Kaysville Exploring Muni Fiber; UTOPIA is a bidder

The muni fiber train in Utah continues to pick up steam as Kaysville wraps up a RFP to build a municipal fiber system. UTOPIA confirmed that they are a bidder on the project which calls for a public-private partnership in which the city maintains some level of ownership or control while another party handles construction and operation of the network. The city’s goal to deliver gigabit services to all homes for $80 or less per month by May 2021. The project scope also includes connecting all city buildings to the fiber network.

This is the latest example of cities finding that their options to improve broadband options and stay competitive in the marketplace can’t be left to existing incumbent providers. In addition to the 20 cities conducting feasibility studies with UTOPIA, multiple cities including Millcreek and Cedar City have heard proposals from EntryPoint Networks to construct municipal fiber systems.  This means upwards of 20% of the incorporated municipalities in Utah have built, are in the process of building, or are considering building fiber networks. That’s the kind of critical mass that can’t be undone and stands in stark contrast to how skittish many of them were even 5 years ago.

I’ve reached out to Kaysville City for more information on their proposal and will update the article as I hear back. Meanwhile, residents of Kaysville should contact their city council and mayor to make their voice heard, particularly if you have a preference as to who the city opts to partner with.

UPDATE 10/24/2018 9:19AM: I’ve been told that both Riverton and the small town of Hideout are also in the process of RFPs for fiber optic networks. Most notable is that Riverton has very clearly specified that they require an open access network and they are a non-pledging member of UTOPIA.

h/t Jonathan Karras for sending me a link to the RFP.

Expanding UTOPIA the Layton Way

UTOPIA has never been in a better position. Revenues have exceeded operating expenditures for a considerable amount of time, new footprints are being opened for service every month, and many member cities have been finally embracing the network as a vital part of their infrastructure. While Orem has been putting in a lot of time drawing up plans, Layton actually beat them to the punch and pulled the trigger on an expansion that will take no more than 24 months to cover the rest of the city.

In many ways, this is a lot like the UIA plan where bonds are issued to be paid back by pledging subscribers. There’s a couple differences, though. For starters, UIA can now issue bonds on its own authority. This means cities no longer have to use their bonding capacity to back them. The Layton plan also has the city backing the bonds using city franchise fees. If the subscriber numbers fall below what is required to pay the bond (which, to date, has not happened in a single UIA expansion area), the city pledges to cover the difference. On the flip side, if revenues exceed the bond payments (which has happened in most UIA expansion areas), the city gets to keep a cut of that for whatever they want. This could include paying off the original UTOPIA bonds, funding other city services, or anything else, really. It’s important to note that this revenue split option is only available to cities who assumed the original debt service.

A limiting factor is the available construction crews and materials. UTOPIA has said they’re currently connecting 1500 homes per month. The current housing boom has made finding additional people to build challenging. Add in that at least 20 (currently unnamed) cities are conducting feasibility studies with UTOPIA and you can see very quickly that rapid expansion may not exactly be in the cards. The take rate barrier for new cities is a scant 30%, low enough that it makes sense to pull the trigger and get your place in line. At least 40% of currently connected customers are opting for gigabit service, hinting that the revenue streams are there and won’t be meaningfully impacted by users opting for the slower 100M or 250M tiers.

Once again, the Daily Herald completely misses the mark on UTOPIA

It’s pretty incredible that even now newspapers can’t get stories about UTOPIA right. The Daily Herald penned a recent op-ed that managed to skip or mangle so many facts that it’s no small wonder they came to the erroneous conclusions that they did. I have to take some time to dissect the many, many ways in which they fall into decades-old failing arguments and end up doing little more than parroting the kind of tripe the Utah Taxpayers Association has shoveled since the very beginning.

First, they start off with a few paragraphs talking about 5G wireless. Remember when everyone told us that 4G LTE deployments would eradicate the need for wired Internet service at all? Or that WiFi would do the same thing? Yet here we are, two decades after 802.11 was introduced in consumer devices and nearly a decade into LTE deployments and that’s nowhere near the case. 5G will be no different. It lives on short-range frequencies that require deploying a ton of infrastructure to support. And, surprise, a big part of that is fiber to each one of the access points.

