Brigham City UTOPIA Community Outreach May 14, 2014

UTOPIA is formed; feasibility studies performed $30 million bond issued Project Timeline: $66.2 million loan closed with RUS $85 million bond issued; construction starts RUS provided $21 million of loan and reneged on the rest Legislature passes HB 149 restricting municipal telecommunications and establishing wholesale model Legislature passes SB 66 restricting financing mechanism available

Original UTOPIA Goals Build Advanced Fiber-Optics to each home & business Allow competition between multiple service providers Decrease user fees through competition

UTOPIA is formed; feasibility studies performed $30 million bond issued Project Timeline: $66.2 million loan closed with RUS $85 million bond issued; construction starts RUS provided $21 million of loan and reneged on the rest Legislature passes HB 149 restricting municipal telecommunications and establishing wholesale model Legislature passes SB 66 restricting financing mechanism available

$185 million refinancing occurs Utah Infrastructure Agency (UIA) created Project Timeline: UIA issues $11.2 million bond Construction continues $16 million federal stimulus grant received Brigham City forms Special Assessment Area (SAA) UIA issues $29.5 million bond; construction continues UTOPIA sues RUS Discussions began with Macquarie Capital Legislature restricts ability to bond for operational expenses

UTOPIA & UIA Bonds BondsTotal System Brigham City Portion UTOPIA ** 185,000,0006,179,000 UIA ,500,000182,900 UIA ,205,00069,471 Total Bonds (Does not include Brigham City bond) 225,705,0006,431,371 ** Note – In order to refinance this bond, the City would need to pay a premium of approximately 40%. This would equal approximately $8,650,000 ($2,471,000) above the debt amount.

$185 million refinancing occurs Utah Infrastructure Agency (UIA) created Project Timeline: UIA issues $11.2 million bond Construction continues $16 million federal stimulus grant received Brigham City forms Special Assessment Area (SAA) UIA issues $29.5 million bond; construction continues UTOPIA sues RUS Discussions began with Macquarie Capital Legislature restricts ability to bond for operational expenses

Brigham City Special Assessment Area Allowed Property Owners to Voluntarily be Connected to Network at Their Own Expense Connection Fee for a “Normal Residence” was $2,760 Cash Up Front or $3,000 Financed Approximately 1,600 Properties Signed Up in Area Approximately 1,300 Active Customers Currently in Brigham City

Current UTOPIA Operations Building out system with UIA bonds Build out is focused on best returns Losing about $2m annually – excluding litigation costs

UTOPIA Go-Forward Options 1. Let the system go dark 2. Sell the system 3. Slowly Grow the System to Profitability (Current Plan) 4. Public/Private partnership for complete build out and operation

Go – Dark Scenario Pros No service related UTOPIA Issues Operations are not the responsibility of the City Cons City would still pay UTOPIA bond payments for 27 years City would begin to pay UIA bond payments 1,300+ Brigham residents with connections would not receive service Possible litigation related to broken contractual obligations (Could be many $thousands/millions) City would lose any upside related to the system

Sell the System Pros Service provided to residents Operations are not the responsibility of the city Cons 11 cities need to agree on sales price City would (probably) still need to pay all bond payments Service provider issues may arise Possible monopoly Why Don’t We Just Sell to Google?

Grow the System to Profitability Pros Operational Cost Would Eventually be Paid by Revenues City Bond Payments Would Eventually be Lowered/Repaid Control of Network Multiple Service Providers Cons Operational Shortfalls Take Time to Reduce City Bond Payments Would Take Much Longer to Reduce/Repay Operational Risk is the Responsibility of UTOPIA/City Cities are Reluctant to Issue More Debt

UTOPIA OPEX Shortfall (Excludes Litigation)

UIA Monthly Recurring Revenue

Public Private Partnership (PPP) / Macquarie Proposal Maquarie would build out the network to every city in UTOPIA Maquarie would operate the system Users would be required to pay a utility fee for access to the network and a basic level of service A Wholesaler would manage relationships with Internet Service Providers (ISPs) – not sale services to the public ISPs would provide services to the public – basic level of service would be provided at no additional cost Cities, PPP and Wholesaler all participate in network upside through sharing of transport fee revenue

Competitiveness of the Basic Service ProviderIntro PriceStandard PriceSpeeds (MB)Data Cap Internet Only Basic Service$18-20/month 3 / 320 GB CenturyLink $30/month plus one time charges of $120 One year contract $42/month 1.5 / 0.9 to 40 / GB Comcast $30/month 1st year $8/month modem One year contract $50/month $8/month modem 25 / n/a300 GB Internet + Phone Basic Service$25/month* 3 / 320 GB CenturyLink Double Play $55/month phone One year contract $70/month 1.5 / 0.9 to 40 / GB Comcast Double Play $40/month 1st year $60/month 2nd year $8/month modem Two Year Contract $83/month 3rd year $8/month modem 25 / n/a300 GB * Based on Indicative third party VoIP service pricing of $5 - $8 per month

Public Private Partnership (PPP) / Macquarie Proposal Pros 1 GB fiber optic connections available at all buildings All UTOPIA debt is projected to be repaid under the plan City retains network ownership Operations are not the responsibility of the city Multiple service providers – causing competition Utility fee is lower than many users currently pay $300 million funding obtained by Maquarie SAA Customers will be treated equitably Cons All residents required to pay utility fee Many details need to be worked out Cost associated with exploring the plan Opt out provision could be very costly

Comparison Slowly Grow System Every resident continue to pay $5.32 per month for current service to be available to a limited number of residents by issuing more debt Macquarie Proposed PPP Required utility fee to all residents with a basic level of service that in most cases will cost less than comparable services already being purchased by most residents

Questions?