The Salt Lake Tribune wrote up an article on Tuesday’s decision to delay the vote on accepting Veracity’s offer and it brings up interesting points on how the loan from the Energy Department’s reserves will be secured. The plan is to have existing customer accounts and any new accounts on the network act as collateral as well as Veracity’s customers on iProvo. Veracity, however, is not required to include any customers not on iProvo included in that total.
I think this raises important questions about how much skin Veracity has in this game. If Provo ended up having to seize the collateral after a default, what can they do with it? They’re legally barred from selling the services to those customers and the customers themselves will have little value of their own without the network. In that scenario, the network would be quite distressed and wouldn’t be able to fetch the same sale price as it had before. It would also be hard to convince another provider to buy the customer list.
I also have a problem with the appearance that Veracity has structured a deal that insulates them from almost all risk. If there’s nothing contractually stopping them from doing so, they could switch their customers back from iProvo to Qwest transport just before defaulting and lose nothing in the deal. If that is the case, Veracity has nothing to lose and everything to gain.
I think Veracity is a great company providing great services, but my inner skeptic says that this needs additional scrutiny. I’d feel a lot more comfortable with this proposal if I felt that they had more risk involved.
Jesse, this is exactly right. Veracity has nothing to lose and everything to gain. The whole concept puts them in diver’s seat with the city at their mercy. Veracity is not known for their carrier loyalty. This is the kind of deal where it clearly feels real wrong, but it’s still tempting in light of the alternative. There comes a time when you just have to deal with the hard stuff.
At the end of the day, Veracity will have exclusive and unquestioned control of the $60+ million network without spending or putting at risk even a nickel. That can’t be right.
What do you propose the city to do?
To me, if I was Veracity, I would not touch it. It is not a good business decision. You are paying $40 million for something that is worth much less. It seems to me that Veracity is giving the city a break.
Saving the city from getting the network back is only a favor if the terms are right. I still don’t endorse one option over the other, but I’d like to see Provo covering its bases. They need to make sure they are still sufficiently protected in the case of a default. Veracity is only giving them a break if they are assuming some of the risk. Right now, I don’t see that they have done so.
(If anyone from Veracity wants to speak to this or correct me if I’m wrong, please jump in.)
So you think that Veracity can just swoop in and be making a profit right off?
Lets play a what if game, Lets say that currently Broadweave is in a negative cash flow situation (Lets say they are losing $200K a month). Now lets say that the city agrees to discounting the bond payment $82K for 18months at which point the bond payment goes up by $115K. Right after the merger Veracity is going to have to make up the difference ($118K) a month. In order to *break even* Veracity is going to have to increase revenue by $250K (assuming they can maintain 40% margins). Thats to *break even* for the “18 month period (while the bond payment is reduced)” , then Veracity has to generate an additional $300K in new revenue to compensate for the bond payment increasing by $115K (after the 18 months have passed).
So the way I see it, Veracity has to increase revenue on the iProvo network by $550K in 18 months, they will most likely have to invest like 1.5 to 2 million dollars into the network out of there cash flow during this period.
I think Veracity is going to be putting plenty on the *line*. Remember that the Letter of Credit is almost exhausted to the point where the city can take the network back. This dosen’t change if Veracity Networks comes to fruition.
Now, lets say that the city takes the network back, what makes you think they could run it any better than Broadweave? Lose any less money than Broadweave?
The truth is the city is in bad shape because they built a network for 40 million and its only worth 18 million and that value goes down every year. It is not Broadweaves fault the city is upside down on their investment.
The reason the city is in the position they are in is 100% their fault.
The really funny thing here is that people like to crucify companies that are trying to come in and make it work, and god forbid eventually make a proffit.
Wow, what am I saying, thats just crazy talk.