Then they declare that bonding to finish construction puts Orem in deep financial trouble. Except, well, it doesn’t. Ever since the SAA/UIA model rolled in, every bond issued is guaranteed by subscribers. It won’t even get issued until the take rates are high enough to break even. The latest news about the UIA is that it even generates revenues in excess of the bond costs, a net positive. So, seriously, where is the downside when the worst case scenario is break even?

Oddly, they then launch into concerns about Orem’s needed infrastructure spending. But what is fiber if not infrastructure? Given past results, a new UIA bond would cover some of the original bond debt and free up more money to spend on other things including roads. It’s concern trolling at its finest.

There’s one of two possibilities for the sloppy fact-omitting editorial that the Daily Herald’s board pumped out: they either are ignorant of the facts or chose to deliberately ignore them. In either case, they have acted very irresponsibly by pushing a view that doesn’t jive with reality. Hopefully they’ll be open to getting educated and publishing a “mea culpa” response.

Macquarie is probably dead, and that’s probably okay

macquarie_logo_2638While I wasn’t able to attend the latest UTOPIA board meeting (bit of a drive from Cedar City), I did get a summary of what was discussed during that meeting. One of the things that came up was the long-delayed Macquarie deal. For all intents and purposes, it’s most likely not going to happen. There appears to be slow action on a binding public vote and the utility fee was very unpopular (and wasn’t coming down). The board has voted to pay Macquarie what they are due and take those reports as valuable information to plan for the future with no further action. Right now, that’s probably okay.

Think back to when Macquarie first entered the picture. The network wasn’t expanding much if at all, mostly because the focus was on signing up commercial customers to plug the operating expenses gap as quickly as possible. Several cities had openly rancorous relationships with UTOPIA despite being stakeholders in it. Heck, Oremites ran an initiative petition to overturn… I’m not sure what exactly, but dagnabit they were certain that an angry public arglebargle session would save them about a hojillion dollars.

Fast forward a little over two years. UTOPIA is probably in the best shape it has ever been in. They have or will soon hit operational break even, where all operating expenses are now covered by revenues. Between remaining UIA money and the RUS settlement, they have operating capital they can use to expand the network. In fact, expansion is now underway in Perry, Layton, Midvale, and West Valley City. All of the expansion is being done to demand and the cost is landing squarely on subscribers.

Even the public attitude is different. I don’t see baseless fact-free editorials against it with any notable frequency. Even the Utah Taxpayers Association has gone uncharacteristically silent. Orem elected pro-UTOPIA candidates. Murray has been actively working on ways to maximize the network in their city. Payson reportedly even shows up to board meetings with regularity now. From many sources, I hear less “how do we get rid of it” and more “how do I get it in my house”. The importance of competitive, fairly priced, and high performance broadband has entered the mass consciousness in a way that I haven’t seen it before. Most importantly, highly visible failures by incumbents to deliver the kind of broadband nirvana they’ve been promising for decades has made the public highly cynical to their claims.

There is still work to do. UTOPIA has a lot of network to build to serve every address in member cities. There are a lot of areas badly neglected by incumbents that don’t have any kind of viable competition. Google is great for those that have it but creates a lot of have nots and replaces one duopolist with another. The companies who are doing interesting competitive things can’t really do it at scale. Despite these challenges, one thing is certain.

We won the war.

Yes, I’m declaring victory. It’s taken nearly 10 years of running this blog, but the hearts and minds part of the game is more-or-less over. It’s all mop-up operations from here, scattered battles that I think we’ll have little trouble seeing through to victory.

PS No, this blog isn’t going anywhere. I’m working on improving broadband options in Cedar City (since I live here now) and will still be an advocate for UTOPIA and municipal broadband systems. Those jobs are just going to be a lot easier when I’m not re-hashing the same old debate I’ve been used to for a decade.

UTOPIA announces Roger Timmerman as the new executive director

utopia-logoAfter two years of searching, UTOPIA has announced that Roger Timmerman will be returning from Vivint Wireless to be the new executive director. You may recall that Roger was involved both with UTOPIA and iProvo since the early days (2004, to be exact), so he’s bringing a pretty deep understanding of both fiber and municipal networks to the table. I was sad to see Roger go (and you all know how I feel about Vivint), so I’m glad to have him back.

