Wed 2 Jul 2008
High placed sources, speaking on condition of anonymity, have confirmed that Veracity has pulled out of the merger with Broadweave and that Sorenson Capital may have withdrawn financial backing as a result. The 60-day delay cited by Broadweave in the papers is rumored to be buying time to find new backers. The loss of Veracity combined with the iProvo NOC employees who have left means that video experience is almost non-existent and staff resources will be stretched dangerously thin. This may account for anonymous commenters who have reported issues reaching customer service over the last several days. When asked about these details, Provo City employees involved in the deal were unaware of the failure of the merger.
This puts Provo in a terrible situation. Broadweave purchased Mstar's customer list using the debt they were to assume from the city. If the purchase fails and they no longer have that debt, they may find themselves in a sticky sitation, having a customer list that they didn't really pay for. Veracity also has a year and a half left on their contract and has no intention of selling their customer list to Broadweave at this point.
Provo is also looking at a greatly decreased sell price since the customer base has been thrashed and they have proven so eager and willing to sell. We're also left with a lot of unanswered questions. If Broadweave has to pull out of the deal, will Mstar resume operations and take back their customers? Will Broadweave continue to provide services to the Nuvont customers they bought? More importantly, can the network rebound after throwing the existing providers under the bus?
I submit that it can, but it requires one thing: join UTOPIA. In addition to getting back Mstar, they would add XMission and up to 17 new providers. Rumor has it that 8, not 4 as previously reported, are within months or weeks of offering services on the network. One of the key points that both Franklin Court and CCG made was that adding new providers was critical to the success of the network. Provo could attempt to find service providers on its own, but its trashed reputation would impede negotiations even starting. Joining UTOPIA would immediately bring on new providers and regain those 4 lost NOC employees. (C'mon, who didn't guess that the iProvo NOC employees had moved to UTOPIA?)
I honestly expected that this deal would fail, but certainly not before the ink dried on the paper. The spectacular nature of this collapse could prove very damaging to Mayor Billings and Kevin Garlick, Energy Director for Provo. The Mayor negotiated this deal and Garlick was instrumental in pushing it. The City Council could also see some serious problems for members who voted to approve the deal. All three who voted against it cited feeling rushed and it appears that their hesitancy was well-founded.
July 2nd, 2008 at 4:21 pm
As Gomer Pyle would always say, “Surprise, Surprise, Surprise.”
July 2nd, 2008 at 4:56 pm
Whether it fails now, as you’ve reported, or in a year or two, it will fail. Broadweave has never swam in competitive waters. It was silly of Mayor Billings to do his we’re-absolutely-not-for-sale-oh-wait-we’ve been-for-sale-for-a-year-and-a-bunch-of-Mormon-demi-celebrities-bought-us. So, as Mr. T said above, they ended up w/ an incompetent purchaser.
Not meaning to divert too much from the point of your post, Jesse, but this is a real problem w/ municipal broadband. Once problems surface, rather than deal w/ them straight up, politicians (as they’ve been known to do) spin.
Anyway, thanks for the info.
July 2nd, 2008 at 8:30 pm
What happened to all the UTOPIA NOC People if the iProvo guys jumped to UTOPIA? Didn’t they have their own staff?
July 2nd, 2008 at 8:40 pm
Steve: Very true. The political implications of municipal broadband can cripple such initiatives when there’s not enough oversight. We’ve watched Provo get itself in deep by spending a year trying to find a way out instead of digging in to do some hard work. UTOPIA also experienced it when they did the walk of shame back to the cities to ask for a second chance. The gag with municipal networks is that residents own them and have to act like it, something that hasn’t been done all that well in the past.
Anon: I believe that DynamicCity/PacketFront has been providing the NOC services to date and UTOPIA is trying to bring more of that management in-house.
July 2nd, 2008 at 9:29 pm
Ok, just for clarification, not all four were NOC techs. While they worked in the Network Operations Center building, the people that went to UTOPIA were the NOC Supervisor, a NOC tech, a Network Engineer, and the Field Services Supervisor. These losses to the iProvo/Broadweave team are significant.
As for UTOPIA, it is apparent that they are bringing in-house what has previously been outsourced. The relationship with the DynamicCity/Packetfront is either changing or ending. I believe some of those guys are probably moving over to UTOPIA as well. Certainly, it will be interesting to watch as UTOPIA restructures, adds new service providers, and moves aggressively forward with new management and an experienced team.
July 2nd, 2008 at 10:00 pm
I am not sure it would be in Utopia’s best interest to have iprovo join them at this point.
The iprovo network has a 40 million dollar debt has shown zero reguard for their providers and is going though a process in which it has lost a substantial number of customers. iprovo has been terriably mismanaged and the only thing of value as far as Utopia is concerned is the video head end.
July 2nd, 2008 at 10:17 pm
So, for those of us who are Mstar customers, what is the alternatives if this fails and we refuse to go back to Comcast? Where do we go from here?
July 2nd, 2008 at 10:18 pm
So, for those of us who are Mstar customers, what are the alternatives if this fails and we refuse to go back to Comcast? Where do we go from here?
July 2nd, 2008 at 11:20 pm
Anonymous: I’m sure that UTOPIA would ask them to consider a refinancing package similar to what they did with a two-year “grace period” on bond payments. Certainly a lot of other negotiations would have to go into it, but they are certainly not in a position to improve operations after what’s gone down recently.
kg: Well… that’s a great question. Broadweave bought the Mstar customer list using the debt that Mstar owed iProvo. If Broadweave doesn’t get the debt to use as payment, they could either pay Mstar for the customer list and become a provider on the network OR give the customer list back.
If Mstar gets it back, we have to wonder if they would consider being a provider given their seriously strained relationship with the city. Mayor Billings was just shy of openly hostile towards Mstar in one of the city council meetings I attended and I can’t imagine that Mstar has much love left for Provo either. I think we’re going to have to wait and see what happens over the next few weeks.
July 2nd, 2008 at 11:58 pm
Looking forward to the “spin” from Mayor Billings and Mr. Stewart. I hope for the customer’s sake iProvo can live on. Hopefully, this episode will re-entrench the ideals of open access.
July 3rd, 2008 at 11:09 am
Looks like the news is out:
http://www.heraldextra.com/content/view/272301/18/
http://deseretnews.com/article/1,5143,700240104,00.html
http://www.sltrib.com/ci_9776005
July 3rd, 2008 at 11:38 am
Wow, that really backfired didn’t it.
As I told the mayor and Mr. Stewart in person (nice guys both of them), they should have just stayed the course, added some new providers and dealt with the political ramifications, but they weren’t willing to stand up to the backwards thinking citizens who were too dense to understand the long term value of a fiber to the home network. Now the politicians are in even hotter political waters. Sad!
I re-iterate what I said at the beginning of this fiasco, they should have just told the public that this is a long term infrastructure investment, it wont turn a direct profit for many years, if ever, but that’s besides the point. It adds extreme value to the future of the city. It’s nothing more complicated than a change in perspective. After all, when was the last time a sewer system or road turned a profit directly? Never. But imagine how it would devalue a city if it didn’t have those. Well fiber is the road of the future, and iProvo was national leader in this important future infrastructure, now they are just in a mess.
That being said, the fiber is still in the ground, and attached to nearly every home and business in the city. Pretty much no other city in the entire country can say that, though most would love to. The city just needs to sit down, back away from all the current disastrous decisions, strained relationships and re-think how to take advantage of this powerful virtually future proof foundation they’ve built.
July 3rd, 2008 at 11:54 am
Sadly, it looks like we may need to wait 60 days to see what will happen? So far the deal appears to still be a go, even with these bumps in the road.
