UTOPIA is trying to reinvent itself. The fiber-optic telecommunications system, owned by 11 Utah cities, still is bleeding red ink, but its managers say they have a new business plan that will turn red ink to black. All they need is a little reorganization, a little more time and a little more capital: up to $60 million.

We would love to believe this is possible, mostly because the cities are on the hook to repay $500 million to retire UTOPIA’s bonds over the next 30 years if the enterprise can’t generate enough operating revenue to do the job. But we remain skeptical.

The business lost $51 million in fiscal 2009, is expected to lose $25 million in 2010 and is projected to lose another $20 million in 2011. Though the losses are declining, which represents progress, they still are losses. The system has about 10,000 customers; it needs 15,000 to break even.

Nevertheless, the optimists point to rising demand for bandwidth to enable services like streaming video in homes and high-capacity communications for business. They say their system, which delivers fiber-optic cable to the customer’s door, is in the best position to provide it. Their competitors, mainly Qwest and Comcast, use copper wire or coaxial cable in the final link to the customer’s home, so they cannot provide the same speed and reliability.

The question for the 11 cities, then, is whether to back even more debt, up to $60 million, to market the system and build it out in phases. They would target clusters of customers who are willing to sign long-term contracts or pay the $3000 upfront to bring fiber-optic cable to the home or business, as Brigham City has done.

To facilitate this, the sponsoring cities would create a new organization, the Utah Infrastructure Agency, to issue new debt. It would not be saddled with the system’s existing debt. The cities also would create municipal utilities to collect installation and service payments directly from customers, rather than relying on service providers to bill for those fees and remit them to the cities.

UTOPIA is unique in that it builds and operates the system, but it does not provide service, such as telephone, television and Internet access. About a dozen private providers do that over the UTOPIA system. (UTOPIA is an acronym for Utah Telecommunications Open Infrastructure Agency.)

Instead of pumping more money into it, the cities could try to unwind the business, but that would leave them with little more than long-term debt. Not a happy alternative. Under the circumstances, they may have little real choice but to press on with the new business plan.