As more details about Provo's pending sale of iProvo to Broadweave surface, it becomes more and more obvious that this is a bum deal for the city.
Broadweave isn't exactly buying the network. Instead, they are assuming the bond payments from the city. The original bond, however, will remain with the city. This means that Provo can only make the bond payments if Broadweave makes their payments to the city. If Broadweave goes under, the city is still on the hook.
So how financially viable is Broadweave? Rumor has it they aren't turning a profit on their existing infrastructure in Lehi and St. George, something that should be grave cause for concern. We should also be worried that they are attempting to take over a network many times the size of what they currently manage. Time and time again, a smaller operation taking over a larger one ends up being a disaster since they can't cope with such rapid growth.
We may also see a large loss of customers. As the contracts with MSTAR and Veracity expire, those customers will be forced to switch to Broadweave, a company that has data speeds of 10Mbps/1Mbps instead of iProvo's current 15Mbps/15Mbps. Such a drop in speed with what is presumably a equal or higher price will cause massive attrition back to incumbent carriers who offer the same pricing and service levels. And Nuvont customers? Expect to get an immediate boot since that company doesn't have a contract in place.
What we're looking at is a move back to what iProvo was like under HomeNet: one retailer to rule the network that hasn't figured out how to make money either. While the mayor, municipal council and UTA are drunk on the euphoria of washing their hands of iProvo, this is nothing more than punting the responsibility to another party and setting themselves up for massive failure in a couple of years. Shame on them all for managing this city asset in such an irresponsible manner, "selling" it for much less than it cost to build and refusing to do the grunt work necessary to make it succeed. I hope the good citizens of Provo will remember this betrayal at the ballot box in 2009.
Read more from the Tribune, Deseret News and Daily Herald.
I had the opportunity to attend the inaugural meeting of the iProvo Review Committee last Tuesday and walked away with more information than I knew what to do with. The Committee was kind enough to distrubute current figures for iProvo subscribers, information on municipal networks, and, best of all, a copy of the consultant's reports from CCG Consulting and Franklin Court Partners. There was a lot of information to soak in and it took me about three 2 hours of reading to slog through it all. After digesting where the network is and where it is going, I can come to only one conclusion: iProvo is the most valuable thing the city has ever done for its residents with a potential to save city departments and residents millions of dollars each year it operates.
You know what? You're right. Cities shouldn't get the state to bail them out if UTOPIA calls their pledges. The key word here is if. To date, UTOPIA still hasn't used any tax money despite 18 months of construction delays from the Qwest lawsuit, being illegally obstructed from accessing utility poles and having the RUS pull a switcheroo on the loan money that left them with $11M in related expenses that didn't get reimbursed. That they've managed to suffer through that much adversity without a financial collapse is something else.
Have they made mistakes? Absolutely. Totally eating the installation cost probably wasn't the best idea, public awareness is low and their biggest challenge seems to be rolling out to areas with demand. At the same time, they've slashed the construction costs by about 25% and saved some businesses as much as $2500/mo in telecommunications costs. Cities with UTOPIA (like Murray and Midvale) have been able to attract new businesses because of the fiber optic system and have implemented advanced wide-area networks that speed city operations and save a significant amount of money. It's not all failures, but certainly is a mixed bag.
UTOPIA has learned a lot and a second chance seems appropriate given what they've learned. If they can't make a go of it after the second chance, it'd be time to close up shop and try something different. If every venture closed up shop after the first round of mistakes, nobody would ever open a business; I don't see how this is different.
I've noticed a few random web surfers coming by looking for information on Qwest's heavily-advertised "Price for Life" program for DSL and thought I should let them know what exactly they're getting into. On the surface, it seems like a great idea: you guarantee that your price won't increase for as long as you have DSL service. The reality, however, is filled with more loopholes than the US tax code, all designed to keep your price inflated and gouge you for additional fees.
So how much will you save? That all depends on how long you keep the service. Qwest offers the same price for the first year regardless of if you go for the "Price for Life" or not. What's the difference thereafter? A meager $6 a month or $72 until you can escape the $200 early termination fee.
