The BlogHive Reacts to Proposed iProvo Sale

There's been a lot of good commentary from other bloggers about the pending sale of iProvo to Broadweave Networks and it appears to be mixed at best.

I've yet to see any bloggers writing unabashedly in praise of this proposed sale. Could it be that we all know that this deal has serious issues?

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29 Responses to The BlogHive Reacts to Proposed iProvo Sale

  1. jasonthe says:

    I think that is an understatement.

    This deal reaks of bad idea.

  2. Jesse says:

    iProvo has been losing money precisely because it hasn’t fully embraced being an open network. It came up with unreasonable demands on retailers (all triple-play, wholesaler dictates services) that discouraged new entrants and had them act as a retailer by proxy instead of a true wholesaler. Then then spent the year after the RFP was published not signing up additional providers to offer whatever services they could, severely limiting network growth. The only open networks that succeed are those with many service offerings and providers. Certain agenda-driven members of the municipal council, however, decided to push for a sale instead of actually becoming an open network. At least the new Executive Director at UTOPIA gets it and plans to add a few new triple-play providers within a few months.

    I don’t think the network will be better off. Even if Broadweave makes investments and shoulders the debt for a couple of years, it will likely shed customers as they feel loyalty towards making the city project work but none towards making a private network succeed. There are hundreds, maybe thousands of Provo residents who signed up for iProvo only because they wanted the city project to succeed. There is no such emotional investment in a private network and they will shed customers as a result. Failure means that a smaller customer base will be handed back to the city and retailers, stung by being thrown under the bus once, won’t be likely to entertain offers to join the network. Paying off a small amount of the bond debt only to be left with fewer customers and no retailers is hardly an improvement.

    The OEN network did greenfields AND overbuilds (source, PDF warning). To presume that anyone would buy a network with overbuild coverage and not seek to expand it is unrealistic, especially since the network as it is was a money-loser. Given who you are (yes, I can Google :)), I’m sure you know how much money it takes to do overbuilds and that’s money I’m sure Broadweave doesn’t have, investors or not.

    But let’s talk open networks again. I can name a few companies who wholesale to competing retailers. Like Qwest. Or Verizon. Or AT&T. Sure, all three are looking to file for forbearance so they won’t have to deal with pesky competition, but they are open networks that appear to be working. Or do you contest this?

  3. Paul says:

    Capt. Video, I can’t point to a successful open network in the U.S. probably because of the newness of the model and my own ignorance. Others may have successful examples to point to. However, there is an excellent example of a successful open network in Vasteras, Sweden and there are others throughout Europe. I know that Sweden is not in the U.S. and therefore probably doesn’t count as an answer for your question. However, before dismissing anything European, let’s remember that America perfected the European model of democracy too, and from my experience with these countries and people, they are also full of fiercely capatalistic folks like us.

    Although I can’t name you any U.S. open networks on which the jury is not still out, there are plenty of initiatives that tell me someone is going to get the model right and at that point others will follow. Some examples: Seattle, San Francisco, and Palo Alto.

  4. FGF says:

    “Can you point to a single successful open access network anywhere in the nation?”

    Water treatment plants
    Regulated radio spectrum
    Mass transit
    Utility cooperatives

  5. Jesse says:

    No, there’s not a successful one yet. Just like there wasn’t any successful municipal power in 1900. You see, it’s easy to say “it just doesn’t work” when something is in its infancy. You don’t even give it a shot.

    Provo’s big problem is that it isn’t being run like an open network. The city is trying to be a proxy retailer by imposing all kinds of inane restrictions on what the retailers can and can’t do (15Mbps limit, all must be triple-play, leasing the video head-end, etc.). In the process, they’re acting as if their customers are the end users and are focusing on getting more of those while ignoring that their customers are the retailers. If they just said to a retailer “here’s your 100Mbps pipe, make sure you pay the bills”, it would probably attract many more providers and result in much greater revenues. At least that’s what’s been working in Sweden.

    CCG and Franklin Court already pointed this out, but it seems that Provo is too intent on sabotaging itself to actually follow through on any of their suggestions. It also doesn’t help that certain members of the municipal council have been trying their darnedest to trash-talk and sabotage the network from within from just about day 1. They want it make it not work to prove their assumption that it can’t work.

