Salt Lake City is About to Make a Broadband Blunder

This article is cross-posted at Beehive Startups.

I've made a huge mistakeSalt Lake City just can’t seem to make up its mind on broadband. Given the chance to join UTOPIA in 2004, Mayor Rocky Anderson turned down the offer citing “risk [to] taxpayers’ money”. His successor, Mayor Ralph Becker, similarly waffled, giving a response that neither closed the door nor endorsed the idea. In that time, much of Salt Lake City has been unable to get CenturyLink’s ADSL2+ service (with speeds up to 40Mbps down), often getting a meager 3Mbps on vanilla DSL. As a result, Comcast doesn’t offer the same high-speed packages it does in areas with better speed choices, sometimes maxing out at 25Mbps. The reluctance to make a bold choice to improve the city’s infrastructure has cost residents dearly.

Now it appears that SLC is about to double down on those past mistakes. Google revealed that they’ve been in talks with Salt Lake City to extend Google Fiber from Provo into the city. While Salt Lake City officials are claiming that “no tax dollars” will be involved, it’s well-known that Kansas City provided a lot of concessions to Google worth millions of dollars. Provo effectively gave Google an indefinite lease on the network for $1 plus $18.7M in closing costs. We don’t know what Austin provided yet, but we can probably take a guess. Google loves it some public funding but without all of that pesky partnership business.

And what does SLC get from the deal? Sure, they get gigabit, but not with great terms. If you don’t sign up during the initial push, you’re forever cut off from the network. Kind of sucks for renters and new move-ins. Don’t like how Google does things? They’ll be the only gigabit option in town. If Comcast and CenturyLink hurt enough, they could effectively withdraw from the market and leave Salt Lake City with a real monopoly. Can’t afford $70 per month? Too bad; there’s no alternative pricing plans like UTOPIA’s 100Mbps for around $35. And if history is any indication, Google won’t sign a contract with the city for longer than 7 years. They reserve the right to get bored and just turn off the network when it runs out. Compare that with the 30-year deal that UTOPIA has been working on with investment bank Macquarie Group. The only reason Google Fiber sounds good is because you’ve been in an abusive relationship with Comcast and/or CenturyLink for far too long.

Given the stark differences between how UTOPIA and Google Fiber operate, how badly Provo was jobbed on its deal, and how much better a deal UTOPIA was able to negotiate, you have to wonder how there’s even a debate about the choice between dealing with Google or joining up with UTOPIA. It seems that Salt Lake City’s elected officials, mayor and city council alike, are too cowardly to do what’s best for the city instead of what’s best for their next election.

Brigham City on Macquarie: Yes, please

On Thursday night, the city council in Brigham City voted to move forward on a predevelopment agreement with Macquarie. This is a positive step towards bringing $300M in investment to UTOPIA, completing the buildout in all member cities, and contributing money towards the UTOPIA bond payments and Lending Tree. Unfortunately, the meeting wasn’t without theatrics and hysterics with plenty of incoherent rants and untruths during the public comment period. We even got a special Hitler reference from one of them.

You can watch the work session and city council meeting online (skip to 33:00 to begin public comment). The work session includes a very informative history of how private industry failed to build the infrastructure the city needed to keep businesses. Some quick facts from the work session and council meeting:

  • In Brigham City, a total of 1600 people signed up for the SAA and about 1300 are current subscribers to the service, about 26% of the city.
  • Brigham City is currently not contributing any payments towards UTOPIA’s operational shortfall of about $2.1M per year.
  • UTOPIA’s revenues raised much faster when they started primarily targeting business customers.
  • January’s income is much higher than expected.
  • Anything beyond the current plan to slowly grow the network to profitability would be a much more expensive option. But we already knew that, didn’t we?
  • Reissuing the bonds would be very expensive because of the way the current bonds are issued.
  • The network will remain the property of the member cities. Macquarie is primarily interested in a return on their investment, not ownership. To break even, they’d need to bring in $10M per year over the life of the contract.
  • Per Ken Sutton, owner of UTOPIA ISP Brigham,net, if the network doesn’t make a profit, Macquarie doesn’t get paid. Period.
  • The woman who canceled the RUS loan to UTOPIA is now an executive at Frontier, the incumbent operator in Tremonton. Isn’t that special?
  • Per their IT director, Box Elder School District depends on UTOPIA for 55% of students to get Internet access. They have no other fiber options available to them.

