December 11, 2009
It has come to this.
Utopia, the ill-starred fiber-optic network in which 10 Utah cities are enmeshed, is hemorrhaging cash. Those cities already are on the hook for millions of dollars in pledges of sales tax revenues to back the system’s debt. Utopia could begin to call on those pledges just as cities face budget crises caused by the recession.
Now the Utopians have come up with a new scheme: create special service districts to finance the system. But the folks in Brigham City, who apparently are the first to participate in this new model, have discovered an ugly catch.
The service costs $3,000 upfront. Or you can pay $25 a month for 20 years, which adds up to $6,000. But if you choose the payment plan, the special service district will place a lien on your home.
Customers in Brigham City have complained that salesmen didn’t tell them about the lien when they signed up for the monthly payment option. Now both Utopia and the city say that it’s too late for customers to back out.
This is just the latest unpleasant surprise that Utopia has sprung, and it may not be the last.
It wasn’t supposed to work out this way. When backers proposed the network in 2002, they called it UTOPIA for Utah Telecommunication Open Infrastructure Agency. But the acronym wasn’t the only thing that was too clever by half.
It was supposed to provide customers in the member cities with high-speed, fiber-optic data service for things like Internet, telephones and television. Utopia would lay the cables. Private providers would compete to offer services over the system. All the cities had to do was guarantee a portion of the system’s debt, so that it could be financed at lower interest rates.
But things started to go sour. The systems never attracted enough customers to make a go of it. The participating cities had to double down on their commitments so that the debt could be refinanced. Meanwhile, the whole thing keeps losing money.
We argued against Utopia almost from its founding because we thought it was a bad idea for municipal governments to get into the risky telecommunications business. Not when the likes of Qwest and Comcast were already duking it out with private capital. We also thought it unfair for Utopia to be tax-exempt when its competitors weren’t.
Unfortunately, our misgivings came true. Utopia turned out to be a financial quagmire rather than a technological paradise. And the swamp keeps getting deeper.