I believe the iProvo network (a completely built network covering a full city) is more valuable that the UTOPIA network currently is, with significantly less debt.
I’m betting Provo will seek one of those other buyers if this sale fails. The guys that cried over the sale not being fair?
There is no question that a failed sale to Broadweave would be a disaster for Provo City and lower the value of the network.
July 3rd, 2008 at 12:12 pm
A follow up on my thoughts, after reading the articles linked above.
Broadweave: “We only started focusing on due diligence the day after the Provo Municipal Council approved the deal.” Wha?? Maybe you should have been doing this back in THE YEAR you had before this was announced.
At this point, I encourage Sorenson to back out. And I suspect if they do their due diligence over the next 60 days well, they will probably realize that’s the best option.
It would accomplish two things, it would save Sorenson from throwing money down a black hole (don’t forget the symbolism of the shiny new gas guzzling trucks from Airswitch… er ah… Homenet… er ah… Broadweave, I get those so easily confused). And second it would kick in the clause that gives ownership of the network back to the people should own it… us, the tax paying citizens of Provo City, who agreed to pay for the installation of a city owned, open network, not fund yet another private one. This would also allow Provo to do the right thing and join or cooperate in some way with UTOPIA.
July 3rd, 2008 at 12:26 pm
A primary reason why I believe the rumor that Sorenson will pull out is that Broadweave by themselves doesn’t meet their investment profile. They’re looking for companies with annual revenues between $20M and $200M and annual earnings between $3M and $25M. (Source) Broadweave + Veracity fits that profile, Broadweave alone does not. I’d be surprised if Sorenson follows through after this failed merger.
July 3rd, 2008 at 12:49 pm
As a tax paying citizen of Provo, I’m very unhappy with the decision to take the open network and create another private one. I also don’t like the way the Mayor went about it. It was obviously too rushed and leaves the customers caught in the middle. How in the world can they hope to compete with the “big” guys when it seems they have little to no business sense or ethics?????
July 3rd, 2008 at 12:54 pm
Capt Video: I think UTOPIA is turning that around with some of their new management. Todd Mariott has worked in telecom for 15 years and Chris Hogan was VP of Marketing for Packetfront, another telecom company. Provo, on the other hand, left their telecom manager position vacant for over a year. While they may have both made similar errors in the past, they are taking radically different steps to correct course.
July 3rd, 2008 at 3:06 pm
“There is no Plan B.”
State Senate Majority Leader Curt Bramble stole my line.
http://www.heraldextra.com/content/view/272301/18/
http://www.freeutopia.org/2008/05/28/notes-from-the-iprovo-hearing/#comment-5067
That’s the real trouble with this situation. Long before the council approved the deal, the proponents of the deal made sure the council couldn’t turn it down because the whole system would implode if they did, with no other alternatives. Now we’re even farther past the point of no return.
July 3rd, 2008 at 4:00 pm
While the losses are real and definitely a serious concern for Provo. I suspect the situation was made to look even worse (very worse case scenario presented?) in order to push the council for a quick decision.
Given that the sale is now delayed 60 days (and I suspect Provo is still paying the bond payment until the close, likely recovered upon close?) perhaps they could have taken a little more time to allow everyone to do their due diligence?
July 3rd, 2008 at 8:35 pm
It is funny that Sorenson is now saying the same thing Sherrie Hall Everett and Cindy Clark were saying.
July 4th, 2008 at 8:30 am
I stand corrected!
The Daily Herald reports that Broadweave took over the bond payment and the network July 1st.
July 4th, 2008 at 9:50 am
Well it happened. My internet is now being routed through Broadweave and my speeds have dropped from 40+ Mb/s to around 12, it’s not the end of the world, and is closer to what I’m paying for, but still not what I want. I’ll have to look into a faster plan I guess. Also, in a strange coincidence, my router stopped working. I can ping it, but can’t log into it, or get any internet through it. Odd that they happened at the same time…
July 4th, 2008 at 2:12 pm
LOL…That is a strange coincidence that you cant log into “YOUR” router at your house…..*where did i put that dang password again…” The network-voodoo-bandwidth-configuration gods went out and changed your router…lmao…Your riding the same infrastructure!!..your change..your Internet goes out a different router in the Provo NOC out XO instead of Center7 (who is going to drop MSTAR like a rock because they havnt paid them over 900K).
July 4th, 2008 at 3:27 pm
I think Jeremy was careful NOT to blame Broadweave for the router problem and did say it was a strange “coincidence”.
I surprised that a company that would allow a small monthly bill to grow to almost a million dollars. Provo did the same and were foolish to do so. If Center 7 allowed Mstar to get that far behind (how many months is that?)they might need to review their bad debt policies?
July 5th, 2008 at 11:30 am
Capt. Video it sounds like you’re trying to blame MStar’s huge unpaid debts on the creditors! The same thing apparently happened to just about every company that MStar bought services from. Isn’t this why NGT was shutting off phone service to iProvo customers a week or so ago?
July 5th, 2008 at 11:58 am
Not at all. The bad debt is totally Mstars problem and I am well aware of some of the internal management decisions that contributed to the problem.
But good fiscal responsibility is not shown by companies like iProvo when they fail to take appropriate action when customers don’t pay.
So Mstar owing money is not Center7 or iProvo’s fault, however if they let the debt grow to huge amounts ($1,000,000.00?) and then lose that money, if Mstar fails to pay and goes bankrupt. If I were a member of the board or stockholder I would hold someone in my company responsible for the loss if they failed to follow good bad debt policy and procedure.
There is a reason companies like Comcast and Qwest disconnect customers after only 60 days (or less?). By taking action when the amount of money owed is smaller, they are much more likely to collect quickly and get back on track.
Do you find iProvo or Center7 allowing the Mstar debt to reach $1,000,000.00 to be responsible?
So I’m saying Mstar is totally responsible for the debt, if that debt turned into a loss for the company it was owed to, someone at that company might be responsible for the loss.
July 5th, 2008 at 12:07 pm
I have no knowledge of Mstar account status with NGT and would not be surprised to learn they might be behind in payment to some degree.
I do know that NGT supports the Mstar phone service for both Provo and UTOPIA. It’s interesting that there was no disruption related to Mstar’s UTOPIA NGT customers. Mstar continues to add new customers to NGT weekly?
There was more to the phone problem than meets the eye or was in the paper.
July 5th, 2008 at 12:25 pm
These are more complicated situations than Comcast with an end customer. There are serious consequences to shutting off services. Provo couldn’t exactly shut off services to MStar to get them to pay the bill. That would have been shooting themselves in the foot in a serious way. Provo’s best option was to set up to remove the customers from MStar, something I believe their contract allowed in cases of nonpayment.
I believe I read somewhere in the recent deluge of rumor and innuendo that MStar’s service providers were soon going to be “sister companies.” This tells me that maybe some of the other debts are being converted into equity. Imagine if they just shut off services instead. Suddenly MStar can’t service their customer base and all of the customers leave for a new provider. MStar now has 0 cash generating ability and absolutely no hope of ever paying anyone back.
So the point is that sometimes shutting off service is going to hurt the creditor more than help. I wouldn’t assume that they were just looking at the mounting balance due saying, “I sure hope they pay us soon!” There has to be a fine balance between applying leverage to force payment and not killing the revenue base.
July 5th, 2008 at 1:22 pm
I agree with that, including that SOMETIMES shutting off service is going to hurt the creditor more than help…but those times are VERY RARE. Most of the time not shutting them off will generate a larger loss (write off).
I think taking “action” is the key. Not a wholesale turn-off of the customers as a first step.
In iProvo’s case slowly selling/moving Mstar customers to Veracity was an option. (Perhaps each month moving customers valued at the amount owed that month?)
