Qwest Rallies on Death of Utopia

Qwest Communications International Inc. (NYSE: Q) won a big victory in Salt Lake City this week, but that town's residents may have been shorted a chance at choice.

After the Salt Lake City Council voted Tuesday against funding construction of a municipally owned fiber optic network called Utopia, Utah’s largest incumbent carrier solidified plans to make DSL service available to 90 percent of Salt Lake City residents by year’s end.

Qwest had said that if Utopia won the city council’s support, the company would slow its rollout of DSL in the city since demand for the service would likely have been impaired (see Grass Roots Fiber Booms). Now, with no looming city-financed rival, Qwest will proceed with the rollout at full speed.

“We have said we are going to deploy DSL to more than 200 new areas in Utah this year,” says Vince Hancock, a spokesman for Qwest. “We had to look at the best places to deploy it based on where we thought we would get the best results.”

The city council’s vote was a philosophical victory for Qwest, which as a general policy is opposed to municipally owned telecommunications networks. “We don’t think government should be in the telecom business,” Hancock says. “We don’t think they should be competing in an industry they regulate.”

The Utopia project proposes to build an open service provider network funded by, and providing service to, 18 Utah cities. The network would deliver Internet access, cable television, and phone service over one infrastructure. So far, 11 cities have committed funds to the project. Utopia’s administrators have asked participants to establish cash reserves to pay off debts in case the project fails. The Salt Lake City Council voted against setting aside the needed $4.1 million in taxpayers’ money per year for 17 years.

As a result, Utopia’s organizers will now reformulate the project’s financial plan and present it to the 11 participating cities by early May. Roger Black, COO of Utopia, says Utopia will live on, even if Salt Lake City doesn't want it. He points out that each city is only asked to carry its own costs, so Salt Lake City's departure won't necessarily dampen the rest of the lot.

Black says the city council’s vote was a disappointment, but he holds out hope that Utopia may eventually build in Salt Lake City after it has developed enough cash flow to finance the project without requiring a large reserve of taxpayers’ funds. In the meantime, Black is not overly concerned about competition from Qwest.

"It will be fun to see the competitive situation unfold when residents of West Valley City, Utah, have three and four choices of video providers over the fiber network, four or five choices of local telephone providers, and a choice of ISPs,” Black says.

“All of that will be available over Utopia, and residents of Salt Lake City will have one cable TV choice, one telephone choice, and ISPs limited to DSL speeds.”

— Justin Hibbard, Senior Editor, Light Reading