A Performance Audit of the Utah Telecommunication Open ...

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Five‐Year Plan Summary 2Agency (UIA). The plan entails both new build and additional penetration in existing areas. Theplan is designed to be somewhat flexible, allowing customers to get connected in areas thatexpress the most demand. Demand will be measured by launching an extensive awarenesscampaign in member cities. The campaign will allow residents to 1) be educated about thecommunity network ‐‐ many people are unaware of cities’ fiber‐optic infrastructure today; 2)learn about the power of choice and the opportunity for emerging technology that acommunity network affords them; 3) become educated about their different options forconnecting and sign up to be installed. The awareness campaign will be comprehensive, relyingon: traditional and new media, a high penetration of awareness representatives in thecommunity to help answer questions, and broad grassroots and city efforts to help keep thecommunity educated. The model anticipates construction activity in each of the participatingcities and projects subscriber growth of about 20,000 over the next five years.Funding and deploying the five‐year planThe first year calls for a bonding of approximately $20 Million. This initial draw will providefunding for the first year’s awareness, construction costs and associated debt service. Asmentioned previously, new construction will not occur until the demand has been identified.However, customer connections in existing areas (already built out) will take place as customerssign up. As targets are reached, additional funding will be drawn down. The model assumes atotal bonding of approximately $62 million, drawn down in increments over five years.Demand‐based DeploymentIn the past, the cities operated under the “build it and they will come” philosophy.UIA is addressing this issue by identifying areas with adequate customer demand tojustify the cost of construction. Under the new five‐year strategic growth plan, allconstruction will be demand based.Critical Success Factor IndexThe campaign will be launched, demand will be measured, and construction willbegin, based on UIA’s Critical Success Factor Index model (CSF). The CSF is similar tothe Baldridge quality criteria or Balanced Scorecard approach; the CSF synthesizesthe criteria to quantify demand and prioritize deployment – both in early stages andto analyze the model with the flexibility to respond to the market demand withmaximum efficiency as UIA grows. In this sense, the plan is built from the bottom up;initial projections about areas that will receive more marketing and will likely beconstructed first are based on measures that have been proven and achieved in- 68 - A Performance Audit of the Utah Telecommunication Open Infrastructure Agency (August 2012)
Five‐Year Plan Summary 3previous deployment models. Each city is divided into footprints of addresses, andeach footprint is individually evaluated in the CSF based on factors including the mixof address types (business, residential, etc.), demographics, existing take rates, thearea’s existing available services, etc.Incremental Draw Down of FundsThe plan’s take rates, revenue objectives and construction costs have been vettedagainst CSF measures. This allows predetermined metrics to be met prior to drawingdown addition bonding (after the initial draw). The UIA cities, collectively, hold thepurse strings on additional borrowings; only upon successfully hitting targets will theUIA Board approve additional borrowing. Additionally, these subsequent borrowingswill be smaller than the cities have made in the past; rather than bonding for allrequired funding in the five‐year plan, smaller increments of funds will be taken asdemand is proven and targets are reached, reducing interest costs and financial risk.How will it launch in my city?The Contractual Utility Enhancement (CUE) modelCustomers will be able to sign up for much better speed and service, and the total cost forservices and infrastructure will be available at a market‐competitive price.Under the CUE model, residents request to have fiber connected to their home. The UIA citythen identifies (through their contract with the UTOPIA network) the cost to connect thecustomer – based on the penetration of demand in that resident’s area, various financialfactors, and the type of construction – and provides a mechanism for the customer to pay theentire cost upfront or pay over a number of years. The financing mechanism, bonds within UIA,will only be sold when cities determine there is enough demand to merit a bond (after theinitial bond to kick‐start network growth); for this reason, it is not anticipated that cities willhave to cover any additional bonding.These parameters, which affect the decision to build, also affect the total cost to the customer.As more people sign up after the cost for the build/bond has been determined, the increasednumber of people paying against a fixed shared‐infrastructure cost will ultimately reduceeveryone’s payment, as they all pick up a piece. Under these circumstances, the CUEmethodology creates the optimal environment for customers to connect to the fiberinfrastructure. This cost to connect to the network is separated from the cost for services,which provides a level of transparency for city residents. Infrastructure costs are included inevery telecommunications bill; the difference is: once the infrastructure cost is paid off on theOffice of the Utah Legislative Auditor General - 69 -
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REPORT TO THEUTAH LEGISLATURENumber
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DigestA Performance Audit ofUtah Te
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Table of ContentsDigest ...........
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will be funded through UIA financin
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the organization’s general manage
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UTOPIA Did Not Reach Its Goal to Bu
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UTOPIA did notachieve its goal toco
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Figure 2.4 Summary of the Agencies
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efinancing, the maximum amount pled
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One consequence of the slow growth
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factors in deciding where to build.
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Page 32 and 33: Figure 2.11 By 2010, UTOPIA Had Spe
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Page 40 and 41: agreed to provide UTOPIA with a $66
Page 42 and 43: As problems mounted, the board deci
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Page 46 and 47: As stated previously, two possible
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Page 50 and 51: UTOPIA Has a New Development PlanAi
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