Skies have been brightening for the Utah Telecommunications Open Infrastructure Agency Network (UTOPIA). The trend is continuing for the network that has seen rough times in the past, testament to their fortitude, creativity, and ability to turn lemons into lemonade.

Finishing Layton

Most recently, UTOPIA announced that they had reached an agreement with the town of Layton, Utah, to finish deploying fiber infrastructure to residents and businesses. UTOPIA plans to have deployment in Layton, where approximately half of the city currently has access to the infrastructure, completed within 24 months.

According to Jesse Harris at Free UTOPIA!, expert at all things UTOPIA, this build out varies from deployment in the earlier days of construction in a few ways:

For starters, UIA [Utah Infrastructure Authority] can now issue bonds on its own authority. This means cities no longer have to use their bonding capacity to back them. The Layton plan also has the city backing the bonds using city franchise fees. If the subscriber numbers fall below what is required to pay the bond (which, to date, has not happened in a single UIA expansion area), the city pledges to cover the difference. On the flip side, if revenues exceed the bond payments (which has happened in most UIA expansion areas), the city gets to keep a cut of that for whatever they want. This could include paying off the original UTOPIA bonds, funding other city services, or anything else, really. It’s important to note that this revenue split option is only available to cities who assumed the original debt service.

Harris speculates that, due to the housing boom in the region, UTOPIA may face a difficult time recruiting the people they need to build the network. There are also almost two dozen potential UTOPIA communities engaged in feasibility studies. All these factors, in addition to the possibility of access to materials, may impact the ability for the network to expand at the rate they’d consider ideal.

10 Gigs for Residents

In January, we reported that UTOPIA announced a financial milestone — for the first time, revenue covered bond payments and also allowed a 2 percent dividend for most member communities. 

Things have been looking up for the Utah Telecommunications Open Infrastructure Agency’s fiber optic network (UTOPIA) in recent years and in December network officials reported they’ve reached a significant financial milestone. For the first time since the open access network began operations in 2003, revenue will cover bond payments and will provide a 2 percent dividend to most of the member communities.

Despite The Limitations

In keeping with state restrictions, UTOPIA can only provide wholesale services via their fiber infrastructure. Ten ISPs offer residential services on the network, which establishes ample competition and all its benefits for subscribers, including lower prices, better customer service, and the ability to switch providers. Businesses can choose from 25 ISPs.

The wholesale-only model, however, significantly reduces the revenue communities can expect from their investment, which was the case with UTOPIA. The eleven member cities bonded approximately $185 million, but revenue limits due to the restriction, some early management decisions, and general apprehension from member communities, created political controversy. At one point, member communities considered selling out to Australian investment firm Macquarie.

Fortitude Paying Off

In 2011, eight of the member communities created the Utopia Infrastructure Agency (UIA) in order to spur more network expansion. UIA collaborates with UTOPIA as a separate entity; its purpose is to deploy the network in more locations and connect more premises and has issued the dividend to its member communities.

With the best intentions, Kentucky announced in late 2014 that it would build out a statewide open access fiber optic network to at least one location in each county to encourage high-quality connectivity in both urban and rural communities. Hopes were high as rural residents and businesses that depended on DSL and dial-up envisioned connectivity to finally bring them into the 21st century. After almost three years and multiple issues that have negatively impacted the project, legislators and everyday folks are starting to wonder what's in store for the KentuckyWired project. 

Local Communities Are Best Suited To Deploy Community Networks

There is no one-size-fits-all method of deploying across a state filled with communities and landscapes as diverse as Kentucky. From the urban centers like Louisville and Lexington to the rocky, mountainous terrain in the southeastern Appalachian communities, demographics and geography vary widely. But most lack modern Internet access and local ISPs have found it hard to get affordable backhaul to connect to the rest of the Internet.

There are several municipal networks in Kentucky, some of which have operated for decades. In addition to Glasgow, Paducah, Bowling Green, Frankfort, and others, Owensboro is currently expanding a pilot project that proved popular. As our own Christopher Mitchell discussed at the Appalachia Connectivity Summit, several cooperatives have made major fiber-optic investments in the state.

