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Google Buys Provo Community-Owned Network

I just left the Broadband Communities Summit in Dallas, where I ran into many people doing great work to ensure everyone has access to affordable, reliable, and fast Internet networks.

Also while there, Google announced it had reached an agreement to offer Google Fiber in Provo by purchasing the municipal FTTH network. Provo has long been cited as a failure by critics of community-owned networks (even as it continued to attract jobs to the region).

Though Provo originally wanted to offer television, telephone, and Internet services directly using its trusted reputation in the community, the state legislature bowed to pressure from Comcast and CenturyLink (then Qwest) to limit local authority and tilt the playing field in favor of two distant corporations (that have still largely failed to invest in the networks needed by Utah communities). Provo was forced to use a wholesale-only business model.

That approach is rarely used today by communities that seek to build out the entire community at once because it is very difficult to generate enough revenue to pay the full costs of the network.

Despite Provo's struggles, Google recognized a community it wanted to work with. From Google's blog post:

Provo started building their own municipal network in 2004 because they decided that providing access to high speed connectivity was important to their community’s future. In 2011, they started looking for a partner that could acquire their network and deliver an affordable service for Provoans. We’re committed to keeping their vision alive, and, if the deal is approved and the acquisition closes, we’d offer our Free Internet service (5 Mbps speeds) to every home along the existing Provo network, for a $30 activation fee and no monthly charge for at least seven years. We would also offer Google Fiber Gigabit Internet—up to 100x faster Internet than today’s average broadband speeds—and the option for Google Fiber TV service with hundreds of your favorite channels. We’d also provide free Gigabit Internet service to 25 local public institutions like schools, hospitals and libraries.

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At the Institute for Local Self-Reliance, we strongly encourage communities to own the essential infrastructure upon which they depend and we are dismayed to see such investments fail to meet their own goals or be privatized as has now happened in Provo.

But we also recognize the authority of communities to decide for themselves what the best path is and we believe that in these two isolated cases, Google Fiber will be a boon to the communities over the short term and resolve ongoing problems.

We have concerns over the longer term, but understand how difficult this business can be, particularly when state laws undermine the capacity of local governments to use the business models that give them the greatest opportunity to succeed.

As long as the Utah Legislature continues to kowtow to Comcast and CenturyLink demands, there would not have been an opportunity of Provo to fix the problems iProvo developed as a direct result of the initial crippling legislation.

I had an opportunity to speak with Milo Medin, head of Google Fiber, after his lunch keynote (which I hope to comment further on shortly) and he once again reiterated his (and Google's) opposition to states that restrict local authority to build these essential networks. He and we are on the same page - communities should be free to choose between building their own networks or partnering with others... or even doing nothing, though both Google and ILSR counsel strongly against that option.

One of the reasons Google chose Austin was because it was ready to work with them. In fact, we have long believed that if AT&T hadn't convinced the Texas Legislature to revoke local authority from communities, Austin Utilities probably would have already made network investments to benefit the community. As Google continues to look for partners, it will ignore entreaties from local governments that have had their heads in the sand, hoping they could avoid taking responsibility for ensuring great Internet networks.

Broadband at Speed of Light Cover

We continue to be excited that Google's investments in fiber access networks have changed the paradigm regarding access to the Internet. Those efforts have awakened the media to the pioneering work already being done in communities like Chattanooga, Lafayette, Bristol, Morristown, and many others (including Clarksville now). And we will continue to advocate for communities safeguarding their self-determination by having a measure of ownership over the networks on which they depend.

There is no doubt that communities are foolish to depend on distant national cable and DSL companies to build the next generation of Internet networks.

And don't be fooled by these two quick annoucements -- Google takes many months to negotiate agreements with local governments like Austin, Kansas City, and Provo. I would not be surprised to see another announcement or two in 2013, but would be surprised to see more than a handful more. Communities need to make their own plans, not hope for an outside entity to rescue them.

For cities that don't want to get into offering services, we have been identifying communities that have made smart investments in partnerships with other providers or on an open access basis -- see Danville, Palm Coast, Mount Vernon, Indianola, Princeton (IL), Cortez, and many others on our map of community-owned networks.

