Thank you Roger for that detailed write up. What happened to the first phase bond?
Jared Sent: Friday, October 28, 2016 at 8:37 PM From: "Roger Timmerman" <timmer...@gmail.com> To: af@afmug.com Subject: Re: [AFMUG] Ammon City fiber Most of what Chuck says is true about the first phase of UTOPIA. It was a disaster. Some of it was their fault, some of it wasn't. For example, AT&T was actually the first service provider on UTOPIA and had an initial exclusivity period. One day the higher-ups at AT&T decided to abandon that part of the business without telling anyone. AT&T's services on UTOPIA went dark and no one was there to answer the phones. Took a while to recover from that one. The next provider to go belly-up was Mstar which was a whole other financial disaster for UTOPIA. RUS loans that were approved and then later withdrawn caused UTOPIA to invest heavily in rural areas rather than build in more strategic areas. This was the topic of a lawsuit between UTOPIA and RUS for which there was a recent $11M settlement after several years of fighting. A lawsuit from Qwest tied up construction for a while and cost a fortune to fight but eventually resulted in a settlement, was still a huge blow to the project. Bad management, bad state legislators, bad contractors, you name it. UTOPIA has had tough times. However, there was a restructuring about 8 years ago when I first came on board. The management company was given the boot and we parted ways with bad contractors and partners. We in-housed our operations, NOC, technicians, network engineering, etc and recruited better service provider partners. Costs dramatically decreased, reliability increased, and the project gained some stability even though it was still costing a lot of money keep the lights on. We used what money we had after a debt refinance of the original bond to finish Tremonton City, and we partnered with Brigham City to build their city with them doing their own bond. The revenues covered all of Brigham City's new debt payments and the new revenue decreased the bleeding for UTOPIA. We knew that if we could replicate the success of Tremonton and Brigham City we would not only build out more network, but also would further alleviate the bleeding and maybe even break even. 9 of the original 11 UTOPIA cities agreed to take down new debt to do this. One dropped out when it came time to bond so only 8 proceeded with the bond. Because it had different city membership, we had to create a new agency that acts only as a financing arm for furthering the project, with the same purpose of UTOPIA, but without investing in the cities that didn't financially support the new growth. UTOPIA and UIA (the 8 city project) have taken down three additional incremental bonds for building out the system. Now we cover a much larger area and are covering all of costs and generating positive net revenues. All of the debt service is also being paid for by UTOPIA and UIA except for the first phase bond. Rather than spend the net revenues on partially addressing the original bond, we are investing in finishing out the project. We are currently building out at our fastest pace with a model that is financially sustainable and actually profitable. Our service provider partners are stable, growing, competitive, and well liked. If bonding weren't so politically unpopular, you would see us or other similar projects everywhere. However, bond is a four-letter word these days and it is still an uphill battle to do these types of projects despite how well they do. Roger On Fri, Oct 28, 2016 at 10:46 AM, <ch...@wbmfg.com[mailto:ch...@wbmfg.com]> wrote:It is all armchair quarterbacking at this point. It went wrong at its inception. A guy named Arthur Brady with Telecom Choices played the part of Harold Hill in the Music Man. He got paid for the band instruments and blew out of town. So, the cities were sold a bill of goods in my opinion. But the largest city was smart enough not to put its foot in the trap. Salt Lake City. Then they had issues with contractors and quality of work. They overpaid. They borrowed too much etc etc. They honestly expected Qwest and Comcast to ride their network. There was a point in time that Wireless Beehive was installing at a weekly rate greater than UTOPIA and almost had as many customers. We were in the hole perhaps $2-4M and they were in the hole more than $100M. I think it was more like $216M. All backed by bonds that were tied to sales tax revenue. Originally they needed 120,000 customers they said to be viable. That was a 1/3rd take rate. I am guessing they don't even have 25K at this point but that is just a guess based on nothing. So the debt service was more than they could ever cover it appeared at one time. I fully expected bankruptcy. Then they attempted to do a deal with an Australian company that would have forced personal debt on everyone owning property in all the member cities. It has been a cluster from the start. Sounds like Roger has turned it around. I personally am philosophically opposed to governments providing goods or services that private companies can do. Obviously streets are better done by government. Arguably water and sewer. I have lived in cities with two power companies. But all the rest should be done by commercial providers. More importantly government should never compete with businesses. They have many unfair advantages. -----Original Message----- From: fiber...@mail.com[mailto:fiber...@mail.com] Sent: Friday, October 28, 2016 1:49 AM To: af@afmug.com[mailto:af@afmug.com] Subject: Re: [AFMUG] Ammon City fiber Chuck McCown wrote:Utopia tried that method in Brigham City and it didn't work so well (for a variety of reasons). Did UTOPIA have any option? Municipalities in Utah are barred from providing retail services. Where do you think they went wrong? Jared