As expected, Ruth Jensen was combative for much of the work session, fitting her previous history of more-or-less unhinged opposition to UTOPIA. She even went so far as to propose suing UTOPIA, calling it “enslav[ing] the people”. The city attorney promptly smacked her down, saying that it would be the city effectively suing itself. (Skip to ~38:00 in the work session video to see it for yourself.)

So far, West Valley City, Layton, and Tremonton have also signed on. Centerville and Murray are considering it this week. Payson, as usual, is hoping that the whole thing will just go away and is ignoring anything UTOPIA-related. Word around the campfire is that all of the other cities want to move forward on a full study.

More than a coincidence? HB60 would kill access to UTOPIA as CenturyLink preps business gigabit

We’d like to think that incumbents are a well-oiled lobbying machine, but they often do things so ham-fisted and amateurish that you’re left wondering if Gomer Pyle is in charge. This week is proving no different. After getting a legislator who took their money to propose cutting off UTOPIA at the kneecaps, CenturyLink announced that they would be offering gigabit service to office parks along the Wasatch Front. You know, the same ones that HB60 really wants to keep UTOPIA from providing service to.

So let’s recap our timeline here:

  • CenturyLink sends campaign cash to a legislator.
  • Said legislator runs a bill to kick UTOPIA out of business parks that paid to have the service built to them.
  • CenturyLink comes in behind that and sells their own service, most likely at a much higher cost. This includes state agencies such as UDOT, UEN, and UTA.

Could it be any more obvious as to what’s going on around here? CenturyLink has convinced a legislator, Rep Curt Webb, to run a bill to kick their competition out so that they can take those customers. I’m furious about that arrangement. You should be too. It’s time to yell about this one from the rooftops.

Bill Alert: HB60 would ban UTOPIA construction outside member cities

In a completely ill-considered move, Rep Curt Webb is running a bill, HB60, which would restrict any municipal fiber network (but, curiously, not cable, DSL, wireless, or any other technology) from building anything outside the boundaries of member cities. This is aimed squarely at UTOPIA only, and it is meant to be a purely punitive measure.

So what prompted this? Probably the developers and companies who paid out of their own pockets to expand the network. Hamlett Homes extended it into South Salt Lake communities, and a number of businesses near the backbone but outside of member cities have done the same. These extensions help lessen the burden on taxpayers as a whole by shifting more of the costs onto subscribers, but it doesn’t cost any city a red cent.

As the bill is currently written, UTOPIA wouldn’t just be prevented from building to people willing to pay for it. They could also be required to shut down any existing services and be prohibited from maintaining their backbone that links cities together. It would effectively be a death sentence on any network that isn’t entirely within member cities AND can connect to an exchange point to reach ISPs and the rest of the Internet.

Naturally, I had to follow the money and it explains a lot. Rep. Webb has taken contributions from CenturyLink and the Utah Rural Telecom Association. What’s he got planned next? Duplicating the anti-Google Fiber bill from Kansas?

Hans V. Anderson Jr.’s Curious Definition of Failing

I suppose it could be possible for UTOPIA opponents and critics to make their case without lies or misrepresentation, but much like discovering how many licks it takes to get to the center of a Tootsie Pop, the world may never know. The latest example is an op-ed published in the Daily Herald from Orem City Council Member Hans V. Anderson Jr. In addition to many of the usual talking points, he makes multiple assertions that contradict what we already know about the deal with Macquarie.

For starters, he’s stating that Macquaries investment would be a loan. No published source has stated this at all. In fact, the published information is that the money would be a required network investment similar to what Google did in Provo. If it’s actually a loan, how is it that Anderson is the only one reporting such, especially when numerous city council members and mayors were at the same meetings?

