UTOPIA Restructuring the Bonds

UTOPIA appeared before the Tremonton city council a couple of weeks ago to discuss refinancing the current bonds held by the network. As you may recall, the bond market went sideways after these bonds were issued resulting is a significantly higher interest payment than was planned for. This move is meant to change up the bond structure to normalize the interest payments and reduce volatility. No, it’s not another request for money money, though I can already hear the Utah Taxpayers Association gearing up to spin it that way. The principle, term, and payments will remain entirely unchanged, but the cities still have to sign off on it. It may be possible, however, to secure an even better rate on the bond as rates are well south of 4% right now.

If you get any scare messages about UTOPIA wanting to get more money, be sure to set the record straight.

1Wire Goes Residential with SumoFiber

UTOPIA has added a new residential provider to the network via existing commercial provider 1Wire. SumoFiber will be offering 50M/50M, 100M/100M, and 1G/1G Internet and unlimited phone. Given the prices, I assume they are before the UIA costs are added in, but it’s still pretty competitive.

The good news about this addition is that it’s coming from a company with a performance record. UTOPIA has increased standards significantly for new and existing providers to try and prevent the kinds of problems we saw with Mstar and their resulting trail of wreckage. If anyone signs up for service, let us know how they do.

(Thanks to reader David for pointing out the addition.)

UTOPIA Sues RUS

I can’t say this is unexpected. UTOPIA has filed a lawsuit against RUS for failing to live up to their contractual obligations under the loan taken out several years ago. The delay in reimbursement caused a lot of strain on UTOPIA vendors, delayed network deployment, and left UTOPIA on the hook for millions of dollars in authorized but unreimbursed expenditures. I’m still waiting for a copy of the court filing so I can see their specific claims, but I would bet that they’ve got a pretty solid case and are asking for a pretty hefty amount in punitive and actual damages.

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.

Continue reading

Further UTOPIA Installation Details

I just spoke with someone who’s considering getting UTOPIA installed in Orem (yes, the salespeople are apparently out in force) and got some details about what to expect on install costs under the UIA model. The cost of installation is $3,000 which is available to both new and current subscribers. If you pay up-front, you get a $250 discount and it will drop the monthly cost somewhere in the $25 range. There are also options to finance the install over either a 10-year or 20-year period. The 10-year period requires $300 up-front and about $30 per month whereas the 20-year period is no up-front cost and around $25 per month.

The real trick with the install costs is to do a quick run-down of what you’ll be paying in the long term. Assuming a savings of $25 per month, the up-front payment for installation will pay itself back in just over nine years. Under all plans, the cost of installation will eventually go away, but Qwest and Comcast will still be charging you for that “free” installation. Odds are pretty good you’ll be subscribed to Internet service for the next two decades (and if you don’t think you will be, why are you reading this?) and there are multiple choices for service if for some reason one of the providers cheese you off, so I don’t think there should be a lot of concern about not using the infrastructure you paid for.

If you live in a UTOPIA member city and want service, make it easy on the sales guys and let them know ahead of time that you’re interested.

Comcast Can’t Shake the Anti-P2P Legacy

Yesterday morning, the Internet went into a total tizzy when Comcast users found themselves unable to access the infamous torrent site ThePirateBay. Almost immediately, the accusations of intentional blocking spread like wildfire despite Comcast’s insistence that they aren’t doing anything. This reveals a pretty telling truth: Comcast’s foray into filtering traffic has done permanent and incalculable damage to the brand, even years after admitting to the blocking and putting an end to it.

Is Comcast blocking anything? I doubt it. They took such a big PR black eye the first time that they’re unlikely to be dumb enough to try it again. That the stain persists years later, however, shows what a bad move it is to manipulate user traffic. Let that be a warning to all service providers of the lasting consequences of abusing users.

UTOPIA’s Five-Year Plan

I had the chance to visit with Gary Jones, UTOPIA’s new sales and marketing guy, Julie Paulson, the new PR flack, and Kirt Sudweeks, the CFO, to get some updates on how things are going to be playing out this building season. I got a pretty good rundown of where they’re going, and I think the plan is good enough to work.

