iProvo "Sale" Will Be Another HomeNet Fiasco

As more details about Provo's pending sale of iProvo to Broadweave surface, it becomes more and more obvious that this is a bum deal for the city.

Broadweave isn't exactly buying the network. Instead, they are assuming the bond payments from the city. The original bond, however, will remain with the city. This means that Provo can only make the bond payments if Broadweave makes their payments to the city. If Broadweave goes under, the city is still on the hook.

So how financially viable is Broadweave? Rumor has it they aren't turning a profit on their existing infrastructure in Lehi and St. George, something that should be grave cause for concern. We should also be worried that they are attempting to take over a network many times the size of what they currently manage. Time and time again, a smaller operation taking over a larger one ends up being a disaster since they can't cope with such rapid growth.

We may also see a large loss of customers. As the contracts with MSTAR and Veracity expire, those customers will be forced to switch to Broadweave, a company that has data speeds of 10Mbps/1Mbps instead of iProvo's current 15Mbps/15Mbps. Such a drop in speed with what is presumably a equal or higher price will cause massive attrition back to incumbent carriers who offer the same pricing and service levels. And Nuvont customers? Expect to get an immediate boot since that company doesn't have a contract in place.

What we're looking at is a move back to what iProvo was like under HomeNet: one retailer to rule the network that hasn't figured out how to make money either. While the mayor, municipal council and UTA are drunk on the euphoria of washing their hands of iProvo, this is nothing more than punting the responsibility to another party and setting themselves up for massive failure in a couple of years. Shame on them all for managing this city asset in such an irresponsible manner, "selling" it for much less than it cost to build and refusing to do the grunt work necessary to make it succeed. I hope the good citizens of Provo will remember this betrayal at the ballot box in 2009.

Read more from the Tribune, Deseret News and Daily Herald.

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9 Responses to iProvo "Sale" Will Be Another HomeNet Fiasco

  1. Luke says:

    Unfortunately I’m going to have to stay out of this one. 🙂

  2. KLT says:

    Very well stated. This is a big win for the incumbents who want the network to fail.

    Can Broadweave succeed? It is possible but not probable. They have less experience than the city or the existing service providers. Their best line of action will be to move fast to recruit the best thinkers from the existing service providers if they are to have any chance at all.

    My crystal ball says they will fail miserably. They will struggle to pay the bond payment and eventually forfeit, leaving Provo citizens to pay the bill and clean up the mess.

    I’ll give them two years max and then Provo will be trying to solve the problem again. Of course by that time Mayor Billings will be long gone and it will be someone else’s problem to solve.

    It was a very good sleight of hand on the Mayors part, but the citizens will ultimately pay for his deception. Best of luck to Provo and Broadweave.

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  4. Mike Taylor says:

    I have some questions to ask Provo officials:

    * First, after working so hard and sacrificing so much to pioneer something new, are you willing to throw it all away and loose many of the originally sought benefits?
    * Didn’t you create your own network because the telecom incumbents weren’t taking the initiative to do it themselves?
    * When you decided to create the network, didn’t you decide that the lack of a truly free market in telecom was what caused poor service offerings in your city in the first place?
    * Are you willing to sacrifice those principles just to get rid of the network?

    If the answer to those questions is yes, then I have just a few more simple questions for you that you would be foolish not to consider:

    Why doesn’t the city put an open invitation for any company to purchase the network? Wouldn’t the public and city interests both be best served by an open invitation for buyout bids? Are you afraid that some other company would come in with a better offer than Broadweave? Wouldn’t it be better for the city if another company were to offer more for the network?

    As it stands, the current proposal reeks of a back-room deal that tramples over the best interests of the city and its residents.

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  6. LoT says:

    This deal reminds me vividly of the en mass privatizations of government run industries after the fall of the Soviet Union. Hook up your friends and family with a great deal on a state owned industry and they scratch your back later on. Congrats Mayor Billings on being the biggest criminal of the bunch. Broadweave doesn’t love you, and when they default on their payments, the citizens of Provo will realize that they don’t love you either. But you’ll be long gone. Hope you can sleep well at night my friend. Most criminals don’t.

  7. As more information about the Broadweave deal appears, I’m becoming more and more convinced that you’re being irrationally optimistic.

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