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.”
Pete Ashdown, CEO of X Mission, blogs about a great moment from a recent public meeting in which an elderly gentleman, who was around when Murray debated whether to install sewer and water lines, told about the critics back then who said they didn’t want the service because “they had septic tanks and wells.” The gentleman concluded that our cities “need to move into the future.”
I work for Macquarie Capital, a worldwide leader in Public/Private Partnerships (P3) for the provision of public infrastructure. Macquarie has invested more than $100 billion of equity in infrastructure projects worldwide, where more than 100 million people use essential services provided by Macquarie managed businesses. That is our world; we do it very well.
The central question in this current discussion is simple: is broadband vital infrastructure? If you believe broadband is only about Netflix, you join those who think wells and septic tanks are sufficient. If you understand data traffic trends, emerging technologies and the new digital economy that is opening to all of us as we speak, you understand that high-speed data connections are hardly a luxury.
In the interest of space, allow me share a few data points:
- Honest people can disagree about whether UTOPIA should have ever been undertaken in the first place.
- The 11 “UTOPIA” cities hold an incomplete, under-performing network asset and significant debt from it.
- Without our proposal, they have no means of servicing that debt beyond tax revenues.
- The cities should get out of the risk business. An alternative route in which capital and operational risk shifts to a private partner for the provision of the backbone infrastructure and allows the cities to safely leverage future revenues makes sense.
- The network remains open and wholesale. Inviting competition from multiple service providers who will meet willing consumers at the intersection “of price and demand” for additional services.
- Achieving the very modest level of 30% of the eligible homes purchasing some level of “premium” service – TV, faster Internet, etc. – the network will return sufficient revenue to more than service existing debt, without new debt.
It is difficult to respond to the sheer volume of misinformation from our friends at the “Utah Taxpayers Association,” paid for by a generous contribution from one of their members (you get two guesses as to whom). It is clear that UTA and their company are far more concerned about the TWO taxpayers that will lose their monopoly status and be forced to compete, than about the hundreds of thousands of taxpayers who stand to gain.
Given their prior support for privatization, one wonders why the Utah Taxpayers Association would work so hard to protect companies who depend upon monopoly control of vital infrastructure, fearing competition most of all. We toss around terms like “free market,” but free for whom? From the consumer’s perspective this project stands to free this most “unfree” market and open up competition – with its price, service and innovation benefits – for the first time.
Geoff Segal is a Senior Vice President at Macquarie Capital. Before joining Macquarie he was the Director of Privatization and Government Reform at Reason Foundation.