 6-7%.

While this was originally conceived as a way to quickly extend UTOPIA further into member cities without waiting for revenues to do so, it can also be used by non-member cities and unincorporated areas to bring in UTOPIA. I don’t know about you, but I plan to start asking my neighbors if they want in on that.

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25 Responses to UTOPIA to Use Special Assessment Areas to Extend Reach

  1. Anon says:

    This brings up a big issue on UTOPIA… fairness. It’s the issue that I don’t ever hear people adequately addressing.

    The subscribers in recently-added cities are paying a higher monthly fee for services when compared to the original install footprint subscribers. They’re paying more so that the cost of the new installs will be paid for over time, right? But once the investment pays for itself with the additional revenue, will the price go back down to the price the original footprint people are paying? And what did they do to deserve a higher price than folks within the original footprint? Not have the good luck of those whose neighborhoods was paid for with the early investment money?

    Now, let’s say I’m in an original footprint city, but in a neighborhood that wasn’t built-out. If I work with my neighbors to do a SAA and we end up paying an extra $15 a month for 20 years or something, that’s totally unfair when you compare it to folks across the street whose neighborhood was part of the original UTOPIA footprint and was built-out with no cost to them. The only cost to them is the promise to repay the bond if UTOPIA is insolvent, but I’m on the hook for that too, even though I never get the benefit of UTOPIA (ignoring SAAs).

    For this to fly, UTOPIA needs to make it clear how they are going to make things more fair. If I pay for the install using cash or a SAA, I (and my neighbors) should own part of the infrastructure, and UTOPIA should buy it back from me over time, by giving me a discount on my service each month until they own it. Either that, or the customers in the original footprint should be paying some extra every month until their install is paid for.

  2. Jesse says:

    As I understand it, the monthly price charged by service providers will be substantively reduced in SAAs since homeowners are directly paying for the infrastructure. A wholesale transport fee will still be passed to UTOPIA to cover their costs.

    That’s the trade-off: if users take ownership of the debt via an SAA, they get service now and are on the hook for it no matter what.

  3. Anon says:

    I understand the trade-off… I just don’t think that they will adequately address making the trade-off fair. It’ll be something where they say “trust us, we’ll give you a discount,” then the discount will go away in a year or two, or when the UTOPIA network gets sold to Verizon. Like I said, unless they make it fair, I don’t think it’ll fly. Since the SAAs are on the hook no matter what, they should own the infrastructure (until somebody buys it) no matter what. So if UTOPIA goes away and somebody else buys it up (a la iProvo/Broadweave), the SAA people would still have some leverage to get better pricing, or to get reimbursed for their infrastructure as part of the purchase agreement.

    The point is that over a long period of time (say, 20 years), my average monthly price in an SAA area should be no different from the average monthly price of the people with similar services, but not in an SAA area. The only difference is who’s doing the financing of the install (me or UTOPIA/member cities).

  4. Jesse says:

    I like the “home with tails” idea and I think that’s something UTOPIA will have to do a good job explaining. Letting the homeowners maintain ownership is a Good Thing(TM).

  5. Tim says:

    Utopia has dropped the ISP wholesale fees to compensate for the monthly SAA fee. If the property owner wanted to pay off the SAA early they have that option as well, then subscriber would just pay the ISP side of the service. Of course the equipment and fiber is owned by UTOPIA but what good does it do owned by anyone else. Utopia will maintain and upgrade it. The purpose of the SAA is to improve infrastructure. Having fiber to your home makes the home as a whole worth more. There have been potential buyers of homes in Layton asking if fiber was to the home as of late.

  6. Mike Taylor says:

    I’ve heard the UTOPIA people discuss this idea for at least a year now. However, I have seen no concrete details on how to actually start the process of doing a special improvement district or area. Also, UTOPIA has given no direction as far as I know on how to work with them to get it done. I’d like to know how to execute on it.

  7. Anon says:

    Are you saying that UTOPIA would derive zero revenue from the SAA areas? Indefinitely? That seems counter-intuitive too, since that gives UTOPIA no incentive to provide service, maintenance or upgrades to SAA areas.

    It is certainly true that the SAA area people won’t want to own the infrastructure for the reason you mention — maintenance and upgrades. But if the SAA people don’t own what they paid for, what leverage do they have to ensure that they will receive the benefit from their expenditure? The way you propose it, I pay for the fiber installation, which I essentially gift to UTOPIA. So UTOPIA gets the fiber for free, but what assurance do I have that UTOPIA (or a successor) will give me discounted service long enough to compensate me for my up-front cost? I’d only sign up for that model if there were a contract signed and recorded that had some teeth to it.