    If Provo were actually selling the network (none of this “rent-to-own” hooey) to a competent network operator, I’d just be disappointed instead of outraged. Broadweave, however, is looking more and more like a group of rank amateur shysters who can’t even get their business licenses in order. If they want to sell it, fine, but at least get some good terms from a good provider when doing so.

  6. luminous says:

    how about the portland community fiber network

  7. Paul says:

    Strange as it may seem, Capt. Video, I actually agree with you that there are open questions here and that we need to avoid kool-aid (in favor of more adult beverages like Coca-Cola). However, I submit that there is more than one flavor of kool-aid. I sincerely believe you that you hope this can succeed here, but there is a flavor of kool-aid that says that if there is no successful model in the U.S., then it can’t be successful here. There are plenty of innovations in the history of technology that didn’t originate in the U.S., but which have been adopted and perfected (or at least vastly improved) here. Interestingly, several of these – railroads, steam engines, rocket propulsion, internal combustion engines, asphalt paving, indoor plumbing, sewers, and a host of other technologies and infrastructures made their way to America through Europe. Catch my thread here? I know you’re not saying that because there’s no successful model in the U.S. there never will be one. I take comfort in knowing that there are plenty of successful examples of open networks in Europe. UTOPIA is learning from those networks, and I’m confident it will find the right application to the Utah market. It’s the nature of our great country that with the genie out of the bottle, there are plenty of innovative folks out there who through a process of trial and error (UTOPIA has had its share of the error part) will find the formula that works. If that’s kool-aid, then I guess I’m guilty of drinking.

  8. Jesse says:

    While I certainly don’t like any sale, you’ll note that my objections are around this specific buyer and the terms of this specific “sale”. If a company with proven experience came in a dropped a wad of cash on the table, I’d find that to be a much better deal than working with the yahoos at Broadweave. Nothing I have found about them instills any amount of confidence in the company.

  9. Jesse says:

    A funny thing about being “best” is that it doesn’t automatically qualify anything as “good”. I’m with Pete that if the city wanted to get the best offers possible for a sale of the network, they should have done so instead of expecting everyone to read between the lines. It’s especially obvious that this wasn’t the original intent as Mayor Billings over the period of several months insisted that it wasn’t time to sell the network and that the RFPs being looked at were for future service providers.

    I’m sure Provo’s municipal council will sign off on this deal no matter how much light is shined on it, their last act of desperation to try and get out from under the decision of a previous council instead of righting the ship. While I hope I’m not saying “I told you so” in 2-3 years, I highly doubt it.

  10. Jesse says:

    While I can understand the logic behind recouping the install costs, it never made sense to eat the entire install cost and attempt to recoup it over time. Certainly I think UTOPIA has figured out that this isn’t sustainable in the short-term and causes all kinds of cash flow issues. Passing along some or all of the installation costs to the retailer, the true customer of the network, and letting them figure out what to do with it makes much more sense. In that kind of model, nobody cares what services a retailer offers because getting the money back is now their problem.

    Certainly an advantage there is that retailers can roll the cost into the service for the first year or two, eat some of it, pass it to the customer, or a combination of the three. Don’t think for a moment that incumbents don’t do it. The difference is that you will never finish paying off the installation cost and enjoy a lower rate as a result. It takes some work to sell that to consumers, but once you do, they realize the value. That marketing component is certainly an area where iProvo has been lacking.

    While the debt load on the bond might be reduced in the case of a failure, the network would also be left in a more distressed condition. In addition to having no retailers like when HomeNet went under, attracting new retailers will be almost impossible when you’ve demonstrated a willingness to pull the rug out from underneath them. I don’t see that they’ve appropriately mitigated the risks in dealing with this company, especially since Broadweave may be able to claim ownership of any improvements put into the network.

  11. luminous says:

    utopia has a RPU average of 48$, that clearly shows that their are many customers that are picking up more then 1 service in a network with single service providers.

