This opinion piece is adapted from my more in-depth analysis of the situation with iProvo and was published in today's Daily Herald.
I had the opportunity to attend the inaugural meeting of the iProvo Review Committee and walked away with a significant amount of new data including copies of the reports from CCG Consulting and Franklin Court Partners. After digesting where the network is and where it is going, I can come to only one conclusion: iProvo is a valuable city asset with the potential to save city departments and residents millions of dollars every year.
First, however, let's look at the problems. Between October and March, iProvo has netted a gain of just 180 new accounts. This is very far from the goal of signing up 60 customers per week and the main drag is stagnant growth in apartments and condos.
This group of customers accounts for over half of iProvo subscriptions and has experienced an 8.2 percent drop in revenues per unit during this same period. It now takes upwards of 69 months to recoup installation costs from these customers. While single-family homes and businesses have enjoyed strong revenue and subscription growth, it's not enough to make up the difference.
Installation costs are taking a big toll as iProvo current eats $800 per installation. Also, installation often takes two days to complete, leading to higher costs and dissatisfied subscribers.
There are some possible bright spots. Once a location has service installed there are few, if any, installation costs to reactivate service. According to Council Member George Stewart, the network equipment is left on-premises when service is canceled and can likely be activated remotely without the need for a visit from a technician. As the network grows, the installation costs will be eliminated once all addresses are reached.
While cash flow can be improved by using a unified installation process, Provo could go one step further and also consider passing on the costs of installation to the customer in exchange for a lower monthly rate. Under such a plan, installation can be paid up-front by the customer, spread over the term of a service contract, absorbed by the retailer or a combination of all three.
There are also many new potential revenue streams, including burglar alarm systems, co-location (renting out space for servers), and off-site data backup.
The most critical change, however, is to add new providers to attract more customers. Franklin Court believes that neither of the current providers will remain solvent over an extended period and new providers must be added soon. The prospect of another HomeNet fiasco is disturbing, but while Provo has been negotiating with new service providers since September, it has yet to bear any fruit.
Even with some of the changes above, the current trends show that iProvo will still not be able to attract enough customers to entirely cover the deficit in the debt service in the foreseeable future. The dependency on low-revenue apartments cannot be made up through increased subscriptions from other account types.
The financial picture seems bleak — until you start looking at the potential benefits of the network to various city departments. The Energy Department stands to eliminate costs of around $704,000 per year through automated meter-reading and remote connects and disconnects of service. The water utility also wants to use the system to save around $250,000 per year and, for the first time ever, be able to read meters in the winter. They can also get instant feedback on water quality, pinpoint potential leaks and see water pressure statistics in real-time.
Even more exciting is the potential savings to power customers. The fiber-optic system will give the city immediate feedback on outages and allow them to remotely turn on and off devices during peak usage, in a manner similar to Rocky Mountain Power's CoolSaver program. Power customers stand to save upwards of $5.5 million in power costs and regained productivity. This more than covers the shortfall from subscriber revenues and results in massive savings for the citizens of Provo.
It just scratches the surface of the potential savings. The smart management of the power grid will reduce demand for new power plants and reduce air pollution. The school district could save $78,000 per year with a switch to a new VoIP system. Electronic parking meters and traffic light photo enforcement can bring in as much as $275,000 annually. Certainly the city can envision many more uses into the future.
While a lot is made of iProvo's up-front losses of around $2 million per year, the potential savings and new revenue for both residents and the city exceed $8 million per year. While detractors focus heavily on the losses, they fail to see the larger picture and overall positive cash flow from the project.
• Jesse Harris spends some of his time advocating for municipal fiber projects at FreeUTOPIA.org. This article is adapted from a posting at www.freeutopia.org/iprovo-report.