    Like if UTOPIA owned the infrastructure, but the SAA people had a deed of trust on it such that if UTOPIA or its successor didn’t perform (i.e. give a discount), ownership would revert to a trustee who could sell the infrastructure. The proceeds of the sale would then go to the SAA people who paid for it in the first place. After the 20 years (or whatever) where they’ve given the discount long enough, UTOPIA owns it free and clear, and they can charge full price again.

  8. Jesse says:

    Basically, you’re paying for expedited deployment, not buying the infrastructure yourself. Sure, UTOPIA will, sooner or later, deploy fiber to all serviceable addresses in all member cities, but you have to wait for the money to be available to do that. The SAA is a way to pay to skip to the head of the line and front the necessary funds for the fiber. The lines are “owned” by UTOPIA, but UTOPIA is owned by its members. I only see the scenario you describe become an issue if a neighborhood in a non-member city joins and thus doesn’t have a direct stake like a city would. That probably needs to be worked out, sure, but I think you may be exaggerating the what ifs.

  9. Anon says:

    It really boils down to this: is my cost over a long time going to be the same as those not in an SAA? I doubt if you’ll find any neighborhoods with 35% of people who are willing to pay only for expedited deployment. You’ll only convince people to do the SAA if they are cost-competitive vs. alternatives.

    So how are you going to convince me to spend $5k if I have no assurance that it will be cost-competitive (over the long-term)? Taking UTOPIA at its word won’t cut it. Sure, I trust the UTOPIA of today, but what about the UTOPIA of tomorrow that has fallen on hard times? Without a contract, they’ll renege on the discount, and I’ll get screwed.

    In other words, you should be paying for a guaranteed discount, and expedited deployment.

  10. Jesse says:

    Which is all fine and well, but we’re all taking stabs in the dark here. None of us knows all of the particulars, just the generalities.

  11. Anon says:

    Sure, but by voicing concerns, hopefully the powers-that-be will notice and take these things into account. If it’s not structured well, it’ll be a hard-sell to neighbors, and it’ll never fly.

    Since it may not be evident from my posts, I want to make it clear that I am a proponent of the SAA idea. Once I’m convinced that the SAA is fair, I’ll be organizing a door-to-door effort in my neighborhood, and spending evenings trying to convert the masses to the UTOPIA fold.

  12. Anon says:

    So I was looking at a map of my neighborhood to see how likely it would be that I could convince 35% to join a UTOPIA-SAA. I had to immediately discard every rental home and apartment in the area, since there is no way the owners would let you attach a SAA to their property taxes. Only landlords that are already bundling Internet services with the rent (i.e. large MUDs) would consider joining the SAA. Lucky for me, there are comparatively few rentals in my area (as far as I know).

  13. Capt. Video says:

    I think UTPOIA is doing the right thing to offer this option, however I strongly doubt any significantly number of people will take advantage of this “opportunity”.

    First…given past history with free installs UTOPIA is not reaching 35% of the homes it’s available to.

    I think the greatest danger to those taking advantage of an offer like this is the very strong likelihood that UTOPIA will be sold.

    The basic economic problems they face have not really changed. They have over half a billion dollars of debt and are not generating sufficient revenues to make the payments when they come due.

    They are currently NOT on track to be able to make those payments. Unless there is some significant change in the operation (subscribers increase by 300%+(?), they get the economic stimulus money they are lobbing for, Comcast and Qwest both fold up) they could go bankrupt or be sold for pennies on the dollar.

    But no matter what happens to UTOPIA, even if they stop providing service completely. Those is a Special Assessment Area will still be paying the Special Assessment. So they could be paying Comcast or Qwest for service and still paying off the UTOPIA install for 20 years?

    As always, the fate of UTOPIA is in the people’s hands….all they need to do to save UTOPIA is subscribe. It’s really as easy as that. But given how easy it is, some 70-80% of those that have the opportunity to subscriber, elect not to.

    Unless UTOPIA learns the missing ingredient that will get people to subscriber (which to me is offering a product people want at a price they will pay…and marketing that well!) I fear UTOPIA’s best hope is a future sale to a private company.