The network currently has about 9,000 subscribers out of 56,000 marketable addresses. The plan calls for adding on 5,000 new subscribers each of the next five years. Under the UIA model, this would cover all operating expenses of the new subscribers and the operating expenses of the existing subscribers while potentially providing a small offset of the current pledges (though significant offsets aren’t scheduled until 2015). Existing subscribers will be given the chance to participate in the UIA model, either to buy their connection outright or finance it over 20 years, either of which will eliminate the built-in network construction costs from the old model. This would also provide a significant influx of cash to UTOPIA to help with construction. There’s also a lot going into identifying potential subscribers in areas with the network in the ground that aren’t currently signed up.

Those of you living in cities that chose to participate in the UIA will be able to sign up under the new model, but the ability of UTOPIA to build depends on group participation and proximity to existing network. If you’re next to one of the anchor institutions being wired with stimulus money, it’ll be easier to hook you up. That, in turn, makes adjacent neighborhoods easier to hook up, and so on. If you live in a small pocket without service available, talk to your neighbors and get that interest registered on UTOPIA’s website.

Now allow me to inject some reality in here. I think UTOPIA’s plan is doable. Adding 5,000 new subscribers a year, if split between new construction and existing areas, would run under 10% marketshare per year. UTOPIA can conceivably hit 35-40% of the markets they serve as iProvo did. If you’re like me and want UTOPIA to succeed and really REALLY want to get service, you’d better be prepared to work. I keep on saying it, but it bears repeating: you’re in the driver’s seat. Don’t sit back and wait for service to come to you, be the squeaky wheel that gets the grease.

If the expansion is citizen-driven and UTOPIA properly executes on the plan (which has been a sore point before), it’ll only be a few years before there’s money to pay the bonds. I have better confidence this time around because unlike Brigham City, the money is already approved and waiting for construction. (Seriously, getting the bonds passed and figuring out what to do in the areas with lower take rates cost at lest 3-4 months.) Now get out there and do your part to make this thing work.

The AT&T/T-Mobile Merger and Competitive Markets

Today, it was announced that AT&T plans to buy up T-Mobile for a cool $39B. This would combine both nationwide GSM providers into the single largest wireless company in the country and bump us down to three such companies. A lot of fiber naysayers like to point to wireless as an example of robust telecommunications competition in the country, but, ignoring the wide gulf of differences between wireless and wireline telecommunications, how can we have a competitive market with just three nationwide carriers?

I’d argue that we can’t. Sprint will continue to be a bit player in the space since they don’t have much in the way of wireline assets and Clear is a boat anchor around their neck. Smaller and largely regional cell providers like Cricket and US Cellular don’t get the hot devices people want and often get chained down in pre-paid pricing plans. The MVNOs live and die by the terms set by larger carriers. The big companies sit on a mountain of unused spectrum which prevents new entrants to the market from even taking hold.

In short, we’re witnessing the wireless space do the exact same things that make us hate the wireline space. This merger will mean higher prices, less consumer choice, and more regulatory capture than ever. Sadly, I expect the same thing to happen that always does when a bad deal is put before the regulators: the state PUCs and PSCs will hand-wring and sign off on what they know is a bad deal using conditions that they know either won’t be met or would have been anyway, and the FCC will just rubber-stamp the decision with minimal oversight or review. And the whole time, we’ll be told that it’s a good deal for consumers.

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.

UTOPIA on the Way to Centerville

Yeah, I know, you’ve heard it before. This time, though, UTOPIA has a sack full of federal dollars to financing building out the middle-mile infrastructure in Centerville. Does this mean service in your neighborhood? Not entirely. The construction will get as far as the substations in the city, but getting it into your house means getting enough of your interested neighbors to sign up for service via the new UIA plan.  Jog on over to UTOPIA’s interest form and get your name on the list to be notified if/when they’re ready to build out your neighborhood.

Read more from the Clipper.