  12. Jesse says:

    Again, the problem with requiring all triple-play providers is that it excludes innovative services such as remote video security, home automation, transparent LAN (a big business service), off-site backups… services that can increase the ARPU substantially. With the unlimited number of VLANs that the wholesaler can provide, it should be a piece of cake for someone to piecemeal services together from several providers and buy many services from the same network.

  13. Jarrod says:

    Wow, you guys have been busy here.

    A thought about the triple play providers…

    The problem has been that none of the providers started out being any good at all three services. It stands to reason that if you had multiple providers with different specialties on an open network that the end customers could get different services from on the same network from different providers.

    So if you have a company that’s really good at video, and other really good at phone and data, and a home security company, etc, all on the network the customers could buy TV from #1, an alarm system from #3 and internet and voice from #2. iProvo gets fees from all of the single service providers, increasing RPU, but you don’t have the problem of low video quality because company #2 is just shoehorning video into their offering because they have to to get on the network.

    Plus there’s only one cost for installation.

    That’s how a truly open network would work. It’s the beauty of the Internet. Too bad we did it the other way and convinced most of the city that the services are sub-par, but they have to subscribe to support the city.

  14. Jarrod says:

    Capt Video:

    Veracity sells to businesses – not so much video need.

    Nuvont sells the city’s video. Look on their website. Put in a Provo zip. It’s video straight from Provo’s head end. I watch it at home. It even has the mtn. I’m pretty sure MStar sells the same thing.

    I’m wondering about the whole ‘invest in the network’ thing that’s being bandied about. What investment does the network need? The network provides the bandwidth it needs to the places it needs. That’s all it should do. The only investment left is to install the locations that are currently not installed.

    What needs investment is services on the network. If we open the network to any single service company that is interested we can promote the kind of investment we want, from multiple sources. I’ve heard talk about network backup services. Great. Maybe I can start a single service company that provides storage services on iProvo. Anyone already on the network can back up to my massively redundant system. I pay iProvo for the bandwidth. iProvo gets additional revenue from already connected users because of my small single service. It’s small ventures like this that make the Internet amazing. If we let the same thing happen on iProvo we can make it amazing, too.

  15. Capt. Video says:

    I think some of the needed investment is on the video side.

    While iProvo offered VOD before Comcast (AT&T back then) it never invested to grow the VOD and now UTOPIA and iProvo have a very limited VOD offering (about 140 movies) and not a single piece of cable channel VOD (no HBO VOD, no History Channel VOD, etc. etc. etc.) All FREE VOD content that Comcast offers.

    Another area is HDTV. They need 40-50 HDTV channels, not the 21 they presently carry.

    Another area that need investment/improvement is the feature of Caller ID popping up on your TV. A feature available years ago on IP TV networks but still not available on iProvo/UTOPIA.

    Also whole house DVR….when you rent a movie you need to be able to watch it from any set top box in your home, not just the one it was rented on.

  16. Capt. Video says:

    The comment about Veracity/NuVont selling satellite video at the expense of the network was directed at UTOPIA, not iProvo.

  17. Jarrod says:

    Are there any commercial systems that can do whole house DVR? I’ve been playing with MythTV at home and it’s got some really cool features like whole house DVR, and I would think MS’ Windows Media Center can, but I haven’t heard of commercial STBs that can do that kind of thing.

  18. Jarrod says:

    I don’t think Nuvont ever had the capability to provide IPTV on UTOPIA, in which case I can’t blame them for not providing it.

    There’s a strong business case for them to bundle with satellite, too. Sell a bundle that includes satellite and the upfront satellite commission covers the upfront cost of the rest. Sell a bundle with IPTV and it’s all upfront cost, to be recouped in the next year or two.

    When you’re short on capital like Nuvont it’s very compelling to change from an upfront cost to add a subscriber to an upfront gain.

  19. Jesse says:

    Capt. Video: Sorry about all of the missing comments. Spam Karma got slap-happy and “retro-spanked” a bunch of comments into oblivion. In turn, I bonked it on the head so it won’t do that anymore. The conversation looks really odd now, like I’m talking to myself or something.