    Offering SAA subscribers some guarantee would make that inevitable sale more difficult. I’ll be a little surprised to see UTOPIA do anything to make a sale more difficult.

    I do find it hard to believe anyone could still believe that UTOPIA will build out to everywhere in all cities they have committed to do so in as Jesse suggests. Exactly where that money to come from? Subscriber revenues cannot pay the existing debt no less fund future construction. What am I missing here?

    I think it’s less than 18 months until UTOPIA bond payments are scheduled to begin. UTOPIA has (fewer?) subscribers than Broadweave and the UTOPIA bond payment is more than a million dollars higher each month? I’ll suspect the UTOPIA cities are very concerned as they are the “surety fund” the money to pay the bonds will come from?

    Subscriber now people!
    It’s UTOPIA’s only hope!
    If you are in a UTOPIA city you are going to pay for the network anyway. Why not subscriber and get something good out of it? Give them a chance to succeed.

    Just as all Provo residents should subscriber to Broadweave, anyone in a UTOPIA served area should subscriber to UTOPIA!!!

  14. Luke says:

    As you know I’ve been working to get UTOPIA into my Condo complex for some time. I was working closely with Paul Recanzone and Jim Morris last year and they have stopped responding to emails. I may look into the SAA as a way to get UTOPIA into my complex. We have 144 units so that would mean about 50 units would have to sign up for service. But I have lots of neighbors that come to me about it so I think it could be doable.

    Thanks for the info.

  15. Jesse says:

    I don’t know about Jim, but Paul moved into a contract position so he could work on other fiber networks as well. He’s more of a design guy, so being involved during the planning stages better fits his skills and interests.

    With a condo complex, you’re probably looking at a lowered per-unit cost of deployment due to density, so you might be able to way low-ball the estimate of $1800 per address passed. That’s always welcome relief (not to mention that some of the rings probably pass really close to you).

  16. Luke says:

    Jim Reams from Orem City. Not Jim Morris.

  17. Jesse says:

    Oh, okay. Can’t say much there. I’ve always been able to get a hold of him in the past. Maybe Orem has a new representative to the UTOPIA board?

  18. Luke says:

    Actually my latest email has bounced. So I will go back to the City Counsel group and hopefully they will get me in touch with the right person again.

  19. Mark says:

    They are using what sounds like the SAA idea in Brigham City, with the drive to get to 37% going right now. I finally got a chance to talk with the UTOPIA reps the other day.

    There will be a maximum $25 dollar charge added to the utility bill of those who sign up for 20 years. when the network is completely built out, sometime in November or December. That charge is based on the cost to finish the construction, so the more people who sign up the lower the cost.

    Also, because the consumers will be paying for the buil-out, the providers will charge less. For example, I was told that X-mission would charge $63 dollars/month for 10/10 internet and VOIP. So based on prices on their website for other cities, it works out to about the same cost per month. Still, the big worry is what happens if UTOPIA stops providing service altogether.

  20. Capt. Video says:

    …and perhaps how strong your guarantee of the lower rate is going forward?

    We know the $25 will be there for 20 years as a lien on the property (?), do you have a similar iron clad guarantee that for the next 20 years, no matter the UTOPIA service provider, you will have a lower rate?

    In addition to the concern of UTOPIA going out of business, what if they just sell the network. If you sell your home the $25 monthly bill goes with it, what if they sell the network? Does your right to a lower rate go with it?

    Paying $6000 for an install just sounds crazy to me…and it sounds like risky business at best.

    Provo spent about $1500 building to every home in Provo. Add another $88-$1000 for the install and it’s still only $2500 or less per home in full construction costs (including finance charges and using $50 million as the network cost, not $40 million). Why would it cost someone $6000 to get UTOPIA?

    I predict a small take rate on this offer. I do think some will take them up on it, but not many. Not enough to make any difference in their future.

    I do give UTOPIA points for creative thinking and trying everything. That’s what they should be doing.

    Final thought…if you are saying the XMission rate is about $88 data and voice that does NOT sound like a great rate. It’s much higher than Comcast’s standard rates for data/voice. Comcast is currently offering a triple play for $99 a month price guaranteed for 2 years.

    This inability or unwillingness of UTOPIA service providers to make really compelling offers that make customers switch providers is what stops UTOPIA from reaching the penetrations they need to be successful.

  21. Mark says:

    You make some good points about the $25 for six months. That is the one reason I have not signed up already.

