Aussies jump in with Utopia FTTH bid

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Spends just as well as a greenback.

Utopia’s saviour appears to be an Australian investment company, Macquarie Capital Group, that specialises in large public sector projects, including fiber optic networks. According to a story in the Salt Lake City Tribune, Macquarie is starting out with a feasibility study…

The goal, according to a senior Macquarie executive, would be to develop a private-public partnership with any of the UTOPIA cities that wanted to participate, with Macquarie paying to build out the municipal Internet grid and then running it under a 30-year revenue-sharing contract. The cities, which are saddled with millions of dollars in debt to build UTOPIA to this point, still will have to pay that off on their own.

The firm’s study over three to four months will determine the engineering hurdles to build out, the costs, possible service levels and the feasibility of making it profitable, said Nick Hann, senior managing director with Macquarie.

The deal as described seems to jibe with the terms of Google’s takeover of the nearby Provo system: taxpayers have their liability capped – but not otherwise relieved – at current levels and Macquarie bears some or all of the financial burden going forward. The major difference is that Macquarie doesn’t appear to be taking full ownership of the system. So it’s not clear that taxpayers would be completely off the hook. That’s the sort of detail you wouldn’t expect to get until Macquarie combs through the books and the plant, though.

Big picture, Macquarie’s interest could mean a couple of things: either they’ve found new investment value in metro-scale FTTH or they’re following a tried and true path of paying pennies on the dollar (or in Google’s case, just a dollar) for distressed telecoms assets. That’s how SureWest’s fiber business got started in Sacramento, for example. We’ll find out if and when we see the terms of an actual deal.

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