When it comes to connecting residents and local businesses, we strongly believe local entities are the best choice. Local officials have a better sense of rights-of-way, the challenges of pole attachments, and the many other moving pieces that go into network investment. Projects with local support see fewer barriers - people are more willing to grant easements, for instance. 

For the second week in row, our staff has felt compelled to address a misleading report about municipal networks. In order to correct the errors and incorrect assumptions in yet another anti-muni publication, we’ve worked with Next Century Cities to publish Correcting Community Fiber Fallacies: Yoo Discredits U Penn, Not Municipal Networks.

Skewed Data = Skewed Results

Professor Christopher S. Yoo and Timothy Pfenninger from the Center for Technology, Innovation and Competition (CTIC) at the University of Pennsylvania Law School recently released "Municipal Fiber in the United States: An Empirical Assessment of Financial Performance." The report attempts to analyze the financial future of several citywide Fiber-to-the-Home (FTTH) municipal networks in the U.S. by applying a Net Present Value (NPV) calculation approach. They applied their method to some well-known networks, including Chattanooga's EPB Fiber Optics; Greenlight in Wilson, North Carolina; and Lafayette, Louisiana's LUS Fiber. Unfortunately, their initial data was flawed and incomplete, which yielded a report fraught with credibility issues.

So Many Problems 

In addition to compromising data validity, the authors of the study didn’t consider the wider context of municipal networks, which goes beyond the purpose of NPV, which is determining the promise of a financial investment.

Some of the more expansive problems with this report (from our Executive Summary):

S&P Global Market Intelligence - May 26, 2017

Hard Data on Municipal Broadband Networks

Written by Sarah Barry James

There is a dearth of good data around municipal broadband networks, and the data that is available raises some tough questions.

A new study from University of Pennsylvania Law School Professor Christopher Yoo and co-author Timothy Pfenninger, a law student, identified 88 municipal fiber projects across the country, 20 of which report the financial results of their broadband operations separately from the results of their electric power operations. Municipal broadband networks are owned and operated by localities, often in connection with the local utility.

...

Yet Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, argued that Yoo's study did not present an entirely accurate or up-to-date picture of U.S. municipal networks.

"When I looked at the 20 communities that he studied — and his methodology for picking those is totally reasonable and he did not cherry pick them — I was not surprised at his results because many of those networks are either in very small communities … and the others were often in the early years of a buildout during a period of deep recession," Mitchell said.

As an example, Mitchell pointed to Electric Power Board's municipal broadband network in Chattanooga, Tenn. — one of the five networks Yoo identified as having positive cash flow but at such a low level that it would take more than 100 years to recover project costs.

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In fact, without the revenue generated by the fiber-optics business, EPB estimated it would have had to raise electric rates by 7% this year.

According to Mitchell, Yoo's study captured the Chattanooga network when it was still "small and growing," but misses "what's going to happen for the rest of the life of the network, which I think is the more important part."

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Telecompetitor - May 25, 2017

Municipal broadband networks do not have a strong financial track record, according to an analysis conducted by the University of Pennsylvania’s Center for Technology, Innovation and Competition. The municipal broadband financial analysis, which looked at 20 municipal fiber projects, found that only nine were cash-flow positive and that of those, seven would need more than 60 years to break even.

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An Opposing View

Municipal network advocate Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, pointed to several flaws in the Penn Law municipal broadband financial analysis.

He noted, for example that a substantial portion of the 20 networks studied were “early in the process and very small.” He also argued that the 2010-2014 study period may have biased the results, as that period included a recession and subscribership for some of the networks has increased substantially since 2014. He noted, for example, that EPB’s broadband network in Chattanooga had about 50,000 to 55,000 subscribers in 2014 but has now hit the 90,000 mark.

The Penn Law authors’ approach was “not the proper way to measure these networks,” said Mitchell in a phone call with Telecompetitor. The analysis “doesn’t take into account jobs created or the impact on the municipal budget,” he said.