I never intimated that anyone could execute an immediate turnaround. I don’t doubt that if anyone can do it quickly and effectively, it’s probably Veracity and I believe I have said as much. I’ve stated several times that I don’t have any issues with the company itself nor the service it provides, just with some of the details of the proposal on the table. I’d hardly call it crucifying, especially given the treatment I gave Broadweave over the course of 15 months. It should be a good thing that someone, anyone is looking at this with a critical eye and, at the least, playing devil’s advocate.
As I understand Veracity’s position, they want the 18-month break mainly to pull existing customers off of Qwest transport and onto iProvo. I would assume that this means that Veracity thinks they can switch enough business over to the network by the time the bond payment goes back to the original sum. They then have 24 months from that point to find another $25K/mo in profit to make the increased bond payments. Even with a large existing customer base, steady growth, and exceptional management, that seems like a tall order. The city should make sure that if Veracity can’t do it, they have something to cover their own behinds. Right now, it appears that Veracity could, at month 17, move their Provo customers off of the network and walk away without too much damage.
I don’t know that the city could run things any better than Broadweave did. There simply isn’t the political willpower to do what is necessary to turn it around. That’s why it got sold in the first place. Reassuming control of the network is a good option for the city if and only if they are willing to see it through. The only way Provo will do this is if the choice is made for them or the alternative is even worse (selling at a huge loss, extending additional loans, etc.).
In all of this, the council should remember that no matter what they do, they are still on the hook until every last cent of the bond is paid. The question isn’t to stay out of the business or get back into it; it is to ask which option has the highest chance of paying off the bond at the lowest cost to city coffers.
(And as an aside, there’s not a lot of need to use that much sarcasm. I’m not trying to be a jerk, just publicly evaluate all aspects of this proposal.)
No one expects them to make a profit right off the bat, nor has anyone questioned their right to make a profit.
What we are questioning is them changing the terms of the deal after its been agreed to. We are questioning rather or not this will get payed back in the event they default. The loans backing is flimsy and likely of little value to provo in the event of default(Customers they are legally prevented from selling services to). We are questioning the value of putting the tax payer on the hook for even more money.
This is discussion worth having, All of the options need to be put on the table and understood. We need to question the possible outcomes of each option.
Sorry, didn’t mean to put that much sacarasm in it:)
I don’t blog very often (should have added a smiley face or two).
Also I beleive that Jesse, Luminous and Capt Video are very intelligent people that interpret the information they have access to very well. I don’t blame any of you for wanting to look at the deal and make sure all options are on the table.
It just sometimes feels like because the city of Provo is involved everyone assumes that there is some favortism or legality issue lol.
All I can say (Capt Video can probably vouch) is that Mayor Billings and Drew are definitely not freinds.
Anyway, I appologize if my last post was overly negative:)
I go back to my mantra. Why all the drama over a relatively small amount of money? Compared to real government projects like I-15 reconstruction, the cost of iProvo isn’t much more than a rounding error.
Just treat this whole thing like any other government utility/public service, like roads/sewer/power/airports, etc. The city should take the network back, pay it off with taxpayer money over the next 3-5 years, and offer the physical connection to all city residences for “FREE” in exchange. The customer just pays for whatever services they want on it. And then have UTOPIA supply those services as requested. Little management and no NOC needed.
Simple, done and done… no more drama, and we get an open network again, just as it should be.
Oh and shouldn’t Provo be able to apply for some of that federal stimulus money, I thought broadband projects like iProvo are exactly the kind of thing the stimulus money was meant for.
I don’t think Veracity has too much skin in the game on the proposed deal…but I’m not sure they should have much skin in the game. They really are unlikely to make a killing on the deal and with little upside there should be little downside for them.
As was mentioned above, the fact that Provo is upside down on this deal is not Veracity’s fault, but Provo’s.
I have assumed the $1.5 million loan would NOT be paid back (I hope I am wrong!!! But wanted to use a “worse case” for my assumption.), but even with that assumption, I believe Provo still comes out ahead.
Even with Provo paying $82k of the bond payment each month, Veracity will still be paying on the bond and will lower the total debt. IF (I stress the IF) Veracity defaults and the network goes back to the city in 2 years (or whenever)…the city would still be better off financially than if they took the network back now and started paying the full amount of the bond rather than just $82k a month.
