This is an archived article that was published on in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Utah legislators are right to be alarmed by the latest audit of UTOPIA, the troubled high-speed broadband network that is slowly bleeding its 11 Utah cities to pay its debts. Some suggested that the cities should sell this bad investment rather than let it continue to dig a deeper financial hole.

The lawmakers may be right, but this is an issue for the cities to decide. The Legislature should not impose new laws that would limit the cities' ability to maneuver in their attempts to deal with their own mess.

Sen. John Valentine, R-Orem, is working on legislation that would prevent county or city governments from borrowing to pay for more than 90 days of UTOPIA's operating expenses or to cover interest payments on its debts. Sen. Valentine is right to be concerned, but this is a decision that should be driven by the market. If, for example, the cities were to come up with a liquidation plan that required them to keep the network on life support for more than 90 days while they close a deal with a buyer or buyers, they should have that flexibility.

That said, it's hard to see light at the end of UTOPIA's fiber-optic tunnel. Since 2002, the network has failed to turn an operating profit. It's never come close. The system lost $18.8 million in 2011, and has a negative net worth of $120 million. Meanwhile, the member cities are on the hook to pay $500 million worth of debt for the next three decades.

The biggest question about UTOPIA is whether its business model can ever turn a profit. The Legislative Auditor General suggests that providing broadband infrastructure at wholesale to independent content providers may never work. But the audit stops short of drawing a final conclusion, suggesting, rather, that the question may be answered in places like Centerville, where the agency is making a new push to market itself. If that fails, liquidation may be the only option.

The cities don't want to preside over a fire sale because they know they would be left with big debts to pay and little to show for it. So they keep nursing the network along, hoping that the demand for high-speed broadband service will catch fire, especially with high-tech businesses that may need the capacity.

That sounds more like wishful thinking than a business plan.

Meanwhile, some legislators are talking up a working group to bring new eyes to the project and help UTOPIA find its way.

We don't hold out much hope, but it's better than Capitol Hill mandating a solution.

comments powered by Disqus