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CITY OF OREM CITY COUNCIL MEETING March 10, 2004
5:00 P.M. STUDY SESSION
CONDUCTING Mayor Jerry C. Washburn
ELECTED OFFICIALS Councilmembers Les Campbell, Dean Dickerson, Douglas R. Forsyth, Karen A. McCandless, and Shiree Thurston.
APPOINTED STAFF Jim Reams, City Manager; Paul Johnson, City Attorney; Richard Manning, Assistant City Manager; Jeff Pedersen, Administrative Services Director; and Gina Peterson, Deputy City Recorder.
EXCUSED Councilmember Stephen E. Sandstrom
REVIEW OF AGENDA ITEMS
The Council and staff reviewed the agenda items.
The Council adjourned at 5:55 p.m. to the City Council Chambers for the regular meeting.
6:00 P.M. REGULAR SESSION
CONDUCTING Mayor Jerry C. Washburn
ELECTED OFFICIALS Councilmembers Les Campbell, Dean Dickerson, Douglas R. Forsyth, Karen A. McCandless, Stephen E. Sandstrom (arrived at 7:13 p.m.) and Shiree Thurston.
APPOINTED STAFF Jim Reams, City Manager; Paul Johnson, City Attorney; Richard Manning, Assistant City Manager; Jeff Pedersen, Administrative Services Director; Ernesto Lazalde, I.T. Division Manager; and Gina Peterson, Deputy City Recorder.
PLEDGE OF ALLEGIANCE Cory Bird from Scout Troupe 568
INVOCATION / INSPIRATIONAL THOUGHT Ben Gold
City Council Minutes – March 10, 2004 (p.1) PERSONAL APPEARANCES
Time was allotted for the public to express their ideas, concerns, and comments on items not on the agenda.
Mr. Harold Bailey indicated he owns Packard’s convenience store south of UVSC. UTA moved their bus stop from across the street so it is now in front of his property. At times there are as many as 40 students at the bus stop and there is no place to sit. It was his understanding a new stop would be constructed in the spring, yet now the City has told him it will narrow the street and the stop will remain in front of Packards. Mr. Bailey stated the street is already too narrow because buses run into the sidewalk. He feels the bus stop should be located across the street and a place should be built for the students to sit. Often times the students litter around his property. He was told by the City Attorney to put up a fence that says “no trespassing”, but he stated he wants to be friends with students.
Mr. Reams indicated there are challenges in locating the bus stop on either side of the street. He reported that the City Engineer was going to investigate locating the stop on the campus side of the street following a recent meeting with Mr. Bailey.
Mayor Washburn noted he met with Mr. Bailey a couple of months ago. He stated the most important concern for the City is the safety of pedestrians and students in the area. A secondary issue is the safety of traffic. Whatever decision is made will be based on those issues. Mayor Washburn concluded saying the City has no vested interest in the bus stop location and is generally concerned with safety as well as Mr. Bailey’s property rights.
SCHEDULED ITEMS
6:00 P.M. PUBLIC HEARING – RESOLUTION – Authorizing Execution of a Pledge and Loan Agreement for Utah Telecommunications Open Infrastructure Act (UTOPIA)
For about two years the City of Orem and seventeen other communities in Utah have joined together to form UTOPIA to develop a fiber optics system to serve each home and business in the member communities. This network will serve as an electronic highway to provide services. These services will be provided by private vendors leasing the use of the electronic highway. AT&T recently signed an agreement with UTOPIA to provide triple play (voice, data, and video) services over the network. Additional contracts are being negotiated with other private vendors such as MSTAR and X Mission. The UTOPIA network is designed to have open access to multiple providers and thus provide a variety of competitive services to home and businesses.
To date UTOPIA has completed a preliminary feasibility study and a final feasibility study. The feasibility study has been reviewed and thoroughly examined by Dean & Company; a national consulting firm that reviews business plans for telecommunication undertakings. Dean & Company only recommend that about five percent of the proposals they review be pursued by their clients. They have described the UTOPIA business plan as a “robust” plan.
The financial feasibility of the system is dependent upon accurate revenue and expenditure projections. The revenue projections are based on two factors, the lease rate for use of the
City Council Minutes – March 10, 2004 (p.2) system to be paid to UTOPIA by the private vendors, and the number of subscribers to the system. The number of subscribers is based on surveys conducted in member cities by the Strategic Research Institute (SRI). Dean & Company has verified their estimates. The lease rates have been set by contract with AT&T and meet the requirements of the feasibility study. The expenditures (the cost to construct, operate and maintain the system) have been determined by competitive bid.
The next step for UTOPIA is to obtain financing through a bond issuance. In order to finance the bonds, the bond raters and bond insurers are requesting that the member cities agree to guarantee about 39% of the annual debt service. The bond insurer will guarantee the other 61%. The feasibility study projects there will be adequate revenue to cover debt service costs, and operation and maintenance of the system. The bond insurer has asked for this additional financial guarantee of the bonds. Orem’s cost to guarantee its share of the bonds could be up to $2,189,704 annually. Recent legislation requires that the City set this guarantee aside by the time payment would be due; four years after the bonds would be issued. No bond payments are due for the first two years. Any revenue shortfall in the third year would be covered by the debt service reserve fund that the City would be required to replenish by the fourth year and each year thereafter if needed for 20 years.
Mr. Reams then introduced representatives from UTOPIA, Qwest, and Comcast, that would be addressing the City Council.
Paul Morris, Executive Director for UTOPIA, stated the communities that have been involved in the UTOPIA project believe that telecommunications is absolutely essential for economic viability. There is no intent to disparage any company providing those services, but the communities feel there is a disconnect between what these companies provide and the long term needs of the communities, particularly when measured against what will be available on the UTOPIA network.
Mr. Morris reviewed how the UTOPIA network would work. UTOPIA will build the system. Service providers leasing the system would pay wholesale prices to use the network. Revenues from the service providers would cover the debt service. Any excess money after paying off the debt would go back to the cities. Loan guarantees would only be called upon if the take rates were below anticipated.
Mr. Morris stated the actual structure for financing would be finalized after it is determined how many cities are involved. Once the financing structure is complete it will be approved by the UTOPIA board and submitted back to the City. The City will be advised every step of the process. The amount guaranteed by the City is a fixed dollar amount that will not go up, no matter what. Mr. Morris indicated, with the passage of Senate Bill 66, another public hearing must be held before final approval. Mr. Morris acknowledged that by pledging sales tax to guarantee a portion of the debt service, the City’s ability to issue other bonds is reduced.
Mr. Morris then outlined the preliminary list of cities participating in UTOPIA as follows: Brigham City, Cedar City, Cedar Hills, Centerville, Layton, Lindon, Midvale, Murray, Orem, Payson, Perry, Riverton, Roy, Salt Lake City, South Jordan, Taylorsville, Tremonton, and West Valley City. Orem will be participating in 11.2% of the cost of the UTOPIA system assuming
City Council Minutes – March 10, 2004 (p.3) all 18 cities remain involved. He reiterated the pledge amount from Orem City is $2.19 million a year.
Mr. Morris reviewed some of the criticisms received: The feasibility study overestimates the take rates. These take rates were reviewed extensively by Dean & Company. The take rates will drive the prices down.
Costs. Actual costs fit at or below estimates. UTOPIA believes the system can be built for the prices indicated.
