Broadband UTOPIA starts at $23 a month for cities that remain in the game

5 March 2015 by Steve Blum
, , , ,

Click for the full report.

Only six of eleven Utah cities involved in the UTOPIA fiber-to-the-home system chose to move ahead with a bail out plan proposed by Macquarie Capital, an Australian investment company. As a result, the proposed monthly tax bill (characterised as a “mandatory utility fee”) for homeowners in the reduced project area has jumped from $18 to $20 per month to the current estimate of $22.60 and a cap of $25. That’s just to pay for building out the network to every home and business in those cities.

The cities that decided to opt out of the negotiations tended to be ones where construction is already well along. All together, the active subscribers on the network aren’t generating enough revenue to pay off the bonds that financed the initial build. Consequently, sales tax revenue from those communities is being used to make up the shortfall.

As a result, the UTOPIA network is something of a patchwork and, according to the latest report issued by Macquarie, isn’t a viable business…

Fragmented network severely restricts ISPs’ ability to market successfully to users. Business model is uneconomical due to high cost of acquiring customers and maintaining superior service without scale.

If Macquarie’s bail out plan moves ahead, every household passed by the system would pay the monthly charge and get basic service of 5 Mbps down and up, with a monthly cap of 20 Gbps. Faster and more generous Internet access, and voice and video service, could be purchased from commercial ISPs that would buy bulk capacity at standard wholesale rates from UTOPIA and resell it as they choose.

One big question is what to do about the cities that opted out of the deal. Network build outs would end, but the $4 million generated annually by existing customers in those cities is a powerful incentive to keep them in the system.

The hope is to have all the questions answered and the deal finalised by the end of July. Voters might or might not get to have a say at that point: the final step outlined in the report is termed a “potential vote by public to affirm project and commercial close”.