Anderson then asserts that a proposed utility fee is actually intended to repay Macquarie for their investment. His own source, however, show that it is to retire the existing bond service. Instead of covering bond service from the general fund, it would be a clear line item spread across all Oremites, similar to how Provo assigned the debt service from iProvo to everyone in the city, subscriber or not. It seems very curious that he would contradict himself to make the utility fee into something it is not.

So what, exactly, is failing? UTOPIA has met or exceeded every financial goal under it’s current five-year plan. It’s now bringing in a partner to finish the network, relieve the cities of shouldering any operating expense shortfall, and likely provide some revenues to reduce or retire the proposed utility fee. I don’t see anything for someone who wants to lessen Orem’s financial load to be upset about at all. Why is Hans furious to the point of lying?

This is what happens when UTOPIA opponents want failure at any cost. Any success, no matter the size, must be turned into failure in order to prove their larger ideological point. Instead of retreating to the absolutely defensible and logical “I don’t like this approach” position, they have to cling to the “it just doesn’t work” one, evidence be damned. I hope the citizens of Orem will ask themselves which kind of elected official they want running their city.

UTOPIA Goes for Cheap Gigabit

Remember the rumblings about UTOPIA’s upcoming announcement last week? Well, it’s here, and its’ huge. Starting today, seven providers will be offering gigabit service for as low as $64.95/mo. If you’ve already paid off the connection fee, this makes it the same or less than Google Fiber in Provo on six of them. Here’s the full price list:

Of note is that UTOPIA has added another provider, WebWave. They’ve been using UTOPIA for backhaul to wireless towers in Davis County since May and are now going to be a full-fledged ISP on the network. With nine total providers to choose from, UTOPIA’s offering more competition for your business than ever.

If you’re content on the lower-priced tiers, SumoFiber and XMission have already switched all customers to 100Mbps. Are you planning to pony up a little more for 10x the speed? I know I would.

Brace Yourselves: Gigabit is Coming

Earlier today, UTOPIA posted a cryptic message on Facebook and Twitter that they’d be announcing something on Monday September 16. Obviously, such a vague message has sent the speculation engine into overdrive, but a little birdie told me it has something to do with gigabit.

The likely possibility is that gigabit plans are likely to get a whole lot cheaper. Right now, they’re in the $300/mo price range. Google Fiber is planning to do gigabit for $70 in Provo. It’s possible that we may see a large price cut to make gigabit a much more appealing product in UTOPIA areas. I’d be surprised if it dropped to the same price as Google Fiber, but a price at or under $100/mo would be quite appealing.

Of course, we’ll have to wait until Monday to know for sure and get the details.

XMission Gives UTOPIA Customers a Free Speed Bump

If you’re using XMission on UTOPIA, you probably noticed a nice little bonus last night: all 50Mbps customers got a bump up to the full 100Mbps for no extra charge. There’s a few people left to be switched, but it should be done within a couple of days, tops.

One thing to note is that if you aren’t seeing those speeds, you may need to upgrade your router. Most routers, even newer ones, don’t include a 1Gbps WAN port which often serves as a bottleneck. Older 802.11 a/b/g routers also create choke points on the wireless side. All said, that’s a pretty nice problem to have, isn’t it?

If UTOPIA is a boat anchor, why is Orem the only one sinking?

Over the last year or so, it seems that Orem has taken a real hammering over UTOPIA expenses. Witness the latest low-information rant masquerading as publishable material for further evidence of this. The common refrain is that UTOPIA causes nothing but financial despair for cities. If that’s the case, why aren’t we hearing more stories like this about other cities?

Maybe it’s because UTOPIA isn’t the giant sinkhole people like to think it is. As I’ve discussed before, the issue Orem (and Taylorsville, and, to a lesser degree, West Valley City) is facing is all about having made bets on sales tax revenue from retail driven by out-of-town shoppers. That worked for a few decades, and Oremites got to enjoy some great city services and frozen property tax rates for that time.