If and when the city gets the network back, they would want Veracity Communications (different than Veracity Networks) to stay on the network and to pay transport fees. They hopefully would be able to either serve or sell the Broadweave/Veracity Network customers if that company did not wish to stay on the network and pay transport fees.
Assuming Veracity moves existing customers from Qwest, the network will be larger and more profitable. It would cost Veracity something to move customers back to Qwest and hopefully they would leave them on iProvo and just start paying transport fees.
I assume Veracity will see significant savings over the next few years as they will no longer have to pay transport fees or they will at least be paying those fees to themselves.
Veracity is a very good company. Drew Peterson is a very good businessman and cannot be made to roll over by the city. I have seen Drew stand up to the City on more than one occasion (unlike most others). You will not see him make a bad deal for Veracity and he will likely not (and should not?) assume “risk” that belongs to the city.
I think the loan will remain for the most part, “unsecured”. After all, the $82k is not really a loan to Veracity, that $82k will be used to pay on the bond which is Provo’s problem to deal with, not Veracity’s. But even with the loan assumed to be a loss, you need to ask, “Does the city still come out better than if they took back the network and began paying the full bond?”
I’m on record as saying I’m in favor or allowing someone else to pay all or part of the Provo bond for as long as we can get them too. If no one can make the network profitable, Provo will get it back. No private company will continue to lose money on the network.
What if Provo does NOT approve the merger?
If Broadweave were to decide to turn the network back….
…could they actually SELL their existing customers to COMCAST? Transferring them to the Comcast network and then just turning over the network (without Broadweave customers) to Provo.
Could Broadweave try to recover some of their loss by selling their customers to Comcast or Qwest?
I don’t know if Provo has any rights/ownership of the customer base. We know they still own the network, but I think the customers were bought from MStar and NuVont in a transaction completely separate from the network sale?
If the network reverted back to Provo we should not assume the customers would go with it. I guess Broadweave could SELL the customers to Provo or some other service provider…if the price were right. But if I were Comcast I would be interested in buying them.
How much more might Provo have to come up with to buy the customers? A million? More?
Lets not jump off the train into crazy town. If provo votes no and the network drops into provo’s lap its much more likely that broadweave/veracity will stay on as a retail provider and pay provo for transport.
Personally I am much more curious as to why we haven’t heard anything from ESnet through all of this. If I where them I would be having a conniption.
Provo: $1.5 million dollars?!? that wasn’t part of the deal!
Darth Veracity: I have altered the deal, pray that I alter it no further.
I assume if Broadweave would want to stay on the network as a service provider they could but it would be a business decision on their part.
There is a history of companies losing money by providing services on the network. Let’s not just assume that would be something Broadweave would want to do. They have turned down the chance to do that in the past.
If I could recover more money selling my customers than I could by continuing to provide service to them…I would sell them? They are likely sitting on a million dollar asset and as smart business people (who may feel they got screwed by Provo not allowing the merger) they will do what they feel is best for THEM.
I’m not trying to be crazy here, but we should understand where these decision could lead? Remember Provo does NOT own the customers and Broadweave may have a legal responsibility to maximize profit, not insure a smooth transition for Provo.
Just a wild “What If” that I’m sure Provo City has considered too.
lol…what’s that someone said on this blog long ago?
Owe Provo $40 and they own you….Owe Provo $40 million and you own them?
or was it…”Don’t force me to use the Force Luke!”
Jeremy mentions stimulus money…I think incumbent operators (Comcast/Qwest) could and would weigh in on a request for Telecom Stimulus money and make it unlikely they would get any (the area is already served and does not meet the standard for money?).
However, I believe Provo City has applied for (and received?) stimulus money from another pile that is not telecom related.