If Provo took SOME action, with a small number of customers as soon as Mstar was over the contractually allowed payment amounts (60/90 days?) they would have sent a CLEAR message that not paying is not an option and changes at Mstar would have been made (including management and ownership if needed) to avoid seeing their entire asset become worthless to them as subs were moved.
Requiring customer payments to go to a lock box (as was done many months too late) was another option.
There are lots of options to get their attention (limiting network speeds, cashing any security bonds or deposits, etc.) and payments. Doing nothing is just not one of the good options.
That’s what iProvo did. Nothing.
I don’t know what Center 7 did, but I also don’t know that Mstar actually owes them $900k or anything at all.
My comments are a general statement that allowing an individual or company to get too far behind is likely to cause a large loss in the end. I think this is well known and most companies will not allow it.
Most believe it’s better to write off a smaller debt. If they can’t pay you $100,000 is it likely that can pay $1,000,000 if you allow the debt to grow?
All UTOPIA cities (except Payson) just took your course. Allowing themselves to increase their risk hoping to avoid a smaller loss.
Time will tell if they made the right decision…allowing their creditor (UTOPIA) to go deeper in debt in hopes they will one day be able to pay.
Risky Business!
July 9th, 2008 at 9:51 am
Anonymous? Laughable. We all know who it is and it’s going to come back and bite this person…
July 9th, 2008 at 11:14 am
Do you? There’s dozens of folks who have the inside track. Might make for an interesting game of Clue (”Bob Jones… in the break room… with his cell phone!”), but speculation is just that: speculation. The only people who know are me and my source.
July 9th, 2008 at 12:17 pm
I was amazed it took so long for Jesse to get the news. It was announced company wide within Veracity Tuesday morning and Jesse didn’t post it until Wednesday night. And it wasn’t like Veracity’s employees were told not to tell anyone (I think, I didn’t actually get the email, I just heard the news from others when I walked in the office.)
July 9th, 2008 at 1:10 pm
It was me, I’m the anonymous source. Now that you say it’s going to come back and bite me, I’m trembling with fear. Please don’t hurt me mister!
July 11th, 2008 at 5:45 pm
My external managed DNS service recently lost the ability to receive zone transfers from my box running on Nuvont/iProvo. After determining that nothing was wrong on my end, I took the opportunity to call Broadweave and see what was going on (I haven’t heard one word from them about the transition, and my Nuvont services have been mostly uninterrupted).
The Broadweave service rep. said that I was still a Nuvont customer. I asked when that would change, and he said it might not change. He said that some segments of Provo will remain Nuvont customers as part of the deal, “so [I] might not have any problems after all.”
????
This must be some new deal I’m not aware of. I attended all the hearings and read lots of documents, but don’t remember anything that sounded remotely like this.
Anyone know what’s going on?
Next, I called Nuvont. After a while, an automated answering service picked up. This was a small miracle. This is the first time I’ve ever been able to call Nuvont from my Nuvont-powered phone. It usually just results in a fast-busy. The automated answering service said, “thanks for calling Veracity.” When I finally talked to a human, I was told that Veracity and Nuvont are kinda-sorta the same thing. The after-hours Veracity tech didn’t know if/why some Veracity/Nuvont customers wouldn’t be transferred to Broadweave, and he was unable to look in to my DNS problem.
/me longs for Xmission on iProvo.
July 11th, 2008 at 6:31 pm
It’s all very confusing.
I feel for all involved. Poor Broadweave expected the deal to close on July 1st and they could “take over”. Then two monkey wrenches were thrown in the gears.
Veracity nixed the merger and that changed things. So now Broadweave had to adjust their plans, including the use of Veracity techs and customer service reps. NuVont was a spin off from Veracity so I’m not sure how independent they are and how the Veracity non-merger effects them?
Then the iProvo purchase deal didn’t close, so Broadweave is running iProvo (sort of) but they don’t own it yet. So Provo City still has final say and some control. In some ways Broadweaves hands must be tied? How much money would you put into the network if you didn’t know it was a sure thing that you would own it? Expecting it to close (as I do) and spending your money on the network before it closes are two very different things.
We (iProvo subscribers)need to suck it up and wait until Broadweave is able to spread it’s wings and fly alone before we judge them too harshly.
There is no doubt they should have communicated with their customers better. But some of the rocky road related to the transition must be due to the unexpected elements of the deal.
I’m sure Broadweave is looking forward to owning the network as much as Provo is looking forward to NOT owning the network.
What have they got 50 days and counting?
July 11th, 2008 at 7:21 pm
If anyone from Broadweave is reading (and I’m sure they are), they really ought to consider setting up a company blog with regular updates on where things stand. Every day that passes without news of what’s happening is a day that customers get nervous and jump ship.
July 11th, 2008 at 8:04 pm
Jesse, that’s an excellent suggestion and let me know if you are willing to cover wagers that it will happen, I’m always looking for a safe bet. As far as blogs covering iProvo updates, this is it.
July 11th, 2008 at 9:13 pm
That informs the geeks, but what Broadweave really needs to do is the basics to inform ALL their customers. Not just blog readers or email readers.
They need to spend the damn 42 cents (cheaper using bulk permits or postcards) and talk to each and every customer. It’s not rocket science. It’s not hard. It’s not expensive.
Can you imagine being willing to spend $40 million dollars to buy a network and not spending a few thousand to communicate with your customers. If they paid 40 million for 10000 customers that’s $4000 per customer. The mailing would cost less than the value of 1 or 2 customers.
Comcast was sure willing to spend much more to communicate their message. They didn’t have the Broadweave customer list so they send to all non-Comcast customers.
It’s plain poor business and frankly just stupid to be too busy to communicate with your customers.
Someone from Broadweave want to explain the lack of communication? They have a PR person on staff. I saw her picture with the Mayor in the newspaper.
July 13th, 2008 at 2:32 pm
Show me the service: I thought the mayor was their PR person.
He sure seems to make a lot of statements on behalf of the company.
July 26th, 2008 at 10:38 am
Today’s Daily Herald reports that Sorenson just provided funding for another company (not Broadweave). Are we now just over thirty days from the proposed SECOND closing?
I’m sure Sorenson has the ability to fund the iProvo deal. The question? “Is the business plan sound?” Can Broadweave cut expenses low enough, raise rates high enough, and still add enough subscribers to pay the bond plus operating expenses? While also replacing the World Wide Packet boxes, improving and adding services, (as Broadweave said they would) and paying to install the thousands of new customers needed?
I wonder what the really smart money people at Sorenson think?
July 27th, 2008 at 8:54 pm
Does anyone really believe that Sorenson is still in the game? I hear they have long since fled the scene. Broadweave is desperately searching for the capital partner they need. I also hear that they have no operating capital and are paying employees from Steve Christensen’s personal funds. How long will that last? Did Provo really give away this $60 million asset to a company with no operating capital? if you think this is justifiable Mayor Billings, you better get a reality check. Kevin Garlick has led you down the path to complete disaster.
July 27th, 2008 at 9:23 pm
I wouldn’t count Sorenson out yet, I do wonder what is going on at this point in time tho. If the deal falls apart it would likely be the end of several political careers. If it does fall apart what will provo do next? find another buyer sell it for a song and a dance and eat a large chunk of lose, or maybe work with utopia so that utopia providers can sell retail services on iprovo(I root for this one).
I have a hard time beleaving that their are many providers that would risk trying to setup on iprovo again(or for the first time) after the stunts that have been pulled.
July 28th, 2008 at 8:38 am
Prior to the sale, all UTOPIA providers except Xmission sold services on iProvo. In fact selling more services as Veracity and NuVont were able to sell video.
