Show All Answers
West Valley City is currently reviewing the Macquarie proposal. Under the proposal, residents will not be paying that $18-20 utility fee until their entire neighborhood, including their home, is connected to the fiber network. Approval of the plan is still months away, and there will be opportunity for public input. Once approved, it could be as many as two years before they would have to pay that utility fee. When the neighborhood is connected to the UTOPIA network and has internet service, the utility fee will be charged to each residence; the fee includes internet service at no extra cost.
Every home, apartment and business in the 11 member cities network connected.
With a ubiquitous (fully built” network, scale attracts new service providers and content opportunities).
An access portal to be installed on each residence within 30 months.
A utility of fee to be charged by the cities, in exchange, a basic level of service provided.
PPP provides fixed cost for construction and operations.
Operating deficits eliminated, no more requests for additional funding.
Network remains open access, fostering competition and enhanced services.
Upon handback of the network after 30 years, the Cities will have an asset that is expected to produce approximately $100 million of free cash flow per year. This represents a tremendously valuable resource for future generations.
Macquarie has also been a leader in developing the Public/Private Partnership (P3) model. Globally, Macquarie manages assets including $100 billion of infrastructure projects in the United States, diversified across ports, telecoms infrastructure, bridges, tunnels, roads and airports. Approximately $25 billion of these assets have been developed under the P3 model, and Macquarie believes that municipal fiber assets such as the UTOPIA network are well suited to this same model.
Resources not keeping pace – debt levels getting too high.
P3 leverages government resources without capital market expense and more debt. .
P3s ensure ‘asset performance’ — payments to private entity based on performance.
Private partner assumes burdens: on-time, on-budget, managing performance and costs.
Cost reductions of 20-30% compared to similar, government run projects.
The Cities will not have to make any payments to Macquarie until a customer is connected to the network, or 6 months after the network is built to the customer’s address, whichever comes first.
Network construction only partially complete.
Market too small to attract major providers.
Available providers not sufficient to attract more customers.
Revenues insufficient to complete construction.
Incomplete construction keeps customer base small.
A ubiquitous build-out will allow service providers to more efficiently market their services. For example, right now it doesn’t make sense for service providers to buy print, radio or billboard ads because the network is only available to a small subset of the people they would reach through those media.
But please note that a deal with Google, were it available, would provide no opportunity to assist the 11 partner cities with existing debt. Provo sold its fiber network assets for $1, kept all its debt, and was left with no revenue stream to help pay it down.
A key objective of the partnership between the cities, UTOPIA and Macquarie is to maximize benefits for the communities. Keeping the infrastructure in the control of the cities ensures all residents, regardless of income, are provided a basic level of connectivity at a competitive price.
The P3 and its various operational entities will not compete directly with private providers for residential or business customers. The operator of the former UTOPIA network will be providing a “fiber highway” that any provider can use to deliver data, voice, video and other services to customers. This highway is open to any provider that wishes to use it, including Comcast.
First, simply completing construction of the UTOPIA network will increase the alternatives available to all residents. Providing communities greater choice of providers generally reduces prices for telecom services, even from current providers. Macquarie understands that Google’s entry into the Provo, Kansas City and Austin markets has resulted in price reductions and speed increases from incumbent providers.
Second, this P3 network will help your city save money in a number of ways in delivering services and information to residents. Third, network cities may offer free services such as public ‘hot spots’ throughout the community. In short, the benefits will not begin or end at your front door.
Even if certain residents don’t use the internet, there is a very good chance they do have a phone service. For very little additional cost (likely less than $8 per month), residents could add a phone service to the basic internet service. This would likely result in basic internet and phone service at a price lower than their existing phone-only service.
The performance standards will be set to ensure users have a reliable network on which they can utilize the full capacity of connection speeds up to 1Gbps. Macquarie must meet these standards, both in network design, construction and operations, to receive any payment from the cities. Macquarie’s ultimate success hinges on superior network capability, a robust product offering and high customer satisfaction.
Existing users will also be stranded without service.
However, no adjustment will be made to cover any unexpected or unforeseen increases in costs that could have been mitigated by Macquarie. For example, even if the cost of the build out exceeds the price guaranteed to the cities, or costs to operate the network are materially higher than calculated by Macquarie, the utility fee cannot be adjusted without written consent from the cities.
So this proposal must be viewed in light of the past and the repair that is needed, but a much bigger and more important reason for it is the future. Fiber and the superfast connectivity it brings are the future in medicine, education, public safety, business and economic development – almost every aspect of our lives. Who could have imagined fifty years ago where we find ourselves today in terms of telecommunications and information technology? Connectivity affects everyday living in ways our grandparents could never have imagined. A successful, prosperous future will require even greater vision, innovation and investment, and the future is what this “deal” is really about.