    Jarrod: There’s been a lot of buzz about whole-house DVR, but I don’t think that anyone has quite gotten there yet. I know that Windows MCE can operate in “extender” mode with an XBox or another Windows PC and MythTV offers similar functionality. You’d think that companies like Motorola and Cisco would get on that boat, but it might be a challenge to get STBs to talk to a DVR in the same house without saturating the neighborhood connection. IPTV has a leg up on that by being all on the same LAN, but I don’t know if cable/satellite can do the same.

  20. Jonathan says:

    MythTV is a backend/frontend setup. I have used mythTV for about 4 years or so now. It works very nicely. In the old days you had to to an NFS mount between the backend(the recorder) and the frontends (the playback). Now it streams the content on demand. The newest version of MythTV now has backend autodiscovery. So now the frontends don’t even have to be configured. I haven’t tried this feature out.

    If your looking for a DIY DVR project MythTV is the way to go. Throw a DVD drive in there and you have a DVD player also. Not to mention it will rip the DVD’s to storage and download the cover art ala iTunes. Pretty soon there is no more need to get out the DVD’s anymore.

  21. Jonathan says:

    I hate to post to my own posting. But here is an article about how someone is/was using MythTV in a community setting.

  22. Jarrod says:

    I actually have MythTV working on my iProvo video. It pulls the MPEG2 streams directly, so I’m not using the set top box. My only problem is I don’t have it all the way set up for my tv, so I do still use the set top box. But when I get the frontend finished I can stop using the Amino.

  23. Capt. Video says:

    Amino and ADB (the STB’s used on Utopia and iProvo) will both release whole house DVR in the near future. It’s more of a “middleware” (Minerva) problem than a STB maker problem.

    When the security is turned on (watch for it in the next few months) you will have issues not using a STB. The security is required by many of the content owners (ESPN, HBO, Fox, etc.)and will likely require STB usage.

    You should expect that Cable will also be able to do whole house DVR in the near future. They will also do on screen caller ID, etc.

  24. Capt. Video says:

    Your comments on NuVont selling saellite video are important. They show that what’s good for the service provider (NuVont) can be exactly opposite of what’s good for UTOPIA (the network owner).
    You should also realize that the service providers lack of capital (which leads them to sell satellite)is another negative for the network overall.
    UTOPIA needs service providers that are going to bring business (including video) TO the network, NOT service providers that are going to sell UTOPIA customers competitive services to make a buck upfront.
    Very Short Term Thinking in my opinion and not the road to success.

    Not a good partnership business model when it’s good for one partner to something that’s bad for the other partner!

  25. Capt. Video says:

    It appears iProvo will be losing it’s local TV studio (and conference room?)as that space is going to be turned into customer service cubicals for Broadweave’s call center.

    If true, this is a shame as the ability to have a local channel with local (Utah) content was one thing that satellite and Comcast have not provided in the past.

    iProvo’s studio produced Kelsey’s Kitchen, a local cooking show created by BYU student Kelsey Nixon. Currently Kelsey is on the Food Network competing to become The Food Networks Next Big Star.

    Provo High School production classes were taught in the iProvo studio.

    After iProvo started doing local content Comcast started adding some high school sports, local dating shows, etc.

    This does highlight a difference between a public and private network. It’s likely a good business decision as local programming did not “pay”, but to a city, that community feel and spread of local information was important enough to invest in even without an immediate payback.

  26. Jesse says:

    Broadweave has said repeatedly that they are open to suggestions. Maybe it’s time to see if they’ll put their money where their mouth is and allow a public access channel?

  27. Capt. Video says:

    Todays Daily Herald (local newspaper) had an insert from Comcast targeting business class customers. Similar to the direct mail piece it highlights “With the upcoming change from iProvo to Broadweave it’s time to take another look at Comcast.” adding, “It’s about having a local partner you can count on” and mentions that “Comcast has also been selected to provide service to students living on campus at BYU”.

  28. Jesse says:

    Given that Broadweave has presented service offerings focusing almost exclusively on residences, it’s a smart move on Comcast’s part to play on that lack on information to snap up the high-dollar commercial accounts.

  29. Jarrod says:

    I would say that with the merger of Broadweave and Veracity there isn’t much change with business offerings. Veracity’s business unit has the same offerings it has had for a long time.

    However, it is a smart move on Comcast’s part to play up the uncertainty to win contracts. I wonder how well it’s working.

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