UTOPIA plans secret project

UTOPIA’s next move is a secret.

The Utah Telecommunications Open Infrastructure Agency, a consortium of 11 municipalities that have pledged tax revenue to back construction of a $340 million fiber-optic network, plans to build a $25 million pilot project in one of its member cities, but it won’t say where.

By Steven Oberbeck
The Salt Lake Tribune

http://www.sltrib.com/2004/May/05212004/business/business.asp

UTOPIA President Paul Morris said the pilot program will test technology the project will use. It will enable planners to evaluate construction costs and measure "take" rates, or the number of subscribers who sign up for the services.

"We have to start somewhere," Morris said. "After we have the the first phase completed we can evaluate if it [the network] should be expanded to full capacity."

Two years ago, 18 Utah cities organized UTOPIA to explore construction of a large-scale fiber-optic network. Supporters initially promised it could be built without cities’ financial backing. Last year, however, proponents revealed in order to get favorable interest rates on the bonds necessary to build the network, participating cities had to guarantee a sizeable portion — later set at 39 percent — of the network’s debt. Eventually, 11 cities pledged their financial support.

Under UTOPIA’s pilot, the 11 member cities will need to guarantee only 20 percent of their original pledge amounts. "The genius of what we are doing is that we will be able to move forward with the development without the cities initially committing 100 percent of their pledges to the network," Morris said.

UTOPIA’s critics, however, see only peril in a plan that will require taxpayers in 11 cities to commit $2 million per year for 17 years to build a pilot project in a single city.

"The big question we have is: Why should any municipality be backing bonds to build infrastructure outside their own city limits?" said Mike Jerman, Utah Taxpayers Association vice president.

If Morris two years ago had suggested to council members in any of its 11 communities that they commit tax revenue for a pilot fiber-optic network in another municipality — with the stipulation that if the pilot project is successful it will then be built in all the pledging communities — he would have been laughed out of the meeting, Jerman said.

UTOPIA’s pilot will not be self-sustaining financially, Jerman added. "That will mean if UTOPIA is unable to proceed to the development of the next phase, the city pledges will be automatically exercised and taxpayers will end up paying."

Claire Geddes of Utah Legislative Watch called the plan "absolutely ludicrous. So they [the 11 cities] are going to go out and pledge taxpayer money on a pilot project that might not be successful? They must all just have tons of money laying around that they don’t know what to do with."

UTOPIA proponent Arthur L. Brady at Utahns for Telecom Choices said the plan to start small makes more sense than the original proposal to raise all the money for the network and have those funds sitting around for several years until they are spent. "It adds a whole new sense of control over the future of the project and will help ensure it [the network] is on the right track going forward."

He believes council members in all of the communities involved will support the pilot. "There remains this strong collegiality among UTOPIA supporters on the city councils, that we are in this together and that good things are going happen," Brady said.

Morris said UTOPIA wants to keep the location of the city where the pilot project will be built secret for as long as possible to help ensure competitors such as Comcast and Qwest are not able to react too quickly to skew the "take rate" numbers the pilot project hopes to measure.

"It [a competitive reaction] is a concern, but we have a plan on how we can deal with it," Morris said, indicating that plan, too, is secret. "We can always hope they act like gentlemen and don’t engage in any predatory pricing."

Comcast’s director of government affairs, Steven L. Proper, nevertheless promised that that communications company will compete aggressively with UTOPIA. "We will have some competitive reaction but whether we play all of our cards up front or wait is something I can’t answer right now."

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