December 17, 2009
It once promised to be the largest, ultrahigh-speed digital network in the country.
Its anticipated price tag of around half a billion dollars also branded it as one of the most ambitious fiber optic projects in the world — one which some reports said intended to serve three-quarters of a million residents, a quarter of a million households and nearly 35,000 businesses.
And it would deliver computer data at a speed 100 times faster than what was then the norm, for an estimated user price of just under $30 a month.
Its backers predicted that cities which participated would have a leg up in attracting high-tech companies seeking a populace of computer savvy individuals. And construction was anticipated to begin within about six months.
The project, called the Utah Telecommunication Open Infrastructure Agency, was even hailed as the key to future economic growth by its boosters.
And the best network in the United States was going be in Utah — not in New York, Chicago or Los Angeles, according to Paul T. Morris, then executive director for the project.
It was all pretty heady stuff — in late 2003.
Now, almost exactly six years later, the UTOPIA project seems more like the boulevard of broken dreams — the victim of ramped-up expectations, poor financial decisions, lack of oversight, hampering lawsuits, widespread competition and leapfrogging technology.
The organization’s new managers have ratcheted down expectations in favor of a long, slow effort to achieve at least a portion of the promises the group made to its member cities years ago.
According to some, it was the dream of fiber optics for absolutely everyone that led to some of the trouble in the first place.
“Early on, the philosophy was, ‘We’re just going to build the whole network everywhere,’ whether or not it was a profitable or smart thing to do,” said Centerville City Financial Director Blaine Lutz, a member of the UTOPIA board. “Honestly, there were some places that were built-out early on where people are just not using the service.”
Though UTOPIA is continuing its efforts to actually get some fiber optic cable into the ground (the current focus is on Brigham City), the group has had to move slowly due to the lack of working capital.
“We’d like to expand in Layton, but we can’t afford it,” said UTOPIA president Todd Marriott. A small area within the city of Layton has been laid with fiber optic cable as part of a test project done last year — but while Marriott says they’re getting a 31 percent subscription rate in the area, those customers haven’t generated enough capital to expand.
“Our problem has always been that the demand is greater than our ability to supply,” he continued. “We will get the cable laid down, but whether we get it done in the next three years or the next 10 depends on operating capital.”
The fall from utopian dream to long-delayed capital project began with early lawsuits from both Qwest and Comcast, which argued that UTOPIA was a private business trying to use public funds. Though the lawsuits were eventually settled in UTOPIA’s favor, the project’s initial start-up lost some of its early momentum and favorable publicity.
The real trouble, however, came with some early financial decisions made by the group, which Layton City Manager and UTOPIA board member Alex Jensen has described as treating business relationships more like friendships which depended too much on good faith. Loan arrangements and deals with subcontractors ended up falling through without back-up or contingency plans, draining both time and money from the project.
In the year-and-a-half since UTOPIA’s new management team has been in place, the group has ended several of the subcontract arrangements, leading the company along much more regimented business models.
“Were there misjudgements? Were there wrong assumptions? Absolutely,” said Jensen. “We understand that there’s an important need for oversight.”
According to Lutz, an earlier application of that attitude might have saved UTOPIA from the fall entirely. “Now we’re going where there’s an actual demand,” he said. “I think, if we had taken that approach from the beginning, the network would have been much more successful.”
Even with the belated change in approach, the road hasn’t gotten any easier. Though the management secured new financing in 2008 to generate enough base capital to get the ball rolling again, the recession, combined with UTOPIA’s previous bond debts, led to extremely high interest rates that have already drained that capital nearly dry.
UTOPIA management, however, is still doing everything it can to leave behind a tangible result for all the efforts everyone has made.
“Fiber optic cable is public infrastructure, just like roads,” said Marriott. “If you don’t feel that, then UTOPIA doesn’t make sense.”
Centerville, which has yet to see any useful cable laid in the city (cable must be connected into a central node in order for service providers to be able to use it), is taking the long view on the project.
There’s no way to back out of the current financial commitments to the project (UTOPIA warned the member cities this past summer that the first payment would likely be expected in the next few months), and the city has shifted its hopes for the results to several years in the future.
“Though the citizens are currently happy with the service they get, we don’t think that will be the case long term,” said Thacker.
“As new services come out, we think that residents’ current capacity will not be enough to get what they want. At that point, there will be a demand for fiber optic cable to the home.”
At the moment, however, he acknowledges there are no immediate plans to bring that cable to Centerville, with early discussions about the city’s redevelopment agency falling under lawsuit threat from Qwest and talks of a city-built telecommunications hub having been relegated to the back burner.
Instead, the city is looking closely at UTOPIA’s current efforts in Brigham City, where the group is setting up a special assessment district to generate bonds that it hopes will pay for connecting up the entire city.
Though UTOPIA has faced claims that residents of the city weren’t aware that agreeing to the district would put a lein on their houses – a practice that Centerville City Manager Steve Thacker said was a standard part of all special assessment districts – Marriott says that even after those who were confused about the lein backed out there are still enough to move ahead with the bonds.
Thacker is still not certain whether Centerville will follow that same route with UTOPIA – neither the city nor UTOPIA has yet approached the other about the possibility – though if they do he assures residents that the city will make sure there’s no confusion as to what they will be signing up for.
Beyond that, however, they’re finalizing plans to take care of any bond payments that might come up and are settling in for the long haul.
“Obviously we’re facing challenges right now, but we’re taking the long-term view on this,” said Thacker. “We know that this will take some time before it pays for itself.”