He argued, for example, that a municipality that previously paid $1 million annually for connectivity might instead pay itself $500,000 for connectivity on the municipal network.

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Read the full story here.

The Utah Telecommunications Open Infrastructure Agency’s (UTOPIA) regional fiber network serves communities in the north central region of the state. Without the publicly owned network, it’s doubtful the eleven communities served would have access to high-quality Internet access. It’s almost certain they wouldn’t be able to choose between so many providers who operate on UTOPIA's open access infrastructure. Now, the city of Bountiful, Utah, wants the network to extend its reach to their community.

Reaching Out To Other Communities

Recently, the city council voted to give UTOPIA a franchise agreement so the network but the city will not contribute financially to the deployment. According to the Standard Examiner, officials from the networks anticipate the first customers will be business subscribers who would help pay for the expansion.

Bountiful isn’t alone - other communities have granted franchise agreements to UTOPIA.

“This is just kind of a natural progression out of the Salt Lake Valley,” said [Roger] Timmerman, executive director of UTOPIA… The deal “brings more options to Bountiful,”

Bountiful City Councilman Richard Higginson described UTOPIA as a “proven player” in an email to the Standard Examiner. Other communities with franchise agreements include Salt Lake City, Draper, South Jordan and Pleasant Grove. Higginson wrote:

“If UTOPIA and its member cities find that providing services to customers in neighboring cities benefits their operation, then it could be a win-win for both UTOPIA and non-UTOPIA cities alike."

The franchise agreements will allow UTOPIA to deploy in cities' rights-of-way in order to connect customers to the network.

Broadband Benefits In UTOPIA Towns

Last fall we spoke with Mayor Karen Cronin from Perry City, which already connects to the UTOPIA network. She described how competition from the open access network has improved local services, the economy, and the general quality of life. Roger Timmerman participated in the interview as well. Listen to the podcast here.

It’s no small feat to plan, deploy, and operate a municipal citywide Fiber-to-the-Home (FTTH) network, but communities are doing it. We’ve put together a Citywide Municipal FTTH Networks list and a map, with quick facts at your fingertips. If your community is considering such an investment, this list can offer a starting point on discovering similarly situated locations to study.

The list is divided by state and each state heading offers a description of any barriers that exist and a link to the statute in question. Under each community, we also included relevant links such as to the provider’s website, coverage on MuniNetworks.org, and reports or resources about the network.

We used four basic criteria to put a community on our list and map:

• The network must cover at least 80% of a city.
• A local government (city, town, or county) owns the infrastructure.
• It is a Fiber-to-the-Home network.
• It is in the United States. 

Share the list far and wide and if you know of a community network that meets our criteria that we missed, please let us know. Contact H. Trostle at htrostle@ilsr.org to suggest additions.

Consumers should be able to expect a certain amount of privacy and recent rules adopted by the FCC are a step in the right direction. That step has also revealed some key differences between profit-driven national Internet service providers, smaller ISPs, and municipal networks. The different attitudes correspond with the different cultures, proving once again that small ISPs and munis have more than just profit in mind.

On October 27th, the FCC adopted an Order to allow ISP customers to determine how their data will be collected and used. According to the FCC, they made the decision in response to public comments about the concern for personal data protection.

The New Rules

Over the past few years, consumers have become savvy to the fact that ISPs have access to personal data and that they often sell that data to other companies for marketing purposes. Under Section 222 of Title II of the Communications Act, telecommunications carriers are bound to protect their subscribers’ private information. Because those rule are designed to change as technology changes, says the FCC and Congress, this same authority applies to private data collected by ISPs. 

The FCC decided to divide the permission of use of personal information based on type, categorizing information into “sensitive” and “non-sensitive.”

Sensitive information will require ISPs to obtain “opt-in” consent from subscribers, which will allow them to use and and share this type of information:

• Precise geo-location 
• Children’s information
• Health information 
• Financial information
• Social Security numbers
• Web browsing history
• App usage history
• The content of communication 

Non-sensitive information would include all other information and customers would need to "opt-out" in order to prevent their ISPs from collecting such data. Examples of non-sensitive personal information include service tier information.