UTOPIA Financial Audit: Fail

Posted by Sam Churchill on

Founded in 2002 the Utah Telecommunications Open Infrastructure Agency (UTOPIA), was one of the first regional fiber networks to serve municipalities and individuals. UTOPIA is a city-owned Telecommunications Network with services offered by the consortium of 16 Utah cities.

But a recent state audit of UTOPIA has fueled questions about its viability (pdf), notes Fierce Telecom.

The Audit (pdf) has led The Salt Lake Tribune to question whether the 11 cities paying the bills for the agency should just “pull the plug.

For UTOPIA, the newspaper said, “The audit suggests providing broadband infrastructure at wholesale to independent content providers may never work”, but it stops short of drawing a final conclusion.

It does say that the question may be answered in places like Centerville, where the agency is making a new push to market itself.

If that doesn’t work, the newspaper suggests that the sponsoring communities might consider refusing to underwrite more debt and just quit the whole project. Currently the 11 participating cities—Tremonton, Perry, Brigham City, Layton, Centerville, West Valley City, Murray, Midvale, Lindon, Orem and Payson—are on the hook to pay nearly $13 million next year to service the agency’s bonds.

In all, 11 of the founding cities, from Brigham City in the north to Payson in the south, pledged about $500 million over 32 years to back the bonds that UTOPIA sold to finance network development. Some cities, it noted, “have begun to raise property taxes to keep their municipal services whole while making UTOPIA payments.”

UTOPIA might be considered similar to Google’s fiber effort in Kansas City (except UTOPIA charges $2,750 to bring fiber to a home).

Google Fiber launched its 1-gigabit-per-second broadband service in Kansas City last week. Installation costs $300.

Analysts estimate that it cost Verizon roughly $670 to run fiber past each home in its footprint. That cost depends on how far apart homes are and whether Verizon can string fiber from telephone poles, among other things. Verizon spent $23 billion to bring fiber past 17 million homes. Do the math.

To reduce the cost, Google asks potential users to convince their neighbors to sign up. The goal is to get a critical mass of between 5 percent and 25 percent of the homes in a given neighborhood. Milo Medin says the $300 initial connection fee will cover the costs associated with the deployments — it’s not doing that at a loss. All of these things will help Google deliver a gigabit per second to the home at a profit, says GigaOm.

Google Fiber offers broadband, internet-only service for $70 a month, with 1Gbps downloads and uploads. It will also provide the 1 terabyte of data storage, as well as a network box for offering the service.

The Gigabit and Fiber TV service will cost $120 a month with 1Gbps connectivity. There is no data cap. It also comes with 1 terabyte of Google Drive cloud storage.

Google is charging $300 to every home that gets the fiber service for the construction of the fiber link. But the company is waiving that fee for people who sign up initially for the service, reports C/Net.

GigaOm says its deployment and customer acquisition model will put it in the black, claiming that the upfront fees will cover the bases. Google Fiber is shaving costs with bulk deployments in Fiberhoods, and the use of home-grown network gear.

Currently, Verizon’s FiOS FTTH technology is a substantial percentage of homes with fiber in the United States.

President Obama signed an executive order in June to create a national 1 gigabit per second broadband network (pdf fact sheet), under a newly created non-profit partnership called US Ignite.

The network would serve as a test bed for next-generation applications in areas such as education, health care and clean energy.

The National Science Foundation is the lead Federal agency for US Ignite, and will expand its initial 4-year, ~$40 million investment in the Global Environment for Networking Innovations (GENI) project, which currently connects more than a dozen universities with ultra-high-speed, programmable networks. About 100 partners (pdf) are helping US Ignite, with some providing in-kind backing, including Cisco Systems, Juniper Networks, NEC and Hewlett-Packard. The NTIA says that six of the companies building or upgrading plant with Recovery Act broadband grant moneyMerit Network, UTOPIA, Utah Education Network, Urbana-Champaign Big Broadband, and Internet2 — are joining US Ignite.

Seattle Mayor Mike McGinn is pushing to bring high-speed fiber-optic connections to businesses in the city, starting in Pioneer Square. Portland’s Strategic Broadband Plan aims to lay fiber to schools, hospitals and community centers, first, then build out from there.

South Korea has launched a nationwide broadband upgrade to rid themselves of 100Mbps service for $38 a month. By the end of 2012, South Korea intends to connect every home in the country to the Internet at one gigabit per second and slash the monthly price to just $27 a month.

GigOm compiled a list of places that offer 1 Gbps residential connections.

Related Dailywireless Fiber articles include; UTOPIA: FTTH Now Focused on Business, Trouble in Utopia, FiOS: Too Risky?, Municipal Fiber: Fits and Starts, Be Your Own Fiber Net, RUS Awards $1.2B for Broadband, City Fiber Strategies, US Broadband Sub Count, Hawaii Plans Broadband Initiative, Unlicensed Muni Broadband: Take Two?, Ten Largest Data Centers, The Fiber Utility, 1 Gbps Fiber Comes Home, HomeGrid: Closer to Home, Seattle Kills Municipal Broadband Plan, Facebook Invests in Asian Oceanic Fiber, US Ignite: 1 Gbps Nationwide Fiber Network

Posted by Sam Churchill on Tuesday, August 7th, 2012 at 11:06 am .

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