Fiber to home is a technology that will become obsolete. Years ago when UTOPIA was first being investigated, it started out technologically ambivalent. It has been determined that for at least the next few decades, and for the life of the bonds, fiber will not become obsolete by any technology, including wireless. In relation to redundancy, capacity and raw bandwidth, nothing touches fiber technology. The UTOPIA business model includes a formula to keep pace with the changing electronics of fiber technology.
High speed services already exist. DSL is available, but in relation to economic development and the standard needed, it is not there. Big Broadband, 10 megabits (Mb), is not available. Many residential and business areas are still not serviced with DSL.
Government should not intrude where there is a robust competition. Taxpayers pay for the telephone network and even with the telecom act of 1996 there is still a defacto monopoly in Utah, particularly in residential areas. Companies, such as Comcast and Qwest, that expand their networks do not have any obligation to allow anyone else to use their network. UTOPIA is not competing against the private sector, but is providing an infrastructure that allows private providers to compete. Government has traditionally been involved in important and essential infrastructure, from water, sewer, and roads to airports.
Mr. Morris stated several key benefits of the UTOPIA project include world-class speed and the most advanced network in the United States, bar none. There are other places in the world that will have an equal system. There will not be a digital divide in the community in higher end areas. It will give the economic vitality advantage which will increase the tax base. The network embraces robust competition. Even those that do not use the network will get a benefit through competitive pricing. Mr. Morris indicated UTOPIA would be a true benefit to the entire community.
Mrs. McCandless asked if the possibility existed that Orem would be asked to commit to a higher amount above the $2.19 million if the pledge were approved. She also asked what other areas of the world have 100 Mb service. Mr. Morris indicated the pledge amount would not increase due to the passage of Senate Bill 66. This bill grandfathered Provo, with iProvo, and those cities participating in UTOPIA, but gave specific requirements with deadlines that the issue had to be noticed by March 2 and decided by April 15, 2004. It also mandated that if pledge amounts changed, the process would have to begin all over which is not possible due to the deadline dates. Mr. Morris indicated Iceland, Sweden, Italy, and Japan have 100 Mb service.
Mrs. McCandless referred to the Riverstone Network and asked if the difficulties they have had are a concern to UTOPIA. Mr. Morris stated the board reviewed four criteria in determining
City Council Minutes – March 10, 2004 (p.4) what type of technology to use. They picked an active Ethernet system because they did not want proprietary vendors. Riverstone had a financial scandal, but their equipment measures up very well. Notwithstanding their problems, Riverstone is highly rated, but if they happen to run into difficulties, UTOPIA has others waiting in the wing to take their place. Riverstone won the proposal fairly based upon their abilities and product.
Mrs. McCandless asked how wireless compares to fiber. Mr. Morris indicated wireless is a complementary service but not a substitute for a fiber system. There is absolutely a role for wireless, and he believes UTOPIA will also have a wireless system. The three great issues for wireless in the future will be for mobility; wireless inside homes and businesses to distribute services within short distances; and price. Rural areas needing service that are not ready for fiber have a good option in wireless. Wireless doesn’t have the capacity of fiber, but it can provide something better than the alternatives.
Mrs. Thurston asked about the agreement with AT&T. Mr. Morris indicated AT&T is the first of several providers on the network. UTOPIA has a nonexclusive contract with AT&T to phase in and start with a company. In order to get financing, UTOPIA needed a heavy hitter that would provide all the triple play services. The system will interface with one company and work out any weaknesses. There will be a trial test period between AT&T and another billing system but people will not be able to switch between the two companies. After nine months of working out any faults other companies will be invited to participate as single service provider and subscribers can switch between providers. Currently Xmission, MSTAR, and Sisna have expressed an interest in joining after the nine month time period. When the network is half built it will be a completely open network with other triple and double play providers being added. The bulk of the potential subscribers are all when it is a completely open network. Fears of exclusivity with AT&T were raised during the process of Senate Bill (SB) 66. It was never the intent of UTOPIA to give an unfair advantage to AT&T, rather to phase in other service providers until there is a completely open network. SB 66 says that no entity can give an undue advantage to a service provider. Based on that legislation, discussions will take place with AT&T and other service providers interested in participating on the network, to ensure full compliance with SB 66
Mrs. Thurston asked if any aspect of this network challenges the telecom act of 1996. Mr. Morris responded no, adding that issue was studied extensively.
Mayor Washburn asked what the actual financing structure would be after all of the cities have determined whether or not to authorize their pledge. Mr. Morris indicated the financing people have spent a great deal of time on this issue. UTOPIA believes the network will work and not have to use the pledge amounts, but it is appropriate to ask “what if”. UTOPIA will not build the entire system and then see if it works; it will be built and turned on in phases. The financing structure is set up to minimize risks on the pledge amount and allow certain exit points. It is similar to a construction loan, with bench marks, spending money, and then turning into long term financing.
Mayor Washburn acknowledged financing is set up to pay off debt service first. He asked, as a best case scenario if the take rate in Orem is high and there is a surplus after a number of years, would that surplus be accrued to the benefit of Orem or shared among member cities. Mr. Morris responded it would be to the benefit of Orem, but only after the debt service is paid.
City Council Minutes – March 10, 2004 (p.5) Mayor Washburn asked if it was possible for others cities to accrue a deficit to the point of impacting Orem. Mr. Morris indicated the interlocal agreement banding cities together spreads the risk amongst everyone, almost like an insurance policy. If needed, Orem’s pledge would be called upon the same as another city, yet once debt service is paid any surpluses are attributed to those who generate it.
Mr. Forsyth asked how SB 66 impacted financing. Mr. Morris stated the only change made by SB 66 to financing was that UTOPIA will bring back the final financing plan, the City will consider the plan at another public hearing and then be able to adopt a revised Interlocal agreement. At this time, the City has one final option to withdraw. SB 66 also indicates the sales tax pledge has to be less than 50% of the total debt service. The current number is 39% but may change with the final financing plan. Also, for the benefit of Comcast and Qwest, written notice must be provided to them the day the city sets the public hearing. Mr. Morris clarified that SB 66 did not change anything about the sales tax pledge.
Mrs. McCandless asked for clarification of what possible changes could take place in the City’s financing obligations between now and the final financing plan. Mr. Morris indicated some cities participating in UTOPIA might choose not to pledge. He stated the formula would be recalculated among the cities that remain UTOPIA members, based on the reduced cost of the network and the higher percentage of the new cost attributable to Orem.
Mayor Washburn then invited comments from Mr. Reams.
Mr. Reams stated over the last 20 years a major part of the City’s economy has been based on technology. Orem has been known as the center of technology with WordPerfect, Novell, and many spin-off companies coming from this area. The economy will continue to be built based on technology and for economic growth he believes it is essential to have technological infrastructure in place. Mr. Reams acknowledged the gap between services that are wanted and what is being offered. He feels there is good community support for this effort. Mr. Reams recommended the City Council’s approval of the UTOPIA pledge based on the fair and reasonable feasibility study which has been reviewed by Dean & Company with a skeptical eye. He stated there is a very comfortable margin between the feasibility study “base case” take rates and the subscriber rates necessary to financially support the costs. Mr. Reams recognized the risks, but believes the City has done its due diligence and looked at the issue from many directions. He stated it is a low risk to the City to provide needed and valuable services for the community.
