UTOPIA audit
When is it time to pull the plug?
This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

A state audit of UTOPIA doesn't shed much new light on the troubled high-speed broadband network that is slowly bleeding the budgets of 11 Utah cities to pay its bonds. Maybe that's because only the market can answer the biggest question about UTOPIA: Should the cities pull the plug?

The Legislative Auditor General's report retills old ground about the mistakes in UTOPIA's past. It recommends that the Utah Telecommunications Open Infrastructure Agency implement better fiscal controls and write a narrative version of its business plan. It says the agency should follow the financial standards for local governments more closely, and be more transparent in its dealings.

But the biggest question about UTOPIA isn't operational. It's whether its business model can ever turn a profit. So far, that hasn't happened. The audit suggests that providing broadband infrastructure at wholesale to independent content providers may never work, but it stops short of drawing a final conclusion. It does say that the question may be answered in places like Centerville, where the agency is making a new push to market itself.

But if the plan doesn't work there, and the business continues to show a negative cash flow, then what happens? (The system lost $18.8 million in 2011.) Should the sponsoring cities pull the plug by refusing to underwrite any more debt?

The cities haven't done that so far because they know that a fire sale of the system's assets would bring only pennies on the dollar, and cities still would be left with bond payments on the existing debt. So they keep nursing UTOPIA along in the hope that its high-speed broadband service eventually will catch fire in the market.

It's the same reason why Provo continues to hang onto iProvo, which is suffering much the same fate.

UTOPIA was launched in 2002 with the goal of providing ultra-fast broadband connections to homes and businesses in cities that, its proponents argued, were being ignored by the telecom companies.

The original 11 cities include Tremonton, Perry, Brigham City, Layton, Centerville, West Valley City, Murray, Midvale, Lindon, Orem and Payson. Together, they will pay nearly $13 million next year to service the agency's bonds. With the reduction in sales-tax revenues due to the slow economy, some cities have begun to raise property taxes to keep their municipal services whole while making UTOPIA payments.

There's still no light at the end of UTOPIA's tunnel. Maybe it's time to quit digging.