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UTOPIA Hopeful about 2012 prospects despite 2011 Loss

January 20th, 2012

This is a repost of an article found in The Salt Lake Tribune. To view the original article, click HERE.

By Steven Oberbeck

The Salt Lake Tribune

Published: January 18, 2012

Despie losing more than 200 customers, the UTOPIA fiber-optic network is reporting that revenue generated from its operations increased 83 percent during its fiscal year that ended on June 30, 2011.

UTOPIA, an acronym for the Utah Telecommunication Open Infrastructure Agency, said that it generated $5.2 million in operating revenue, compared wih $2.8 million in the previous year. Its expenditures dropped 7.2 percent.

Still, the agency reported that its operations produced a $6.2 million deficit in 2011, although that loss was among its smallest ever.

“We made some good progress,” said Kirt Sudweeks, UTOPIA’s chief financial officer. “In fact, if you take away our depreciation and eliminated the bad debt we had to write off due to the bankrupcy of one of our service providers, we would have been at operating break-even for the year.”

Sudweeks said the bulk of the jump in operating revenue came from an increase in businesses signing up to receive services over the network. Also, the netwok raised its wholesale rates, which is what it charges service providers who use the network’s fiber-optic infrastructure to serve customers.

UTOPIA was organized in 2002 by community leaders in more than a dozen municipalities along the Wasatch Front. At the time, they believed that private telecommunications providers in the state were unwilling to bring the benefits of high-speed Internet and other broadband services to their communities. In all, 11 of the fonding cities, from Brigham City north to Payson south, pledged about $500 million over 32 years to back the bonds that UTOPIA sold to finance network development.

The network, though, has been plagued with continuing losses and over-optimistic projections. It has yet to earn a profit and has a negative net worth of more than $120 million, which means that if all of UTOPIA’s assets were sold it would still owe that amount to its creditors.

Long-time UTOPIA critic Royce Van Tassell of the Utah Taxpayers Association, said the loss in subscribers is troubling, particularly given the significant expansion undertaken last year in Brigham City and other areas.

“In order to build in Brigham City they indicated they needed around 1,500 new customers,” he said. “So, if they saw a loss of 210 customers (in fiscal 2011) that means that across the entire network around 1,700 other customers had to drop.”

Van Tassell said that should be troubling to the communities that have invested in UTOPIA, given that its long-term viability is premised on aggressive annual growth.

Todd Marriott, the network’s executive director, attributed the decline in subscribers to them being upset about the bankruptcy of one of the outside companies that was serving customers using UTOPIA’s fiber-optic lines.

“We’ll go back and get those customers,” he said, indicating that in the six months since the end of the 2011 fiscal year 1,444 Utahns have signed up to receive services over the UTOPIA network.

Marriott and other network supporters are counting on the success of the Utah Infrastructure Agency, a separate entity set up by nine of the UTOPIA cities. The UIA, which was funded by an additional $62 million in bonds, is in charge of marketing and completing development of the UTOPIA network. And in the future, new subscribers who receive services over the network will be handled by UIA rather than UTOPIA.

What that means is that next year to get a good understanding of how the network is performing it will be necessary to look at the financial statements of both UTOPIA and UIA, Sudweeks said.

UTOPIA supporter Jesse Harris, who operates the freeutopia.org website, said he was encouraged after seeing the 2011 financial statements.

“Whatever they’re doing they should keep doing,” Harris said. “You can’t argue with doubling revenue while decreasing cost. It represents a huge improvement, and that doesn’t take into account that they also signed up more than 1,400 new subscribers since the close of their (fiscal) year.”