American Crafts' New Muse is UTOPIA

If you are a 21st century crafter, you are probably prolific at finding inspiration online. You may be familiar with American Crafts of Orem for ideas or products. The company, founded in 1994, is now a customer of UTOPIA and reports significant bandwidth improvement after the switch from old T-1 connections. From the UTPOIA blog:

With a robust e-commerce presence, American Crafts has to rely on its network. According to Kris Barlow, IT Manager, before switching to UTOPIA, the firm used a single T-1 connection, along with two additional T-1 connections to connect a remote warehouse in Provo. “Our Provo location was using an iProvo connection at the time. By switching to UTOPIA, we could use a single fiber connection to our headquarters building which provided much faster Internet speeds—up to 10 Mbps on our service plan, as compared with traditional T-1 speeds.”

Barlow also notes how the switch has allowed the company to consolidate headquarters and warehouse locations. Reliablity has also been a key improvement:

“In the three years that we've had UTOPIA service, I can remember only two or three service interruptions, all of which were resolved within the same day and were not related specifically to our connection,” he says. “Using the UTOPIA network has allowed us to drastically reduce the fee that we pay for Internet service when compared to the T-1 connections we were previously using, all while also drastically increasing the bandwidth of the connection.”

Because UTOPIA is open access, the company could keep the same phone provider, as it is an ISP on the UTOPIA network. The switch was seamless:

“This allowed for us to simply add the UTOPIA service to our current provider’s bill and allowed us to avoid the hassle of establishing a new account with a new provider,” Barlow says.

UTOPIA, For Better And Worse, Profiled

Since 2008, we have followed and reported on the peaks and valleys that is UTOPIA. Recently, the Salt Lake Tribune ran a series on the regional network. The coverage includes a sampling of the bitter and sweet of the complex relationship between the pioneering network, the state, and the customers it serves.

As many of our readers know, UTOPIA is mired in debt and endless political controversy as Comcast and CenturyLink fund "think tanks" to attack it.  Tony Semerad from the Tribune talked to our own Chris Mitchell:

"When you build a network like this, it takes a minimum of several years of spending a lot of money before you start to get it back from your customers,’’ said Christopher Mitchell

As Christopher goes on to note, a large debt from the beginning to create an open access network is not a favorable situation. Additionally, past management made choices that still negatively impact the network. Constricting legislation at the state level prevents the network from expanding to a more profitable retail market, weakening it even further. Also from the article:

State law requires UTOPIA to operate as a wholesaler, a limitation conceived at UTOPIA’s inception when telecommunications giants such as CenturyLink and Comcast, now called Xfinity, grew wary of plans by Spanish Fork and Provo to get into the cable television business and lobbied state lawmakers for protections.

Some communities express derision at the situations they face regarding UTOPIA, having been left with debt and not yet received the ubiquitous access they anticipated. Some communities, who are still waiting for better subscriber numbers, already see improved economic development and remain patient. Connected communities vary in their satisfaction and level of support:

Layton » Mayor Steve Curtis believes UTOPIA fiber-optic lines already are luring business to his Davis County city and benefiting residents. The grid is built out to a small portion of Layton, one of eight municipalities that have signed on for a second round of UTOPIA bonds. "A lot of legislators don’t understand UTOPIA and haven’t taken the time to know it," Curtis said.

...

Payson » In spite of promising subscription rates among residents and a belief in UTOPIA’s value to the community, the Payson City Council chose not to back the newest round of borrowing. "It just came down to budget,’’ City Manager David Tuckett said. "We didn’t have the money."

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While overall subscribership is lagging, customers share one common trait - they love what they get and the prices they pay. Another article in the series quotes current UTOPIA customers:

"It’s great,’’ Eric Eide of Murray said. "It’s very reliable. It’s high-speed. Whenever I check, I get the speed that is advertised."

"It’s pretty steady. I don’t notice any tail-off in the afternoons or evenings. It’s always the speed I pay for. We watch a lot of stuff on Netflix, and I don’t experience any stuttering," Phil Windley of Lindon said.

...