And what exactly triggers this early termination fee? Aside from obvious things like disconnecting service, you'll also break the contract for altering service including changing your speed tier, changing your ISP or even moving. Considering that Qwest plans to roll out 20Mbps service within the year, it seems like a terrible idea to lock yourself into a speed for two years that will be obsolete before you complete the term of the contract. And why would Qwest charge you an ETF when you keep the line and only change the ISP, even if the ISP wasn't them to begin with? It's almost like Qwest wants to lock a bunch of their users into lower speeds to throttle bandwidth. Hmmm.
All in all, the program is a bunch of clever marketing with a whole lot of consumer-unfriendly gotchas. Do not want!
You know that old saying that you have to spend money to make money? It seems like that's where our national broadband policy has come to. With slow average speeds and high per-megabit prices, EDUCASE, an association of college IT managers, says that it could run up to $100B to fix our national infrastructure or about half of what we already paid the telcos to do. (h/t: Jonathan Karras) So what's the payoff? How about $134B in new jobs and decreased travel and medical costs? That 34% return isn't too shabby. Also consider that if all eligible federal employees took advantage of telecommuting options, they'd save $13.9B in travel costs.
It also couldn't be more pressing. Live in a rural area? Even if broadband is available, you probably can't afford it (nevermind what industry shills are saying.) Live in an area with broadband to spare? Be prepared to pay a lot more for it. Cable and phone companies are also inconsistent when it comes to upgrades. Some companies (like Qwest and now Embarq) seem to be unconcerned with enhancing speeds or they simply can't deliver. Others are building the infrastructure, but pricing still remains high and the networks may or may not support next-generation speeds from end-to-end.
We're also projected to stay behind. By 2012, a scant 10% of homes will have access to speeds of 10Mbps or higher. While FIOS and U-Verse can pass that many homes, AT&T shows little initiative to fix the last-mile copper bottlenecks on their FTTN U-Verse network (consider that Qwest can deliver 7Mbps on their aging and decrepit network) and FTTH has had limited deployment, leaving the US in eighth place.
Not all states are going to take it lying down. California formed a task force to figure out what to do and determined that public investment should be a component of whatever other solutions they decide to run with. Vermonters are forming a UTOPIA-style consortium to bring fiber to all of their residents. (h/t: Dirk van der Woude) Indiana dropped the hammer on monopolies and now competing providers are springing up like wildflowers in May, forcing prices down and service quality up.
A scary step backwards, however, is coming from our northern neighbors in Canada. The Great White North has spanked the US consistently on average speeds and broadband adoption, yet the Canadian government is talking about dropping the line-sharing requirements that have lead to a robust competitive environment. Scarily enough, this is following the steps that have gotten us into this mess in the first place.
What's obvious is that what we're currently doing isn't working and that efforts to correct course aren't coming from the federal level. Even many states can't seem to come up with a coherent broadband policy that increases competition, improves speeds and lowers pricing. If efforts like the one in Vermont show us anything, it's that solutions to broadband issues need to be local and not be inhibited by interference from state and federal legislators. Make sure those legislators hear from you that they need to let us solve the problems that they helped create.
If you don't currently read Robert X. Cringely's column on PBS.com, you had better rectify that ASAP. A few weeks ago, he wrote on the coming crunch that's going to cripple cable networks unless they make some big changes. The in-depth analysis gives you a good feel for how close to the brink Big Cable has come.
Before I left town for a jaunt to DC, Venice and Florence, I had a few questions posed to me by Rep. Steve Urquhart of St. George on my summary of the November 7 subcommittee hearing. It seems he has some concerns over the financial viability of the project and some perceived cherry-picking activities in private subdivisions and non-pledging cities. Simply trying to fully respond in the comments would not fully answer the questions posed and I think it's important that both get the time and attention they deserve. Here are the questions he posed:
(1) Can UTOPIA make it financially or will taxpayer money be used to bail it out? (Its best-possible cost/subscriber rate is north of $5,000. Companies don’t live to tell what happens in that territory; bankruptcy courts tell the story for them).