But then the perfect storm hit. Retailers ran out of space in fast-growing Utah County and moved up to American Fork and Lehi. The recession killed off a lot of companies not nimble enough to weather it. And, most importantly, online retailers like Amazon swooped in and ganked away business on everything from books to TVs to furnaces (yes, they sell those). Any city who depended too heavily on retail got creamed.

Smart cities developed office space to diversify their tax base. Murray scored the Intermountain Medical Center. Midvale turned a superfund site into a fiber-loaded business park. And Orem? They lost Adobe to Lehi while a giant mixed use development stayed half-finished for years. And why? Because retail is what mattered to them.

This has nothing to do with UTOPIA. It has everything to do with the city overextending itself in myriad ways during good times. The responsible thing to do would be to explain the problem to the voters and undertake the long-overdue rebalancing of revenue streams back onto other sources. Opportunists, of which there are many, instead bury the boring issue of an imbalanced tax base under a hot-button scapegoat to suit their own agenda. Don’t let them get away with it.

How likely is it that Google Fiber takes over UTOPIA?

Even before Provo announced that Google Fiber would be taking over iProvo, there’s been a lot of speculation that Google Fiber could potentially take over UTOPIA. UTOPIA made their pitch with 1100 other cities, and I produced my own video explaining why a partnership would be a good deal for both parties. Since then, Google has drastically altered the original terms of the arrangement, throwing both open access and municipal involvement under the bus (unless you consider providing tons on concessions “involvement”). Despite Google and UTOPIA being in talks shortly after the RFI closed, I don’t think we’re likely to see any kind of takeover or partnership between the two unless there’s concessions from one or both sides.

I think the largest sticking point is going to be open access. UTOPIA has repeatedly stated that their goal is to offer a world-class infrastructure that any private company can use to provide services. It’s not just enough to provide a third pipe; the network must allow you to pick between companies that differentiate themselves on what they can do with it. This kind of competitive environment has been proven to drive innovation and lower consumer prices across the board. While I have no doubt that Google’s network will do both, it runs the risk of being so superior to existing options as to become a new monopoly.

Google’s focus has been on residential customers. While this is a critical segment for service, there’s almost no mention of business needs. Yes, small businesses and startups can probably do just fine using the same tier as residences, but many need more than that. UTOPIA’s biggest customer uses 20Gbps of bandwidth. If all of their users on the network were on gigabit, they’d need even more to keep up with all of them. The lack of focus on the business end of the pipe degrades the value of the gigabit connections for residential customers. UTOPIA has a complete end-to-end vision; Google does not.

Another problem is the financial terms of any arrangement between the two. Google got a very sweet deal on iProvo, effectively a perpetual free lease with a $1 security deposit. The city is still going to have to pay off the debt on the asset themselves. In exchange, they’re hoping that improvements done to the network will improve it enough that it will be an economic net positive. I think the city could have negotiated a better deal and Google would still be doing well on it financially. I have no doubt that the UTOPIA cities, who are much more eager to pay off the bond, would hold fast for better terms.

If the numbers from iProvo translate to UTOPIA, Google would have to spend somewhere in the range of $40-50M to connect houses currently passed by the fiber and upgrade them to gigabit. This doesn’t include building fiber rings to areas not yet covered. That could easily add another $150-200M to the tab. Should they manage decent take rates (35% of customers paying for service split evenly between Internet-only and double play, and another 35% taking the freebie service), they’d earn $78.1M per year on expenses (including the bond) of about $36M per year. At the high end of finishing the network, it would take them almost six years to break even.

Given that Google seems to be aiming for seven-year commitments, that might be a price they’re unwilling to pay. The cities would have to make some kind of concession to sweeten the pot, and it would likely include tossing existing providers off the network and covering at least some portion of the bond debt. These actions would cause a decent amount of backlash both from residents as a whole and the power user subscribers who have been evangelizing the network for years. If Google’s goal truly is to increase broadband penetration, I’d like to think they would accept any offer that doesn’t make them lose a small fortune.