UTOPIA’s primary advantage is that it can deliver much higher download and upload speeds for lower prices than competitors, according to those who use it. For $35 per month, for example, a UTOPIA customer through the ISP XMission can get up to 50 megabits per second of both download and upload speeds. By comparison, Comcast charges $73 per month for 30 megabits-per-second download speed (the upload speed also is slower). UTOPIA also offers up to 1 gigabit (1,024 megabits) per second of download speed for $300 per month.

Getting more for less is always good, but the network and the state are at a crossroads. Some want to sell the network, others want to legislate tighter controls, still others want to give momentum a chance to build under present management (which has resolved many of the problems of previous management). 

The idea of disbanding the network leaves us somewhat incredulous. No one would wish for the present situation, but abandoning UTOPIA would leave the municipalities still responsible for the debt while also removing any incentive for Comcast and CenturyLink to be competitive. In short, such action preserves all the negatives from the status quo while ending the benefits.

Utah's Spanish Fork City Network an Incredible Success

Back in 2010, we reported on the municipal network in Spanish Fork, Utah. Back then, the utility innaugurated its telephone service, which completed its triple play offering. With recent discussion around Utah's UTOPIA, Spanish Fork is getting a second look.

A Cimaron Neugebauer, Salt Lake Tribune article, highlights the success of the Spanish Fork Communications Network (SFCN). When we last reported on SFCN, 60% of residents subscribed to its cable television and high-speed Internet service. Two years later, the numbers are even higher:

Spanish Fork runs its own municipal network to deliver telephone, cable TV and Internet services. The network has deep ties with the community and is popular with residents, nearly 80 percent of whom are customers.

"It’s exciting to live in community that invests in this kind of thing," resident Bret Bills said.

A combination of bonding and borrowing paid for the $7.5 million network including a municipal electric utility substation. Construction began in 2001. The investment continues to pay off:

Today, the city currently makes about $1 million a year profit from the service and its bonds of $600,000 annually will be paid off in 2015.

The network is a combination of fiber and coax cable. As is often the case, the community acted to fill the gap left by the failure of the private sector, involving the community along the way. From the SFCN website:

SFCN offers services that no other company will provide and can only be implemented by the public sector. The Spanish Fork Community Network has been established to serve the residents of Spanish Fork, not the interests of some large corporation.  We have involved the citizens of Spanish Fork since the systems inception through a local Citizen's Ad Hoc Committee and it has ensured the system is design to meet the needs of Spanish Fork.

Unlike UTOPIA, SFCN is able to offer retail services, having been grandfathered in at the time of the crippling Municipal Cable TV and Public Telecommunications Services Act.

Prices are incredibly reasonable and vary from $35 - $75 a month for residential Internet of 12-55 Mbps and $55 - $85 for business. There are steep discounts for adding TV services. Triple play is $90 per month for the expanded TV package and basic television is as low as $13 per month. There is no installation fee, no contract required and the first month is free.

The network serves most of the churches in town, all school district facilities, and the municipal government. There is even a television channel that provides weekly local news and covers local events. The sentiment from local citizens:

"I love Spanish Fork cable,’’ resident Marietta Pruitt said. "They are doing a fabulous job.‘‘

Broadband is Essential Infrastructure for Communities

In August, we reported on the results of a report on UTOPIA by the Office of the State Auditor General of Utah. As you will recall, the results were less than favorable and presented more fodder for those opposed to municipal telecommunications infrastructure investment.

The same old arguments often rest on the financial investment in municipal networks - they are considered failures if they don't break even or make money. Pete Ashdown, founder of ISP XMission in Utah, addressed those arguments in the Salt Lake Tribune:

UTOPIA provides broadband service in 11 Utah cities. Today, communication infrastructure is no less critical than transportation, sanitation and clean water. Government is not a business, but the infrastructure it provides contributes to a robust business environment.

Consider how private businesses rely on government funded infrastructure. Why don’t entrepreneurs clamor to build the next generation of roads? Why don’t airline companies get off the public dole and build their own facilities? Why are sewer facilities so rarely handled by anyone else but the state?

Does effective infrastructure cost? Considerably. Does it make a profit? No.

