UTOPIA tests everyone pays, everyone gets muni broadband model

9 March 2015 by Steve Blum
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At a crossroads.

The latest report issued by Macquarie Capital as it pushes ahead with an effort to bail out the sinking multi-city UTOPIA municipal fiber-to-the-home project in Utah confronts an inevitable collision between public policy and profitability.

Good public policy requires muni FTTH service to be available to all, whether or not they want it now, or whether their neighbors want it. It’s a defining characteristic of any government-provided service. On the other hand, good business practice – indeed, the defining feature of capitalism – calls for money to be spent where the return on investment will be the highest.

Google Fiber is picking and choosing the neighborhoods where it’s building out on the basis of neighborhood demand. According to the Macquarie report, that’s just one example of how investment-driven decisions reinforce existing inequalities…

Based on…Google Fiber’s deployment in various cities, one can see that the coverage gaps in a demand driven models are severely skewed towards disadvantaged users…The demand driven or opt-out model both perpetuates the digital divide and as cities transition into gigabit infrastructure, disadvantaged users may potentially be permanently left behind.

According to the report, Google Fiber take rates in Kansas City vary by household income, ranging from 15% in areas where household income is $20,000 a year or less, to 53% among middle income (average $57,000) homes, all the way to 83% in a neighborhood where average income is $112,000.

That difference is the center piece of Macquarie’s pitch that homeowners and businesses in the six Utah cities that want to complete the Utopia buildout should be taxed pay a mandatory monthly fee. It’s currently pegged at $22.60, but could range up to $25 – whether they want fiber service or not.

It appears Macquarie is putting all its cards on the table. If voters in those six cities get the final say – it’s assumed they will but it’s not completely certain – then it’ll be a fair test of taxpayer interest in re-defining broadband systems as core, publicly provided infrastructure, like roads or sewers.