Given Xmission’s limited success (low subscribers) on UTOPIA I doubt allowing UTOPIA service providers to sell on iProvo will be seen as much more than going back to how things were before the sale. I thought Xmission was already 1 of the new service providers iProvo was already working to add before the sale? Again based upon Xmissions sales on UTOPIA their addition will do little to help iProvo.
UTOPIA and iProvo share a single major problem. TO OFFER PRODUCTS AND SERVICES AT PRICES THAT WILL MAKE PEOPLE SWITCH. If they are able to do this they will be successful. If they can’t, they will fail! Currently either the products and services or the pricing is NOT compelling enough to make people switch, and both networks are failing.
While I too have heard all of the rumors Harold mentioned, I’m not sure which, if any, I believe. I guess the only thing that matters is if Sorenson is in or not? In just over a month we should know. I hope we do know in 30 days and there is not a request for an extension? Given most of the iProvo employees are gone, would Provo be in position to deny another extension?
Since I think the sale is something most Provo citizens support (It’s very clear most did not support iProvo by becoming customers. If they had Provo would not have looked at selling!) I’m not sure the deal not going through will be a black eye for the Mayor, etc. Some might think, “At least they are trying to sell!” and like the Mayor more???
When you have Frasier Bullock from Sorenson publicly telling the City Council they will be funding the deal, how does the Mayor or anyone else get a black eye if they then don’t fund it? How could the Mayor know if they would pull out? I guess that’s why I believe they are likely still in? You have to think before Frasier spoke Sorenson had run the numbers and they worked? At that time they expected Broadweave to buy Veracity customers, not merge with them, so that deal falling apart should not change things?
As for Kevin Garlick, he is not a politician and has a long and very successful career running power companies. Including Provo’s, where he has made many, many millions for the City. I believe he does what he is asked to by the Mayor, including running or selling iProvo?
luminous has a good point that given Provo’s now public strong desire to sell the network they might have trouble attracting new service providers or having existing providers invest in gaining customers they would be forced to sell? But if the customer sale price were likely to be higher than the acquisition/installation cost they might try to install even more?
July 28th, 2008 at 8:43 am
I’ve heard that both Mayor Billings and Councilman George Stewart are current or former stake presidents… and that Fraser Bullock was their direct supervisor as an area authority. That paints on a whole new level of conflict of interest. I suspect that the “failure” was engineered by Billings and Garlick to do a favor for Bullock. Disgusting.
July 28th, 2008 at 8:51 am
We have to consider that one of Broadweave’s mail selling points was that they would have complete control of the wholesale and retail sides and would be aggressively pursuing business accounts. The failure of the merger with Veracity and complete absence of pricing on business services (not to mention that Nuvont didn’t sell their customers after all) means that their revenue projections will be markedly lower. Don’t think for a moment that these two competitive retailers are still going to pursue accounts and lock up as much revenue for themselves as they can. With this kind of massive change in the financials, I don’t know that I would count on Sorenson sticking around for too long.
July 28th, 2008 at 9:03 am
What is the “favor” they did for Bullock? Getting him involved in this deal?
Not sure that’s a “favor”.
Or was the “favor” telling him to get out?
If Sorenson does NOT provide the funding it looks like a black eye for Bullock?
I have no knowledge of these church assignments, but could easily believe all those men held those positions. I don’t know Bullock, but I know Billings or Stewart and don’t believe they would do a “favor” for anyone at the expense of the City. They both seem to take their responsibility to the City very seriously.
July 28th, 2008 at 9:17 am
I think the implication being made is that since Bullock is an investor in Broadweave and a member of its board, there’s the possibility that Mayor Billings did him a favor by selling the network to him on the down low. It’s entirely plausible, especially since there wasn’t an open bidding process and some experts I’ve talked to say the network is worth more like $45-60M.
July 28th, 2008 at 9:20 am
I still don’t think the Veracity deal dying kills the iProvo deal.
I assume the original purchase idea from Broadweave was that they immediately take over Mstar customers and that they would TRY to buy Veracity/NuVont customers. But if they could not reach agreement on price, they would become the “landlord” and collect the network usage fee from them until their contracts expired and then not elect to renew the contract?
July 28th, 2008 at 10:10 am
That would be entirely contrary to how they presented themselves before the city council. Broadweave constantly beat the “full control” drum and made it clear that they believe that the bifurcated model was the cause of the financial issues.
July 28th, 2008 at 10:43 am
But I think most people (including me) expect iProvo to be sold for much less if this deal falls through? liminous says the system will be sold for a “song and a dance”.
That does not sound like Frasier is getting that good a deal?
I’ll be shocked if someone else steps up and will take the same deal. If Sorenson thinks the numbers don’t work and pulls out, how likely is it someone else will take the same deal?
July 28th, 2008 at 10:46 am
Based on people I’ve talked to who work in the FTTP business, a proper RFP process would get offers from at least 4-5 companies for more than Broadweave is offering and without owner financing.
July 28th, 2008 at 11:00 am
I think they are very seriously mistaken.
Paying more than it cost to build for a failing network is just bad business and I don’t believe anyone would do it.
July 28th, 2008 at 11:09 am
I think Broadweave believes in the one provider model, they made that clear at the public meetings and it makes business sense (lower operating costs than an open network for both service providers and network owners).
That would be why they would try to buy the Veracity customers. But if they had to wait for the contract to end to fully reach their model I believe they were prepared to do that.
Not their 1st choice, but not a deal killer?
They had to assume there was a chance that Veracity might NOT elect to sell and they would have to wait a little to reach the holy grail of sole owner, service provider. They had to know Veracity had a valid contract they would have to honor.
July 28th, 2008 at 2:02 pm
In my opinion it was never the bifurcated model that was the problem. It was a lack of marketing.
I go back to my original premise when I started iProvoWorks.com (before the Broadweave announcement), go door-to-door (homes and businesses) and tell them they can get a much faster, less expensive internet connection and support their local community at the same time, instead of pouring their hard earned money into an impersonal mega-corporation / borderline monopolies (the cable and the phone company). Seems like this pitch is a no-brainer. And it was, if properly communicated.
And furthermore stop overcomplicating the sales pitch by practically forcing an inferior video and voice service as part of the deal. Let people keep their existing cable and phone providers if they like. In fact, if I were running the network, I’d drop those services entirely from the “Head” and just figure out how to profit from the internet connection. If people are really into HDTV (who isn’t?) I’d encourage people to keep their existing cable provider (after all they offer lots of HD programming and fully functional and CableCard ready HD-DVRs, which don’t even appear on the radar for Broadweave, or Mstar). If individual ISPs want to create their own IPTV services and offer them, then great!, but let the ISP deal with that. Drop the old school media crud, and just keep the network clean and fast!
Or even better, show customers the future of TV and telephone. Explain to them the powerful new things they can do with this wicked fast internet connection, show them they can save money and just buy the TV shows they actually watch (iTunes+AppleTV) and show them how simple it is to sign up for services like Vonage. Or explain to people that some of their cell phone providers are now allowing their cell phones to use in-home VOIP over wifi for calls. Take advantage of your high speed upstream and explain the things they can do on iProvo that’s not possible AT ANY PRICE on Comcast or Qwest. In other words, educate your customers of the true power of a blazingly fast bi-directional in-home or in-office internet connection, and market it like CRAZY! Engage your happy subscribers to help by offering discounts if they get their neighbors to sign up, and engage the truly passionate subscribers to help with the door-to-door marketing by training and paying them for their time. It would have worked, but instead we ended up with this mess.
