Two Utah-based FTTH overbuilders, Utopia and iProvo, have discovered just how hard it is to overbuild both telcos and cable companies, no matter how attractive a proposition might be. So might the municipal governments that backed the builds.

 

Eleven cities in Utah, including Orem, Lindon, and Payson, pledged $202 million in sales tax revenues over 20 years to pay back bonds supporting Utopia. But unexpectedly low subscriber counts and revenue shortfalls are threatening Utopia’s ability to make its bond payments, say Grace Leong and Joe Pyrah, reporters for the Daily Herald.  

 

Utopia has passed about 42,000 households and businesses, but has gotten only about 7,200 paying customers.

 

In iProvo’s case, Provo officials had projected that 75 percent of customers would sign up for its top-end “triple play” — meaning TV, telephone, and Internet services in a single package.

 

Instead, the iProvo triple play take rate was closer to 17 percent. While the network passed the 10,000 subscriber mark late last year, city officials now say they may need as many as 15,000 subscribers to break even.

 

Both networks are access wholesalers, and neither network has gotten enough retail partners, nor have the retailers done well enough to fatten either network’s revenue, either on the business or consumer sides of the business.

 

Tough retail competition from Comcast triple play offers, two satellite retailers, and Qwest (News - Alert) has been a factor, as it always is for a residential overbuilder. Also, business-focused service providers probably would have concluded there is insufficient demand in the markets both overbuilders have targeted.

 

As so many other would-be competitors have discovered, incumbency has its advantages.