Documentary on UTOPIA Fiber brings opportunity to envision role of open access networks

UTOPIA Fiber, the largest open access network in the United States, released a new documentary film – Rocketeers – acknowledging challenges but touting its successes.

With the relaunch of the American Association for Public Broadband under the leadership of Gigi Sohn, now is a perfect time to watch the 24-minute documentary film. The spine of the story in Rocketeers centered on the launch in July 2022 of Yellowstone Fiber – with the very active help and assistance of UTOPIA Fiber.

UTOPIA Fiber’s history is a fascinating story in its own right. None of it could be captured in a single short film. I had the chance to watch it at the Broadband Communities Summit in May. Even more exciting than watching the documentary was being able to do so in the company of so many broadband enthusiasts for open access, including Sohn; Roger Timmerman, CEO of UTOPIA Fiber; @Kimberly McKinley, chief marketing officer at UTOPIA Fiber; and Christopher Mitchell, director of the Institute for Local Self Reliance’s Community Broadband Program; and others.

The availability of the film on YouTube presents an opportunity to step back and reflect: What can we learn from UTOPIA Fiber’s experience?

What is UTOPIA Fiber?

UTOPIA stands for the Utah Telecommunications Open Infrastructure Agency. The core of the network is found in 11 medium-to-large-sized cities in Utah, and UTOPIA Fiber is actually a government entity founded by an inter-local agreement among these cities.

UTOPIA Fiber operates an open access network upon which dozens of competitive Internet Service Providers offer their services to businesses and residents. In addition to being the largest operating open access network in the United States, it’s also fast growing. It has expanded to many additional cities in Utah, and it is also playing a significant role in Idaho (with Idaho Falls Fiber), Montana (Yellowstone Fiber), and California (the Golden State Connection Authority).

The film showed the importance of UTOPIA Fiber owning its failures and using those to springboard to success. Even though it’s been around for 20 years, over the past 10 and particularly five years, it’s been accelerating like a rocket.

Because I’ve had many interactions with UTOPIA Fiber over the past 10 years, I’ve been able to see this trajectory first-hand. In fact, from 2013 to 2019, I lived in one of the 11 UTOPIA Fiber cities: Orem, Utah.

The entity was always a topic of conversation during the time with my neighbors. In fact, the desire to see better broadband throughout my city is what led me to run (unsuccessfully) for City Council in 2017. At the time, I wrote an opinion piece about the need:

My city of Orem is one of 11 cities that participate in UTOPIA. It’s been doing it for more than a decade. Everyone agrees that UTOPIA has made mistakes.

But here’s what it’s doing right: It offers a great wholesale fiber connection, with faster speeds, lower prices and better service. It has helped jump-start a marketplace for competitive internet service providers….

But building fiber, which is necessary to support the next-generation services and wireless 5G networks of antennas, requires significant capital expenditures.

Hence, the problem our cities face isn’t with UTOPIA or with its business model. In Orem, the real problem is that only one-third of citizens have access to this vital network. 

Working to solve that problem motivated me to run for office. And, as I discovered when I ran, people didn’t dislike UTOPIA Fiber. They just disliked the fact that the network hadn’t been funded sufficient to a complete the built out of the network.

Looking backwards, however, it’s important to note that by 2022, UTOPIA Fiber had finished construction of gigabit fiber connectivity to all the homes in all of its original member cities.

What was the Macquarie Capital proposal?

One of the key things NOT covered in the film was a fascinating episode from UTOPIA Fiber’s history that may have bearing upon the current moment of investment in broadband assets. It’s the story of the unsuccessful attempt by the Australian-based Macquarie Capital to acquire UTOPIA Fiber.

In 2014, this is how Broadband Breakfast reported on the effort:

The Sydney-based Macquarie unveiled the details of its proposed Public-Private Partnership at a series of three open meetings last week. The first on Tuesday was in Orem, near Brigham Young University on the southern edge of the UTOPIA region. Wednesday’s meeting was in Layton, in northern Utah. West Valley City, a blue-collar sister city to Salt Lake, hosted Thursday’s meeting.

If the UTOPIA cities agree to the Macquarie proposal, Utah Valley would offer a remarkable contrast in financing different Gigabit Networks. Google Fiber is currently operating in Provo, and the Macquarie-built UTOPIA network would be next door, in neighboring Orem and 10 other cities.

In April 2013, internet search giant Google announced an agreement to purchase the assets of iProvo, a municipal fiber network. Google – which has built fiber networks in Kansas City and is now building one in Austin, Texas – purchased the troubled Provo network for the price of one dollar.

Importantly, Google did not assume any of the city’s liabilities, which remain the responsibility of Provo citizens. Each Provo resident currently pays a utility fee of about $6 a month.  Moreover, as the network owner, Google will receive 100 percent of the profit from the network.

Macquarie, by contrast, is proposing a 30-year leasehold interest in UTOPIA. It promises to completely build out the network, share profits with the cities, and give a working Gigabit Network back to the cities at the conclusion of the lease.

Google’s Gigabit fiber network in Provo follows the same paradigm of traditional telecommunications monopolies: it is a closed networks serviced by a single provider — Google.

The Macquarie-built network, by contrast, retains the wholesale-retail model as originally envisioned, and thus far imperfectly executed, by UTOPIA.

In my opinion, the Macquarie proposal foundered on the simple fact that they were proposing a “utility fee” that all residents would be required to pay, and the fact that the utility fee was going to be too steep for residents: $18-20 a month.

