An experiment in publicly-owned fiber to the home in Utah was on the brink of bankruptcy in April. The project was oversold and underfunded, and found itself at an impasse where it had to go back to the taxpayers for a bailout or liquidate. They built it, but nobody came. A big part of the problem, apparently, is that the project was saddled with a structural separation ideal that forced the public infrastructure to act as a wholesaler with third parties providing retail services. See The case for UTOPIA and iProvo: Double down or cut bait?
From the beginning, UTOPIA and iProvo either chose, or were saddled with, a business model that has proved least successful in fiber rollouts, analysts say.
In 2001, the state Legislature passed the Utah Municipal Cable Television and Public Telecommunications Services Act, which allows cities to construct telecommunication infrastructure but not become the retail service provider for those systems. Instead, they have to use a wholesale model in which they build the digital pipe and then lease the lines to retail service providers such as Mstar.
That leads to underselling of the system and friction between the municipality, which needs to see a return on its multi-million dollar investment, and the service providers, which haven’t risked as much, says Michael Render, president of RVA, a market research company that focuses on private and public fiber systems.
“They don’t have skin in the game,” he said. “The more difficult ones have been the wholesale systems such as iProvo and UTOPIA.”
Projects like this are similar to publicly-financed sports arenas. They’re great if you happen to be a fan of the sport, but not so great if you’re simply a hapless taxpayer footing the bill for somebody else’s entertainment. Not to mention the mismanagement that goes hand-in-glove with free money. In order for muni networking to be successful, it apparently needs to be run as a hard-core vertically-integrated monopoly, and that’s pretty distasteful.
The resolution for iProvo was a sale to a private company:
Leaders of Provo City and Broadweave Networks were harder to find Monday (June 30th) than cheap gas.
They were holed up in city offices hammering out the details of the $40.6 million deal that privatizes the fiber optic network, in turn taking the money-losing venture off the city’s hands. The deadline was Monday and by now, Broadweave owns the system — we think.
“I’m holding my breath hoping that it gets done,” said Councilman George Stewart, who was also awaiting word Monday. There was supposed to be a small ceremony, but nothing had been made public, even to council members, by 5 p.m. Monday. The council approved the sale in June.
The sale was concluded in July.
UPDATE: UTOPIA lumbers along, with only one city, Payson, voting to leave the consortium. Take-up rates have been much lower than anticipated, due to good competitive options, but supporters continue to have high hopes for its ultimate success.