Furthermore, I take issue with the claim that the “bifurcated model” lead to a such a bad customer service experience as to justify this mess. Specifically that it’s so inconvenient for the customer to have two sets of installers show up at their house and to have to take time off twice to get their connection up, that they’d rather just stay with a monopoly. Bah! Sure it was inconvenient, but have you read the horror stories of people waiting for the cable company installers to show up? They’ve made MOVIES about that for heaven’s sake. With iProvo at least both installers showed up on time and did their work efficiently. That being said, I propose a rather obvious solution. Synchronize the installer schedules so both installers show up at the same time… Sure easier said than done, but easier than selling the entire network?? I think not. [Baby... bathwater...]
I agree with the premise of the original posting, pull the plug on the deal with Broadweave, and merge iProvo into UTOPIA. I’m sure it will make for a paperwork nightmare, but it’s the best solution all around. Customers will have superior services WITH A CHOICE of providers, UTOPIA at least doubles it’s subscriber base, the NOC has engineers again, and maybe even UTOPIA could take advantage of the infrastructure of iProvo’s NOC saving them some money down the road. And most importantly we are back to the original open network concept not just another private network. But I fear politics, both public and internal are going to sour any chance of a logical solution like this.
For some perspective from a passionate subscriber, for the first time in a couple of years, I visited Comcast.com so I could gauge their prices and install times should iProvo go completely dark at some point down the road due to this mess. That’s both sad and scary!
July 28th, 2008 at 4:26 pm
iProvo ran models on doing just internet and other options. None worked very well. You just don’t realize the serious results on the business model if you do data only. (Which is the most profitable service, but not strong enough to stand alone.) There are no additional fiber network costs or fiber install costs for the phone and video service. Install fiber for data and it can also deliver voice and video.
The cost of building the fiber network and the high cost of each install means you go from needing a 30% penetration with three services to needing 70% or more with just data.
If iProvo had got more than about a 33% take rate they would have needed many millions more in capital to buy more World Wide Packets switches in huts and portals in homes and do the additional installs at almost $1000 each. Perhaps moving the project from a $40 million to a $50 million or more project. The $40 million was to be able to connect about 10k homes. Which with a good triple play split is enough to be successful.
If you run the numbers in a business model (as I have) it becomes clear that selling multiple services is the key to success. You must make the video and phone services competitive. You cannot walk away from them. You cannot be successful without them. (The service provider can be successful without them, but not the network. Which is a problem in itself as it removes the need or desire of the service provider to do more services, which the network NEEDS to be successful.)
iProvo only needed 10k subs to be successful (with about 75% being triple play). When they got lower triple play numbers, it move the number of subs needed to 15k or 18k. With single play only, it’s even higher.
Getting 10k subs in Provo is not out of the realm of possibilities, moving the number up sharply makes it very unlikely.
I do agree that there was not enough marketing (and discount offers) to make people switch. Comcast and Qwest have continuous marketing, with continuous offers. I’ll bet almost every home in Provo was visited by 1 or more door to door sales person (not all were home). Both Mstar and Veracity had strong door to door crews in Provo and as each area was activated it was hit by both companies sale crews. Then hit again hard during the summer by door to door. I believe Mstar spent over $1 million dollars on Marketing (and not surprisingly, they have the largest number of subs on both networks?)
I’ll give you that not only do you need TO OFFER PRODUCTS AND SERVICES AT PRICES THAT WILL MAKE PEOPLE SWITCH, but you also need to let the people know of the offer. (Marketing!)
Sorry, but Provo has a much better chance of becoming profitable than UTOPIA does. Provo should work closely with UTOPIA to eliminate duplicate expenses, but Provo would be foolish to take any share of the massive UTOPIA debt or turn over operations to UTOPIA. Given UTOPIA’s current position I see no possibility of Provo joining UTOPIA.
I think Provo’s best chance of being profitable would be to operate the network themselves as network owner and the only service provider. As successful Spanish Fork City does. But it would require taking the State to court to be allowed to do so, and they might not win in court.
July 29th, 2008 at 6:10 am
Capt. Video,
When you managed iProvo, you had your shot at getting it right. Poor choices on service provider selection and nothing but negative marketing killed it. Quik Internet (wireless demo), King Communications (Provo Cable), Ceristar (fiber demo), Homenet, Mstar, Nuvont and Veracity all had a hand in the debacle. They were all selected due to some political connection or backdoor alliance. Xmission and many others, who had the track record were sent away. A successful, commited service provider was never given a chance. The bad part is that these terrible provider choices spilled over to Utopia and did great damage to that project. Who knows what would have happened if Provo politics got out of the way.
You mention Kevin Garlick bringing millions to the Energy department. What about that $40 million dollar debt that will be hanging around the city’s neck for a long time to come. What about the $20 million pulled from Energy funds to cover all the early parts of the project and bail outs.
I’m sorry but iProvo,Energy, and the city would have been more successful financially without Mr. Garlick.
July 29th, 2008 at 5:56 pm
Sadly, I never had my shot at getting it right. I never made decisions for iProvo. But I was along for the ride and there is plenty of blame to go around.
I believe Mstar and perhaps Veracity were actually UTOPIA providers before they joined iProvo. So I’m not sure in which direction the choices spilled.
Neither network was able to attract the large, well funded, aggressive service providers they had hoped for.
Mr. Garlick did not come up with the iProvo idea and does not have the authority to spend millions of the power company reserves. Those decisions are made by the Mayor and Council. It was his bad luck to have his dept. placed over the project. As mentioned, with lots of blame to go around, I think it unfair to place the lions share on Mr. Garlick. As if it were his idea and his failure.
The original idea was for the City to be the service provider, as it was with power. Qwest and AT&T got the legislature to pass a law not allowing that. That and many other decision (some political as you mention) all hurt iProvo.
The Xmission track record on UTOPIA of gaining subs and generating revenue is not better than other providers that I am aware of. UTOPIA has Xmission (whom I believe to be a great internet service provider) and they are in worse shape then iProvo.
The fact remains that the fiber to the home business model cannot ride on a single service as you suggested.
July 29th, 2008 at 10:49 pm
Since our name keeps getting bandied about in this thread, I thought I should clarify one specific point.
There currently exists essentially 4 markets on UTOPIA: 1) triple play, (2) double play (3) Data to the home and (4) business access.
Numbers 1 and 2 account for the majority of UTOPIA’s subscribers. XMission does not compete in these markets.
However, we do compete in numbers 3 and 4. And we have the significant and vast majority of these subscribers, a success based largely on user satisfaction.
We are actively working on increasing our product catalog both for UTOPIA and across our other service areas (and beyond); service extensions that we hope will have a significant effect on our UTOPIA penetration.
July 30th, 2008 at 8:28 am
Warren,
What happened to VoIP on UTOPIA? I thought Xmission had started that, so you would be considered a double play provider.
Also what tech did you guys end up using. I left the NOC before you deployed the hardware. If you did deploy the hardware that is.
July 30th, 2008 at 8:54 am
I understand it’s been delayed for further testing and will be generally available this fall. Part of the delay is that UTOPIA is re-working their wholesale rates.
July 30th, 2008 at 10:19 am
(Hey Tom! XM misses you :p)
Without going into too many details, our VoIP offer was disrupted by the Veracity-Broadweave merger as we were leasing a partition on a switch.
Since all the obstructions we have hit in getting VoIP to market have resulted from third party partnerships, we are now in the process of bringing VoIP completely in house and have a live target of the end of the year.
July 30th, 2008 at 10:20 am
Sorry, this is Warren. Having issues logging in today for some reason.
July 30th, 2008 at 1:27 pm
Good to hear from you Warren.
I miss working on UTOPIA. But alas things change. Hope all those iProvo NOC people doing good on UTOPIA for you.
August 7th, 2008 at 4:24 pm
George Stewart is leaving the Provo Council to serve another mission. He will not run for Mayor!
http://www.heraldextra.com/content/view/276055/17/
He’s says selling iProvo was his goal?
