A Performance Audit of the Utah Telecommunication Open ...

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As problems mounted, the board decided to hire its own in-housestaff to assume greater control over the construction and operations ofthe network. For this reason, in 2008, UTOPIA severed ties with itscontractors and consultants, hiring a new executive director anddeveloping its own in-house staff to carry out the agency’s newbusiness plan.A Lack of Sufficient Subscribers AlsoContributes to UTOPIA’s ConditionIn addition to UTOPIA’s problems with poor planning,mismanagement, and unreliable business partner performance, a lackof sufficient customers is also a cause for the agency’s slow progress.UTOPIA’s historic and current take rates, coupled with its revenues,strongly suggest either a lack of consumer demand or an agencyinability to meet the consumer demand that does exist. A contributingfactor to UTOPIA’s difficulty in meeting targets may also be itswholesale-only operating model.Take Rates Did Not ReachProjected LevelsIn the past five years of operation, UTOPIA has failed to reach itstarget take rates (projections for subscribing residents). Currently, theUtah Infrastructure Agency (UIA) is also falling behind its mostrecent targets.UTOPIA’s originalmodel predictedsubscription rates farhigher than UTOPIAhas yet achieved.Historic Take Rates Never Reached Projections. The originalUTOPIA feasibility study predicted rapid growth in take rates. The2003 study gave a base case scenario for UTOPIA, projecting thenetwork’s success according to the performance of similar networksacross the nation. The study, based on a survey of residents in eachmember city, predicted take rates beginning at around 5 percent in thefirst year and steadily climbing to above 50 percent by the eighth yearof operations.Actual take rates in the network showed a far different pattern. Inthe first year of operations, UTOPIA’s take rate rose to almost 5,000subscribers of roughly 24,000 marketable addresses, giving it a takerate of 20 percent. However, during the next several years, the numberof subscribers grew at a slower pace than did marketable addresses,causing the take rate to drop and then hold relatively steady at around- 32 -A Performance Audit of the Utah Telecommunication Open Infrastructure Agency (August 2012)
16 percent. In fiscal year 2011, UTOPIA reported fewer subscribersthan it had in 2010, making 2011 the first year UTOPIA actually lostmore subscribers than it gained.While UTOPIA did grow during its first five years of operation,after the first year, it never met the expected growth rates. Whilemultiple factors may have contributed to UTOPIA’s lack ofsubscribers, one explanation is that demand for the product was not asstrong as first predicted by outside consultants.Current Take Rates Are Falling Below UIA Targets. UIAdeveloped a financial model that gave subscription targets for eachmonth of the next five years. UIA predicted first-year subscriptions tocome from areas where UTOPIA was already present as well as fromnew construction areas.Actual subscriptions have not kept pace with the targets outlined inUIA’s financial model. Figure 3.2 compares the number of new UIAsubscribers to the targeted growth in subscribers since July 2011. Theblue line represents UIA model projections while the red line showsUIA’s actual progress. The red line starts higher than the plan linebecause the marketing program began weeks before the start date inthe plan.Figure 3.2 Growth in Subscriptions Compared to Targets. The actualnumber of new subscribers during the first year of the new five-yeardevelopment plan is below the targeted amount.UIA’s currentsubscription rate isfalling behindprojections, averaging190 new subscribersper month instead of450.Source: Data provided by UTOPIA administration.Office of the Utah Legislative Auditor General - 33 -
Page 1: REPORT TO THEUTAH LEGISLATURENumber
Page 5: DigestA Performance Audit ofUtah Te
Page 9: Table of ContentsDigest ...........
Page 12 and 13: will be funded through UIA financin
Page 14 and 15: the organization’s general manage
Page 16 and 17: UTOPIA Did Not Reach Its Goal to Bu
Page 18 and 19: UTOPIA did notachieve its goal toco
Page 20 and 21: Figure 2.4 Summary of the Agencies
Page 22 and 23: efinancing, the maximum amount pled
Page 24 and 25: One consequence of the slow growth
Page 26 and 27: factors in deciding where to build.
Page 28 and 29: completed in a timely fashion and h
Page 30 and 31: Figure 2.10 Seven Years of Operatin
Page 32 and 33: Figure 2.11 By 2010, UTOPIA Had Spe
Page 34 and 35: plan did not anticipate the difficu
Page 36 and 37: end of 2010, 3,698 former subscribe
Page 38 and 39: Uncollected revenuesfrom retail pro
Page 40 and 41: agreed to provide UTOPIA with a $66
Page 44 and 45: The data in Figure 3.2 shows that,
Page 46 and 47: As stated previously, two possible
Page 48 and 49: This Page Left Blank Intentionally-
Page 50 and 51: UTOPIA Has a New Development PlanAi
Page 52 and 53: Centerville and in its legacy areas
Page 54 and 55: UTOPIA shouldidentify specific area
Page 56 and 57: e applied. Not surprisingly, we fou
Page 58 and 59: act in its entirety. Also, the agen
Page 60 and 61: Manual, which describes how local a
Page 62 and 63: in public, the executive committee
Page 64 and 65: separate public body that must comp
Page 66 and 67: public entities that are subject to
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Page 78 and 79: Five‐Year Plan Summary 2Agency (U
Page 80 and 81: Five‐Year Plan Summary 4cities’
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