For decades now, public service entities have contended with the argument that if they are "run it like a business" they will be more efficient, productive and even profitable. While lessons from the private sector may contribute to increased efficiency at times, government is NOT a business. Applying business tenets should be done sparingly and not in the case of critical infrastructure like electricity, roads, and yes, access to the Internet.

Gary D. Brown, who lives in Orem, shared a guest opinion through the Daily Herald and drew a similar parallel between UTOPIA's status and the business world:

When UTOPIA was first proposed, I was all for getting a fiber optic connection to every home and business in the at-that-time 17 cities. In my opinion, the original business model was sound; install fiber to each home/business and offer data, voice, and television services at the retail level.

Of course, the entrenched incumbent businesses, namely US West (it became Qwest and now CenturyLink), Comcast, and AT&T, who would face real competition, sent their lobbyists to the state legislature and after some intense lobbying, got the legislature to eviscerate the UTOPIA business plan by passing a law that prohibited community-based consortiums such as UTOPIA from offering services at the retail level.

UTOPIA will forever remain in the news because its financial struggles forced member communities to pay part of its costs through sales taxes. Though most community owned networks have not used tax revenues to support the network, we do support the right of communities to do so if they so choose.

We have covered the story of Leverett, where the community imposed a property tax increase on itself to pay for part of a new community owned fiber network. Communities that want to build networks entirely without tax subsidy should be free to do so, but those that want to pay for part of it with tax dollars should also have the right. That should be a local discussion, possibly a heated one. But it should not be decided in state capitals or Washington, DC.

UTOPIA Makes Red Cross More Efficient, Cost Effective

In 1881, Clara Barton started the American Red Cross as a way to offer relief to victims of disaster. Coordinating relief in the face of crisis will always be challenging, but now UTOPIA, the publicly owned, open access FTTH network in Utah, makes it easier and more economical. The change will allow the regional Red Cross to dedicate more funds to helping people, rather than for administrative costs.

The Murray, Utah, Blood Services location is now using an in-house video conferencing system with bandwidth supplied by UTOPIA. From the UTOPIA blog:

“The UTOPIA network definitely has the bandwidth and reliability we need for video conferencing,” says Travis Weaver, Technical Support Analyst at the American Red Cross. “UTOPIA has made in-house video conferencing possible for us. This switch saves us money because doing it in-house is cheaper than paying for the service and it allows for long distance, face-to-face meetings without the cost of travel.”

Weaver also considers the open access an added benefit. The organization is able to work with one of their current providers, easing billing and negotiation. The organization clearly appreciates UTOPIA's presence:

Weaver feels the infrastructure UTOPIA provides is critical. “I believe in the need to continually invest in the communications infrastructure of our municipalities,” he says. “Failure to do so will not let us keep pace with the rapidly accelerating network communications global community. Having access to UTOPIA in Murray City has certainly opened up our capacity to meet the communication needs of our organization by using leading-edge technology.”

 

Utah State Auditor Reviews UTOPIA, Ignores State Role in Handicapping Network

Just this week, the Office of the Legislative Auditor General of the State of Utah released a report to the Utah Legislature on UTOPIA. The report, titled A Performance Audit of the Utah Telecommunications Open Infrastructure Agency rehashes prior criticisms of UTOPIA and tells the abridged story of the Auditor's understanding of UTOPIA's financial troubles.

While one can accept the report as truthful, it certainly is not comprehensive. Jesse Harris, of FreeUTOPIA notes that leaving out certain pieces of information taint the presumed impartiality of the report. From Jesse:

The Legislative Auditor General has published an audit of UTOPIA, and, as expected, it drags a fair amount of ancient history back into the spotlight.  The report concludes that additional accountability will alleviate the problems that UTOPIA has experienced, but it missed the mark on a number of points.

The Audit Scope and Objectives are spelled out in the beginning as:

Members of the Utah Legislature asked for an audit of UTOPIA so residents of UTOPIA member cities might know how the organization has used its funds. Legislators also asked for a review the organization’s general management practices. To address their concerns, we developed an audit plan to review the following areas:

  • The size and use of UTOPIA’s debt financing
  • The causes leading to UTOPIA’s current financial 
condition
  • UTOPIA’s management and board governance practices

While there are many bar graphs, pie charts, and dollar signs in the report and it seems to meet the scope and objectives, financial information alone does not explain UTOPIA's troubles. The first place to look is close to home.

