Eighteen Utah cities are pursuing a plan to invest millions of dollars in a fiber optic network that will include “last mile” connections to businesses and residences. The eighteen cities, stretching from Tremonton to Cedar City, have formed a consortium called the Utah Telecom Open Infrastructure Agency (UTOPIA) which intends to issue revenue bonds that will finance the construction of the network. Since Utah law (2001 HB 149 – Curtis) prohibits cities from retailing telecommunication services, UTOPIA plans to lease the network to private service providers who will be responsible for providing content. UTOPIA also claims that taxpayers will bear no financial risk. As of June 30, 2003 UTOPIA’s liabilities were $2 million, $1 million of which were owed to participating cities themselves.
UTOPIA claims the network is needed for the following reasons:
1. Private sector service providers like Comcast, Qwest, and AT&T are not building telecommunication infrastructure fast enough to accommodate the current needs to citizens and businesses.
2. A city wide fiber network will attract new businesses to locate in UTOPIA member cities.
3. Cities have a responsibility to provide essential infrastructure needs such as water, sewer, roads, and fiber optic networks.
4. Residents and businesses need the capacity that a “future proof” fiber optic connections provide. Copper-based DSL and cable modem technologies currently provided by the private sector do not provide the necessary capacity.
Taxpayers in these 18 communities should demand answers to these important questions about UTOPIA:
How will the construction and operation of a government-owned network impact state and local taxes? Government-owned entities, even those that clearly compete against the private sector, are tax-exempt. UTOPIA will not be paying property taxes, 53% of which are used to fund public education, on its network. Any “profits” will be exempt from corporate franchise tax, all of which are used to fund education. UTOPIA’s tax-exempt activities will crowd out private investment and will reduce future tax revenues. This increases pressure on Utah’s taxpayers, including those who will be UTOPIA’s customers.
Will taxpayers be exposed to unneeded risk? Telecommunications is a volatile industry. Investors have lost billions of dollars in recent years due to unforeseen economic, regulatory, and technological changes. Yet, UTOPIA insists that this investment is risk-free to taxpayers.
Specifically, taxpayers will be exposed to several risks—Will UTOPIA’s investment in fiber optics be rendered obsolete by advances in wireless and other broadband technologies? If an investor-owned company miscalculates and loses money, investors suffer. In UTOPIA’s case, taxpayers will be exposed.
Will UTOPIA be able to find a content provider who will be willing to lease UTOPIA’s infrastructure? Qwest, Comcast, and other local providers prefer to use their own infrastructure. If UTOPIA is unable to secure a provider who will lease its infrastructure or if UTOPIA secures a provider who later withdraws, will UTOPIA be forced to lobby for a statutory change to allow local governments to operate its own retail telecommunications systems, exposing taxpayers to additional risks and losses?
Will UTOPIA, despite its huge tax-exempt competitive advantage over the private sector, be able to compete with Comcast, Qwest, and AT&T who have decades of experiences in telecommunications and who are investing hundreds of millions of dollars in local infrastructure upgrades and expansions? Will cities (i.e. taxpayers) be required to escrow sales and property taxes upfront to secure the revenue bonds? Will future taxpayers be expected to fund UTOPIA’s infrastructure upgrades and replacements once it becomes outdated? Will road cut fees be waived, which means that city taxpayers will cover the costs of repairing roads?
Is UTOPIA even needed?
Taxpayers should be leery about claims that UTOPIA will address needs that the private sector is not willing to provide. UTOPIA consortium members maintain that fiber optic connections are needed to attract high paying jobs. However, the private sector is currently providing new and existing businesses with the desired network connections UTOPIA says the capacity provided by fiber optic connections is needed now. However, DSL and cable modem capacities are sufficient for most people’s current and near-future needs and entail none of the risks associated with taxpayer-backed infrastructure costs.
The American telecommunications industry has an excellent track record of satisfying the technological needs of customers. UTOPIA’s proposed network may offer technological advantages in the short run, but in the long run the private sector will undoubtedly meet or exceed UTOPIA’s network in terms of features, service, and cost without exposing taxpayers to risk while paying taxes to support public education and other government functions.
The real meaning of UTOPIA
Webster’s Collegiate Dictionary defines utopia as an “imaginary or an indefinitely remote place” and “an impractical scheme for social improvement.” Taxpayers beware!
(Listed by population)
- Salt Lake City
- West Valley
- South Jordan
- City Cedar City
- Brigham City
- Cedar Hills