This money can be used to read meters, manage utilities, etc. over a network and could pay for the install of the equipment (including fiber to the home and a portal). This would allow the city to pay for the lions share of the fiber install with stimulus money. It still needs Council approval, but being it’s not city money I expect that will not be a problem.
This could really help both the city and the service provider by eliminating or reducing the biggest single problem, the cost of getting the fiber active to the home. Once the fiber and portal are there then other service could be sold and installed much cheaper.
The existing Broadweave/Provo City contract requires Provo to pay install fees if fiber is run to the home for use by the city. The city is already paying $25k a month for the “right” to use the network for things like this…why not do it??
I would think the City wants to help Broadweave/Veracity be successful in any legal way they can!
Its to late to applie for any stimulus $$$ now anyway at least for the current round.
Yes that witty well played remark does sound like something I would say! I must say to use my own witty remarks /em **adjusts his monocle** against me is well played!
Of course what is playing out in Provo is nearly as entertaining. Hopefully this doesn’t come back and bite them on the rear.
Captain… You’re so funny… Ain’t nobody selling this fiber customer to Comcast or heaven forbid Qwest! I’d leave Provo first.
I may be a little late to the game in commenting, but Veracity seems to have a lot of “skin” in the game. They are joining forces with Broadweave and Provo City, that is like jumping on the Titanic and telling everybody, “don’t worry guys, I have a bigger bucket, and can bail water faster than the last guys”.
From the looks of Veracity, they have created a profitable company. If they merge, and “Perspective” is right (Broadweave is losing $200000 per month), Veracity is covering those losses with their profit. Is there bigger risk than that? If I were a poker player, that would be called: “I’m ALL IN! And if I lose… i’ll pay your mortgage too… oh it’s a $40million house…” Wait… that is a lot of skin in the game.
Also for some perspective from a Veracity customer standpoint, any business customer want to be a Provo City Customer for your phone service? Raise of hands please… Yeah, I didn’t think so. That would be a worthless addendum, because Businesses have a multitude of Service Providers available to them, and they would jump off of Provo City Telecom faster than Oklahoma Jumped out of the top ten… week 1. Which would put the value of that addition to the contract worth about the same as Sam Bradfords arm in week 2… Thank you Coleby Clawson!!!
You have provided some information that I have never heard such as a current value of $18 million for the iProvo network. As a Provo businessman and voter, I am very interested in how this $60 million asset is now diminished to only $18 million. This would be criminal malfeasance if Provo Administrators threw that kind of money away. Perhaps you or Capt. Video can enlighten us on this new appraised value and the source.
I think no one knows the current value of the network. I think the suggestion of $18 million was more of a “what if”? I also think it’s foolish to suggest “criminal malfeasance” even if the network were worth that amount or less.
There is nothing criminal and no malfeasance (an elected official who accepts a bribe in exchange for political favors has committed malfeasance) involved.
The worst you could say is they had poor judgment. If you were to base poor judgment on the difference between the value you anticipated in a property and it’s current value millions of home owners and commercial property owners would be guilty as well.
I would dare suggest that I believe that iProvo is more valuable (sold on the open market) than UTOPIA. Considering iProvo spent $50+ million and UTOPIA spend $185 million.
I believe that the Provo Networks full value is not currently being seen by Provo City and that will change in the future.
I don’t agree with your definition of malfeasance. I do tend to favor a definition tendered by the West Virginia Supreme Court of Appeals:
“ Malfeasance has been defined by appellate courts in other jurisdictions as a wrongful act which the actor has no legal right to do; as any wrongful conduct which affects, interrupts or interferes with the performance of official duty; as an act for which there is no authority or warrant of law; as an act which a person ought not to do; as an act which is wholly wrongful and unlawful; as that which an officer has no authority to do and is positively wrong or unlawful; and as the unjust performance of some act which the party performing it has no right, or has contracted no, to do. ”
—Daugherty v. Ellis, 142 W. Va. 340, 357-8, 97 S.E.2d 33, 42-3 (W. Va. 1956) (internal citations omitted).
