UTOPIA CEO: Recent success will benefit Tremonton | Tremonton Leader – The Herald Journal

The UTOPIA high-speed fiber optic network is becoming a more popular choice for internet service among the Utah cities that participate, and the man at the helm of the network says Tremonton should start seeing the financial returns it has been hoping for in the next couple of years.

Eighteen years after becoming one of the first cities to get on board with the ambitious fiber-to-the-home project, Tremonton is still making substantial payments on the bonds issued to finance the building of the network.

Roger Timmerman, executive director of UTOPIA, visited the Tremonton City Council to give an update on the progress of the network, its growing customer base, and how proceeds from the network are starting to increase in a way that will eventually benefit the city.

UTOPIA, an acronym for the Utah Telecommunications Open Infrastructure Agency, was founded in 2002 and issued its first bonds in 2004, with 11 original member cities, including Tremonton, pledging to back those bonds. The financing has been used to build an extensive fiber network in those cities, and Timmerman said the project is now seeing strong returns after some tumultuous early years.

The first bonds for UTOPIA were issued in 2004, with Tremonton and 10 other northern Utah cities getting in on the ground floor. But the early years were a struggle, and Timmerman said that in 2007, the financial situation of UTOPIA had deteriorated to the point that bond refinancing was necessary.

It was on the verge, and thats probably a light way to put it, Timmerman said. Cities were fed up with the debt burden, and it was losing a lot of money just on the operating side. There were not a lot of revenues from customers on the system, and it was a really hard time.

At the time of the bond refinancing, UTOPIA was looking at about $185 million in debt.

Under the new bond terms, member cities would make payments that escalated every year, with the agency returning enough money to the cities to at least cover the difference in payments from year to year.

Part of the new bonds were used to finish building out the network in Tremonton, and while there are still pockets where the service isnt yet available in the city, Timmerman said there has been a lot of interest among local residents in recent years.

He said about 35 percent of homes and businesses in the city that have access to UTOPIA fiber are now subscribers (about 1,000 total customers), and with the network buildout expected to be finished over the next few years, the city should see even higher take rates.

There are some very patient people out there in neighborhoods that have been part of UTOPIA since 2002 and still dont have services, but its being built out faster than it ever has been, he said.

The early years of the network were marred by low take rates (not many customers signing up for the service), and member cities have been bearing the brunt of the cost. Tremontons annual obligation on the bond payments is currently more than $300,000 annually, with the bonds scheduled to expire in 2040.

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In 2010, the Utah Infrastructure Agency (UTOPIA phase two, as Zimmerman described it,) was formed as finance mechanism for funding network expansion into new cities and areas. Instead of member cities directly backing bonds, the UIA model is for individual customers to back the bonds by signing long-term service contracts or paying a lump sum up-front. UIA cities issue the bonds, which are repaid through revenues from customers.

Tremonton opted not to join as member of UIA, but remains part of UTOPIA, placing it in a unique situation.

Even though Tremonton is not a member of UIA, we kind of consider you part of both families, Timmerman told the Tremonton council.

He said UIA has invested more than $170 million in infrastructure, and all of that is now paying for itself.

Its being built out faster than it ever has been, and were adding customers, he said. We used to celebrate 100 (new customers per month), and we may break 600 new customers this next month.

As revenues have increased, so have payments to cities to help neutralize the higher cost of the debt, although they still havent come close to reaching the break-even point.

Tremonton received $15,000 in repayment from UTOPIA last year. Timmerman said the city will receive $33,000 this year, and the hope is that amount will increase by 50 percent next year.

From the city perspective, that should mean your UTOPIA obligations stay the same, he said. As we continue to build out UIA, there should be a significant increase in that amount.

He said UIA issued a new $45 million bond to build out the infrastructure statewide, and will bond for another $45 million next year, which will complete the financing needed to build out the entire network.

He said the UIA finance committee, and ultimately its board of directors, is still figuring out how to use UIA revenues to help cities repay their UTOPIA bonds, and said it could be another two and a half to three years before that is all figured out. In the meantime, UIA will continue to make remittances so that at least the citys annual payments wont increase.

The desire is to pay off the UTOPIA bonds to get rid of those obligations, he said.

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UTOPIA CEO: Recent success will benefit Tremonton | Tremonton Leader - The Herald Journal