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.”
Ten years ago, I wrote an article and said that a $40 million gamble to build a fiber network was undue risk to Provo taxpayers. I predicted tax increases.
Today that tax increase is an extra $7 per month for all Provo utility customers.
Unlike most government services, there is already a robust private sector competing with each other for these customers. Cities predict unrealistic subscription signups and revenues in the face of fierce competition. It doesn’t work.
In the short term for iProvo, a new competitor meant prices fell and residents benefited. Long term though, iProvo didn’t sign up enough customers and didn’t generate enough revenue. When Provo City could no longer subsidize iProvo bond payments, stark choices were confronted including shutting the fiber network down or raising taxes. Try selling a $7 per month fee to your residents for no apparent benefit. The future was dark indeed.
From nowhere, Google appeared as a white knight in shining armor negotiating a sweetheart deal to have Provo utility customers continue to pay off the $40 million bond whether they used Google or not, but have Google provide network upgrades and much higher internet speeds to those Provo residents who were willing to become Google customers. Provo leaders couldn’t say yes fast enough. In addition to keeping the fiber network up and running, Provo benefits from co-branding as a Google fiber city. The Google save is proof that sometimes its better to be lucky than financially responsible.
Early on, 16 Utah cities looked at iProvo and thought if it was a good idea for one city, why not combine and go even bigger. Today, after untold millions in city commitments to create UTOPIA, too much overhead cost and not enough fiber installation makes it anything but UTOPIA for member cities. A better name would be Taxpayer Burden.
A new proposal partners UTOPIA with an investment firm and imposes a new fee of $18-$25 per month on as many as 160,000 utility customers in order to finish the fiber buildout. Then much like Provo, the investment firm will run the network and sell internet and cable services at market rates.
Member cities are in a tough position. Within weeks, each member city must decide whether to double down on their existing investment with a total cost over 30 years of $500 million or walk away from their sunk costs.
Today municipal broadband is as big a gamble and a risky proposition if not bigger and riskier than 10 years ago.
So my advice is to walk away. Yes, you will have to charge residents a monthly fee for no tangible benefit due to poor decisions in the past. But your city won’t be burdened with additional investment that, if history is a guide, will fail to generate your predicted subscription numbers and revenue and threaten your future.
- Google to Buy Provo’s $39 Million Fiber Network for $1 for Google Fiber Expansion (hothardware.com)
- Google Fiber coming to Salt Lake City (fox13now.com)