Surprising precisely nobody, it appears that CenturyLink VP and long-time UTOPIA opponent Eric Isom is a member of the Utah Taxpayers Association’s Executive Committee. Per their June 2014 newsletter, he’s currently serving as the Secretary. You may recall he also was roaming the halls during meetings on HB60. If it isn’t crystal clear now why the Utah Taxpayers Association is astroturfing for CenturyLink, I don’t know what it’s going to take.
Of course, CenturyLink has a lot to lose. With the announcement in West Valley City that Ooma will be giving away the hardware for free landline service, they could shed as many as 40,000 access lines and several thousand vanilla DSL customers who opt for the basic 3Mbps service. While that fits their moves to abandon residential wireline service entirely, it also cuts into the highly profitable business products they’ve been focused on for the last few years. CenturyLink could lose tens of millions of dollars per year if Macquarie completes the buildout of the network.
So what can you do to help?
I don’t think most people realize just how deeply CenturyLink is embedded in the Utah Taxpayers Association. Bring it up at every public meeting. Share this post on every piece of social media you can and do so often. Once more people realize the uNOpia effort is just CenturyLink protecting its turf, the tide will change.
As if the hyperbolic uNOpia site wasn’t light enough on facts, the Utah Taxpayers Association also commissioned a report that repeats many of the same mistakes. Apparently the hope is that by repeating the same lie over and over, it’ll end up being true. In this case, it appears that Doug MacDonald, who prepared the report, chose to merely parrot what his client asked him to. Let’s go through section-by-section and find the glaring errors and omissions, shall we?
Number 1 (pg 2)
- Doug is making the same error of insisting on using inflation figures rather than constant dollars. This is misleading and no reasonable economist would dare do this. Constant dollars are the bread-and-butter of all economic analysis. Someone with his experience should know better.
- The report shows 149K households, but Macquarie’s Milestone One report makes it clear that they intend to build out 163K households.
- Macquarie will be contractually obligated to build, operate, and maintain the network for 30 years, but the report raises the impossibility of them abrogating the contract and still collecting the utility fee. He also hints that a future city council could attempt to break the contract, yet that would open the city up to massive liability. Apparently contract law is not a strong suit.
Number 2 (pg 3)
- Doug claims that cities have considered not making existing bond debt payments, but there is zero evidence of this. No city in their right mind would default on any bond obligation.
- Macquarie is assessing the utility fee to the cities who are free to figure out the most equitable way to collect it. The report, however, claims that the fee is mandatory for every resident. This makes no mention of Provo’s utility fee which is scaled so that businesses pay more and residents pay less or the planned waivers for indigent households.
- The report makes the absurd statement that anyone who doesn’t have UTOPIA either loves their existing service or doesn’t want any kind of telecommunications service. This is despite the readily available evidence that consumers absolutely hate incumbent providers. There was apparently no effort made to do any kind of survey, scientific or otherwise, to back this claim.
- The waiver for the indigent has been falsely characterized as a general opt-out provision. That is completely false.
Number 3 (pg 4)
- Macquarie has committed to investing around $300M in building out UTOPIA, yet the report hand-wrings that it will be very difficult, if not impossible, to find the money. Macquarie is an investment bank with $140B in assets, so I’m pretty sure they’ve got the money around there somewhere.
- The take rate figures provided in the report are completely inaccurate and measure the entire city as opposed to areas actually passed with fiber and able to be hooked up. There’s also no comparison to iProvo which achieved a 35% take rate with no install fee, a ubiquitous build, and terrible service providers.
- The “break even” mentioned in the report is way off. A wash on the Macquarie deal is around 35%. Covering all of the existing bond service as well is in the 55% range.
Number 4 (pg 5)
- Every ISP has committed to participate in the included basic tier of service, yet the report spreads more fear, uncertainty, and doubt about their participation. It’s obvious that Doug didn’t talk to a single one of them about this. I know for a fact that XMission, SumoFiber, Veracity, and WebWave are on the record with being strongly in support.
