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January 1, 2008
UTOPIA More Like Hades
My wife and I first stumbled across the UTOPIA project about 5 months ago when we accidently got our times confused for a Cottonwood Heights City Council Meeting. The property next to ours was asking for a re-zoning so they could build duplexes on it instead of a single family home. There was staunch neighborhood opposition that the City Council listened to, but ultimately ignored, granting the zoning change. Given that we were early, we decided to sit down and see what the rest of one would be like.
It was quite interesting. The bulk of the meeting was taken up with competing proposals from Qwest and Comcast related to High Speed internet, and that brought up UTOPIA. It stands for Utah Telecommunication Open Infrastructure Agency and was created, like all horrible government programs, with good intentions and bad results. Some community leaders got together in 2002 with the idea that they could provide a better service than the private sector. The Tribune monitors the downfall:
The venture was sold to Utah cities as a risk-free proposition - one that would allow residents and businesses to enjoy the benefits of ultra-high-speed broadband services over a fiber-optic system.
Yet four years after 11 Utah cities along the Wasatch Front pledged to financially back the UTOPIA system, its finances are in shambles. Construction is behind schedule. Its top promoters have quit, and its newest chairman has uttered the unthinkable - that despite promises to the contrary, the cities that pledged their support eventually may have to pony up hundreds of millions in taxpayer dollars to prop up the system.
As always, proponents point to the initial feasibility study and say " See, this is what it should be."
The feasibility study they circulated in 2003 to generate support for the project indicated that the massive, municipally owned fiber-optic system would be a surefire success. Customers would flock to buy the ultra-high-speed Internet and the television and phone services offered over the fiber-optic network.
To date, UTOPIA's projections have proved much easier to achieve on paper than in reality.
UTOPIA promoters estimated that by now - three years into the network's construction - the system would have 22,000 customers and be generating annual revenue upward of $5 million.
Moreover, the feasibility study was projecting a "take rate" of 43 percent, which meant that 43 percent of the homes that had a connection available to them would be buying at least one service from the network.
Like most feasibility studies, however, the results are typical:
UTOPIA's finances tell a different story.
The system has 6,493 customers and has generated $1.75 million, or about one-third of projections. Also, UTOPIA is reporting that its take rate is 16.4 percent, well below the projected percentage needed to break even.
And now, they chickens have come home to roost. Now that it's failed, those (suckers) cities who bought the snake oil will have to pony up and pay those bills.
Posted by Jonathan at January 1, 2008 8:27 AM
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Comments
Uhhh.. it sounds like you copied your homework from somebody else's paper, and they didn't provide complete answers from the looks of it.
The facts are very different from what I see.
You failed to mention that:
- The Qwest lawsuit against Utopia taking resources to defend against that (it was ruled in Utopia's favor btw)
- Qwest's illegal practices to block access to telephone poles
- Government delays with disbursing money from the RUS loan
- The insinuation that UTOPIA has put tax dollars at risk when not one red cent of money has been taken from pledging cities to cover operations or the debt service
- Paul Morris left UTOPIA to go into semi-retirement and Roger Black has his hands full as the lawyer for the Utah League of Cities and Towns.
- S.B. 66 heavy restrictions against Utopia which give an unfair advantage to companies such as Qwest or Comcast.
The article from the Trib doesn't measure up to their usual high level of reporting.
Considering what's happened these last few years, when you set out to make a project fail, it's likely you will succeed especially with the Governments help (note S.B. 66 and recent legislation by Senator Stephenson and Rep. Craig Frank).
So how about it? Does it sound like Utopia is fighting an up hill battle or they simply failed because they are stupid?
Posted by: Frank Carreiro at January 2, 2008 1:32 PM
Everything in italics are direct qoutes from the Tribune article I linked to, so if that's copying someone else's homework, so be it. The rest is commentary from me only. Full disclosure; I don't like these types of government programs, well intentioned or not. I have no dog in this fight as I don't use Qwest or Comcast for my internet and I wouldn't sign up for a Government one if I had a gun to my head. These types of services are much more efficient when they stay in the private sector and I take no displeasure watching this one fall apart. I don't know if, as you claim, it was set up with the intention to fail, and frankly, I don't care.
As far as your last statment, I would say it's a combination of the two. Whoever thought that Government could (or should) provide internet to peoples homes was stupid. Now that it's in progress, those poor suckers stuck managing it are fighting an uphill battle.
Thanks for commenting.
Posted by: Jonathan at January 2, 2008 1:50 PM
You are under the mis impression that Utopia is providing Internet services. To clarify this, they are not.
The government provides infrastructure which is exactly what Utopia provides. You can call them ans ask for Internet. They will tell you to contact one of the providers which offer the service as Utopia doesn't.
It no different than any other infrastructure provided by our Government. Roads, electrical, telephones, airports, and the list goes on.
Posted by: frank carreiro at January 3, 2008 6:54 PM