In Utah, Public Works Project in Digital – When it comes to the Internet, residents of Utah are taking matters into their own hands.

In a 21st-century twist on Roosevelt-era public works projects, Salt Lake City and 17 other Utah cities are planning to build the largest ultrahigh-speed digital network in the country.

By MATT RICHTEL

Construction on the project is scheduled to start next spring – if the cities can raise the money to pull it off. The network would be capable of delivering data over the Internet to homes and businesses at speeds 100 times faster than current commercial residential offerings. It would also offer digital television and telephone services through the Internet.

With a $470 million price tag, the project is considered one of the most ambitious efforts in the world to deploy fiber optic cables, which carry data in bursts of light over glass fibers. Though it has not received much attention outside the area, the project has raised questions here about the role of government, particularly from telecommunications companies, which are starting to complain about the prospect of competing against a publicly sponsored digital network.

The cities involved argue that reliable access to high-speed data is so important to their goals of improving education and advancing economic growth that the project should be seen as no more controversial than the traditional public role in building roads, bridges, sewers and schools – as well as electric power systems, which are often municipally owned in the Western United States.

Data infrastructure "is not a nicety,” said Paul T. Morris, executive director for the project, which he has named Utopia, a stylized acronym for the Utah Telecommunication Open Infrastructure Agency. "It’s an essential economic growth issue," he added. "The best network in the U.S. will be in Utah – not in New York, not in Chicago, not in Los Angeles."

Its advocates say that Utopia will give participating cities a leg up in attracting sophisticated companies and highly educated, technology-minded individuals. The network is expected to be available to 723,000 residents in 248,000 households and 34,500 businesses. Prices would vary considerably depending on the service, though basic high-speed Internet access is expected to cost about $28 a month.

But private sector competitors and taxpayer groups assert that the cities and their residents face a high level of financial risk for a network that may far exceed their needs. Telephone and cable companies nationwide are scrambling to build networks relying on less expensive, less advanced technology that they argue will be perfectly adequate for many years to come.

Jerry Fenn, the president of the Utah division of Qwest, the regional telephone company here that provides its own high-speed Internet access, said there were few uses yet for the network Utopia plans to deliver.

The speeds to be provided "are way more than what most consumers need in their home," Mr. Fenn said, adding, "Why provide a Rolls-Royce when a Chevrolet will do?"

The notion of building extensive fiber optic networks may raise painful memories for many investors. During the latter half of the 1990’s, several telecommunications companies lost billions of dollars when they laid fiber across the country – and under the ocean – in anticipation of huge demands that failed to materialize.

But the Utopia project, which has been in the works for 18 months, is different. It is an attempt to complete a direct fiber optic connection to the home – an ambition that collapsed in the telecommunications bust. And its advocates argue that the best way to advance digital technology is for a public entity to build a common fiber optic connection as a utility for all potential users rather than relying on the competition among private rivals that helped foster the over-investment debacle at the turn of the century.

The Utopia effort, while by far the largest to date, is not the first attempt by municipalities to build an Internet infrastructure. In the spirit of power utilities, a small but growing number of local governments are investing in high-speed networks that far exceed current commercial speeds. But the efforts so far have tended to be in rural areas.

As of October, only 180,300 homes had direct access to fiber optic lines; 64,700 were actually connected, according to Render, Vanderslice & Associates, a market research firm in Tulsa, Okla.

"This is a very powerful test case," said Sharon Gillett, a research associate at M.I.T.’s center for technology, policy and industrial development. "If Utopia succeeds, it will be the first really large-scale deployment of fiber to the home in the United States."

Most people still reach the Internet from their homes through dial-up connections over copper telephone lines, typically limited to delivering data at 56.6 kilobits per second. That speed works well for things like e-mail messages, but it can be frustrating when using graphics-rich Web pages or downloading music and other larger files.