Mayor Washburn asked Mr. Reams understanding about the system becoming obsolete or being allowed to grow. Mr. Reams indicated he has learned a lot over this process and his understanding is that the ability for uses of fiber continues to grow at leaps and bounds. Wireless will not take over because uses of fiber are being developed at a faster rate than the uses of wireless. The feasibility study looked at this issue and anticipated the replacement of the electronics at either end of the fiber, and UTOPIA has planned to upgrade the electronics every three to five years.
Jerry Fenn, President of Qwest–Utah, then addressed concerns about UTOPIA. He introduced Michael Daleabout from the Law and Policy staff of Qwest. Mr. Fenn stated Qwest believes the UTOPIA paradigm has changed quite a bit over time. The original proposal did not call for sales
City Council Minutes – March 10, 2004 (p.6) tax revenues of cities to guarantee the bonds. The revised business plan which was changed after UTOPIA found out they could not obtain financing at a reasonable interest rate, included a revenue pledge from cities with a significant taxpayer risk. He noted Orem’s pledge is $2,189,704 annually. There are quite a few organizations that oppose UTOPIA, including Comcast, labor unions, Qwest, Utah Taxpayers Association, Utah Rural Telecom Association, XO Communications, NFIB, and Salt Lake Tribune and Deseret Morning News editorials. Mr. Fenn stated, candidly, he feels UTOPIA has moved forward by attacking Qwest and making it seem like it is the only company opposed to UTOPIA.
UTOPIA erroneously assumes that broadband isn’t readily available, fiber to the home is the only solution, and the business model is both legal and prudent. In reality, broadband is widely deployed in Utah. Qwest intends to be there meet the demand of the market place and with respect to that principle, Qwest is expanding broadband in Utah. Mr. Fenn reviewed technology deployments in Orem with seven remote terminals already in place and 13 remote terminals in construction. He stated every resident within 18,000 wire line feet radius of the central office (325 South State Street) should be able to qualify for DSL through Qwest. These new deployments are not being done because of UTOPIA but because of Qwest’s desire to expand broadband. Qwest will continue to aggressively compete for customers and fill in gaps. He then discussed expansion speeds which are continually increasing. There are higher speeds available which are dictated by market needs and requests. Mr. Fenn indicated the price for DSL has decreased 60% since 1998. Overall, Qwest believes it is the capability of a system, and not the specific technology, that matters. Mr. Fenn stated the actions of local governments must be competitively neutral and nondiscriminatory. Currently private industry is providing the services that meet the demands and needs of residential customers. With respect to business customers, Qwest can provide any connectivity at any speed with dark fiber to meet the needs businesses may have.
**Mr. Sandstrom arrived at 7:13 p.m.
Mr. Fenn continued, saying one of the reasons Qwest has been so aggressive in new deployment is because of Voice Over Internet Protocol (VoIP), which is coming to Utah. Mr. Fenn acknowledged that fiber will not become obsolete, but WiMax, or wireless Internet, is the next generation technology. It has a significantly lower cost and will be commercially available later this year. So, although fiber will not be obsolete, technologies that cost less than fiber will become available and will drive marketplace and pricing. Mr. Fenn stated copper still has viability with compression technology to get more and more speed. He stated Qwest is not planning an overbuild situation to install fiber because it is way too expensive, and the lower cost alternatives are preferable to fiber.
Mr. Fenn stated a fundamental flaw of UTOPIA is that it underestimates the competition and puts taxpayer dollars at risk. He reviewed a magazine article that indicates offering telephone and cable service is far more complex and difficult than collecting trash or cleaning parks. Telephone service requires switching equipment, secure facilities, back-up power generation and a trained staff of customer service agents. Mr. Fenn believes UTOPIA is a very risky venture. Eagle Mountain was in the telecom business with their telephone system and it turned out to be disastrous.
City Council Minutes – March 10, 2004 (p.7) Qwest believes the network will cost more than anticipated to construct, particularly since it is not being built in a green field environment, but is an overbuild. The take rates are very optimistic and the Dean & Company study acknowledges that UTOPIA did not take into account the impact of competitors. There are multiple competitors in the market place that will do everything they can to hang onto customers by their service quality and pricing. Once a customer is happy, Qwest believes they will stay with private industry. Qwest has no intention of using the UTOPIA network and they do not perceive UTOPIA as a win-win scenario. Qwest has billions of dollars in unappreciated assets in the State and are completing millions of dollars of upgrades so it makes no sense to use the UTOPIA network.
Mr. Fenn stated the bottom line is the City’s sales tax pledge will continue for 17 years which is a long time to put citizens at risk. UTOPIA is unfair, and other avenues need to be pursued in the future that address regulators (cities) as competitors. Regardless of whether UTOPIA goes forward, Mr. Fenn indicated Qwest wants to be a partner with Orem City to attract economic development. They can design a system specifically for businesses that have needs. As the market goes forward and demand is increased for additional products, speeds will incrementally increase as well.
Mr. Forsyth indicated he read and studied all the information provided to him by UTOPIA prior to the meeting. He expressed frustration that not a single piece of information was provided from the private companies regarding their position until tonight, and he doesn’t have time to go through the information tonight. Mr. Fenn stated, technically the City Council doesn’t have to vote tonight and can delay a decision until April 15. He also noted a positive decision made tonight is not irrevocable. Qwest recommends Orem City pull out of UTOPIA. Mr. Fenn stated he has been favorably impressed that Orem has allowed Qwest to make their case and he wished Qwest documents had been provided to the City Council earlier.
Mr. Fenn reiterated that this is not a win-win scenario for Qwest. He stated it troubles Qwest that the taxes they pay are being used to compete against them and government should not be involved in this industry. Qwest paid $22 million in taxes to Utah communities last year. There has been some legitimate criticism that Qwest has been slow, but that was because of difficult financial times. Customer service has dramatically increased.
Mr. Campbell stated he detects very strong feelings from Qwest about government not being involved. He asked if Qwest now, or under any of the other names it was previously known, would be where it was today without government involvement. Mr. Fenn replied obviously not because for many years Mountain States was the only provider in town and rates were regulated and kept low. He stated that is ancient history with a paradigm that changed in 1996. Competition is robust and welcomed, and in the business market it keeps prices down. Qwest is losing market share to wireless phones all the time. It has also cut rates $12 million dollars over the last several years. Mr. Fenn stated the issue of government assistance is ancient history because Qwest no longer receives financial support from the government. Qwest was actually penalized by the government as the FCC required its network be opened to competitors at less than wholesale cost. He stated one of the reasons DSL isn’t deployed in Orem neighborhoods faster is because the FCC requires a 60-day notice be given to competitors so they can get a head start before they can go market DSL in the neighborhoods. Mr. Fenn believes the days of monopoly are long past.
City Council Minutes – March 10, 2004 (p.8) Mr. Campbell asked if UTOPIA goes forward, would it be fair for them to say in 20 years that government involvement was just ancient history. Mr. Fenn asserted that government does not need to get involved where private industry is already filling in.
Mr. Campbell clarified that Qwest services 89% of the residential wire lines in its service territory. Mr. Fenn noted there are at least 12 other telephone incumbents in Utah so if Utah is counted as a whole, the number that Qwest services would be significantly less because it does not service all areas.
