Resolved: “UTOPIA cities are being offered a lifeline by Macquarie and, despite the estimated $18 to $20 per household utility fee increase, should take the deal.”
Let’s play a municipal version of The Dating Game. We have three contestants, each with their strengths…but which one should our municipality tie the knot with?
Contestant Number One: This contestant has a partially finished fiber network. Chances are high it will never be finished, but with some additional subsidies along the way, it will continue to go along as planned. They will finish paying off $500 million in bond debt and continue to accrue more taxpayer debt as they refresh the network and continue to cover operating shortfalls. Chances are nil they will finish the network, but as people want it, they can pay $2000 to have it installed in their homes. This is expected to cost their citizens around $12 monthly indefinitely.
Contestant Number Two: This contestant has a partially finished fiber network and wants to shut it down. It has cost taxpayers too much. Therefore, the most prudent thing to do is finish paying off $500 million in bond debt and chalk it up to experience. They promise to never do anything like this again.
Contestant Number Three: This contestant has a partially finished fiber network and wants to finish it. Because paying for the network with tax dollars is an untenable option, they want to sell to a private company who will finish the build out and make it profitable. Their chosen partner is a well-capitalized multinational who will finish building the network within 30 months. Additionally, they will provide a free internet tier to all who are connected to the network.
While there are many who feel that choices 1 or 2 are best, I feel that the third choice is the best option in the long run. There have been many mistakes made with fiber UTOPIA since their inception, but the Macquarie deal stands the best chance of being successful for several reasons.
- Critical Mass. By getting fiber to every home and business in their catchment area, they will ensure that enough people have service that they can start to recoup the build out costs.
- Business acumen. Business internet costs significantly more than home internet. While I was living and working in Orem, I got faster speeds at home for 1/10th of what it cost me at work. Both were on UTOPIA, but I got free installation to my home and it cost $10000 to go to my office. Macquarie would get high paying businesses on UTOPIA.
- The highest chance of taxpayer ROI. Shutting down UTOPIA ensures that the fixed costs stay on the books and nobody benefits from a dark network. Keeping it operating with the status quo keeps it draining city coffers on an ongoing basis. Only the Macquarie deal gives taxpayers an opportunity to actually eliminate the public subsidy on the network.
As a result, the Macquarie deal is the clear winner. It is the only option that offers cities a profitable way out of the mess they got into when they created UTOPIA in the first place.