With UTOPIA reaching operational break even and starting to build more network in more places, now is a good time to have someone back in the captain’s chair. I hear that in addition to expansions in Midvale, West Valley City, and Layton, the city of Perry is getting a full deployment. Orem also has new councilmember (and UTOPIA supporter) Sam Lentz as their member of the UIA board, so it’s possible that there may be some movement there as well.

Download (PDF, 55KB)

The Need for Speed: UTOPIA bumping 100Mbps tiers to 250Mbps

moarWord is coming in that UTOPIA customers on the 100Mbps tier are about to get a very nice present: a free bump to 250Mbps. SumoFiber has already updated their website to reflect the change and other providers are expected to follow suit soon. This counters the fastest tier that Comcast has been able to offer (before their fabled 2Gbps vaporware tier materializes) with 5x the upload and blows way past the horrifically antiquated ADSL2+ tiers that CenturyLink hasn’t updated in many, many years.

This highlights the power of using a fiber network. When you need more speed, you flip a switch and maybe upgrade some electronics. CenturyLink is still years from offering any significant fiber deployments (outside of heavily cherry-picked areas willing and able to pay big bucks) and Comcast is still having trouble getting DOCSIS 3.1 rolled out in any significant volume to deliver anything approaching what UTOPIA is doing now.

If you’re on UTOPIA, have you already gotten the speed bump? Sound off in the comments.

The Macquarie deal isn’t dead; it’s resting

Now a year late on delivering MS2, most people have assumed that the Macquarie deal is dead and buried. With no real news (other than the leak of the draft MS2 proposal from earlier this year), there’s been no evidence that the deal is alive at all. So is it dead? No, but it’s not exactly moving forward either.

As part of the deal, Macquarie wants a binding public vote on the MS2 proposal. This makes a lot of sense over a council vote. Some of the shenanigans in Orem with public referenda probably woke Macquarie up to how an irate minority can put their thumb on the political scales. A public vote can’t be overturned in a similar fashion.

Unfortunately, it’s also something that can’t be done. State law does not currently allow for a binding public vote on the city entering into a contract. The legislature has also not been in much of a hurry to change this. No action was taken in the previous legislative session, and there’s unlikely to be any action in the upcoming one. I can’t help but imagine that Comcast, CenturyLink, and their Utah Taxpayers Association lackeys have worked hard to shoot down the idea.

The short version is that if you want some finality on the deal, you need to bug your legislator to come up with some kind of fix allowing a public vote. Until that happens, this deal is effectively dead.

A UTOPIA Update: More network, more money

utopia-logoI had the opportunity last week to speak with Gary Jones and Kim McKinley from UTOPIA to get an update on where things stand. It seems like the main reason UTOPIA has been out of the news is that nobody wants to report on boring good news. Here’s a quick bullet list of the things you should know (with, you know, my standard commentary):

  • UTOPIA has been growing revenues at the rate of $10K/mo for over 3.5 years now. Most of that has come from the board mandate to aggressively pursue business customers. Almost every business service area in UTOPIA cities now has the network available, so most growth will now have to come from residential footprints, they all use Trendy business names to get more costumers.
  • Residential footprints are getting built out in Layton, Midvale, West Valley City, and Tremonton using a combination of RUS settlement funds and the remaining $24M from the existing $65M UIA bond. Priority is being based on footprints with strong demand. When two footprints have the same demand, the city with the lowest amount of completed network gets priority.
  • All new construction is covered by subscribers footing the bill just as it has been for the last several years. This shifts debt burdens away from taxpayers as a whole. Most footprints are seeing around a 25% take rate for services, exceptional considering that they have to bear the cost.
  • There’s nothing official yet, but operational expenses are very close to a break even point. UTOPIA will announce when that point is hit. Once that happens, there will be money to start paying bond interest. That may prompt cities to consider bonding for more construction money to be paid for entirely by subscribers.
  • Cities are finally past the “raking UTOPIA over the coals” stage and are starting to be more active in figuring out how to improve operations. Murray undertook an effort to reconnect homes that, while it didn’t accomplish its intended purpose, did improve revenues from that portion of the network. Payson has even started showing up at board meetings again with regularity. Even Orem, a city with some, er, “colorful” comments from candidates and elected officials seems to be turning a corner and is likely to elect at least one member who is ardently pro-UTOPIA.