Mrs. Thurston repeated that Qwest has seven remote terminals in Orem and there will be 13 more deployed by June. She asked if the 13 remote terminals will deployed regardless of the vote tonight. Mr. Fenn agreed, stating one thing that is different about Qwest from the past is they have more decision making control in the local office. He offered to sit down with the City engineers and planners to discuss short and long term plans in case other prioritization needs to be made. Qwest will not abandon Orem to UTOPIA. Mrs. Thurston noted it is a big jump to go from seven remote terminals to 20. Mr. Fenn indicated it is no secret there was a season of a former regime and management of Qwest, but the days of when Qwest cut back on infrastructure improvements are over.
Mrs. McCandless stated Mr. Fenn reported that Qwest paid $22 million in taxes last year. She asked if that was corporate taxes or strictly franchise tax that are passed onto the customers. Mr. Fenn stated some taxes are passed onto the consumer, but some are sales taxes paid on equipment, etc. He indicated he could provide a breakdown later if needed.
Mrs. McCandless asked that even though WiMax has certain constraints that fiber does not have, Qwest still sees it as something that will meet needs of residents in the future. Mr. Fenn answered yes, because it is a lower cost alternative. It provides a high speed compliment to DSL. An example was given that WiMax could provide services to the whole metro area of St. Louis for $100,000. Mrs. McCandless asked if he feels the constraints of WiMax justify the cost trade off. Mr. Fenn stated only a small percentage want 10 to 20 Mb speed. In an overbuild situation, Qwest thinks wireless is the better plan.
Mr. Forsyth asked what Mr. Fenn anticipated was the maximum speed of copper. Mr. Fenn replied the exact numbers are proprietary, but it is significantly higher than 7 Mb.
Mayor Washburn thanked Mr. Fenn for his time stating he hopes Qwest feels they had the opportunity to make a fair presentation. Mr. Fenn reiterated that Mayor Washburn and Mr. Reams have been more than fair and kind and he has not felt that way in every city. He apologized again for not connecting and getting material to the City Council prior to this meeting. He stated it is a sad situation for Qwest to be in a position to make sure UTOPIA fails. Qwest will not go away and will continue to provide service in the city.
Steve Proper, Director of Franchising & Government Affairs with Comcast then addressed the City Council. He thanked Mr. Fenn for his information. He stated the principle concern of Comcast is that they are used to negotiating franchise agreements with cities, and now the regulators are potentially becoming the competitors. There is a misnomer that UTOPIA is not here to compete, yet Mr. Proper stated he has heard officials from more than one community tell citizens their tax dollars will not be affected if they take the UTOPIA service. Comcast is
City Council Minutes – March 10, 2004 (p.9) perplexed as to why the City would be interested in this risk when private dollars have already been invested. Over the next five years Comcast will have invested $350 million in upgrades. That is not a short term investment. Mr. Proper stated Comcast has fiber that reaches every neighborhood in Orem and from fiber optic nodes hundreds of video services are provided. Mayor Washburn noted services of particular interest to the City including distance learning, telemedicine, telelearning and telework. Mr. Proper then talked about those services indicating that Comcast offers them and that they can, and do, compete.
Mr. Proper indicated Comcast has not reached capacity with regard to their network and he feels customer service will differentiate Comcast from other companies. In UTOPIA presentations there has been very little discussion about customer service and operational expertise. That is the lifeblood of a telecommunications company. He indicated he would be willing to sit down and discuss with the City what needs they have. Mr. Proper asked the City to consider financial obsolescence as well as technological obsolescence of the UTOPIA system. Consider if a product comes along that can be done far cheaper than the UTOPIA system. Comcast has financial stability and they are here to compete, here to stay, and get new customers as well as old customers back. He cautioned that telecommunications is a very cutthroat and competitive business.
Mr. Proper stated Comcast has been approached to go on the UTOPIA network and they have no interest in doing so because of investment, employees, and their 40 year business model. This model is predicated on Comcast’s ability to control, manage and operate a physical network. When you take the physical network away you are left with a customer. On the UTOPIA network Comcast would become stuck in the middle when there is a problem with the network. He stated that is not a valid business model.
Mr. Forsyth asked if Comcast upgrades are complete in Orem and Mr. Proper responded yes, for the first time they have built a ubiquitous network. He noted Comcast will never be completely finished but every place serviced, which is about 90% of Orem, has all products available.
Mr. Reams stated the City has dealt with a downgraded system for a long time. There was a time when Comcast was known as Insight or TCI that the system was obsolete and there were continuous efforts on the part of the City to get it upgraded. He asked what assurances the City would have the next time an upgrade or expansion is needed that it will not take years again. Mr. Proper stated Comcast has made significant investment in the upgrade. Everything is in place in terms of structure if Comcast wanted to build fiber to the home. Mr. Reams reiterated the demand was there for a number of years and there wasn’t a response. It has only been in the last couple of years that Comcast has stepped up. Mr. Proper attributed the delay to the recession and problems on Wall Street, etc. The plans of the franchise were affected. Mr. Proper stated he believes economics and competition will be what drives the future of telecommunications.
Mayor Washburn stated both Qwest and Comcast have indicated they provide adequate service for high speed Internet. Recently he was told a major high tech industry did not locate in Utah because of lack of capability. The abilities for distance learning are not even close to what is needed. He sees a void that is not going to be filled unless pure fiber is used. Mayor Washburn acknowledged the City’s dilemma of balancing the cost benefit and the risk. He asked if there are systems available that are satisfactory to all users.
City Council Minutes – March 10, 2004 (p.10) Mr. Proper stated Comcast does not know how fast is fast enough, but they are trying to meet that expected demand and need. Comcast’s biggest competitor is the huge market that is perfectly satisfied with an old dial up system. They have not found the demand is what has been represented in the UTOPIA feasibility study.
Mayor Washburn expressed thanks to Mr. Proper for his information. Mr. Proper stated he appreciates Orem for its openness and allowing Comcast to come forward. He added it is certainly not something he has experienced in all communities.
**The City Council took a brief recess at 8:40 p.m. The meeting reconvened at 8:47 p.m.
Mayor Washburn opened the public hearing.
Mr. Phil Windley, a Lindon resident, stated he was the former CIO for the State of Utah. He previously owned a business in Orem, which employed approximately 100 people, and he is a professor at BYU with a doctorate in computer science. He stated does not have a vested interest in UTOPIA or any of its partners. When he became CIO, Governor Leavitt gave him three tasks and one of them was to figure out a way to get broadband in Utah. Business development in Utah depended fundamentally on this core technology. He has studied this issue, not just as a hobby, and he firmly believes the only way the right network can get built is for government to do it. He stated UTOPIA is the right thing and technology for this city. Mr. Windley stated UTOPIA has nothing to do with how many megabytes someone can have or where fiber goes, but everything to do with an open versus closed system. Qwest and Comcast offer to provide products by telling people to give them money, then they will figure out what is needed. That is a closed network as facilities based carriers. They invest a lot of capital in their plant so they can be a monopoly. They want to own the customer and control what the customer can do to maximize the amount of money received from the customer. That is simple business practice. It is not the City’s job not to figure out whether private industry gets a fair shake in the business world. It is the City’s job to help get services to residents and businesses. Mr. Windley used the analogy of a railroad versus a highway. The railroad is a closed system where a company owns the facilities and decides when the trains run. An open system is the interstate highway where consumers can choose when and how to go. Mr. Windley stated having an open network would enable business opportunities this community cannot even imagine.