- Of the ISPs on UTOPIA, most of them do not provide services over other methods of transport. Those that do are often looking to get away from doing so. XMission converts DSL customers to UTOPIA. Veracity has gone so far as to build their own fiber to CenturyLink cabinets to get off of their transport. The idea that they will sell their service over competing infrastructure is not based in reality.
- The utility fee covers connecting the network to each address. The $50 reimbursement to ISPs is to cover any installation costs beyond that. ISPs do not have to front any money to hook up basic service customers.
- Doug again asserts that cities may choose to default on their existing debt obligations, a scenario that no city in their right mind would ever attempt.
- Macquarie has experience with telecommunications systems in Asia and is partnering with some of the biggest names in fiber optics such as Alcatel Lucent and Fujitsu. This is not going to be a project run by rank amateurs.
- The report cites a failed toll road project in San Diego to try spreading fear that Macquarie would walk away from a project, but the details, as usual, are much more complex. The project went through a Chapter 11 filing in which Macquarie had to write off their interest in the road, yet the road continued to operate.
Number 5 (pg 7)
- Macquarie has never stated that people will not need premium services. Even if lines will not be fully utilized, there is a huge demand for service provider alternatives just to get away from the terrible service provided by incumbent operators.
- Again, the utility fees are assessed by Macquarie to the cities and it is up to the cities to determine who pays what. Provo has already implemented a model where businesses pay a lot more than residents. Concern trolling to scare residents isn’t serious research at all.
Number 6 (pg 8)
- Evaluating the cost to sell or shut down the network is a farce. In either event, the bond reportedly becomes callable meaning that the entire amount is due immediately. Treating that as a realistic option doesn’t even make any sense.
- No evaluation of the probable value of the network was done. Instead, Doug pulled two numbers out of a hat: the $1 “sale” price of iProvo and the $86M in assets reported by UTOPIA.
- The “sunk cost” argument depends heavily on the fabricated “needed investment” and fallacious take rate estimates from number 3. As such, it can’t be considered a serious argument at all since the underlying assumptions are bad.
Number 7 (pg 9)
- The debt amounts cited in the Econowest report do not appear anywhere in the Milestone One report, yet it claims that they do. In fact, the Milestone One report makes it very clear that the principal and interest currently totals around $500M. This amount is in line with $185M of bonds over 30 years at a nominal interest rate. How that gets inflated to $335M is beyond me.
- Doug again screws up by claiming that UTOPIA debt is 69% of the level of state debt, yet the state debt of $35.7B works out to almost ten times the amount he claims. This is something easily discoverable with Google in about 30 seconds.
Number 8 (pg 10)
- Just like the auditor’s report it cites, this one fails to draw any distinctions between current and former management.
- Doug completely fails to consider any argument on the economics of utilities and trots out a “private sector” argument with no supporting evidence. I’ll just leave this piece on why he’s wrong right here.
This report is sloppy and unprofessional, something that should be embarrassing for someone of Mr. MacDonald’s experience. There’s ample concern trolling and FUD on points that have been settled. Basic figures are completely incorrect and unsourced. Absolutely no effort was put into doing research to back up the conclusions. This amateurish work doesn’t read at all like it was completed by a professional.
If this is really the best that the UTA can come up with, I’m going to have a hard time believing that opponents of the deal are going to make much headway.
Wondering how the uNOpia site sprung up so quickly and with so much funding? Wonder no more. I have inside information that the payments for the entire operation come directly from CenturyLink itself. This isn’t too surprising since they rarely directly involve themselves in politics anymore, preferring to launder the money through hatchetmen like the Utah Taxpayers Association (who, of course, is heavily promoting the uNOpia site). Given how much CenturyLink stands to lose in the residential and commercial wireline market should this succeed, it’s no wonder they’re willing to spend thousands of dollars to try and upend it.
This isn’t anything too surprising after the confirmed involvement of the Utah Taxpayers Association in HB60 and the suspected involvement in SB190 earlier this year. Incumbents will stoop to any low in order to protect their turf and keep prices artificially high.
