The iProvo Deal Worsens: Broadweave Also Plans to Buy Defunct OEN Network in Houston

Talk about stretching yourself thin. Broadweave mentioned to the Daily Herald that they plan to buy a fiber optic network in Houston, Texas, likely the OEN network that went belly-up after less than a year of operations. They only manged to reach about 5,000 customers before abruptly halting service, falling far short of their goal to wire 1.6M homes. Despite the large investments from venture capitalists, I doubt Broadweave has the money to continue construction in Houston, do further roll-outs in Provo and continue to build their network in Traverse Mountain.

Wake up, Provo. This company isn't going to be around more than a couple of years and you'll still be left holding the bag.

EDIT: Almost forgot to mention that Broadweave also plans to upgrade the TV signals on iProvo from MPEG-2 to MPEG-4. This will require replacing the existing set-top boxes to support the new signals. At around $300 a pop, it would take nearly $1.8M to upgrade the existing video customers on iProvo. Yet another hunk of cash I doubt they have.

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10 Responses to The iProvo Deal Worsens: Broadweave Also Plans to Buy Defunct OEN Network in Houston

  1. Wishtobe Anonymous says:

    Well, as far as I have found out by talking with folks at Mstar, is that Broadweave has a multimillion dollar investors behind them to back them up…I doubt that they default on their deal any time soon. They are following there previously patterned business model of coming into a master planned community and being the sole provider for them. There experience with the small customer base is a good learning stage for them. Granted it will be difficult to take so many customers at once, it definately helps to have deep pockets to hire additional help. As for the services to be provided compared with the existing services available, its disappointing…but oh well, nothing we can do about it when they have more power to push a deal then any one else around here.

  2. patience says:

    Let us watch for the future Press Releases, review the additional informative releases as the date of June 30th gets near, and make informative comments and suggestions that can be utilized by the general public to share opinions and ideas.

  3. Paul says:

    Let’s not kid ourselves. Broadweave’s statements about “inefficiencies” of the open network model tell me that MStar, Veracity, and Nuvont are history on the (formerly) iProvo network. I wish Provo well, and hope that Broadweave can last, but I don’t hold out much hope that Broadweave will be incented to act any differently than any other facilities based provider that owns its own network. If you want or need fiber in Provo, you’ll have to pay their price. There ain’t no competition to keep them “honest.” Open networks work! Give UTOPIA time, and that will be evident. As UTOPIA gains critical mass of potential subscribers, I predict more service providers – some small, some not – but all with the incentive to provide the best combination of service and price, and motivated to innovate in both areas.

    I’m worried that UTOPIA’s next big hurdle will be the legislature. Check out Howard Stephenson’s statements in the May issue of the Utah Taxpayer’s Association newsletter regarding the agenda for their ambush (sorry, “Conference”) next week. To quote Howard, “UTOPIA and iProvo have both failed spectacularly, though their member cities are approaching this failure in very different ways. While Provo wants to sell their fiber optic network, UTOPIA has
    asked its member cities to more than double their sales tax commitment. Provo Mayor Lewis Billings, UTOPIA interim Executive Director Jim Reams and Utah Taxpayers Association President Howard Stephenson will examine what lessons cities and the Legislature should draw from these eerily similar experiences.” Pay particular attention to the last sentence. Sounds like we better gear up to prevent the legislature from legislating UTOPIA’s failure.

  4. Jesse says:

    Building up three separate networks across two states is going to take tens, probably hundreds of millions of dollars. They’ll need to drop at least $5M on Provo alone to complete installs to all the homes and upgrade the set-top boxes to handle MPEG-4. It’ll take tens of millions to build out the network in Houston and try to win back the customers burned when OEN failed.

    How exactly can Broadweave, a company that can’t even find private financing for their “purchase” of iProvo, find that kind of operating capital, especially after buying the assests from OEN? I think they’re hoping against hope that they’ll get a large enough customer base that they can finance expansion from operating revenues. That model can work with UTOPIA and multiple retailers, but I doubt that a single retailer can pull it off.

