Headend Brawl: UTOPIA and Provo at Odds on Shared Assets

As the clock ticks down on a contract between UTOPIA and Provo for a shared video headend, the fight over who owes who money is starting to heat up. I’ve had a lot of anonymous tipsters relating details and rumors over some strong disagreements regarding compensating UTOPIA for their portion of the headend, a subject that appears to be strongly muddied by unclear contracts with Broadweave.

I’m no lawyer, but from looking at the headend agreement, it appears that Provo sold UTOPIA’s interest in both the VOD and Wildvine servers to Broadweave as a part of the sale of iProvo and used UTOPIA’s unused exercise of the right of first refusal as consent to do so. If that is the case, UTOPIA would naturally like to be paid for their share of that asset; it just isn’t clear who should cut the check, City of Provo or Broadweave. Given that the total is rumored to be in the hundreds of thousands of dollars range, I can imagine that all parties involved are taking a strong stance on their respective positions.

The Daily Herald reported that both Kevin Garlick of Provo and Todd Marriott of UTOPIA are confident they can work something out, though I’ve heard that the problem in all of this is Broadweave CEO Steve Christensen who refuses to reach any kind of agreement. It looks like the headend agreement with Broadweave was signed in August of 2007 and I don’t think UTOPIA was involved in that discussion. This is coming back to bite Provo since they decided to make a lot of assumptions instead of talking it through with their partner.

Given the price tag and the tight financial situations with Provo, UTOPIA and Broadweave, I’m anticipating that this disagreement will get ugly if none of the sides plans to budge. Here’s to hoping they work out some kind of equitable solution instead of ended up in an “all sides lose” expensive legal action.

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6 Responses to Headend Brawl: UTOPIA and Provo at Odds on Shared Assets

  1. Ben Saunders says:

    Yea this will get ugly. Provo walked all over Utopia’s rights to a share of the headend and now there is no clear path to resolution. Broadweave couldn’t give a rip. I have a feeling that this is just the first of a long line of problems Provo will see based on their wonderful relationship with Broadweave.

  2. HST says:

    There was a head end valuation listed on that watchdog site, before it was summarily purged from existence, of $1.75 million, which makes very little sense. There was also speculation by the “Dog” that figure was intentionally inflated to ward off UTOPIA’s acting on their right of first refusal, which sounds plausible but it could come back to bite them. If UTOPIA can get a check for half that amount they can build two IPTV head ends.

  3. wraptur says:

    This whole thing stinks!
    Remember when all three parties involved cared more about offering great services to its customers current and potential? Now all they do is bicker and who ends up suffering? The children! 🙂

    The whole iprovo sale was shady so I hope Utopia doesn’t end up being dragged down financially for Broadweave and iprovo’s mistakes.

  4. Jesse says:

    From everything I can tell, UTOPIA is in the right on this one and Provo wants to make good on their obligations. Broadweave appears to be the problem child.

  5. Capt. Video says:

    I know! I know! I said you should count me out. But I received a telephone call from a friend saying there was a posting on the headend (which I know more than a little about) and would I share my knowledge on this post.

    Which I will try to do, in a manner that will not harm any of the parties involved (which will stop me from telling you everything I know).

    There are 2 contracts that control the headend relationship. They are independent and not connected to one another directly.

    1: Headend Agreement between UPOPIA and Provo City: This non-transferable contract allowed UTOPIA to use the headend and the video signals were provided to UTOPIA. However in order for a service provider to use these signals the contract required the provider have video rights (contracts with the channels HBO, ESPN, etc.)Thur this contract signals were provided to Mstar (the only UTOPIA provider with video licenses or video rights).

    UTOPIA paid Provo monthly for the use of the headend. The rate UTOPIA paid was proposed by UTOPIA and accepted by Provo. So UTOPIA determine the rate, not Provo.

    UTOPIA owned nothing in the Provo headend and nothing that was covered by this contract was owned by UTOPIA.

    Since the contract was non-transferable, Provo City remains contractually obligated to provide signals to UTOPIA until the contract expires or is canceled by either party with 6 months notice.

    Upon sale of the network (and headend) to Broadweave, Provo gave UTOPIA the required 6 months notice. In less than 30 days this contract will expire due to the notice.

    This is very straight forward and Broadweave is not involved.

    I understand that Broadweave was willing to honor the original contract and extend it with UTOPIA and UTOPIA elected not to do so, perhaps not liking the rate they set in the original contract?

    The 2nd contract is more the problem, and I don’t think Provo is involved other than in trying to bring the parties together?

    2: This contract is an agreement between Provo City and UTOPIA in which Provo City recently (within the past year?) purchased an interest (50% interest?) in two items UTOPIA owned which were located at the UTOPIA NOC? A VOD server (and associated software and licenses) and an encryption system (Widevine) hardware, software and associated licenses.

    After the contract was signed and money paid to UTOPIA, the equipment was moved into the Provo headend. A much better location to allow it to serve both networks.

    This contract was transferable and Provo City transferred it to Broadweave as part of the sale.

    So now you have Broadweave and UTOPIA party to a contract to share a VOD server and encryption system. But UTOPIA electing not to continue the headend contract with Broadweave….which needless to say, makes the sharing of the VOD server and encryption system somewhat of a problem?

    From everything I can tell, Provo has followed each of the contracts, giving UTOPIA right of first refusal on the headend purchase and when they did not exercise their option, sent them the 6 month notice letter terminating that agreement.

    Provo transferred the VOD/Widevine agreement to Broadweave as was allowed by the contract. I’m suspect Provo was expecting UTOPIA to just renew the headend agreement from Provo City with Broadweave?

    I have never seen the VOD/Widevine contract and do not know what was written into the contract related to termination of the contract, but that seems to be what will govern the Broadweave/UTOPIA relationship.

    If Provo or UTOPIA did not want that contract to be transferable to another company, they should have put it in the contract, as they did in the original headend agreement. They should also have put something in the contract as an “exit clause” and in my non-legal opinion, now are contractually required to live by whatever that contact says?

    I guess I see Provo as no longer having a dog in this fight and just trying to help bring the parties together.

    I strongly support Jesse’s comment, “Here’s to hoping they work out some kind of equitable solution instead of ended up in an “all sides lose” expensive legal action.”

  6. Harold Bills says:

    There are new rumors coming from the Broadweave camp. Some employees are reporting that cash flow problems have resulted in reduced salaries and personnel reduction. There is also a rumor that a certain highly-placed individual has his home in foreclosure. None of us would enjoy hearing of these kinds of problems when they affect peoples families and livelihood, but if Broadweave is in financial trouble, Provo city has a huge problem and needs to know. Unfortunately, the nature of the “sale” leaves Provo in a very vulnerable position should financial issues escalate.

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