NY Times on Utopia


Today's NY Times contains an article on Utopia, Utah's extensive, government-backed broadband project. Here's some interesting quotes from the article:

But private sector competitors and taxpayer groups assert that the cities and their residents face a high level of financial risk for a network that may far exceed their needs. Telephone and cable companies nationwide are scrambling to build networks relying on less expensive, less advanced technology that they argue will be perfectly adequate for many years to come.

Jerry Fenn, the president of the Utah division of Qwest, the regional telephone company here that provides its own high-speed Internet access, said there were few uses yet for the network Utopia plans to deliver. The speeds to be provided "are way more than what most consumers need in their home," Mr. Fenn said, adding, "Why provide a Rolls-Royce when a Chevrolet will do?"

From In Utah, Public Works Project in Digital
Referenced Mon Nov 17 2003 13:56:42 GMT-0700

My experience is that you have to take what Jerry says with a grain of salt. He knows his job: he's an advocate. Before he was regional President at Qwest, he was the lawyer for the Rural Telecom Assoc. In that capacity he was frequently at odds with Qwest. Right now, his job is to make sure Qwest's interests in Utah are protected and that doesn't include Utopia.

"This is a very powerful test case," said Sharon Gillett, a research associate at M.I.T.'s center for technology, policy and industrial development. "If Utopia succeeds, it will be the first really large-scale deployment of fiber to the home in the United States."

From In Utah, Public Works Project in Digital
Referenced Mon Nov 17 2003 13:56:42 GMT-0700

Of course, the biggest question about success is "can they get funding?" That's always been the question.

Mr. Morris said Utopia was arranging financing from a New York investment bank. He said that the cities would be asked to guarantee a portion of the loan Utopia acquires from the investment bank, but that the amount was still being negotiated. Such a guarantee, while not providing a subsidy in the form of tax-exempt financing, substantially increases the creditworthiness of Utopia, dropping the interest rate to the 6 percent range from as high as 12 percent, Mr. Morris said. But it also puts those cities at risk should the project fail to meet expectations.

Mr. Morris said he expected to secure the financial commitment this month, paving the way for construction to begin next spring or summer.

From In Utah, Public Works Project in Digital
Referenced Mon Nov 17 2003 13:56:42 GMT-0700

Such a guarantee is not a foregone conclusion. They haven't gone back to the 17 cities that comprise Utopia and gotten agreement to do the guarantee. I suspect some of them will drop out if that is part of the deal. There will also be some significant opposition at that stage from Qwest, AT&T, and the Utah Taxpayer's Assoc. Don't be surprised to see the Utah Legislature step into this mess. In fact, if I know Jerry Fenn, he's already got several legislator's lined up to introduce the bills and the boxcars (emplty placeholder bills) are probably already in place. Should be an interesting few months.