Phone-system sale OK'd

EAGLE MOUNTAIN — It took about five years, but Eagle Mountain has finally cut through the last piece of red tape and obtained approval to sell the city-owned telecommunications system.

In an order announced Wednesday, the Federal Communications Commission said it will allow the sale of Eagle Mountain Telecomm — the sole provider of telecommunications services in Eagle Mountain — to Direct Communications, an Idaho-based company.

"This has been a long time coming," City Manager Chris Hillman said. "We knew it would take a while, but we did not think it would take this long."

Eagle Mountain began negotiating with Direct Communications in 2000, and in November 2002, an overwhelming majority of residents (94 percent) approved a proposed sale in a referendum.

The deal appeared to be near closing last year when city officials discovered a prior FCC ruling would require FCC review and permission, Hillman said.

The ruling does not require commission approval for the sale itself, but it does require the FCC to sign off on a number of waivers to allow the system to move from public to private ownership.

The FCC also had to approve Direct Communications' use of Rural Utility Service funds, which the government sets aside to provide financial assistance to rural utility systems.

When the contract with Direct Communications was drawn up, Hillman said the city's goal was to break even on the system. However, in the time it took to get the FCC waivers, the city has made a number of other capital investments in the system and paid down the debt, essentially creating some equity in the system.

The infrastructure improvements have made the system more valuable, Hillman said, and the final sale price will likely be higher than the proposed $6.3 million previously discussed, though the exact amount has yet to be negotiated.

About $4.5 million from the sale will be placed in an escrow account, where it will remain for about two years until the city calls in the bond used to build the system.

The City Council will determine how to use any remaining money from the sale.

The sale and the process of switching the system to private ownership are expected to be completed by Jan. 31, Hillman said.

Eagle Mountain residents can expect an immediate decrease in their phone bills. Because Direct Communications is a private company, it is subject to price regulations that did not affect Eagle Mountain as a municipality.

Residents can expect the base rate for basic phone service to fall from $27 per month to just below $20, Hillman said.

Workers at Direct Communications were also reveling in the FCC's order Wednesday.

"We believe it's a very good order," said Kip Wilson, general manager of Direct Communications, Cedar Valley.

Direct Communications has about 1,500 phone customers, 1,200 cable customers and 2,500 Internet customers in its Idaho operation. The company also has systems in Oregon and Washington, but this will be its first venture in Utah.

"We're looking to grow our operations, and we believe the system in Eagle Mountain will continue to grow," Wilson said. "Our plans in Eagle Mountain are to take care of existing customers and expand services to all residents of Eagle Mountain."

Wilson credited interim mayor David Lifferth, former mayor Kelvin Bailey and the City Council for making the sale possible.

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E-mail: jtwitchell@desnews.com