To upgrade dial-up speeds, telephone companies modify their phone lines to offer a technology called digital subscriber line, or D.S.L., which creates a direct connection to the Internet at speeds that vary from 256 kilobits a second to one megabit or so, sometimes more.

Cable companies like Comcast and Cox have been even more aggressive, adapting their systems to deliver Internet services at speeds usually roughly twice as fast as D.S.L. Prices vary, but consumers can pay $30 to $60 a month for high-speed access, whether through cable or telephone lines.

Utah’s competitive landscape is similar to those in other states. Comcast’s broadband service is available to 80 percent of its residents, and should be available to 90 percent by the end of the year. The company is spending about $350 million to increase the capability to as much as three megabits per second.

For its part, Qwest, the regional telephone company, said D.S.L. service was available in about 60 percent of homes in the region. It is spending $100 million to upgrade its systems in 14 states.

But those delivery systems, as well as the higher-speed direct connections that are commonly used to hook up businesses to the Internet, pale before fiber optic lines. Depending on the kind of equipment used, fiber can deliver data at speeds of 100 megabits a second – even as much as 1,000 megabits under some circumstances – enabling the lines to be used simultaneously to send voice, video, Internet and other data traffic.

As of yet, there are few demands for such capabilities. But Mr. Morris, of Utopia, predicted that it would not be long before promising new applications emerged. For instance, televisions need 6 megabits a second to deliver DVD-quality images over the Internet, and 18 megabits to deliver HDTV. He is counting on residents in the Utopia service area to turn soon to video-on-demand, online video games, Internet and telephone service, all of which consume bandwidth.

The applications are not all here today, Mr. Morris said, but when they are, "you get to 95 megabits pretty quickly." He added: "We built a network that we don’t have to change."

The project originated in 2002 after a similar effort by Provo, 35 miles south of Salt Lake City, hit a stumbling block. Provo built a fiber optic network, but it ran into a buzz saw of complaints from private telecommunications companies, notably AT&T Broadband.

The Utah Legislature agreed with AT&T. Following the lead of several other states, it passed a bill making it difficult for government entities to create Internet utilities that sell service directly to consumers. But lawmakers here left the door open for communities to build wholesale networks, which would be required to lease space on the fiber optic lines to companies to provide retail digital services. Following this model, 18 cities created Utopia, vowing to go ahead if they could make the case that the fees paid by consumers and businesses would repay the cost of building the system.

The costs are substantial. Mr. Morris said Utopia would spend about $1,100 a home to run the fiber network by each house in the 18 cities involved, and an additional $1,400 for each home that decided to be connected.

An economic study by DynamicCity in Lindon, Utah, predicted that 40 percent of consumers and residents would sign up after two years. The project was likely to generate enough revenue by its seventh year to cover all expenses, the study estimated.

Mr. Morris said Utopia was arranging financing from a New York investment bank. He said that the cities would be asked to guarantee a portion of the loan Utopia acquires from the investment bank, but that the amount was still being negotiated.

Such a guarantee, while not providing a subsidy in the form of tax-exempt financing, substantially increases the creditworthiness of Utopia, dropping the interest rate to the 6 percent range from as high as 12 percent, Mr. Morris said. But it also puts those cities at risk should the project fail to meet expectations.

Mr. Morris said he expected to secure the financial commitment this month, paving the way for construction to begin next spring or summer.

Some local watchdog groups oppose the venture. Mike Jerman, vice president of the Utah Taxpayers Association, said the government should not be involved in such a fast-changing business. He said that without the taxpayer backstop, Wall Street would be reluctant to give its support. "They were looking at a 12 percent interest rate,” he said. "That’s worse than a corporate junk bond. It’s an indication of how much confidence investors have in the project."

Mr. Morris acknowledged the challenge but insisted that Utopia was a golden opportunity to put together a real business to fulfill a genuine public purpose. "This is a major public works project, but it’s not like in the era of F.D.R.," he said. "It’s not a subsidy. We have a business plan."

Copyright 2003 The New York Times Company