From the beginning, UTOPIA has had to overcome difficult odds in a hostile legislative environment. As we note on our Community Broadband Map, the State of Utah effectively requires that community networks function as wholesale-only. The mandate puts them at a significant financial disadvantage from the beginning, severely limiting the amount of revenue they can collect early in the life of the network.

Another state law prevents community networks from bonding for more than 50% of the cost of the network. The only choice, thanks to the Utah Legislature, was to plan on using revenue from the early phase to complete further expansion of the network. The 50% rule, combined with the wholesale-only requirement prevents the robust expansion needed to breath life into a new network. Auditor staff failed to examine the effects of these two laws taken together.

The auditors gloss over efforts by the incumbents to deliberately disrupt UTOPIA. For instance, Qwest dedicated its significant might to preventing UTOPIA to access poles that it had a right to use. From the audit:

After eighteen months, UTOPIA and Qwest finally resolved their dispute over access rights. By that time, however, UTOPIA staff report that the agency’s construction contractors had moved on to other locations and the financial resources had been committed elsewhere. As a result, the financing was no longer available to complete the partially built neighborhoods. The result is a patchwork of service with some neighborhoods receiving services and with other, adjacent neighborhoods without service. 

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It should read, "Qwest was able to delay UTOPIA's rollout by 18 months by forcing an unnecessary court proceeding. During that time, UTOPIA had little choice but to strand some of its investment and move on to areas where Qwest could not use legal tactics delay UTOPIA." The audit uses neutral language to avoid the important question of why they had a dispute to resolve -- it was because Qwest was using dirty tricks to bleed UTOPIA dry. And it worked.

There is no separation between pre-2008 and present UTOPIA. There are many examples of what hindsight can label as bad management decisions, but not enough examples of the implemented fixes. The report casually mentions a few - "stranded assets" being recovered and connected and efforts to better market the service to increase subscription rates. The Auditor could have and should have included more instances of remedial management action to give an up-to-date picture for the state legislature.

The Auditor's four recommendations revolve around management policy, practice, and greater accountability. Accountbility is always a good thing, but adopting those recommendations may or may not improve UTOPIA's financial health.

The report should have also included a recommendation to the Utah State Legislature - to remove state barriers and let local communities decide for themselves if they need, want, and can invest in broadband. Perhaps if UTOPIA was not restricted from day one, this report would not exist today.

In all, the report only considers part of the reasons for UTOPIA's struggles. There is no balancing discussion of the benefits UTOPIA has brought to its communities in return for the public money they have had to spend on the network. Those connected to the network have access to some of the fastest connections in the nation at very competitive prices. Residents and businesses can choose among more providers than literally 99% of America

None of this excuses the prior management of UTOPIA, which indeed made many mistakes. But to focus only on those mistakes only explains a piece of how UTOPIA arrived in such a deep financial hole.

Provo's Publicly Owned Broadband Network Attracts 98 Jobs

Fresno's loss will be Provo's gain. Why? Because Provo built its own network and can meet the modern telecommunications needs of businesses. A company is moving from Clovis, in Fresno County (California), to Provo, Utah. The Business Journal covered the story:

Clovis-based Secure Customer Relations, Inc., plans to move its entire operation to Provo, Utah this month, resulting in the loss of 98 jobs.

...

Secure Customer Relations operates a call center that specializes in appointment setting, client prospecting and other functions on behalf of the insurance industry.

Overall, the cost of operations in Provo would be a savings over Clovis, Carter said, including labor costs. He added that Clovis does not have the same level of fiber optic infrastructure as Provo.

Interestingly, Clovis is slated to get better access to broadband as part of the stimulus-funded Central Valley Next-Generation Broadband Infrastructure Project. Unfortunately, that is one of them any middle mile projects that will connect community anchors but not offer any immediate benefits to local businesses and residents. It is a middle mile project, not a last-mile project that would build a fiber-optic access network like Provo has connecting everyone.

This is not to demean the middle-mile project, but such things are often misunderstood (sometimes due to deliberate obfuscations by those promoting them).