This is the kind of boring, steady improvement that doesn’t make newspaper headlines. Heck, the Utah Taxpayers Association has been mum because they haven’t figured out a way to spin it into a new hit piece. (Also, because Royce Van Tassell is out and he seemed to have some kind of personal beef with UTOPIA.) These small careful steps are likely to be the future of the network, not some crazy moonshots.

Macquarie cities, it’s time to make a decision

macquarie_logo_2638Maybe it’s just me, but I’m starting to tire of waiting for the cities who opted into Milestone 2 of the proposal from Macquarie to finally act. After missing the original August deadline to complete the report, there’s been almost dead silence. Nobody seems to want to talk about it, UTOPIA itself is kept in the dark, and aside from a draft that leaked months ago, there’s been absolutely nothing for public review. After the tumultuous ride that we’ve all been through on UTOPIA already, does this seem like a good way to win over the public trust?

I get that this is a very complex deal. With only half of the cities on board representing only slightly more than half of the network, it creates a lot of complexities. It’s also no small matter to try and re-work the costs to stay as low as possible for those who stayed in. No doubt the deal is being engineered to also try and entice in some of the cities who decided to pass.

But we’re past the point where the complexity of the deal justifies, well, much of anything. The cities need to stop discussing the minutiae to death and start accepting that they, in fact, are not in the position of power when it comes to negotiations. UTOPIA is a half-built network that’s barely about to cover its operating expenses. Even supporters of the network hate the way it’s been run, say nothing of people who still continue to try and find a way to kill the network no matter the cost. Macquarie got pretty well blindsided by the complex politics involved and the cities have a kind of fearful fatigue in discussing the issue any further when any position will draw wrath and ire from some vocal minority.

None of this justifies the complete and total lack of public discussion. In fact, it makes it worse. People want to know what’s going on. If you don’t tell them, someone (probably the Utah Taxpayers Association and their big donors Comcast and CenturyLink) will toss whatever speculation they want out there to see what sticks. By waiting to talk about anything until every little tiny detail is sewn up, Macquarie and the cities are leaving an opening to be derailed early and left constantly playing defense. This has basically been UTOPIA’s entire PR playbook as far back as I can remember and now the name is so toxic that everyone agrees it’ll have to die no matter what happens with Macquarie. That’s not exactly a winning move.

Macquarie and cities, start talking to us. The more you wait, the worse this looks.

Macquarie Milestone 2: What you need to know

Macquarie’s Milestone 2 proposal has been finally released to the public. Here’s a quick run-down of the most important details.

  • The final cost per address is estimated at $22.60 per month. Macquarie estimates that re-working the deal to account for five cities bowing out trimmed the cost by $8.57 per month.
  • The revenue split is much more generous than I expected, allowing the cities to keep 75% of wholesale revenue after the first $2M per year. It’s expected to completely cover the debt service by 2021 with just a 24% take rate for premium services.
  • The basic level service has also been improved. Instead of 3M/3M service being included at no extra cost, it’s been bumped to 5M/5M. This matches Google Fiber speeds on the free tier. The data cap stays put at 20GB per month.
  • Macquarie will still be in charge of operating the network for opt-out cities.
  • A public vote will determine if the project moves forward in the opt-in cities.
  • Cities are free to determine what, if any, opt-out provisions will be available.
  • Users won’t be charged a utility fee until they connect to the network or six months after the network connection is available, whichever comes first.
  • UIA and SAA users will not pay any utility fee. If you’re already paying for (or have paid) your network connection, there’s no utility fee for you.
  • The UTOPIA NOC would be closed and all NOC operations moved to a Fujitsu facility in Texas. Keeping a primary or secondary NOC in Utah would raise the utility fee by between $1.50 and $1.79.
  • Almost all of the network revenues are being driven by Veracity, XMission, and SumoFiber. Other ISPs are very small by comparison.
  • The majority of currently connected users are in opt-out cities. This only reinforced that the votes there were “we got ours” selfishness.

Overall, this still looks like a great deal for the cities who are moving forward. It could still be a great deal for cities that haven’t figured out what to do about the network yet (looking at you, Orem).

If you want to read the full report, I’ve attached a PDF copy. 

Download (PDF, 1.68MB)