    You are correct that Xmission could raise their rates in the future, but based on my experience with them I don’t believe any rate hikes will make the service any worse price-wise than any competitor’s service.

    However, your comment on how it is not a great rate doesn’t apply to me because Comcast is not available in my neighborhood, of course that is an option to others in Brigham City. Also, I don’t know about Comcast, but Qwest only offers those great rates to new customers. As an existing Qwest customer I am stuck with my current rate with 256kbps and dial-tone only. If I were to upgrade to the fastest speed Qwest offers at my address 1.5 mbps and upgrade my current phone service to long distance, caller id, etc., I would pay about the same amount. For slower internet and fewer services on my phone. And that doesn’t include the charge per minute on long distance.

    So, if I decide that I am willing to assume that for the next 20 years I will be able to get service over the fiber, from UTOPIA or otherwise, it seems like a good deal to me. Of course, that is still a big assumption.

  22. Paul, you’re comparing a new subscriber promotion to our full rate. Our double play service is quite competitive to Comcast, and has faster Internet speeds.

    There is no SAA promotion yet because there is no SAA yet being built. But for the the better part of the last year we have been using one of the strongest promotions in the industry in new areas, including three months of free service. During this time we have nearly doubled our subscriber base on the UTOPIA network.

    We don’t have IPTV pricing public yet as its still being evaluated and packaged. I doubt we’ll match $99 triple play for 2 years, but the long term commitment should be more than enough of a value to help entice people who may be interested in obtaining a fiber drop for their home and who want the superior product fiber can provide.

    And you’re certainly correct that our prices may change over the next 20 years. We’ve already lowered them several times since we joined the UTOPIA network 4 years ago, even as we increased speed and bandwidth inclusions.

    I don’t know about you, but in that time my bills at home for Comcast (all I can get) and DirecTV have gone up.

  23. luminous says:

    Running xmission 1.5meg DSL here, can’t wait to be running xmission 20/10 fiber on utopia. I wouldn’t want to use any other ISP, xmission has consistently kept ahead of the curve on their network keeping latency low and bandwidth high. They are one of the biggest reasons that we need to support Utopia, If Qwest has their way they would have no access to customers and we would all be stuck on Qwest’s vastly inferior ISP suffering from high latency’s and peek hour bandwidth shortages.

    The quality of Qwest and Comcast servies really show why we need competition.

    on the SSA issue i would think that if i was in your shoes i would demand that the fiber be “owned” by the household paying for it and that the cases of network buyout, shutdown etc, be outlined in the SSA agreement.

  24. Capt. Video says:

    Yes, Comcast has GREAT introductory rates but their “standard rate” is NOT a good value at all. I made my comments based upon rates on the Comcast web site and while I tried to avoid special promotions, I did not read the fine print and apologize if I was fooled into thinking the Comcast rates listed were promotional.

    I just contacted Comcast and you ARE competitive on standard rates.

    I have never seen an introductory rate run as long as their current 2 year promotion. I have not looked into that deal to see the “fine print” or what video package you you receive, etc.

    My hats off to you for the 3 months free promotion. Sadly, this is the type of promotion typically needed to get many people to change providers.

    I expect prices to change over the next 20 years, the question is if there was something binding that would insure people that paid the SSA fee would continue to have lower rates than customers that had not? So even if rates went up for everyone, would the SSA customers remain lower?

    It seems strange that the service provider would give the discount when it’s UTOPIA saving the construction costs? But perhaps the service provider is getting a lower rate from UTOPIA on these customers and passing it on to the customer. If so, does the service provider have a written guarantee of lower transport fees from UTOPIA and will they give the same to the customer?

    I don’t know much about XMission rates, but I know their service is the stuff legends are made of. I’ve had a number of potential large customers that really wanted fiber, refuse to move to iProvo fiber because they would not leave XMission.

  25. Capt. Video says:

    Which fiber should be owned by the homeowner? If it’s just the fiber drop that has little value unless it’s connected to the network.

    The fiber drop itself is worth perhaps $100-$200 (cost of fiber and install). You can also own the fiber switch in your home, but it too has no value unless connected to UTOPIA’s network.

    Since the $6000 is paying for much more than the install, the SSA homes should own more than their drop and in home equipment. But no matter what you own, if UTOPIA goes “tit’s up” it could become worthless.

    We really need to see the deal to determine the actual level of risk…and we have not really seen or hear all the details yet.

    I suspect this program will actually be D.O.A. for almost everyone?

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