Utah Bill Would Kill Fiber Network Infrastructure Expansion

February 10th, 2014

Article was originally published in Government Technology on February 10, 2014 by Brian Heaton

Imagine a scenario where everyone has access to high-speed broadband and a litany of Internet service providers to choose from. That’s the idea behind the Utah Telecommunication Open Infrastructure Agency (UTOPIA). But the picture perfect dream is under fire from new state legislation that could be the agency’s death knell.

Utah House Bill 60 would prevent UTOPIA from building out fiber network infrastructure to non-member cities in the state. Sponsored by Rep. R. Curt Webb, R-Logan, the Interlocal Entity Service Prohibition’s language on its face seems reasonable. But the issue is complicated and has community broadband advocates crying foul and alleging the bill is a punitive measure.

Critics believe the timing of the bill is curious, as the Macquarie Capital Group — a Sydney, Australia-based investment firm – is reviewing UTOPIA to potentially make an investment that will ensure a ubiquitous build-out of the network. At the same time, however, CenturyLink, one of the powerhouse telecommunications companies in the area, is lighting-up its own fiber gigabit service.

Specific wording in HB 60 targets just municipal fiber networks, meaning other types of broadband infrastructure such as DSL or cable would be exempt. Jesse Harris, a blogger at FreeUtopia.org, noted that the bill also uses terms such as “members,” which indicates that it’s very UTOPIA-specific as they are the only interlocal agency of its kind in Utah. Harris also reported that Webb has taken financial contributions from CenturyLink

UTOPIA owns and operates fiber network infrastructure, but does not provide not Internet service. Independent companies use that infrastructure to offer broadband service to consumers. The 11 active cities that make up UTOPIA are each represented by a board member. The agency used bond funding to do the initial build-out. Agency board meetings are open to the public.

Communities located outside the limits of member cities can pay to have the network built-out to them. That helps UTOPIA, as it means the agency doesn’t accrue any additional costs to expand.

In an interview with Government Technology, Harris said between UTOPIA and Google Fiber – which is being installed in Provo, Utah – the entities would cover approximately 20 percent of the total broadband market in the state. He believes CenturyLink and Comcast are aware of that fact and are doing whatever they can to protect their market share.

“You know that has got to be making incumbent providers really nervous and panicky,” Harris said. “So they’re going to try anything they can to throw red tape down to stall [UTOPIA’s build-out]. That’s the pattern they’ve followed pretty much everywhere.”

Pete Ashdown, CEO of XMission, an independent ISP in Utah that operates on UTOPIA’s network, questioned why the State Legislature would want to take away control of UTOPIA from the city managers and citizens. Like Harris, Ashdown thinks Webb’s legislation is being pushed at the behest of one of the bigger telecommunications providers.

In response to Government Technology’s interview request, Webb sent an email explaining that HB 60 is a bill about government transparency and accountability, and doesn’t prohibit expansion of Utopia. At press time, a representative of Webb said he was not available for an interview.

Legislative and legal battles have been a way of life for UTOPIA. Now in its 11th year, UTOPIA was sued by CenturyLink early in its existence under the premise of unfair competition practices. They settled years and millions of dollars later.

Gary Crane, UTOPIA’s legislative policy spokesman, explained that the 11 original agency cities wanted to be providers and offer connectivity to citizens on a retail basis. But extensive lobbying from the big telecommunications companies prevented that.

As a result, UTOPIA could only provide network infrastructure wholesale to private providers. Crane said that the model has worked, but not to the level of success they would have had if cities had the freedom to sell service themselves. One city in Utah currently does – Spanish Fork – and has had great success offering its own fiber-based broadband.

“They provide their own service and that was before the [state] legislature cut us off at the knees,” Crane said of Spanish Fork. “They’ve got about an 85-percent take-rate. It tells you there’s an appetite amongst people for this in our cities.”

Ashdown said the rate of expansion is one of UTOPIA’s biggest problems, and that’s why the potential deal with Macquarie would be a huge win for the agency. He explained that currently, the profits UTOPIA brings in are being used to pay off the interest on bonds, not the principle.

“I think a lot of cities would like to see some hope in the future for paying off the debt completely,” Ashdown said. “Without a ubiquitous build-out, without other cities coming in that are not necessarily founding members, I think that hope is slim.”

Crane said the idea is for Macquarie to lease the network infrastructure system from UTOPIA for 30 years, build it out to all 11 original cities, and then further extend the network. He explained that UTOPIA estimated it would cost approximately $500 million for a complete build-out. About $250 million has been spent so far.

So while HB 60 doesn’t prohibit new cities from joining UTOPIA, Crane said it’s not practical because the other cities don’t want to assume the bond obligations of the 11 original members. He added that other cities have said they’d sign agreements to participate in UTOPIA, but not become a part of the agency. HB 60 prevents that, however, and would likely impact Macquarie’s decision to invest in the project.

“For the 11 cities that made the original investment, that’s significant,” Crane said. “For every new city that joins or builds infrastructure for themselves, it will help retire the debt for the original infrastructure that we put in to make the system work.”