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Division among the 11 UTOPIA cities could threaten utility fee proposal

Published: Friday, June 27 2014 9:12 p.m. MDT

The UTOPIA board will meet next week to review options following a roughly even split between member cities on whether to pursue a controversial utility service model. (Scott G Winterton, Deseret News) The UTOPIA board will meet next week to review options following a roughly even split between member cities on whether to pursue a controversial utility service model. (Scott G Winterton, Deseret News)

WEST VALLEY CITY — The 11 member cities of the UTOPIA fiber optic network are almost evenly split on a controversial proposal to offer Internet services as a mandatory utility, once again making the future of the embattled network uncertain.

Adam Cowie, Lindon city administrator and third vice chairman of the UTOPIA board, said board members will meet Monday to discuss their options and vote on next steps.

But it is not yet known if the division among cities will result in two separate UTOPIA partnerships, require residents to pay more in monthly fees or if the utility service model remains a viable option without an 11-city customer base.

"The question then is, is there enough support for moving forward?" Cowie said. "This is a complicated issue, and it has been a real challenge for everyone to see a clear direction on every single issue and outcome until we get further down the road."

At issue is a proposal by Australia-based Macquarie Capitol Group to assume management of the Utah Telecommunications Open Infrastructure Agency, which was created more than a decade ago amid promises of ubiquitous high-speed Internet access but has been plagued by ballooning debt, incomplete construction, low subscription rates and revenue shortfalls.

Macquarie has offered to complete the build-out of the network to all 160,000 addresses — realizing the original promise of universal access — and guarantee basic Internet service to all residents, in exchange for a monthly utility fee of initially $18 to $20 from each household for the next 30 years.

Municipal leaders in the 11 member cities were given a deadline of June 27 to either reject the deal or agree to proceed to the second of several milestones.

The city councils of Layton, West Valley City, Midvale, Brigham City, Tremonton and Perry agreed to Macquarie's terms while Centerville, Lindon, Murray, Orem and Payson rejected the proposal.

Cowie said board members have not yet heard updated figures from Macquarie, but he suspects the exit of five member cities will affect components of the proposed deal.

"That’s going to change the utility rate and some of these cities are going to need to evaluate whether it’s worth moving forward," he said.

One group watching the ongoing discussions is the Utah Taxpayers Association, which launched a petition and website at uNOpia.org and questioned the legal authority of city leaders to levy a citywide fee for telecommunication services that residents may or may not use.

Royce Van Tassell, vice president of the Utah Taxpayers Association, said the exit of five member cities has significantly changed the math of the Macquarie proposal, particularly considering that cities with larger construction needs have remained.

"From the perspective of Macquarie, having a Lindon or a Centerville in, where there isn’t nearly as much investment necessary, makes the deal financially more attractive," he said. "It’s unclear whether or not they have the critical mass necessary to move forward with this deal and we look forward to finding out what their next decision will be."

He said it's premature to speculate on what Macquarie will do, but the initial terms of the proposal were based on the potential of 160,000 addresses being connected to the network.

"It does seem that Macquarie and UTOPIA were hoping to take advantage of economies of scale," he said. "With so many cities opting out, those economies of scale aren’t nearly as available."

The lead-up to the June 27 deadline was met with considerable public interest, as cities hosted council meetings, open houses and public forums and in many cases launched surveys to solicit feedback from residents.

With the exception of Perry's pro-Macquarie vote Thursday evening, cities that delayed their decisions until the final days of the deadline window elected to opt out of the proposal.

Van Tassell said cities that engaged in the most public outreach and education on the issues surrounding UTOPIA were largely skeptical of the utility fee proposal. But he added there was also a widespread concern about adding to the debt obligations of a network that has consumed taxpayer dollars for a decade.

"I think there is a growing, even surging sense, that the cities never should have gotten into this in the first place and that the smarter play is to stop digging a debt hole and instead take your lumps," he said. "The risks have been taken and let's just see what we can do to get out of this."

Orem resident and UTOPIA customer Jeremy Bowers said he left his Thursday City Council meeting disappointed because he wants the network to succeed, but also optimistic that city leaders are interested in finding solutions that allow UTOPIA to continue.

"After listening to all the Council people have their share, I feel like they’re not going to let the fiber die," he said. "They wanted to keep it and find some way to build it out, but they weren’t sure about this (utility fee) proposal."

He also said that results from an Orem survey showed more than 70 percent opposition to charging a mandatory utility fee for Internet connectivity.

"With those kinds of numbers I can understand why they would vote no," he said.

Carl Woldberg, a UTOPIA customer living in Centerville, said he's worried about the future of the network if cities pass on Macquarie.

He said he would be willing to pay double or even four times his current Internet bill in order to keep his fiber optic service, and he trusts that his city leaders will find a way to keep the network running.

"My gut feeling tells me that the people that run Centerville are smart enough to know that it makes no sense to let the network actually go dark," he said. "That’s my gut feeling, but my gut feeling was Centerville would vote to move forward with Milestone 2 and Macquarie, so I was wrong there."

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