Utah's UTOPIA Broadband Network No Utopia for Taxpayers

The government has a nasty habit of unnecessarily getting involved in private sector industries that have a track record of consumer satisfaction and exponential innovation over time. Municipal broadband is one of the many examples where there is a wide gap between innovation between the slow unresponsive government and the private sector that is always looking to innovate. While it would be ideal if the government would learn from the failed examples of Tennessee and Louisiana (read here, and here), there is another broadband network funded by taxpayers to add to the list of busts: Utah’s UTOPIA.

UTOPIA (Utah Telecommunication Open Infrastructure Agency) is Utah’s version of municipal broadband.  With the goal of providing more access at reasonable costs, the more than decade-old project is just like many of the other taxpayer-subsidized municipal broadband programs that fail to deliver on its promises. The problems that plague municipal broadband are usually due to the fundamental fact that government can’t do a better job than those businesses that are already providing the service; and that inefficiency will lead to wasted taxpayer dollars. UTOPIA has been no exception, and the warning signs have been there from the beginning. Just this month, Kuper Jones with Americans for Prosperity discussed the latest municipal broadband boondoggle, and how taxpayers could really get left holding the bill even if the government moves UTOPIA to the private sector:

UTOPIA has been troubled from the get go. Since 2003, UTOPIA ran on operating losses for nine years straight. By the end of fiscal year 2011, UTOPIA found it had negative $120 million in net assets, according to a report issued by Utah’s Office of Legislative Auditor General. Moreover, local municipalities must come up with $13 million a year in sales tax revenues to keep UTOPIA a float. Today, UTOPIA has generated $500 million in debt for Utah taxpayers but still remains incomplete… Recognizing that there is no way for a government to successfully build a statewide internet infrastructure, UTOPIA and its 11 participating cities are contemplating being bought out by an Australian capital firm. The group claims it can finish the build out process and bring a sustainable network to Utah; however, the group’s plan would impose an $18-$20 monthly “utility” fee on all residents in participating cities–not just those subscribing to the service. Not only would taxpayers still be on the hook for the heap of outstanding debt, in some cases, they would help subsidize a service they may not even use.

It is still a question as to why with all the evidence and examples there are of wasteful municipal broadband projects, local governments still purse these projects. Part of the answer is that government entities that are involved in these projects continue to operate under the belief that their intervention is a means to providing alternative services that expand access at reasonable costs.  Even though the that assumption has been disproven time and again, it hasn’t changed the culture in Washington. Just last month, Federal Communications Commission Chairman Tom Wheeler discussed his commitment to keeping municipal broadband as a viable option, even as Utah lawmakers have attempted to limit their own taxpayer-funded broadband initiative. The remarks came during a speech to the National Cable & Telecommunications Association on April 30^th, 2014:

“It is equally important that we encourage competition wherever it is possible. One place where it may be possible is municipally owned or authorized broadband systems. I understand that the experience with community broadband is mixed, that there have been both successes and failures. But if municipal governments—the same ones that granted cable franchises—want to pursue it, they shouldn’t be inhibited by state laws. I have said before, that I believe the FCC has the power – and I intend to exercise that power – to preempt state laws that ban competition from community broadband.“

Granting cable television franchises is a whole different than building networks.  Processing paperwork is a lot different than building a broadband system. While those remarks touched on the importance of public-private cooperation in expanding broadband access, municipal broadband is something that just cannot compare to the slew of successes that can be seen from the investment of the private sector in expanding broadband access over the years. A report out early last year by Charles Davidson and Michael Santorelli at New York University Law School noted, “Broadband providers have invested more than $1 trillion in broadband between 1996 and 2010, and $66 billion in 2011.“

TPA has written about the need for cities to stop going in the wrong direction on this issue while also detailing the success of programs that are funded from the innovators in the private sector. The Coalition for the New Economy (CNE) highlighted some of the recent broadband expansion programs that have flourished by way of the private sector:

• Google has decided to expand its one-gigabit Internet service package, currently offered in the Kansas City-area.
• Skyriver, which provides Internet services to businesses, announced it will expand its services in southern California.

What’s next for municipal broadband, and more specifically Utah’s UTOPIA program is something that remains to be seen. The fact of the matter is that cities will continue to put together programs to expand broadband access, even as failures pile up. TPA believes that taxpayers need to know that these initiatives are not replicating the success of the private sector, and that as well intentioned as they may be, it is costing the public money they cannot afford and do not want to spend.