August 7th, 2008 at 5:06 pm
Wonder what he will do if the sell falls apart? I would not be shocked to hear that Sorenson has decided to pull out. The sell isnt done yet untell Provo gets a signed contract from Broadweave.
August 16th, 2008 at 8:44 am
Today the Daily Herald reported that NuVont is out of the deal. They are not selling their customers to Broadweave.
August 16th, 2008 at 11:50 am
From the looks of things so far, NuVont is smart not to sell.
August 18th, 2008 at 8:49 am
How in the world did NuVont get to be a service provider if Xmission was turned away? I hear Nuvont has never had a legitimate basis for using the network, but are some kind of Frankentstein that Veracity created and Provo administration was too weak to kick them off. They are pretty arrogant to spit in Broadweave’s face when they have no real basis for being on the network!
August 18th, 2008 at 9:03 am
If I understand it correctly (probably not) Veracity developed a split personality and split their business up. Business customers stayed w/ Veracity and residential went to the newly created NuVont. Which used the Veracity back end.
August 18th, 2008 at 9:56 am
I think that at one time NuVont was a subsidiary of Veracity that later spun off into a separate company with Veracity wanting to stay sharply focused on business customers and NuVont taking the residential customers Veracity did not want to deal with? I heard that NuVont had since obtained a contract with iProvo on their own? While iProvo may have lacked the “stones” to stop them, it was also perhaps not in iProvo’s best interest to kick them off?
I believe the only thing that ever kept Xmission off the network was them not wanting to offer the triple play at that time. So now it’s more Veracity that fails to offer triple play and is more like Xmission? But Veracity might offer video to commercial accounts (MDU’s?)
As discussed in past posts, iProvo saw the importance the triple play would play in a networks success. Perhaps their error was in not providing some significant financial encouragement to a service provider for selling the triple play.
Accepting only triple play providers with no requirement or financial incentive to sell a high percentage of triple plays may have defeated the purpose of requiring all service providers to offer the triple play?
I still believe the ability of the network to be successful without a high percentage of triple play subscribers is limited. The number of additional customers needed to generate the same revenue and the cost of installing those customers makes success unlikely?
August 20th, 2008 at 7:19 am
Capt. Video,
Your are wrong about NuVont. They have no contract. This was verified from the highest of inside sources. Their participation and the process that resulted in their using the network is unfair to others companies like Xmission and clearly illegal. This has always been iProvo’s biggest problem, allowing providers to get away with anything including “homesteading on the network”.
August 20th, 2008 at 9:25 am
I’m not surprised that no contract exists. A number of “verbal” agreements were reached and then there was not a timely follow-up to move to a formal written agreement on many of them. I had thought this was one they had cleaned up, but have no first hand knowledge of that so I believe you!
This could be interesting. Since we know Broadweave would rather NOT have NuVont (or anyone else on the network) if they really have no legal right to be on the network they could be in trouble (and they would have likely sold to Broadweave?).
I suspect they have some legal rights, as a subsidiary of Veracity or somehow. I will agree that the process might not be fair but I’m not sure I would agree it’s illegal? It could be, but I’m just not aware of any law that was broken that would make it illegal?
Since NuVont has customers and is up-to-date on making payments to iProvo I’m not sure allowing them on the network (even through the back door?) was that bad for iProvo?
Had Veracity not spun off NuVont and just stopped selling to residential customers to focus on businesses would that not have been worse for iProvo?
Also interesting that the consultants report suggested iProvo back off the service providers and not be the Network Nazi they were at times? There is likely a thin line between “allowing them to do anything” and giving them the freedom suggested by both consultants?
August 20th, 2008 at 10:13 am
Does this mean I could theoretically switch from Broadweave to NuVont and remain on iProvo? I kind of like that idea since it would be re-enforcing the idea of iProvo NOT being just another closed network. Hrmm…
August 20th, 2008 at 11:10 am
lol…I’m in the process of doing exactly that. I was planning to disconnect from Broadweave at the end of the month, but will now look to switch my service to NuVont. I’ve already contacted NuVont to do that and suggested the same to a number of friends.
August 20th, 2008 at 3:22 pm
Capt. Video,
The precedent that was set by the Veracity/NuVont spawn would allow any recognized service provider to partner up with mom and pop and presto, you’re a service provider. Provo in effect lost all control of the admission process. I don’t see how this could be acceptable especially when many other companies are denied.
I also wonder if Mstar is still a provider by contract without customers. With a little ingenuity, they could add Xmission to the Provo network following the Veracity/Nuvont spawn model and of course they could acquire new customers.
I realize that this sounds a little crazy, but what if?
Perhaps you can tell me why the Broadweave deal is better than a Utopia parnership for Provo? It seems like the Utopia deal could allow Provo to retain ownership of the network which they should do anyway if they can’t unload the debt responsibility.
August 20th, 2008 at 6:27 pm
I don’t support the “back door” method as the best method.
I was just suggesting that it was not overly harmful to the network or a cause of it’s failure. Since both networks are failing due to not enough customers would it be that bad to have many, many providers come in the back door as long as they were all bringing more customers and paying the transport fees to use the network? (As NuVont is!)
I support the Broadweave deal as good for Provo City (not the customers). The Broadweave deal gets someone else to pay the bond, with a guarantee of at least 2 years of bond relief IF the deal goes through as structured (which I would suggest now it may not? Broadweave now has Provo City by the “short hairs” and can just come back now and say, “We will still make the deal, BUT without the guarantee or without that level of guarantee” and Provo is not in a position to say “No!”).
I don’t expect Broadweave to be successful in the long run (they are just paying too much for the network, even with the sweetheart deal of Provo paying them for “future” network capacity, (lol, a sham to make it appear Provo is getting full value for the network)), but a few years of bond payment relief is still good for Provo. The UTOPIA partnership does not provide any bond payment relief and the Broadweave deal does. Mark my words, the network will come back to Provo City in the future! (I suspect the next buyer will pay much less and then may be successful?)
I fully support a working partnership between iProvo and UTOPIA. Sharing items (like the headend and NOC) to reduce costs. They should have done that years ago! Sadly, the Broadweave deal makes this less likely now and in the future.
But I would not support turning over management of the network to UTOPIA.
UTOPIA in my opinion is much less skilled at running the network than Provo is. They pissed away $100+ million(?) and did not get what Provo got for $40 million. (UTOPIA is still trying to figure out what it got for it’s $100+ million?)
UTOPIA has shown NO proven ability to build or run a successful network. I suspect Provo would never turn over it’s “almost” successful network to the much less successful UTOPIA.
In my opinion they still don’t get the importance of the triple play to being successful. Their new outside plant manager is running around trying to figure out what is built and what is not. (They really don’t even know that, and have to go to the field and open vaults and peds to look and see where they have fiber and where they don’t!) They are (were?) considering charging a high install fee (which will never work), and I believe they need over 40,000 new customers to avoid drawing on the city bond guarantees and they don’t have the skill set or funding to build, sell and install that many new customers in the time allotted.
The iProvo Network could break even with a small increase to the power bills (perhaps $3-$4 a month?), (not desirable, but not the end of the world). UTOPIA has yet to have it’s real “come to Jesus meeting” in my opinion.
August 20th, 2008 at 8:46 pm
Capt. Video, I’m really starting to like you.
