UTOPIA Not So Serene
HIGHLAND, UT | 15 April 2008 | Fiver hundred years ago, Sir Thomas More wrote of a society of peace and tranquility. He called it Utopia. It is hailed by some as an ideal communism and the term has become fallen into use to mean an impractical scheme. Perhaps the State of Utah did not fully understand the concept four years ago—or perhaps it has simply become a self-fulfilling prophecy—when they began building the Utah Telecommunications Open Infrastructure Association (UTOPIA), a fiber-optic network offering super-high speed internet which was promising complete coverage. The Utah Taxpayers Association is reporting this week that the government-run high-tech company has accomplished only 3% of its projected revenues and is asking pledging cities to restructure the financing, extending the 20 year salestax agreement to 33 years and effectually increasing the taxpayers’ bill from $202 million to $504 million. Utopia is a term coined by Sir Thomas More from two Greek words: oú meaning “not” and topos meaning “place.” More used the phrase because he was writing about a fictional place. The State’s UTOPIA appears to live up to this meaning as it has no place in Principles of Prosperity.
Key Points
- Government has no place in the markets. It is incapable of competing with private companies. The taking of revenues by force masks the ability to create real value for its customers and distorts the profitability of the company. If people do not like a particular private industry’s product, they are able to hold on to their dollars or to spend them elsewhere. Such is the case with Comcast or Qwest Internet services. The government, on the other hand, has no such indicator because the legalized plunder they use to collect their revenues comes into their coffers regardless of the value creation.
- Government-run high-tech communications, especially, is impractical. The technology changes very rapidly. Meanwhile the payments for UTOPIA are currently spread out over 20 years, while UTOPIA seeks to extend that time to 33 years. The Utah Taxpayers association explains that in such a fast industry:
When private providers go into capital markets to build fiber networks, they anticipate repaying the debt within 5 years. Beyond that time frame the electronics in even “future-proof” fiber optics are outdated.
This means citizens of the “pledging cities” will pay for today’s services far into their children’s and grandchildren’s lives. To keep with the growing technology of the industry, new technologies will need to be paid for with even more legalized plundering, perhaps stretching into even later decades.
Conclusion
Utah’s UTOPIA is a bad idea. It even has the less conservative sections of the state against it. A Salt Lake Tribune editorial said:
We have been dubious about UTOPIA since it was first pitched to Utah cities in 2004. At the time, we argued that governments should not be dabbling in the high-risk, volitalie telecommunications market when private comapnies already have invested heavily in their own systems.
What the editors of the Tribune do not understand by this statement is that government should never dabble in any business. The fact that this is a high-risk, volatile market is irrelevant. A low-risk, relatively stable market is equally a violation of principles of prosperity and should not be dabbled in either. Take for example the reeling Utah Transit Authority, public schools, or government-run health care facilities. These slower paced industries seldom run a profit and rely upon plunderous subsidies from its citizens to keep afloat. Principles govern all markets. The best player in any market is a private individual whose livelihood is at stake when he/she does not perform well.
Action Items
- Review Bastiat’s concept of “legal plunder” in his landmark book, The Law.
- If you live in one of the pledge cities of UTOPIA, speak to your city council members and urge them to drop the program immediately.
- Seek out capitalist companies to do business with, no matter the industry.
MRFC Principles: 
(4, 7, 9, 11, 12)
Resources
“Log off UTOPIA: Cities should cut their losses” Salt Lake Tribune, April 11, 2008
“UTOPIA and iProvo prove municipal telecom doesn’t work” Utah Taxpayers Association Newsletter,
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April 28th, 2008 at 4:50 pm
Jason,
The idea that the government wants to compete against private business is ridiculous. What makes UTOPIA even worse is that the government already has so much control over Qwest and Comcast (the businesses that UTOPIA is competing against). This is a case of the governemnt competitng against itself at the taxpayer expense.
I worked for Qwest Communications in 2004 when UTOPIA was introduced. The “experts” at Qwest were certain that UTOPIA’s build out budgets were misinformed, construction requirements and timeline were drastically underestimated, and that their sales forecasts were extremely naive. To bad the cities that adopted UTOPIA failed to inform their citizens that they had no idea what it would take to deliver what they were promising. Unfortunately, it turns out that Qwest’s experts were right.
If the government would stick to protecting individual rights, we would have more UTOPIA in society and less DYSTOPIA. As a side note, if the government lessened the abusive amounts of regulation on private utility service providers such as Qwest and Comcast, their products, customer service, availability, would be better and less expensive than they are now.
April 29th, 2008 at 4:59 pm
I used to work for Comcast during the infamous iProvo and Spanish Fork City build outs. At times there were neighborhoods without service from Comcast. In order to decide if neighborhood would be “built out” analysis was done on projected profitability. Then decisions were made as to whether the neighborhood would be built out or not.
It was very interesting that iProvo and Spanish Fork City had no choice on whether they would build out an area or not. They were required to provide their service to every resident inside the city limits. At times we saw them running miles of cable and equipment costing in the hundreds of thousands of dollars in cable, equipment and labor for 1 or 2 residents who may or may not actually want to use any service provided by the city. A private business would never choose to do this.
Government, when allowed to work in the private sector, is not concerned with silly things like cost/benefit, profitability, or demand. If they run out of money they can just extend the amount of time that the taxes will go toward building the system. They also don’t have to bother with accurate budgets, proposals and other rubbish. If they get halfway through a project, no one wants to see it abandoned for lack of funding. All the money that went to the infastructure would have been wasted or heaven forbid a private company might buy it and make an attempt at profitability. Of course I’m sure no one will receive a refund of taxes paid in any case.