The pledges, which increase the commitments the cities made four years ago from $202 million over 20 years to $500 million over 32 years, are viewed by Utopia's supporters as a critical component that will help secure the network's future.
They will be used to guarantee the repayment of a $189 million bond issue that will retire Utopia's existing bond debt taken on at a higher interest rate. Once that debt is retired and other bills paid, the system will be left with $11 million in desperately needed working capital.
"We're going to be innovative, cutting edge," said Todd Marriott, a Colorado-based adviser to Utopia after the Murray City Council voted 4-1 Monday evening to back the debt refinancing.
Despite promises that it has turned a corner, many municipal leaders expressed concern about increasing their cities' commitments to the foundering network, even as they voted for the refinancing. Payson was the only Utopia member city to vote against the restructuring.
"I've come to view this as the lesser of two evils," Murray Councilman Jim Brass said in a statement that echoed those of municipal leaders in Utopia's member cities. At least "this will give them a two-year window to see if they can turn this thing around - or not."
Short for the Utah Telecommunication Open Infra- structure Agency, Utopia was organized in 2002 amid a sense of frustration among the leaders of its founding cities that the state's largest telecommunications providers weren't moving fast enough to bring high-speed broadband services to their residents.
Instead of waiting, the cities - Brigham City, Centerville, Layton, Lindon, Midvale, Murray, Orem, Payson, Perry, Tremonton and West Valley City - decided to build a wholesale network that would lease capacity to any service provider who wanted to use the system's fiber-optic lines to serve customers.
Four years after construction began, low customer counts and financial missteps drained Utopia's bank accounts to where it was teetering on insolvency. For Utopia's promoters, the refinancing was necessary if the network was to have a future. Without it, the member cities would be called upon to start funneling their initial $202 million in pledges to Utopia to pay off its bonds, even as the network shut down.
Murray Councilwoman Krista Dunn, who sided with the 4-1 majority to support the refinancing, said her decision was not a vote of confidence. If the network shows signs of failing in coming months, it might be time for the city to cut it losses. "We at least will have a chance to sell it [Utopia], although it may only be for pennies on the dollar."
Utopia's managers have declined to answer specific questions about their plans, such as the time frame for building out the rest of the network. Marriott contends Utopia needs to keep such details secret for proprietary reasons, citing competitors such as Qwest and Comcast.
Still, some details have seeped out.
Utopia intends to charge new customers who want to do business with the service providers $1,000 to $3,500 as an up-front connection fee. It also will try to collect $500 from each of its 7,500 or so existing customers by offering to sell them the equipment placed inside their homes that allows their computers, TVs and phones to connect to the fiber-optic lines outside.
Utopia also is negotiating with its service providers to offer wireless connections, something that the network's operators originally rejected as being too slow to satisfy the broadband needs of the future.
"We're going to be looking at every opportunity we can to generate revenue," Marriott said, noting after the network spends its $11 million in working capital it will have to live on the revenue from customers. "We're going to have to kill what we eat."
When Utopia was founded, its promoters promised fiber-optic lines would be run down every street and everyone in its member cities could hook onto the network. With only $11 million to work with, Utopia intends to concentrate on building fiber-optic rings in the remaining areas.
Although it promises it eventually will run lines down every street, that will happen only when customer numbers justify construction.
Utopia critic Royce Van Tassell of the Utah Taxpayers Association, said it is easy to promise a ubiquitous network without giving a time frame for its completion.
"Their scare tactics worked," he said after the vote in Murray, which was the last city Utopia needed to sign on to its refinancing plan. "They delayed letting the cities know about their [the network's] problems until things got so bad that they could stand up before the city councils and say there was only one option left - refinancing. And it worked so well that they [the member cities] were willing to put a half-billion in future taxpayer money at risk."
steve@sltrib.com
