Yes, I’ve been very quiet around here for the last few weeks despite some news happening regarding UTOPIA. The short version is that I spent two weeks in Boston getting hand surgery for my infant son plus a considerable amount of time getting prepped for that trip. (On a side note, Southwest rocks for still allowing two checked bags at no extra charge.) As passionate as I am about broadband policy, family pretty much trumps it all. So now I’m digging through about a month of e-mail, getting back in the habit of reading my feeds (I had to declare Google Reader bankruptcy, so I’m sure I’ve missed more than a few things), and getting back on my feet from being on the other side of the country. (If anyone wants to come mow my lawn, I won’t refuse.) This doesn’t mean I’ve been totally out-of-the-loop, just that I’m aware of the major happenings and not much else.
So UTOPIA picked up an award from the Broadband Properties Summit for getting things back on track. Good on them. This is positive recognition that management is getting the ship sailing in the right direction, even if there are treacherous seas still left to navigate. I’m not surprised that they had to ask the cities to float them some operating capital for a while, nor do I think any of them were caught unaware. The unexpected nature of the refinance two years ago I think had more effect on the cities’ anger than being asked for money. I’m also not surprised that, again, the UTA was spouting off the same nonsense they always do. It’s fatiguing to see them trotting out the same failed and rebutted arguments every single year, blind to any kind of reality of the situation.
I’d like to give a special shout out to Mayor Mike Winder of West Valley by showing some real leadership on UTOPIA. As part of the city council, he was consistent in voting against UTOPIA. Now he sees that the decision has been made, the financial commitments already made can’t be erased, and they need to make the best of the situation. No, UTOPIA is hardly in any kind of ideal situation. They can’t cover operating expenses right now, much less the bond payments. It kind of sucks for someone like me who’s such a big supporter. I think now is the time to ignore the commentary and just do the work. The people who hate UTOPIA will always hate UTOPIA and at this point, and nothing I say or do will change their minds. Heck, UTOPIA could deliver every pie-in-the-sky promise out there while making the cities run tax-free and someone (probably Howard Stephenson) would still find something to kvetch about. It’s not worth the effort to reason with or attempt to disprove people like that.
With the short runway for this month, I’m going to skip May’s podcast. If you’ve been sending me e-mail, I’ll get back to you soon. If you’ve noticed a lot of downtime with the site (and I have), I’m working on moving to another host because I just don’t have the time or will to manage a VPS setup anymore. I’m not going anywhere, nor am I giving up the fight. I just needed a break for a while.
UTOPIA is back, hat in hand, asking participating cities for more money. The cities need to end the free ride.
The UTOPIA broadband network provides Internet connections to people in 16 Utah cities that have some stake in the system — including Cedar Hills, Lindon, Orem, Payson and Vineyard. It provides excellent connections. But its finances have long been shaky.
The system has never been able to support itself. To provide UTOPIA with a better bond rate, 11 of the cities put up future tax receipts as security. A couple of years ago, 10 of the cities agreed to a refinancing deal. The pledges now total more than $500 million over 32 years. But even after all that, the fiber-optic network is preparing to ask cities to bond for another $62 million.
Our advice to the cities is an old slogan that’s never been more apropos: Just say no.
UTOPIA — the Utah Telecommunication Open Infrastructure Agency — says that with the added money it can sign up new customers and finally break even.
But it has never made good on its initial promises. And there’s little indication it ever will.
The system has dug itself into a deep financial hole. According to the Utah Taxpayers Association, as of last July 1, its net assets were a negative $125 million. That’s right, if it sold everything, it would still owe $125M.
Can it dig itself out? The watchdog group says that even if UTOPIA signed up all the marketable households in its area, and charged them what it charges customers now, its revenue would be less than half of what it needs to finish in the black.
Even if we were say, just for the sake of argument, that the association’s analysis could be too pessimistic, no one has stepped forward with clear reasons why the network will suddenly succeed now.
If anything, the challenges are growing. For one thing, even if the worst of the recession has passed, the nation could face several years of a sluggish economy. It’s not a good time to be wishing and hoping for a flood of new customers.
The competition has grown fiercer. Qwest and Comcast now offer better Internet service than they did in the past, for example.
Those who want a new bond seem to rest on the argument that the cities have already invested plenty, so they have to invest more to keep from losing their stake.
But the money is probably gone. Throwing good money after bad is no answer.
And whether many cities have money to give is another question. Lindon, for instance, is suffering a budget crunch. City staffers won’t get raises, and will pay more for health insurance. City Council members may eventually lose their health insurance. How can the city pledge more to a risky, and so far money-losing, fiber-optic network?
By the way, Lindon feels particular pressure because its network is the most complete of any of the cities in the group. There’s an argument floating around that it’s only fair that Lindon should back the new bond to give the other cities a chance to build their share of the system. What’s unfair, however, is how UTOPIA cities have staked hundreds of millions of dollars of tax money in a high-risk field outside of their realm of expertise and their main mission.
It’s time for a reality check.
Doing a copy/paste of Royce Van Tassell’s latest screed (yes, I read the Standard-Examiner) doesn’t really give you a lot of credibility. After all, at least a portion of his livelihood depends directly on both Qwest and Comcast. While the UTA will acknowledge both of those companies as dues-paying members, they consistently refuse to disclose how much money and input they provide. That’s perfectly within their rights as a private organization, but it sure doesn’t make them look good, especially since both companies have been uncharacteristically silent about UTOPIA for some time. In fact, it makes them look like corporate hired guns. Given this, why should we take them seriously?
The UTA thinks that now is the time to “cut bait”. However, UTOPIA is on an upward trend having cut their operating loss in half year over year. Why would you throw in the towel when the ship is on the right course? That makes no sense.
Most telecom projects, private and public, need 7-10 years to reach black ink. UTOPIA has been building unobstructed since just 2005. Why should they be held to a higher standard than everyone else? If they hit the 10-year mark and still can’t make money, then it’s up to the cities to decide if they need to sell off or accept the reality that the system cannot function unsubsidized. But again, it’s up to the cities, not some industry front group.
So Mr Pickle (or Van Tassell, as I suspect the case to be), your arguments hold no water with me. Calling a project a failure before it has had any reasonable chance to succeed is illogical at best.