When it comes to simply making stuff up, nobody in Utah can top the Utah Taxpayers Association. The latest effort, “uNOpia”, is no exception, a mish-mash of arglebargle designed explicitly to rile up low-information voters into a frenzy (you know, like they did in Orem last year). The arguments are about as smart as a sack of hammers and so very, very easy to pick apart.
- Myth: The Macquarie deal is a $1.8B tax increase.
- Fact: The Macquarie deal has an estimated cost of no more than $1,173.6M. The only way it comes up as $1.8B is if you add in inflation. Even so, none of the UTA’s figures factor in the estimated $1-1.5B in revenues to offset the cost, revenues that, shockingly, will also rise with inflation. The real cost of the deal is around $6.22/mo per residence after paying the existing bonds, a far cry from the no more than $20/mo per residence the city will be charged and less than selling the network.
- Myth: You have to pay for the Macquarie deal even if you can’t afford it.
- Fact: The deal includes a built-in waiver for the indigent. It’s right there in the Milestone One document.
- Myth: UTOPIA will cut off your water if you don’t pay the utility fee.
- Fact: Centerville bundles all utility fees and pays them in a specific order in the event of an underpayment. Right now, water is the last to be paid. The city council can (and probably will) change that. No other UTOPIA city has this kind of structure, and UTOPIA itself has zero power or say-so in this arrangement.
- Myth: Elected officials have no say in UTOPIA if they accept the Macquarie deal.
- Fact: The UTOPIA and UIA boards will continue to operate as they have been and seats will be filled by the cities. Seats have historically gone to mayors, city council members, or executive staff (city manager, economic development, etc). None of this changes, and Macquarie will be bound to honor all contractual obligations of the deal.
- Myth: Utah law prohibits the utility fee.
- Fact: It was very clearly settled during the SB190 debate that the cities absolutely may institute this kind of utility fee. This is part of why the bill was killed before it came to a floor vote. In fact, The Utah Taxpayers Association gave a favorable recommendation to the exact same kind of utility fee in Provo to pay for iProvo.
- Myth: Large tech companies don’t locate in UTOPIA cities or use UTOPIA fiber.
- Fact: Mozy uses UTOPIA fiber and is part of EMC, one of the largest tech companies in the world. (Full disclosure: I work for RSA Security, an EMC subsidiary. They do not endorse my efforts here.) Overstock is dropping $100M on building a new Midvale campus. Symantec relocated its PGP acquisition from Draper to Lindon, a UTOPIA city. Tell me again how large tech companies don’t pick UTOPIA cities.
- Myth: UTOPIA causes tax increases.
- Fact: Non-UTOPIA cities raised taxes around the same time, and many UTOPIA cities did not raise taxes. There’s a much stronger correlation between tax increases and cities who bet a little too heavily on sales tax revenues from large retail establishments.
Really, their diatribe just goes on and on like that. A lot of it is basic fact-checking stuff that’s flat-out wrong, but they know those kinds of statements will rile people up and get them too angry to consider the real facts.
The best thing you can do right now is to make sure you show up at city council meetings, let your elected officials know you support the deal, and make sure you counter any of the flat-out false talking points the opposition will be trotting out time and time again. We’re really close to having this thing in the bag, and we can’t let up until the ink dries on the final agreement.
Surprising exactly nobody, the Utah Taxpayers Association has launched an effort to try and derail the Macquarie deal using misinformation, half-truths, and outright lies. Using the sophomoric name “uNOpia“, they falsely claim that the deal will cost more (when it is actually less than selling), that those who can’t afford the utility fee will be forced to pay it (when the deal includes waivers for the indigent), and that cities lose all control of how the deal works (when it’s all hammered out in a contract). The lies are blatant hysteria designed to whip people into an unhinged frenzy, exactly the same as they’ve done time and time again on anything UTOPIA.
The best thing you can do is make sure you show up at public meetings and counter the misinformation campaign paid for by incumbents CenturyLink and Comcast. It’s time for these hatchetmen to take a seat and let the adults in the room speak.