December 20, 2009
If a salesman came to your house and offered you a killer fiber-optic Internet service, but then said there would be a $3,000 fee to hook it up, would you be interested?
Before you decide, you could choose to finance that hookup fee with easy payments spread over 20 years. But if you did so, the company would place a lien against your house.
Incredibly, some people in Brigham City were. More than 1,600 people recently signed such contracts with UTOPIA, a consortium of 11 Wasatch Front cities that has been working for most of a decade to blanket its incorporated areas with fiber optic cable.
Now, many of those people are claiming they never heard anything about a lien. To which their elected city representatives (all except one councilwoman), have offered a sympathetic, “tough luck.”
The hookup fees and liens are the latest tactic for UTOPIA, which still can’t seem to turn a profit.
Back in 2002, UTOPIA persuaded 11 cities to pledge up to $202 million in sales-tax revenues over 20 years. This was so the consortium could sell bonds at a reasonable interest rate and finance construction. Cities were assured UTOPIA had no intention of actually using any of the tax money pledged.
But by 2008, UTOPIA was running out of money and time. It returned to the cities and asked for more — a combined $500 million that it could repay over 33 years. Again, it said it wasn’t planning to actually use any of that money. All but one city, Payson, agreed.
Then, earlier this year, UTOPIA put the cities on notice that it was going to have to use the taxes, after all. The system still has fewer than 15,000 subscribers. The most recent budget projects a $24.6 million loss in fiscal 2010.
And now Brigham City residents are being asked to pay hookup fees that other UTOPIA residents haven’t had to pay.
From the start, UTOPIA was billed as a way to counter private providers such as Qwest and Comcast, who, it was believed, were thumbing their noses at the bedroom communities of the Wasatch Front. UTOPIA was going to set up a cable system that would be a sort of public utility. Any private provider who wished could pay a fee and use it to deliver services ranging from the Internet to telephone connections. It would enhance competition.
But the competition never seemed to catch that vision.
Last week, the Deseret News reported several interesting facts about Utah, based on new census data. Among them:
– Utah has the second-highest rate of Internet usage in the country.
– 82 percent over the age of 16. In addition, 69.5 percent of Utahns said they had access to it at home, and 59.3 percent of them had high-speed broadband connections.
Those figures were from 2007, when UTOPIA had only 6,161 subscribers. Clearly, the private Internet market must be doing something right in this state.
More than three years ago, I made the point in this column that UTOPIA was gambling it could predict the Internet market for the next 33 years. I asked people to think back 33 years and remember the technology of the time, then imagine anyone back then guessing what today would be like.
It turns out UTOPIA can’t even predict what the current market will bear. Utahns are willing to pay for DSL and other high-speed services that come at a reasonable cost. But high-stakes investments in new technology belong best in private hands. If private investors are wrong, they disappear into the night.
Because governments can’t disappear into the night, they merely become defensive and angry. In Brigham City, the city council refused to hold a public hearing. The many who showed up recently to vent their anger anyway were given a combined 10 minutes to speak.
Then they were dismissed to their homes, and their liens.