  5. What money? says:

    A lot of people seem to think that this thing won’t fail because it’s backed by Sorenson. Well, how long do you think that will last? Venture capital firms can be ruthless in their dealings with unprofitable ventures. Plus, it’s not like they’ve signed a check for 40M. They’re just going to be covering bond payments starting next year. How many years will Sorenson lose money before they shut off Broadweave’s line of credit? I’m guessing it won’t last for more than a couple years of severe losses.

    What I’m waiting to see is the huge number of customers who immediately cancel when Broadweave takes over. A lot of people have put up with issues because they want the city to succeed with the open access network, but now there’s little reason to stay on board instead of switching to the incumbent providers.

  6. luminous says:

    In the event that broadweave does fail to make their bond payment i understand that the city still is liable to cover the payment, but what happens with the iprovo network if that happens? will provo regain ownership? will the network be turned off and provo residents left with a huge bill and no benefit of a running network?

    From a risk point of view without the bonds being simply payed off by broadweave this sounds like it may auctuly increase the risk to provo tax payers by removing options they have to recoup the loses generated by the network. It also sounds like their could be much better buyers found through a simple RFP making it well known that the network is for sell.

    I also think their has been some serious mismanagement going on as Xmission and others have been prevented from becoming retail providers on the network which would bring an infusion of new customers and possibly have prevented iprovo from getting to this point in the first place.

    I will take a wait and see stance on weather or not Broadweave kicks the open network model, I would hope they have enough business sense to know that kicking the other retail providers will lose them alot of customers and revenue. From what i have seen of 3rd network installs around the country (muni and private fiber networks) is that a 3rd network needs the open network model to get enough customers to survive. a 3rd network absolutely needs a multi retail front to hit that critical mass of enough paying customers to survive the onslaught of the incumbent providers.

  7. Jesse says:

    If Broadweave is unable to make the payments, Provo gets to take back the network. The problem, however, is that they won’t have any retail providers, the same situation that hit iProvo when HomeNet died unexpectedly. Provo is jumping out of the pan and into the fire, exiting the telcom business by getting into the banking business (extending loans to Broadweave). Give it a few years and they’ll be in both.

  8. iprovosupporter says:

    So, the April 2007 RFP is not even close to covering the sale to Broadweave. It’s obviously an attempt to go back and try justify what was an illegal closed-door sale of the network. However, this will go through just fine unless it is challenged. The solution is to demand that a new RFP be issued for the sale of iProvo. The question is, what can be done about it? Do we expect Xmission to step up and challenge this with their lawyers? Are there members of the city council who would support the idea of re-issuing the RFP? Should we take action at the upcoming meetings like tomorrow’s open house?

  9. Jesse says:

    I don’t think XMission will sue to stop it and I don’t think the City Council will re-issue an RFP and go through the process again. In fact, the sale to Broadweave has a deadline of June 30 so they’re being pressured to make a decision in about 6-7 weeks. At this point, the best bet is to show up at the meetings to voice your objections and make sure to call and/or e-mail the city council to do the same.

  10. Jarrod says:

    During the open house today Broadweave Steve (the CEO) stated that one of the keys was to provide more reliable phone service. I talked to some of the technical staff after the meeting and pointed out that many of the phone problems were with the client hardware, not the switch. I asked them if they were planning to upgrade the client hardware and they said they are. They may hold onto the Grandstream and Sipura hardware, but they plan to replace the World Wide Packets for phone.

    Obviously an ATA costs less than a set top box, but that still adds another $15 or so per customer, plus the logistics to reconfigure each customer and roll out the upgrade in an orderly, non-failing, and customer friendly way.

    This kind of planned wholesale upgrade isn’t exactly easy, especially not when you’re used to starting from scratch with your greenfield developments.

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