M. Royce Van Tassell

Utah's municipal telecom systems, iProvo and UTOPIA, are failing. Having spent a collective $190 million, they have yet to meet a single financial or subscriber goal. Provo Mayor Lewis Billings is contemplating a variety of options, including selling iProvo to the private sector, but UTOPIA wants its members to prop up the failure with $504 million in sales tax dollars. There is only one solution to these failures: UTOPIA and iProvo need to cut their losses, and sell their systems to the private sector.

For years iProvo -- and UTOPIA -- have predicted that they would break even once they get enough subscribers. iProvo's threshold was 10,000 subscribers, but it passed that threshold last September, and a $2 million annual deficit is still looming.

Though iProvo may not be able to pay its bills, it does better at drawing customers than UTOPIA does. UTOPIA has spent three times as much as iProvo, and has six times as many serviceable addresses in its service area, but in nearly four years of operations it has only 7,300 subscribers. And where iProvo's cumulative operating deficit is $9.5 million, in just its first three years UTOPIA ran up an operating deficit of $37.9 million.

Given these abysmal track records, one data point from the iProvo Committee meeting should raise grave concerns, especially for the city councils in UTOPIA cities. Even if iProvo meets its subscriber growth targets and has 17,000 subscribers by 2012, taxpayers will still have to subsidize iProvo. If iProvo's own projections indicate that it can't reach profitability, even if more than half of Provo addresses sign up for the service, then UTOPIA's chances of ever breaking even are bleak indeed.

UTOPIA faces much more daunting challenges than iProvo. First, UTOPIA's proposed marketing plan anticipates that new residential subscribers will have to pay between $1,000 and $3,500 just for installation. By contrast, UTOPIA's competitors only charge a nominal installation fee, typically under $100. Given the plethora of inexpensive, competitive options available in today's market, it's hard to imagine more than a handful of residences willing to pony up thousands of dollars just for installation.

Second, UTOPIA still hasn't finished its network. Only 31 percent of the households in its footprint could subscribe today. And of that 31 percent, only 17 percent of the households are buying any services. By contrast, iProvo has completed its build out, and roughly one-third of the households in its footprint purchase services.

Despite these huge challenges, UTOPIA wants its member cities to adopt a massive increase in their sales tax pledges. Instead of risking $202 million in sales tax dollars over 20 years, UTOPIA cities would have to risk $504 million over 33 years. And this new financing and marketing plan won't even complete UTOPIA's build out. Before UTOPIA would take services into a neighborhood, 40 percent of the neighborhood would have to commit to pay at least $1,000 each for the installation.

According to UTOPIA's analysis, they must double their subscriber, or the member cities will be on the hook for $504 million. And if iProvo's experience is any indicator, even if UTOPIA lures enough customers into paying that massive installation fee, the cities may still be subsidizing UTOPIA. Instead of doubling down, UTOPIA cities should cut their losses, and sell the system to a private provider.

• M. Royce Van Tassell is vice president of the Utah Taxpayers Association.