Mr. Arthur Brady indicated he is a ten year Orem resident. Although he is a relatively happy customer of Comcast and Qwest he has concern about the services they cannot provide. He is involved with a group called Utahans for Telecom Choices (UTC). UTC is not focusing on technology but rather the idea that competition is a good thing. He noted that Mr. Fenn stated if the service is needed in Orem then it’s available, yet he lives in northeast Orem and is still waiting for service. This has led to the fundamental frustration which brought about UTOPIA. He believes cities have three options: they can hope current providers will do something different by investing long term to get the kind of speeds desired; something else will emerge to make the problem go away; or they can act. He asked that this decision be considered carefully. Mr. Brady stated it is disingenuous for Qwest to say that government should not compete with private industry because the Qwest network at the network level was not built by private risk capital it was built by risk free capital with a guaranteed rate of return under the AT&T/Ma Bell structure. They got the head start and government facilitation by inheriting the network. UTOPIA will not compete with anyone. No one will ever pay a bill directly to UTOPIA. He
City Council Minutes – March 10, 2004 (p.11) stated no one pays the City for Domino’s Pizza, yet the City provides the road the pizza can be delivered upon. With regard to comments that costs were underestimated, Mr. Brady stated in a regulated monopoly the expertise around costing of jobs points to maximizing costs that can be justified. He clarified that means spend as much as you can as long as you can justify it. UTOPIA has signed fixed price contracts with national providers after a public bidding process. There are not cost estimates with the UTOPIA system, it is cost certain. Mr. Brady stated citizens honor pioneer ancestors for making the right decisions under difficult circumstances. This is not just an important decision, but also a historic opportunity.
Mr. Tom Spalding, long term resident of Orem, indicated he works in the x-ray department at IHC. He commented on the availability of telemedicine from personal experience where a doctor was able to view chest x-rays and labs results in a corporate meeting on a laptop. He believes many doctors already have the capability for telemedicine. With regard to speed, the doctors he knows seem to be able to get the answers they need. He also expressed concern with rototilling his backyard and digging up fiber. Mr. Spalding asked how Orem will compensate for the sales tax that will be held and what impact it would have on him as an Orem resident. Mr. Spalding reiterated the current systems are sufficient. He suggested the issue be put to a vote of the people and believes there is a fair amount of resistance about UTOPIA.
Bill Fairbanks, representing the CEDO Board, indicated he has learned much from tonight’s discussion. He expressed frustration with the current service level and stated many people will not rent business offices without the availability of DSL. He commented the CEDO Board agreed to unanimously encourage the City Council to cautiously proceed with UTOPIA. He has no doubt it would better jobs and business to Orem as well as helping the economy. With regard to new upgrades made by Comcast and Qwest, Mr. Fairbanks stated he feels like the cavalry just showed up and battle was over two days ago. In short, they should have stepped up a while ago.
Mr. Lane Livingston, Orem resident, runs a business called Fibernet. He agreed with Dr. Windley that size is an irrelevant discussion. His company would benefit from UTOPIA, but as a citizen he has some concerns about costs and the role of government. He questions whether 100 Mb could be delivered to each home at a cost the consumer could afford. He does not feel it is the role of government to step in, particularly with the lack of experience of cities and the partners of UTOPIA. He stated there has never been a network deployed like this -- ever. He stated there is no reason Orem has to be out front, even if the numbers are accurate. His research has shown that in situations somewhat similar to UTOPIA, entities losing money on operations.
Mr. Bret Haskins stated he works for Motorola and has had the opportunity to scrutinize several business models. He concurs with Dean & Company that UTOPIA has a unique business model. He stated as a young, recent graduate looking for work, this community is the last place to find it. Mr. Haskins stated, in light of such a business model, the City must embrace this idea to provide a future that will help drive the economy.
Mr. Tom Spalding indicated he is a former resident of Orem and the son of Mr. Spalding that spoke previously. He expressed concern that Qwest and Comcast have products available that are not even being utilized. He does not think UTOPIA is worth the risk because of the competition that will come from other companies. He is worried that AT&T has not announced their fee structure and may not be competitive. Mr. Spalding stated many people only want a dial up modem.
City Council Minutes – March 10, 2004 (p.12) Mr. Ben DeHoyas noted he is an employee of Dynamic City and has presented results of the feasibility study in past City Council meetings. He stated he is here speaking on a personal level as a part time faculty member at BYU. There is a trend for electronic media. At BYU, instructors are encouraged to use technology in teaching but the problem is most areas lack infrastructure to accommodate this type of teaching. Delivery of documents is painfully slow. People are willing to pay for access to these services but when it is requested, providers tell them that it is not available. He feels the education of students is hampered by the return on investment demands of private shareholders. Since the private sector is concerned with profits first and with serving the community last, it is time to fix the problem as a community. UTOPIA’s focus would be first on providing service. As long as the system is able to pay for itself and break even, which has been demonstrated will happen, the City can service the community with offerings that the private sector is unable and unwilling to provide. Brick and mortar classrooms will always be built, but technology gives opportunity to extend far beyond the four walls of a classroom. Educational opportunities can be enlarged and true learning can take place where it should, in the home. Mr. DeHoyas stated UTOPIA would expand the educational opportunities of children more than can be imagined. The value of the UTOPIA network is in the life enhancing services that will be available; telemedicine, work at home opportunities, distance education, and more. He requested the City Council make the investment required and support UTOPIA.
Mr. Jay Stocks, Orem resident, stated he would rather have other services, such as sewer, taken care of before replacing a service he already has at the risk of increased taxes. He installs DSL lines for Qwest and most people have equipment that can take care of 256k, but unless everyone gets new computers to handle 100 Mg, this system is not feasible. He feels from reading the body language of the City Council that the decision has already been made and UTOPIA will go forward. As a member of Communications Workers of America, and as a Qwest employee, they will do everything they can to compete with UTOPIA. It will be done in a fair and equitable way so that the cities don’t compete with private enterprise. He stated that Stalin would be very proud to see government going in this direction. He expressed appreciation for the time the City Council has spent and wished the matter could be put before the public for a vote.
Mr. Tom Sawyer, resident of Orem, stated he is a network engineer that has worked with copper, fiber, and wireless. He stated, contrary to what Qwest representatives indicated, the limits of wireless and copper are being pushed right now. He has no qualms with putting fiber in the ground and saying it will work 20 years from now. He stated he is willing to pay more for higher speeds. He is a moderately satisfied Qwest customer and he can get by with current services but he would love something faster. The two business entities against UTOPIA have invested quite a bit, but they build walls around their own business enterprise. Mr. Sawyer would like to see more competition in this arena. He stated timing is an issue. If the City does not proceed now it will lose quite a bit of the benefit. It is perfect timing that Orem can be one of the first communities to do this.
Mr. Alan Finlanson spoke representing the ownership group that bought the former Novell/WordPerfect campus in northeast Orem. He stated this ownership is comprised of local people. One of the strategies in purchasing the campus was to start an incubator situation by inviting smaller talent in the Valley with technology backgrounds. They found that Internet providers were very willing to come in and take care of the “big boys”, but they were very taken
City Council Minutes – March 10, 2004 (p.13) back by the fact that providers refused to bring in DSL or less than a T1 line for small users. He gave the example that two people leased a couple of offices to start a business but could not afford to pay for the type of service Qwest would require. Mr. Finlanson was able to parcel broadband service to some of the smaller tenants. These two people are now in the process of signing a lease for 15,000 square feet with a total of 75 employees. The competition UTOPIA will bring is good, and it helps business grow.