August 21st, 2008 at 8:32 am
Capt. Video,
Your post is full of Utopia is this and did that and so on. I ask, “Who is Utopia?”. It is not Dynamic Cities of the past, it is not Packetfront anymore. There is a new culture at Utopia and these folks have all new perspectives that will likely have a much better result. While I may agree with many of the issues you point out about the old Utopia, I don’t think those issues apply today. It is time for Provo city to forget the rhetoric of the past and realize that Utopia is now very likely the only entity that could step in and manage the iProvo network. Provo is still on the hook for the $40 million bond and handing over complete control of the network to a novice company like Broadweave will help nothing. Yea you may get them to pay a few bond payments before they blow up the network and die and then you start over at a cost that will exceed the value of the payments. Bottom line: net loss. Provo will have to face the reality that they have the debt, it’s not going away, and they will need to protect their asset and learn to make it profitable for the long term. A Utopia partnership is currently the only way this can happen. If you are concerned about the well being of the city and the city’s financial future, you would be calling your council members and asking them to at least give the Utopia proposal equal consideration with the new Broadweave deal.
By the way, I agree with the power rate increase that is long overdue. It is irresponsible management to not increase rates for some 20 years while all costs are rising and while you cut staff and infrastructure below critical levels. This is just canabalizing a perfectly good business for polictical gain. Continuing this will destroy Provo City Power.
August 21st, 2008 at 8:41 am
Without the surety to provide for two years of bond payments, Provo City is in a much worse position. They increased their liability and continue to make payments on the network, albeit to Broadweave in the form of reserving capacity. For such an arrangement to be a positive to the city, their net liability has to be reduced. So far, it’s not looking like this is the case at all.
I don’t think many people expect Broadweave to be a long-term success on this network, especially in light of their inability to secure financing on-time, the failure of the Veracity merger and Nuvont’s unwillingness to sell their customer base. These low expectations are what’s derailing the Sorenson financing and the promised surety. I sincerely hope that Provo City is working feverishly on a Plan B by now. It’s looking like they will desperately need it!
UTOPIA has gone through its “come to Jesus meeting” when it had to go back to the cities and say “guys, we screwed up real bad”. That was a very humbling moment for them and combined with a flush of upper management has completely transformed the culture. Trust me when I say that the things I know lead me to believe that UTOPIA has it together a heck of a lot better than iProvo ever did. I can understand that you place a lot of weight on the poor execution of the past and the current lack of public data, but trust someone who’s looked at the inside when I say it’s better than it’s ever been.
Your proposal to tack a small amount onto power bills sounds about the same as my suggestion to just raise rates for subscribers by about $5/mo. That would’ve made up the entire operating deficit and could have been rescinded as revenues increased. Great minds think alike.
August 21st, 2008 at 9:41 am
Having either Utopia or Broadweave run the network are not the only two options. Provo could find a decent manager to run the network, give him/her the real power to do so, admit to everyone that iProvo will probably take a very long time to hit profitability and plan for it by giving it a budget out of utility revenues, stop having these counterproductive political battles, then give it some time.
August 21st, 2008 at 9:46 am
That would be ideal, though I remain doubtful that if a telcom manager were hired that they would be given the latitude to do what needed to be done. It’s also apparent that Provo’s mayor and city council don’t have the stomach to stick it out like they should have. Perhaps this is why the position stayed empty for so long.
I don’t mean to demean your suggestion (I’ve made similar arguments many times), but the political reality is that Provo wants out and they’re willing to do just about anything to see that through. I don’t think anything short of replacing some elected officials will fix that aspect.
August 21st, 2008 at 9:53 am
The question is, has the NEW UTOPIA management SHOWN they have the ability to build/manage a network? I would say the answer is still no. While they have not shown they lack the ability to do so, they also have not shown they understand the issues and have solutions. (In part, because they have not had the opportunity to do so, but they do NOT have a proven track record.) Add to their lack of proven success the fact that they are starting in a very, very deep hole.
But what I have seen so far does not prove they can do it better. I see no evidence of past success running a cable or phone company (a very similar environment)? I hear talk of some belief that customers (enough customers) will pay a high (or any) install fee. I see UTOPIA appear to NOT keep their service provider partners informed and treated as real business partners?
Do the service provider partners (Veracity, NuVont, Xmission and Mstar) know where and when they will be able to sell to new areas again? Do they know what will happen with video headend services (currently provided by UTOPIA) when the iProvo/UTOPIA video contract expires in less than 90 days?
Do the service providers know the install fee plan and build out plans?
You can bet that Comcast and Qwest are currently planning their “Holiday Promotion” that may start in Nov. or even their “New Year Promotion”. Do you think the service providers have information (from UTOPIA) on what areas will become active 5 and 6 months from now so they can do that type of planning?
I’m watching the “new” UTOPIA and as soon as I see some evidence of skill sets or success I’ll praise them for it. I’m looking for management that lays out a budget and subscriber gain plan, and then executes the plan. I believe the current and past management people are all competent professionals. But that alone will not make UTOPIA successful. Do they have the specific skill set needed to push UTOPIA to success? That is yet to be seen.
I would like to see them saying “We need or expect to connect “x” subscribers a month starting in “, and then showing us they are meeting the goal. This type of proven success, proven ability to predict the results shows they “understand”. If they don’t set and meet monthly goals how do we know how good they are doing. You must keep score and we should all know the score to judge if UTOPIA is in good hands.
So I don’t say the new UTOPIA management does not have the skill, experience or ability to make UTOPIA successful. I am just saying we have not seen hard number “proof” of that YET. I’m sure we would all welcome that proof.
I fully welcome an iProvo/UTOPIA partnership in areas to reduce costs but actually turning over the iProvo network management to UTOPIA’s untested management team would not be good in my opinion. At least when you turn it over to Broadweave they are paying the bills. If UTOPIA were to sign up to pay the bills as Broadweave has, then with their cash on the line, they can manage the network.
But given that UTOPIA will have problems paying their own bills, it’s unlikely they will step up to pay the iProvo bills too?
August 21st, 2008 at 9:59 am
I believe Jarrod’s solution was a good one! That would have been the best solution. Including working closer with UTOPIA as they were starting to do before the Broadweave deal.
The problem was the lack of willingness to pay to support the network. They were grasping at straws to avoid paying to subsidize the network.
They should have just bit the bullet!
August 21st, 2008 at 10:12 am
I don’t think that anyone will really pay Provo’s bills and that is why Provo must retain a vested interest. I’m afraid that Broadweave will just be a temporary,destructive, diversion, so why even go there.
As far the track record of the new Utopia, I have heard a number of issues that have now been recognized and corrected. The ones I have heard leave me saying, “Wow! Somebody finally gets it!”
What I hear about Broadweave is just the opposite, they are re-commiting the errors of the past like poor performance (how is your video guide), little or no marketing, a serious lack of capital, little or no experience, and worst of all technical arrogance that cuased them to squander the knowledge gained from the previous years of iProvo.
August 21st, 2008 at 10:39 am
Thoughts on having Utopia run iProvo:
Pro - Utopia now employs a number of former iProvo techs, so they have the technical knowhow.
Con - iProvo will not be a major focus for Utopia’s management. Compared to Utopia, iProvo has much smaller problems. At best, iProvo will be held steady. At worst, iProvo will be ignored or plundered in favor of Utopia.
August 21st, 2008 at 10:44 am
I look forward to saying, “Wow! Somebody finally gets it!”
When I hear rumors that they think people will pay a high install fee…I say the opposite.
But those are just rumors. Soon, VERY soon, UTOPIA will have to show their thinking on things like the install fee, the importance of video and the triple play, etc.
I look forward to joining you in saying, Wow! Somebody gets it!”
With Broadweave the good or bad will turn upon how much harm is done during their ownership/operation vs. how much of the bond they pay off.
If they complete the deal as proposed they would be paying over 6 million dollars (2 years of bond payments plus operating costs).
But I fear Provo has totally lost control of the situation and is no longer in position to say “No” to Broadweave if they demand the terms change.
