Utah Residents May be Charged $20 a Month to Bail Out UTOPIA

Published June 6, 2014

Residents of 11 Utah cities would be billed as much as $20 a month, as part of a plan to salvage the state’s once-heralded UTOPIA fiber optic network.

UTOPIA, short for the Utah Telecommunications Open Infrastructure Agency, was conceived in 2002 as a local government-managed alternative to commercial cable, telco and satellite broadband and has struggled ever since. It lost $19 million in fiscal year 2011. As of late 2012, the agency was $120 million in the red and had fewer than 10,000 customers

While there have been plenty of municipal broadband failures in the past, this may be the first time a government has actually considered reaching directly into consumer pockets to cover the cost of underperformance. Under the proposal, Macquarie Capital, an Australian investment group, would take over construction and operation of the financially troubled UTOPIA project in return for a share of the profits. The catch, however, is that households in the UTOPIA cities would be hit each month with a special “availability fee” of $18 to $20 to pay for the project’s completion, whether they opt to get service or not. This fee would be adjustable each year.

The terms themselves are measly. The “availability fee” would entitle consumers to only three megabytes per second of bandwidth (UTOPIA originally promised one gigabyte per second — 341 times as fast) and a monthly cap of 20 gigabytes, or enough for five or six high-definition Netflix movies. This compares to the 12 to 15 Mb/s available for $50 to $60 a month, with unlimited data, from most cable companies. AT&T’s U-Verse and Verizon’s FiOS offer faster connections.

In return for a 30-year public-private partnership, Macquarie would promise to complete UTOPIA’s build-out to 155,000 total residential and business addresses in 30 months. The network will continue to serve as a wholesale backbone for retail Internet service providers, and Macquarie would aggressively promote the network and extend it to any additional city that wants to accept its terms.

Five UTOPIA cities–Lindon, Murray, Layton, Tremonton and Centerville–have scheduled public meetings in the coming weeks to debate accepting the Macquarie proposal. Another three –Murray, Lindon and Orem–are polling residents to gauge sentiment on key elements of the plan, including its proposed $18 to $20 fee. Brigham City is studying the proposal and Midvale and West Valley City already have accepted it. Macquarie’s deadline is June 27.

Utah’s largest city, Salt Lake, in a prescient decision, opted out of UTOPIA participation.

It’s another unenviable position for cities that went the muni broadband route. The UTOPIA 11 are on the hook for the debt, and the best option means hitting up customers for service that’s inferior to what’s on the market now. At the same time, advocates of free-market solutions, and limiting government activity in the commercial sphere, warned that taxpayers were going to bear the brunt of any muni failures.

Even as this week’s news brings word of a new Google effort to launch satellites that will facilitate rural broadband, progressives still insist that government broadband is needed to respond to “market failure” in broadband provision. Really? It seems the only consistent failure in broadband have been municipal project after municipal project.