Mr. David Shorten said the City Council should not confuse obsolescence with uselessness. His home is 50 years old and it still works fine for him. Mr. Shorten stated Orem City hires quality staff to do good work and he expects the City Council to listen to their recommendations because they have done their homework. He suggested the City Council vote for the resolution since there is still an ability to withdraw. Mr. Shorten indicated that people have asked the issue be put to the vote of the people, but the citizens took the vote two and four years ago when the Mayor and City Council were elected to do their duty. He stated this is a republic and not a democracy. He acknowledged it is a risk but this City Council has the opportunity to do something good.
Cory Turner, Provo resident, spoke as businessman of Orem. His company, Flowserve, is based out of Dallas, TX. They chose Orem as a hosting site for their data center at the location of the old WordPerfect campus. They have struggled with incumbent providers of telecom services to provide high speed redundant connectivity. Flowserve is a $2.5 billion company and $750 million of that revenue flows through the Orem facility. There is a big impact when they have down time on the network. To this date, they have been unable to get fiber redundant services to their campus. Currently they are being serviced over multiple Qwest copper lines that go back to a bunker at the edge of the campus that are backed by three hours of battery service. Mr. Turner stated Flowserve doesn’t need 100 Mb today, but they do need 20 to 40 Mb of service and over a lot of negotiations, they cannot get it from Qwest. He feels there is a huge gap between what is needed and what is being offered.
Ms. Josephine DeHoyas, stated she lives in Provo, and owns residential rental property in Orem. Many of her tenants are young students/couples that work in technology areas and are very interested in getting DSL in their apartments. Although her area has been able to get DSL, there are many areas that still don’t have it. She indicated people sometimes choose to live in a community based upon technological services. If the City loses residential and business tenants it will not only hurt landlords but also the community.
Ms. Barbara Healey, Orem resident, noted that South Jordan City quit UTOPIA. She has formed an opinion after discussions tonight and is disappointed that Orem is looking at joining at the cost of $1,500 per household. She stated there is no way her computer would be able to handle the kind of capacity that would be offered. She appreciates the jobs that come to Orem, but stated these companies could invest in a T1 line but choose not to pay the costs. She expressed concern with the fact that AT&T has not revealed their rates on the UTOPIA system. She is not excited about the City committing $2.19 million a year for the next 20 years. It is her understanding that even if UTOPIA prospers the City cannot use the money they allocated for 20 years. Someone used a pizza delivery analogy earlier, and Ms. Healey said this is like saying she wants a pizza the size of a room and no one will provide it so the government must do it. She stated if it is viable economic option, Comcast and Qwest will provide it, so it is unnecessary for the City to do it.
City Council Minutes – March 10, 2004 (p.14) Ms. Healey left the meeting and Mr. Reams went to clarify the financing structure of UTOPIA for her.
Ms. Chelle Gordon lives in northeast Orem and indicated she has been on Qwest’s list to get DSL at her home since 1999. She has tried to get the service through other providers but they have gone out of business before her service is installed. She has been waiting and continually checking to see when DSL will be available in her area through Qwest. Her job is working with the Internet to provide financial services to customers. She is interested in seeing the economic growth that can go along with UTOPIA and urged the City Council to support it.
Mr. Steve Janes, Orem resident, talked about his experience in providing resources to his children. Over ten years he has helped his children with homework. The kinds of requests that come from school are getting more creative. For years he was on Qwest’s list to get DSL so he could help his children get a sound clip, picture, etc. Over a period of four years, Qwest would come out and test the line in his area and tell him DSL was not available, yet people directly north and south of him were able to get it. Finally a year and a half ago he was able to get DSL, but was told by Qwest that he had to get a second line. His phone bill went from $32 to $135 a month. He is now able to get video and audio clips although it may take him well into the night to download. Mr. Janes said there is no question whether or not he needs more resources at his home. His question is about trust, and he trusts the City Council more than he trusts private business to do the right things for the citizens of Orem. Mr. Janes stated he supports UTOPIA for the good of education all the way to the grade school level.
Ms. Betty Walling, Orem resident, asked if Qwest is so aggressively giving citizens the service they need, then why are they so afraid of competition? She works at BYU and through the BYU network has 100 Mb to her desktop. They are currently trying to service requests for gigabyte to the desktop. That type of speed is not considered excessive anymore. Ms. Walling stated she works with the main library on campus, which has a program called Information Commons. This is a concept that is in many libraries around the Country to integrate technology services with library reference services to assist students in doing normal assignments. It is multimedia and cannot be done anywhere else. BYU has to have this kind of support for their students. Even though BYU has spent millions of dollars to provide this redundant service on campus, it still cannot be provided off campus. Ms. Walling stated wireless is wonderful but limited, the more people that use it, the less effective the service. She stated she is one of those grannies that want fast genealogy Internet access at home.
Mr. Drew Major, Orem resident, indicated 23 years ago his partners and he built a networking system for the PC that ended up founding Novell. 15 years ago Novell needed to expand and Orem made an offer but they did not seem that serious about it. Provo was excited to get Novell to move. Orem was able to keep WordPerfect. From a competitive standpoint in starting up a company he will always choose the area that has infrastructure. It is important for him that Orem match or beat what Provo is doing. Mr. Major stated when his partners and he were first networking computers it was at a speed of 500 Kb. Today people connect to the Internet typically slower than he first connected networked computers with local area networks (LAN) in making Novell. He is puzzled why the wire area has not kept up with what Novell has been able to accomplish with LAN within areas like the BYU campus. He is very pro UTOPIA and believes fiber will stay around a long time. He stated Novell was able to do new things with
City Council Minutes – March 10, 2004 (p.15) LANs because the bandwidth was available to network the computers together. The UTOPIA network will unleash much creativity and opportunities.
Ms. Kara Wilson indicated she is an MPA student at BYU and the daughter of Keith Wilson from Dynamic City. She understands that no matter how great a proposition comes before the City Council, the cost benefit analysis is something that has to be considered. She stated there is a difference in the conversations that have taking place regarding the cost benefit analysis. Qwest and Comcast wake up breathing the market model but the risks in their cost benefit analysis are the risks to their shareholders and employees. For the City, the risk is bigger; it is not the $2.19 million price tag, but the risk of Utah’s and Orem’s future and the economic development Orem will be missing out on. She expressed appreciation that the City Council was willing to consider that risk.
Mr. Kevan Allbee, resident and business owner, indicated his business sprung from WordPerfect. His business is highly dependent on Internet and high speed access to make it work. They have been frustrated at various times at the availability of those services. He finds it interesting that the competition is getting hot at about the same time UTOPIA starts to become an issue. He feels if UTOPIA dies, the competition will cool off and services will be back to where they were struggling over the last five years. To meet his business needs, he needs what UTOPIA is bringing.
