UTOPIA closes $85 million funding round

The Utah Telecommunications Open Infrastructure Agency (UTOPIA) yesterday closed on $85 million in financing needed to pay for the first phase of a fiber-to-the-premise (FTTP) project that eventually is expected to serve all premises in the 11 participating cities by 2008, according to UTOPIA officials. After completing design and engineering work, construction will begin next month on Phase I of the project, which will connect 50,000 premises in six participating cities—Murray, West Valley, Midvale, Orem, Payson and Lindon—by September 2005, UTOPIA Executive Director Paul Morris said. The $85 million will be used for Phase I of the buildout, with additional financing needed to pay for the rest of the project.

Morris said he was "very pleased" with the 3.16% interest rate on the bonds, which are guaranteed by tax revenues if UTOPIA’s wholesale business model does not generate enough money to pay the bonds on its own.

"It has been a very long time coming, with a lot of twists and turns, but we are thrilled to get moving on this open, big broadband network that will assure all citizens and businesses have the opportunity to access high speed services," UTOPIA Chair and Murray Mayor Daniel C. Snarr said in a prepared statement. Some critics questioned whether UTOPIA construction could occur after Salt Lake City--the biggest city in Utah--pulled out of the project earlier this year. Morris acknowledged that Salt Lake City’s decision not to participate forced UTOPIA to reconsider the project by increasing the risk somewhat, but Salt Lake City’s population of 180,000 does not dwarf the rest of the participating cities.

"Salt Lake did add value--there was some good density," Morris said. "But everybody perceives Salt Lake as being bigger than it is."

Morris said Comcast and Qwest Communications--the area’s incumbent cable and telecom providers, respectively--have opposed the project, with Qwest being particularly outspoken.

"[Qwest’s] corporate stance has been, ‘We must kill this project,’" Morris said. "I keep telling them, ‘I still see you as a potential customer,’ even though they say they will never offer services over a network they don’t own … But you never know what will happen in the future."

Qwest spokesman Vince Hancock acknowledged the RBOC is "vigorously" opposed to UTOPIA. "We think it’s improper for local government to gamble with tax dollars to compete with the private sector," Hancock said. "We think they have underestimated the costs [of building a fiber network] and overestimated the take rate."

Morris said UTOPIA’s business model presumes adoption by 34% of those served by the FTTP network. Hancock said Qwest believes that aspect of the plan is "borderline comical," because aggregate broadband adoption nationwide traditionally has been less than 25% and is divided among multiple providers.

Although plans call for the UTOPIA network to be open to an service provider willing to pay the monthly per-subscriber, per-service wholesale charge, AT&T will be the sole provider of a voice-video-data triple play during the first nine months of the project to simplify UTOPIA’s learning curve as it works with telecom billing systems, Morris said.

"We want our service providers to be healthy and happy," Morris said. "We just want to supply the pipe and … get out of the way, so they can compete."

Morris said the cities participating in UTOPIA believe the fiber network will enhance their economic-development efforts and improve their citizens’ quality of life. Participating municipalities also can leverage the network for public-safety and non-emergency communications.

Key vendors for UTOPIA’s active Ethernet networks are Riverstone Networks, Allied Telesyn and Amino Communications.