And speaking of obfuscation, the Economic Development Corporation of Utah apparently wants the Utah state government to take credit for this company moving to Provo.

"We move a lot of data and need high capacity," CEO Carter Beck told the Journal last week. His company specializes in appointment setting, client prospecting and other functions on behalf of the insurance industry.

The relocation of companies like Secure Customer Relations, Inc. to Utah reaffirms the conclusions of a Utah Broadband Advisory Council Report released last week by the Utah Broadband Project and the Governor's Office of Economic Development (GOED) -- that Utah is attracting businesses due to the state's exceptional level of high-speed internet access and communications infrastructure.

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The discussion about what Utah has done to improve broadband is superfluous. Comcast, CenturyLink, and other major providers are not doing anything special in Utah. CenturyLink has cornered the low-price, slow speed subscribers and Comcast is available for most of those who simply have no other choice for a faster connection. It is Provo and a number of other Utah towns that have built next-generation networks, over the opposition of the state and incumbent providers.

Earlier this week, we posted an interview with UTOPIA and XMission, which provides service on UTOPIA (and CenturyLink, where allowed to). It is UTOPIA and the iProvo network that have boosted Utah's broadband reputation because they offer the fastest connections in the state.

In fact, the state has actively hindered the fastest networks by subjecting them to onerous regulations that do not apply to the big carriers like Comcast and CenturyLink. Why? Because Comcast and CenturyLink make a lot of campaign contributions and employ many lobbyists to cripple potential competition to their services.

If Utah actually wants to encourage jobs in areas not served by iProvo and UTOPIA, it should remove the restrictions that have crippled publicly owned networks. The vast majority of community networks have had more success than iProvo and UTOPIA, and part of the reason is that Comcast and CenturyLink have created an atmosphere of hostility in the culture and the Legislature to sabotge their efforts.

Provo and UTOPIA have been widely critiqued for significant cost overruns and a failure to sign up enough subscribers. Nonetheless, they are making positive contributions to the community, which go ignored by critics that are more interested in attacking anything the government does rather than a proper analysis of whether the private sector alone is suited to run this essential infrastructure.

Community Broadband Bits 3 - UTOPIA and XMission

For the third Community Broadband Bits podcast, we decided to do a double interview, perhaps making up for skipping last week due to our Independence Day holiday. In this show, we talk with Todd Marriott from the UTOPIA open access network in Utah. The second interview is with a provider on the network: Pete Ashdown, the founder of XMission.

The UTOPIA web site is here. If you want to learn more about UTOPIA, an excellent site is Free UTOPIA, run by Jesse Harris. And Pete Ashdown writes about broadband issues at Transmission.Xmission.com.

We continue to be interested in your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is twenty minutes long and can be played below on this page or you can subscribe via iTunes or via a different tool using this feed.

Thanks to Fit and the Conniptions for the music.

UTOPIA Scapegoated as Area Cities Increase Taxes

Jesse Harris has posted an interesting update on the present UTOPIA situation, where a number of cities are heaping perhaps too much blame on UTOPIA for rising local taxes.

A lot of cities have been talking property tax hikes lately, and the most certain thing about all of the proposals is that elected officials are going to look for someone or something to blame. In UTOPIA member cities, blaming the fiber network has become the easy go-to solution, especially since so many mayors and city council members weren’t involved in the original decision. The problem, however, is that this blame is completely paving over a deeper problem of city tax structure that’s boring, doesn’t fit the anti-UTOPIA narrative, and is a much larger problem for city budgets. Let’s take the examples of West Valley City, Orem, and Taylorsville, the latter of which is not a UTOPIA member city. In all three cases, they’ve called for large (as a percentage) property tax increases to make up for lagging sales tax revenues. So if UTOPIA is the cause of property tax increases, why would a non-member city need to more-or-less do the same thing?

The discussion in the comments offer some additional news about UTOPIA's efforts to expand its subscriber-base by giving residents the option of "leasing" a last mile connection if they cannot afford to pay for it outright in areas where UTOPIA is presently not able to extend its network all the way to the home.

Communities seeking alternative ways of financing networks that simply issuing lots of debt upfront should examine the different approaches UTOPIA has pioneered.