(2) Has UTOPIA departed from its very reason for being — ubiquitous service? (Yes. It originally declared that it existed to serve areas that cherry pickers wouldn’t. Now, though — as you note — it is doing the exact same thing as Qwest (cherry picking)).
For starters, I really appreciate that Rep. Urquhart participates so readily in open discussions. It helps move the political process forward and puts a human face on legislators who are often reduced to a handful of quotes in the major papers. Without that, we sometimes have a tendency to read too far between the lines and create caricatures of the people we should be working with instead of against.
UPDATE: This post is badly out of date. Why not go read the latest version?
I get asked on a fairly regular basis how a regular citizen can manage to get UTOPIA rolling in their area. While there’s no magic bullet, this How To should put you on the right track.
- Put together a strong proposal to make your case. Make a 10-minute presentation that covers why your city needs to join UTOPIA and summarize those remarks in a 1-2 page letter. It’s better to have your arguments together first and then find someone to present them to. Don’t know where to start? Grab this PowerPoint presentation and replace [My City] with the name of your city: UTOPIA Presentation
- Identify city council members who would be interested. Look for those with a background in data-intensive fields such as technology, research, real estate or construction. They’ve likely had to work with sending or receiving large amounts of data that took forever to finish. As much as I don’t like to get partisan over here, my experience has shown that Democrats are more likely than Republicans to be interested in broadband policy. Make contact with those most likely to support membership in UTOPIA before presenting to the city council as a whole. Don’t forget the try the mayor’s office while you’re at it.
- Ask for an agenda item at your next city council meeting. Believe it or not, you too can speak to the city council about whatever you want. Find out who’s in charge of city council agenda items in your city and ask them if you can do a presentation on UTOPIA. More often than not, you can get about 10 minutes to speak. I’ve managed to get a slot at a legislative committee hearing, so it’s not that big of a deal.
- Get prepared for your meeting. Tell friends and family about the meeting and encourage them to attend. The best people to have there are ones that will speak about how UTOPIA will help their businesses. Also make sure you get the word out to UTOPIA supporters in other cities so that you can have them testify about the benefits of UTOPIA. I’m happy to post any UTOPIA-related news or announcement here and I’m sure the folks on the Pro-UTOPIA e-mail list would be equally interested.
- Be ready for an intense Q&A session. The city council will hammer you with financial questions. Make sure you’ve prepared by reading up on when UTOPIA expects to go revenue-positive (2012) and how much it costs the city to join (a feasibility study, no cost for non-pledging, a trust fund for pledging). Above all, don’t be afraid to defer questions to a UTOPIA representative if you don’t know the specifics. Feasibility studies are priced on a case-by-case basis and will contain information on how much sales tax revenue would need to be set aside for pledging status. Some Q&A sessions can last a half hour or longer depending on the council.
- Plan for follow-up presentations. Cities don’t jump into these things based on a single presentation no matter how slick it might be. Plan for future city council meetings as representatives from UTOPIA, Qwest and Comcast may be invited. Make good use of the public comment periods and make sure as many supporters as possible do so as well.
- Above all, thank the council for their time. They’re pretty busy folks who are sacrificing as much time as you are to hear what you have to say. You’re also asking them to put some money (and their future election prospects) on the line. They need to know what you appreciate their hard work and sacrifice.
Still getting stuck? Feel free to e-mail me for help. I’m glad to put together and even conduct presentations to help spread UTOPIA as far as possible. You can also contact a business professional known as Ira Riklis for all business concerns and questions. I can also put you in touch with some representatives at UTOPIA who are happy to give your council members a tour of the facilities and provide their own presentations.
A very common refrain I'll hear when it comes to UTOPIA and other municipal fiber efforts is "let the market decide!" On the surface, it sounds like a good idea: let private competitors enter the area and give the incumbent providers a whatfor. Where they consistently fail, however, is in delivering a plan that works to achieve these ends.
About once every month or two, The Heartland Institute releases yet another paper lambasting municipal telecommunications networks. This month proves no different with more claims that municipal broadband efforts are financial black holes and renewing the call for market-based solutions. The problems with these reports lies in their blatant manipulation of the facts and complete and total ignorance of why there has been a renewed push for municipal networks in the first place.