Mr. Ernest Bray indicated he is a resident of Orem and also represents his parents that are residents. He has conducted a lot of research on this issue during the last five years. He stated it comes down to a world class nation and a world class city needing a world class infrastructure. He read comments from the U.S. Department of Commerce, Office of Technology Policy from a study they released: “The wealth of nations is changing. While prior centuries were dominated by nations with superior industrial or agricultural capabilities, the innovation age rewards new competencies and strengths. Knowledge, ideas, and the people who generate them is the new point of the realm. Innovative capacity is the key driver of future economic prosperity. Cross- cutting emerging technologies such as bioinframatics, quantum computing and nanotechnology promise even faster change and deeper disruption in the future. It is no exaggeration to predict that there will be more change in the next 30 years than we witnessed in all of the 20 th century. While America enters this new age of innovation following 60 years of global technology preeminence, our future innovation leadership is anything but assured; in fact it is very much at stake. Our ability to remain a global technology and thereby economic leader will depend upon a variety of factors including our ability to attract, retain and educate the best and brightest scientists and technologists, our support for world class innovation in the public and private sectors, our success in fostering a business environment that rewards risk and encourage entrepreneurship and our ability to maintain a world class information infrastructure. With respect to this last point, maintaining a world class information infrastructure, there may be no element more critical today than ubiquitous and affordable high speed internet broadband. The deployment and usage of broadband networks will significantly impact the global competitive nations and businesses in the 21st century … the current generation of broadband technologies including cable and DSL may prove vocally insufficient to carry many of the advanced applications driving future demand. Today’s broadband will be tomorrow’s traffic jam. The need for speed will persist as new applications and services gobble up existing bandwidth.” He then read another statement from former FCC Chair Reed Hunt, “The big fish of today is big broadband. Access to the web at 10 to 100 Mb per second to homes and 1 to 10 Gb per second
City Council Minutes – March 10, 2004 (p.16) to businesses. The small fish are broadcast DSL, cable modem and voice. With little broadband the access bottleneck will exasperate the users for years to come.” Mr. Bray indicated there are many statements that echo these sentiments. It is quite clear what the need is. While American cities debate these issues other countries such as Iceland, the Netherlands, Finland, Japan, and Italy, are doing it. Mr. Bray stated comments were made earlier that other cities doing similar projects have lost money. He has visited with people from these cities at length. For example, Bristol, Virginia (contact: Jim Kelly) built a 30 million fiber to the home project. They know build costs and what happened. In four months of the system being turned on, they exceeded their year end 2004 projections for penetration and uptake on services. He also noted Cutstown, Pennsylvania and Dalton, Georgia. In summation, Mr. Bray read a comment by the current FCC chair Michael Powell on the information revolution, “Communities that harness this power and the opportunities it presents will stand tall as great powers and those that do not will shrink in every aspect of civilization.”
Mr. Ben Gold, Orem resident, expressed appreciation for the time the City has taken to study this issue. He believes that there is a risk is not moving forward. Government plays a role in business. Qwest is the literal offspring of a government backed monopoly that they inherited. He chastised Qwest for saying it isn’t fair for anyone else to provide an infrastructure today. Many people that oppose government being involved in business are the beneficiaries of SBA loans. He believes UTOPIA is like an SBA loan, yet on much larger scale. Private market is taking 60% of the risk and asking for a co-signing of the balance. He outlined history of how Orem was founded. He reiterated the risk of not moving forward pales in comparison to the venture. He noted Provo is moving forward as well as Lindon.
Ms. Happiness Peterson, resident and UVSC student, spoke representing UVSC student government who is in favor of UTOPIA. She stated young adults and students are largely the ones that will carry this risk for the future. She has a strong opinion that 20 years from now she will be thanking this City Council. As a political science major, she believes the role of government is progress. The founding fathers took great risks to get this area where it is today.
Mr. Dan Corrigan believes UTOPIA will help Orem. He stated this is a risk that has potential for a high return of benefit. Citizens need this system and the essential competition it will bring. The system will benefit Comcast and Qwest in the long run by making them stronger and more technologically advanced to keep up.
Mr. Jason Larson stated students and entrepreneurs struggle to make something happen for them and this system will help. As a technical computer consultant he confirmed that any household could easily use this network. He stated competition is essential and is something lacking in the telecom industry, especially in Orem. UTOPIA is a great opportunity to provide a network technology that knows no limits.
Mr. Gerald Haskell, Midvale resident, spoke on behalf of the Communication Workers of America, the labor union that represents the majority of the Qwest workers and some at Comcast. He stated they have a vested interest because if UTOPIA goes through, jobs in this community do stand to be lost. Private industry will have to lay people off to save costs. He remains hopeful that Qwest will not join UTOPIA because they will maintain more jobs by remaining on their own. His largest fear with AT&T is that their new trend is to hire 50% of people in the United States and 50% in India. He has done some nationwide research and seen
City Council Minutes – March 10, 2004 (p.17) some cities that have had success with fiber network but there are others such as Southern Bell Communications and Verizon that came together to build a network which did not work. As a citizen of Midvale, which is one of the 18 cities looking at UTOPIA, he does not believe it is the role of government to compete with private industry. He asked if fast speed in all homes is the answer. He feels the United States is in a bigger crisis with healthcare than with the needs of telecommunications. If the City is going to start exploring UTOPIA they should explore the bigger pictures that will affect everyone.
Mr. Tim Clawson stated he is part of an educational company that teaches people how to invest in the stock market. The company started out with just ten people and is now 350 strong. All of their tools are web based. He stated it has been implied that citizens already have a choice. 20% of his Qwest bill is taxes such as intracharges, levies, city taxes, etc. In his opinion he is already funding UTOPIA through a legacy system. If he is going to invest taxes, he wants choice. He is confident that all companies will participate in UTOPIA and bring technology that is phenomenal. He stated he has confidence the industry will grow and the people that are going to make that happen is the City.
Ms. Margaret Black, Orem resident, indicated she is a technologically challenged person. She is glad when her kids show up to help her get on the Internet, but the more she has learned and studied about UTOPIA, the more she has liked it. She sees the opportunity and knows this City Council is in the 21st century. She feels confident they will make the right decision to vote for UTOPIA.
Ms. Melissa Smith, Orem resident and BYU student, stated the mark of an advanced civilization is the strength of its infrastructure. She told the Council to think as far back as Rome with the aqueducts and military roads that it made it the power of that time period. The current providers are not meeting all of the needs. There is a wonderful opportunity for UTOPIA to set a standard of availability for everyone and to set it high. She asked that the City Council support the issue.
Mr. Brian Jarvis, Orem resident and super geek, stated he has been a professional programmer for 20 years but always had to work outside of Orem. He asked what Orem would be like without decent roads. No one expects roads to make a profit, and he is sure the City loses lots of money maintaining roads, but that is a cost citizens are willing to bear because it is a great benefit. The digital roads, or UTOPIA, may not make a profit, but without it Orem will not be viable. He encouraged the City Council to vote for UTOPIA.
Mr. Steve Snelgrove, Orem resident, stated Qwest was exercised on the point of having to share facilities with competitive local exchanges. He indicated he was surprised Mr. Fenn was opposed to UTOPIA because it would present competition that would eliminate government supervision of Qwest’s facilities. He stated he supports UTOPIA.
Mayor Washburn stated everyone present has invested very valuable time and the public hearing has been a worthwhile exercise. He asked if there were any further comments. Hearing nothing further, Mayor Washburn formally closed the public hearing.