We should know more at the end of next week when the deal is AGAIN scheduled to close.
August 21st, 2008 at 11:05 am
The part iProvo would need, the tech support (NOC, etc.) can be gained through a partnership without turning over the network’s financial management to UTOPIA.
Provo would just need 2 good engineers and they are likely available from the DC crew let go in the past. They had some very good engineers. So they can likely go it alone and be ok too.
The new UTOPIA management team will have more than they can handle in just turning UTOPIA around and asking them to also turn iProvo around at the same time might be asking too much.
I assume they are only human!
August 21st, 2008 at 11:17 am
Capt Video, that sounds like a good option, assuming the work load wouldn’t be too big for those engineers to manage both networks. I also wonder if it will work to have the engineers oversee both networks from one or the other’s NOC, or if they need to be in both places at once.
I wish there was someone in Provo’s government with the political will to grapple with the problem rather than play political football with it.
August 21st, 2008 at 2:04 pm
The new Broadweave deal is not the same deal. I understand that the initial deal stipulated that the surety was to be provided by Sorenson and only Sorenson. There are also other changes. How can they attempt to close without another pass before the council in public? Oh that’s right according to Provo legal the administration can do whatever they want and the council just lets it all go.
The former DC engineers know nothing about the Provo network since it is totally different equipment, but Utopia staff is qualified.
August 21st, 2008 at 2:22 pm
I don’t understand how the mayor can change the deal without getting it reapproved by the council. Perhaps the council didn’t actually approve the deal, but really just approved the selling of the asset at any terms the mayor could get.
Regardless, I would not allow the terms of the deal to change. The city should never have handed over operations without everything being complete. At this point I would not allow any more extensions and no new negotiations. If Broadweave isn’t ready to close the deal on the original terms with a financial backer at least as good as Sorenson at the end of this month, it’s time to take control back and move on.
But there does need to be a plan b. At the very least something that will work for the short term.
August 21st, 2008 at 3:56 pm
I totally agree Jarrod. Handing over the network before closing allowed Kevin Garlick to spin off the iProvo staff so there could be no going back to the before scenario. This results in another gun to the council’s head. I don’t see why the council does not see through this.
August 21st, 2008 at 4:19 pm
I’m not sure if it’s correct to assume Sorenson is out. At this point that is just a rumor.
But I’m also not sure Sorenson matters either. If someone puts a bond, cash, money that cannot be withdrawn in an account, anyone’s money is as good as Sorenson’s to Provo City.
I would only think the deal needs to be re-approved by the council if the deal points changes. If Broadweave asks to not have to put up money or to put up less money, I could see that needing to be brought back to the council. If they stay with the same deal with someone else backing them. The deal seems the same and should go through without a hitch. Who’s money backs them should not matter.
I’ve never read exactly what the deal was. Rumor was it was Broadweave putting a non-revocable bond up that would cover 2 years of bond payments (about 6 million?). After the first 2 years the bond would be reduced based upon performance? If Broadweave walked in the first 2 years Provo keeps the money and has 2 years of bond payments. Almost insures Broadweave will stay for 2 years since they are paying the bond for 2 years no matter what?
But I believe Provo has completely lost it’s bargaining power at this point and they can only hope Broadweave is ready willing and able to close the deal on the original terms.
While I myself an with you Jesse and would not support any changes or extension, Provo is not in any position to say “No” to them. What if Broadweave asks for another extension. With no good fallback position I think they will have to grant an extension or even make changes to the original deal.
I suspect at this point Provo is just hoping that next week, the deal closes as originally planned. Only about 8 days and we should know something one way or another.
August 22nd, 2008 at 8:37 am
The reason it matters whose money it is is the exact deal didn’t require putting the $2M in a place where it was guaranteed to be available when needed. There was some degree of trust that Sorenson would hand over the money when required.
If that was changed so that the money was placed in escrow in some way then you’re right, it doesn’t matter where it comes from. But as long as there has to be some trust in the guarantor that it will provide the money when needed, it matters who that guarantor is.
August 22nd, 2008 at 8:43 am
I have been reading some of the Mayor’s comments regarding this deal, and I find it funny that he’s pointing to the fact that two bond payments have been made as proof that things are going well.
I looked back through my copies of the documents, and noticed that the city is responsible to pay 1) $500K on deal close and 2) $300K per year for future capacity on the network. The bond payments are around $250K per month.
So are checks actually changing hands (”Here’s your check for $500K”, “And here’s yours for $250K, don’t cash it for a couple days”) or are they just doing it all on paper? With this deal Broadweave doesn’t actually have to cough up cash until month 4.
So as a metric, making bond payments is about as weak as you can get.
August 22nd, 2008 at 8:54 am
I hope you are wrong!
I hope Provo would NEVER accept the deal without the cold hard cash being place in a bond or some irrevocable financial instrument.
In my mind anything less is dereliction of their fiduciary responsibility and downright shameful.
August 22nd, 2008 at 9:05 am
There is a detail that I left out: a security deposit is required to be placed in an account that is equal to one month’s bond payment. And the bond payment is $278K, not $250K. Here are the relevant documents:
http://www.provo.org/downloads/util/surety.pdf
http://www.provo.org/downloads/util/capital_call.pdf
It’s clear from the documents that Sorenson did not need to hand over, or even put in escrow, any of the funds that were part of the guarantee.
What I don’t know is which agreements, if any, have been executed. Certainly not the Capital Call Agreement.
August 22nd, 2008 at 9:06 am
Jarrod: That’s one of the reasons why Rep. Clark objected to the terms of the deal. Broadweave truly didn’t have any buy-in and could run for several months on city dollars. Another thing to consider is that this seed money will last a lot longer than 4 months. Provo only had a $100K per month shortfall on the bond and Broadweave has the benefit of some of the retail revenue, albeit from some of the lowest quality addresses. They could potentially use that money to string this along for months or a year before the house of cards comes down.
August 22nd, 2008 at 9:25 am
That’s right. “No skin in the game.” I guess we’re seeing why that’s important.
Though even more important is actually executing an agreement BEFORE handing over the asset.
“I’ll buy your car for $15,000.”
“Okay, give me the money and I’ll give you the keys.”
“I just need to run down to the bank to get the money, can I have the keys to go get it?”
“Uh, sure, I’ll be waiting right here.”
…
-Phone call-
“Hey, uh, the bank wouldn’t give me the money today. I guess they need to check my credit for the next little while. I’ll have to get you the money in two months. That’s okay right?”
“Uh, is my car okay?”
“Yeah, I’m taking good care of it.”
“Can I have it back?”
“I need it to go to work. If I don’t go to work, the bank won’t like my credit.”
“Well, don’t paint it or reupholster it or anything.”
“Don’t worry, it will be fine.”
I wonder what happens at the end of the two months.
August 22nd, 2008 at 10:58 am
It appears the “additional support” will cover up to $6 million. But I can’t tell how secure that money is. It mentions things like “Irrevocable letter of credit” and such.
Provo would demand that somebody put some money in the bank to insure they have a year or two of payments in case the deal goes south.
I see no mention of Sorenson, but a “provider” which can be any sound financial provider.
I see a separate company was set up for this venture, which is owned by Broadweave. Something like Broadweave Provo LLC and the guarantor is Broadweave?
August 22nd, 2008 at 11:22 am
Back to an earlier discussion, I’d like to put my money where my mouth is and re-enforce the concept of an open network with multiple providers by switching mine from Broadweave to NuVont. But before I pull the trigger on that, I’d like some opinions about the speed. Currently I’m getting 20Mb-70Mb downstream (70Mb to Xmission, which I assume is on the same “subnet” as Broadweave’s provider) and upload streams in excess of 15MB/s. I see that NuVont