The meat of the Macquarie deal: pay less, get more [The Hub Debate]

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This is  a Hub Debate on the proposed Macquarie acquisition of UTOPIAParticipate in the comments or submit a response for publication to UtahPoliticoHub@gmail.com.


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.”


It’s not too often that you get a win-win scenario, but that’s exactly what Macquarie, an Australian investment bank, is bringing to the table for UTOPIA cities. The meat of the deal is that each household will be assessed a utility fee between $18 and $20 per month. In exchange for that money, Macquarie will complete building out the half-finished network, perform periodic refreshes of the network equipment, and operate it for thirty years with an included tier of service for everyone at no extra charge.

What’s often missed, though, is the revenue side of the deal. Macquarie is estimating that the cities will bring in revenues of around $22 per month per household, far more than what Macquarie will be charging the cities. This actually makes their proposal about half the cost of staying the course and almost 20% less expensive than selling the network. At the end of the deal, the cities get the network back and get to keep $100M in annual network revenues. Macquarie gets a stable return for investors, but the cities get to reduce their existing debt obligations, complete the network, and maintain ownership.

So where’s the downside?

To be frank, there isn’t much of one. The deal obviously isn’t perfect (no deal is), but there’s been no credible alternative presented that offers a better upside and/or lower cost. Provo found out the hard way that they can’t shuffle off the debt onto another party, opting to “sell” their network to Google for $1 while charging all residents a similar utility fee. They don’t get competitive service provider choices, they don’t get the network back at the end of the contract, and they don’t get service to every address. It’s a lesser deal, yet Provoans are paying the same amount.

So should cities take the Macquarie deal? Unless you’re cool with CenturyLink’s astroturfing campaign, it seems like a no-brainer.

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