Mr. Campbell stated he is so proud to be at this meeting and to listen to the pros and cons. He has learned a great deal. He expressed appreciation for most of the comments, stating Stalin wanted to control, dominate, restrict, destroy, and discourage. That is exactly the opposite of
City Council Minutes – March 10, 2004 (p.18) what he sees in UTOPIA. Along with other Councilmembers, he has looked at this issue for more than two years. He stated he has a hope and a dream and to compare this issue with Stalin is a mistake. Mr. Campbell stated this City Council will be criticized for a long time regardless of which choice is made. He is grateful for the weight the staff and City Council have given to this issue. He feels badly that background documentation was just presented by Qwest at tonight’s meeting and City Council did not have the opportunity to study it prior. Mr. Campbell acknowledged there are risks, and most of what he heard tonight dealt with the risk of the uncertainties of money. There have been other issues in this Country and State where money is lost but somehow people work together, recover and move on. As he has heard tonight, he thinks there is a bigger risk about what is not being provided for the businesses in this community. As a teacher he stated he is also concerned about the risk of not providing technology for young people, even as young as kindergarten. He has a hope for the young people of this community. He stated someone could make the comment that they don’t drive and therefore don’t want to pay for roads, but then they would like the service of the road when they make a 911 call. There are people in this community who can and will use this technology to bless this community. Private industry has said wait until there is a need, then you tell us what that is and we will work to solve the problem. If the opportunity already exists, wouldn’t it promote creativity, new services, and products rather than waiting and making demands for something to come along to respond to it? Mr. Campbell stated, in spite of the financial risks, he would rather have the opportunities as soon as they are available so that people can come to this community and develop things that are going to bless mankind.
Mr. Sandstrom commented that this has been a very difficult decision that he has gone back and forth with. He is a firm believer in American entrepreneurship and free market. He questioned if UTOPIA violates some of those principles. He expressed concern for costs, if they might escalate and if the City would be liable. He also has concern with the possibility for new technologies. Mr. Sandstrom stated he firmly believes that Orem will get the forecasted take rates. He noted he arrived late to the meeting and did not hear some of the information so he asked if for some reason other cities fall behind, would Orem then be subsidizing those cities that are not pulling their weight.
Mr. Reams stated UTOPIA has up and downsides. He reiterated that surpluses would be distributed back to the communities that generated those surpluses. If UTOPIA as a whole does not cover the debt service payments then all the cities will participate in making up the shortfall to the amount agreed upon in the interlocal agreement. In Orem, that maximum amount is $2.19 million annually.
Mr. Sandstrom asked if this pledge amount will affect the City’s future bond issuances and Mr. Reams answered it might affect the City’s ability to use sales tax to guarantee a bond issuance. Technically, in a real sense, Mr. Reams does not feel it will affect future bond issuances. The pledge amount will not impact general fund revenues. He also noted sales tax rates are set by State statute and are out of the hands of the City. With regard to new technology, Mr. Reams stated even the incumbent providers believe that fiber will not become obsolete. There are radical advances in the use of fiber optic, which are far exceeding the advances in wireless.
City Council Minutes – March 10, 2004 (p.19) Mr. Sandstrom asked at what point every household would need this capacity. Mr. Reams stated it isn’t an issue of who has the biggest Mb, but the choices that are out there. An open network brings competition and increased service.
Mayor Washburn noted Mr. Sandstrom has indicated he is not afraid of the take rate in Orem, so he sees the issue as whether the take rate can justify the investment.
Mrs. Thurston stated the City Council truly cares about this community. She stated every City Councilmember that voted for the University Mall in the 1970’s was voted out at the next election. Every City Councilmember that voted to construct the current City building and library was voted out because many residents thought the City would never grow into it. She indicated she makes these statements, not for an apology, but because many people do not realize the City Council tries to vote with foresight and what they think will be best for the overall citizenry and the future. She stated she is concerned about putting taxpayers at risk and the potential for raising taxes but she is glad to have another meeting to review the final numbers. She expressed appreciation for the comments made during the public hearing.
Mrs. McCandless acknowledged that she too has struggled with this issue for months. She has asked herself if the City should be involved telecommunications and she thinks it should, particularly in this age of an information economy. The goals of the private sector are to look out for the shareholders. Her goals with UTOPIA are open access, economic development opportunities, better quality of life, and rights of way taken rather than a road being excavated. Orem City turning a profit is not even at the top of her goals. She feels UTOPIA will provide many opportunities for creativity. Mrs. McCandless stated she is humbled by the responsibility that the citizens have entrusted in her to make a decision, and she is proud to be able to serve here. She indicated she finally feels at peace with moving forward in UTOPIA.
Mr. Dickerson noted the majority of those that spoke in the public hearing were in favor of the risk. He has seen that with the phone calls and e-mails he has received as well. He stated he is not comfortable with telecommunications being the role of government, yet he is even less comfortable with the City not moving forward. Orem has got to participate in UTOPIA to remain viable in the 21st century. He believes his children are going to appreciate this decision in ten years, probably more so than he can imagine. Mr. Dickerson stated he is comfortable with the risk because he trusts the people the City has hired and is confident in their abilities.
Mr. Forsyth stated he does not think Qwest and Comcast would be launching their aggressive programs if there were not the threat of this competition. He also noted this would not even be an issue if desired services were already available. He believes Orem will come further than ever before with UTOPIA
Mayor Washburn stated this is one of the most important votes this City Council has taken, and will take. He knows the Council has suffered excruciatingly over a decision. He stated he is really pleased to have the opportunity to take this vote because it came close to not happening. There was a very powerful force in the Legislature that tried to preempt this issue and SB 66 was a huge victory. Mayor Washburn stated he hopes those in opposition of this issue will eventually see the wisdom in it and participate. He thanked those present for their patience and comments, particularly those that indicated they were willing to participate in the risk.
City Council Minutes – March 10, 2004 (p.20) Mr. Campbell moved, by resolution, to authorize Mayor Washburn to execute the pledge and loan agreement between the City of Orem and UTOPIA. Mr. Dickerson seconded the motion.
Mr. Sandstrom asked at what point a decision becomes final. Mr. Reams stated when the City entered into the Interlocal agreement they had two points at which they could withdraw, first after the preliminary study was done, and second, when the final financial plan was brought back. With this decision the staff of UTOPIA and the City’s financial team will put together the financial plan and it bring back to the City Council. At that time the City Council will make their final decision whether to go forward with UTOPIA or not. Mr. Campbell noted other cities will have the same opportunity to opt out and that may affect the final numbers as well.
Mayor Washburn called for a vote on the motion. Those voting aye: Mr. Campbell, Mr. Dickerson, Mr. Forsyth, Mrs. McCandless, Mr. Sandstrom, Mrs. Thurston, and Mr. Washburn. The motion passed unanimously.
COMMUNICATION ITEMS
There were no comments on the Communication Items.
ADJOURNMENT OF MEETING
Mr. Forsyth moved to adjourn the meeting. Mrs. McCandless seconded the motion. Those voting aye: Mr. Campbell, Mr. Dickerson, Mr. Forsyth, Mrs. McCandless, Mr. Sandstrom, Mrs. Thurston, and Mr. Washburn. The motion passed unanimously.
The meeting adjourned at 11:38 p.m.
Donna R. Weaver, City Recorder
Approved: April 6, 2004
City Council Minutes – March 10, 2004 (p.21)