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Failed Municipal Network Leaves Taxpayers Footing the Bill

June 6, 2014

In Groton, Conn. and Provo, Utah city leaders approved plans to sell their failed municipal broadband networks for $1 each. (The systems each cost more than $35 million.)

We thought those bad deals were pretty bad until we read a post from RStreet.Com about Utah’s UTOPIA network. (See the Coalition for the New Economy’s paper on this network here.)

As of 2012, UTOPIA was $120 million in debt, about $12,000 for each of its customers. The network’s operators have been looking to sell the network to a private sector provider, and now it looks like it might have convinced an Australian company to complete the build-out of the network. According to the Salt Lake City Tribune, “Macquarie says it can build out the network, make it financially viable, assume the business risks and boost cash flow, ultimately retiring millions of dollars in public debt.”

Under the plan, though, residents in the 11 cities covered by UTOPIA would be charged a $20 monthly fee – regardless of whether they use UTOPIA or not, R Street reports. UTOPIA calls this tax an “availability fee” and, according R Street, while it would “entitle consumers” the network’s 3 Mb service (UTOPIA originally promised one gigabyte per second, R Street notes) but also caps monthly usage at 20 Gbps or “enough for five or six high-definition Netflix movies.” R Street also points out the plan “compares to the 12 to 15 Mb/s available for $50 to $60 a month, with unlimited data” available “from most cable companies.”

The latest proposal is not the first time UTOPIA has gone to utility rate and taxpayers for help. In 2012, the 11 cities in the network tried to raise property taxes to pay for the failed system.

Royce Van Tassell of the Utah Taxpayer Association opposes the proposed “availability fee.” He told the Salt Lake City Tribune, “This is a billion dollar project and that’s where you get the billion dollars … It’s a really difficult ask, to say to people who may never use it, ‘We’re going to require you to pay for the network for someone else.’”

Yet lawmakers in these 11 cities will try. (Two cities have actually already approved the plan.) R Street says UTOPIA cities will consider the “availability fee” idea in the next few weeks.

For the sake of taxpayers and other residents, the leaders in these cities should consider another, less burdensome way to deal with UTOPIA.