As the story above noted, Orem’s neighboring city Provo has long had a utility fee paid by all residents. So the fact of a utility fee need not have been a deal-killer. But an $18 fee was a lot richer than a $6 fee –particularly for a customer who didn’t yet understand the need for the service.

The failure of the Macquarie-UTOPIA Fiber deal was an embarrassment to many, let alone the Sydney-based Macqurie, which has limited its subsequent broadband efforts in the United States largely to Kentucky Wired, and has focused broadband infrastructure efforts overseas. 

UTOPIA Fiber drives forward

For its part, though, UTOPIA Fiber has steadily and persistently progressing, building its model out city by city, even neighborhood by neighborhood.

Call it simple, persistent growth – with strong customer satisfaction. Timmerman recounted how UTOPIA Fiber’s net revenues have begun to pay down the infrastructure debt that the 11 cities incurred to build the network, constructing a network many times larger than its original size. 

Part of its success owes to the flexibility that UTOPIA Fiber has brought to working with communities, assessing their needs, and building a model public-private partnership that works for the community. Among these recent expansions were to Idaho Falls, through an out-of-state initiative run almost like a franchise of UTOPIA Fiber, to Woodland Hills, Utah – in which UTOPIA Fiber is the service-provider to a separate city-owned network – and to Morgan City a UTOPIA Fiber-owned network in Utah, but outside of the 11 core cities.

Expanding to Idaho

Idaho Falls is UTOPIA Fiber’s first out-of-state initiative. There, the network serves as a consultant and “back office” manager for Idaho Falls Power, which launched its own fiber network, Idaho Falls Fiber, in March 2019. In October, the city council unanimously voted to continue with the fiber expansion throughout the entire city.

The Idaho Falls broadband experience began in 2000, when it built a dark fiber network for the use of the city and its electric utility. By leasing fiber to the Idaho National Laboratory and businesses, the city paid off all its debt in 2012, “a lot faster than we expected,” according to Bear Prairie, Idaho Falls Power and Idaho Falls Fiber general manager….

UTOPIA in Woodland Hills

Woodland Hills is a small and low-density but affluent community on the periphery of Utah County. The community badly wanted broadband infrastructure for more than eight years, says Kari Malkovich, a city council member.

After years of consideration, the city began to save its taxes in a dedicated fund with an eye toward building its own municipal fiber network. The most attractive model was partnering with an open-access provider, such as UTOPIA Fiber.

“If we are going to put taxpayer dollars into the network, we want to make sure it allows for competition,” says Malkovich. “We did a lot of homework, and it came to the point where we said, ‘If we own the system, then we have control and can let someone else manage it.’”

After a bid, UTOPIA came in with the best offer.

The $1 million that the city had saved funded a 400-home buildout of fiber throughout the community, averaging $2,500 per home. Then there was an additional cost of $1,500 per household for the drop to individual residences, which was homeowners’ responsibility….

Open Access In Rural Areas

The rural community of Morgan, Utah (and more recently in West Point, Utah), is where UTOPIA Fiber’s vision for gradual community-by-community network expansion is most fully realized.

A rural community without even a stoplight, Morgan is on the least-populated side of the Wasatch Mountains. It was left in the lurch when Comcast left town and stopped providing service. (CenturyLink’s DSL was unreliable.) But with a municipal power system, Morgan felt comfortable managing lines and poles. The community began exploring options to bring a new broadband provider to town.

“The more we researched it, the more comfortable we felt about it,” says Ty Bailey, Morgan city manager. “More than economic development, this is just basic service” that the city needs to offer if no one else will. UTOPIA Fiber’s willingness to bring the open-access model to Morgan became “a really good solution for us.”

As with any fiber-to-the-home network, UTOPIA Fiber’s costs are a mixture of one-time infrastructure costs and ongoing costs for backhaul transport, network operation and internet services. People associated with the UTOPIA Fiber network speak of the 30 percent penetration rate as an important threshold for profitability, even in rural communities such as Morgan.

When times were tougher for UTOPIA, the 11 cities with voting membership bickered among themselves about which city would be the next to get construction. In that era, expansion plans were never part of the discussion.

But with continual growth in subscriber base and revenues, operating revenue at UTOPIA Fiber has been more than sufficient to cover the $125 million in new bonds. That has allowed new construction in small communities such as Morgan and West Point to get service – even when they needed UTOPIA Fiber to bring in the financing and even as bigger cities were being built out, says Timmerman….

Now, on to Yellowstone Fiber

The UTOPIA Fiber film Rocketeers dwells on the story of Yellowstone Fiber, an out-of-state model somewhat like what the open access network did for Idaho Falls.

Yellowstone Fiber was formerly Bozeman Fiber, and was created in 2015 as an economic development initiative to address the lack of true high-speed broadband in Gallatin County, Montana.

A group was formed including the City of Bozeman, Gallatin County, the Bozeman School District and business leaders and funded by eight banks with a Community Reinvestment Act-designated loan.

This $4,000,000 was used to create a fiber ring connecting anchor tenants including the city, county and the school district, and also servicing the Cannery district and downtown Bozeman.

Anchor operations began in the fall of 2016, and commercial operations in February 2017. In 2020, the network formed an operational partnership with Utah-based UTOPIA Fiber to bring fiber-to-the-home services to every address in Gallatin County.

Want to learn more about the effort in Yellowstone? Watch the film!

And then answer this question:

What does UTOPIA Fiber’s progress and evolution say for the build-out of open access networks in cities and rural communities throughout the country?