It clearly extends well beyond bribery. Bribery is just one of a many offenses that constitute criminal malfeasance.
As an owner of the Provo City network, I resent your unwarranted appraisal. Unfortunately naive politicians tend to believe this crap. Just stating that evaluation may result in aggregious losses to the people of Provo.
My definition came directly from the legal dictionary on the internet….but I’m willing to use yours. Yes malfeasance does include taking actions you have no legal right to take.
I still see no malfeasance. The administration and council HAD the legal right to take the actions they took, there is no legal issue here. Was it not the council that took all the legal actions? I don’t think the administration took any legal actions it was not directed to take by the council? If so, what was that action?
You raise these foolish “legal” issues over and over but they are groundless and go no-where. How many times have you expected a law suit that has not materialized?
Just to be clear, I doubt our politicians are as “naive” as you are if you thought someone (it was not me) just suggesting a value of $18 million on a blog, makes it so.
I doubt anyone thought that was more than one man’s opinion of the value as an example? That’s exactly what I thought it was. It could actually be right (or even high!) but we won’t really know the cash value until someone makes a cash offer to buy it. Then we know it’s worth.
One could say since it was bought by Broadweave for $40 million…that is the value? Personally I would not use that figure either.
To me the value of something is what the highest bidder is willing to pay. Since we have never had that process, we really don’t know the value.
I do believe the network will prove to be more valuable to Provo City than the value they would get via a sale.
Your perspective never ceases to amaze me. For the record there has never been a public and open sale for the Provo network. Any estimate is nothing more than a guess. Broadweave never bought anything and in fact never really paid for anything. (What dollars did actually bring to the game?) Their investors have paid the rent for them and that’s about it. The city gets to pay them for use of their own fiber network with never-ending liability for the debt. It is very very hard to find any of the benefit you see in all this. Total nightmare.
I clearly said about the same thing….
1: …we don’t know the value of the network.
2: …we can’t know the value without an actual cash offer to buy. (open bid)
3: I personally would NOT use the $40 million value from the Broadweave purchase.
I support allowing Broadweave/Veracity to pay some or all of the city debt. As Broadweave has been doing for the past year or more.
You seem to separate Broadweave from it’s investors….WHY? Is not a company owned by it’s investors. Who is Broadweave if not it’s investors. The investors control the company.
The city is overpaying for it’s use of the network, but it’s still paying less than if they had to pay the bond. The city is paying $25k a month and the bond is $277k a month.
I support the city making use of the network to get it’s full value and more, to read meters and manage utilities (power & water). Currently the city used the network for connectivity of a few fire stations, the cemetery and the airport. I hope they are able to do new things using stimulus funds.
I hope I’m wrong, but I predict that sooner or later the network will be returned to the city. The city needs to know when it’s no longer in their best interest to continue to loan money to the operator (whomever that might be).
In order to know that, they need to accurately know what it will cost them to operate the network. NOT what is cost 2 years ago when the network was in the construction phase, or when the network had 10k subs with 6k as MDU’s. They need to know what it would cost to operate the network NOW.
Paying current wages (lower) and with current staffing levels (reduced from when Provo operated it) and using current rates for operating costs. Then looking at the current revenue from customers and/or service providers.
Only after they run these numbers will they know how much the city will make as a profit from operating costs (this does not cover the bond payment, but contributes to it). Provo was operating the network cash flow positive before they sold it and should be able to be even more cash flow positive today.
When the total contribution they are making to support the network ($25k monthly usage payment, $82k loan (unlikely to be paid back? = at least $107k a month they are paying today) PLUS the network operating cash flow equals the bond payment…at that point Broadweave/Veracity is not contributing to the reduction in the bond (as operating revenue and Provo City contributions cover the full amount of the bond) and Provo is better off operating the network themselves.
Provo might not want to wait until the lines of payment cross at zero but select a trigger and while hoping the operator is successful, they should be ready, willing and able to step back in, SHOULD THE NEED ARISE.
Currently the City does NOT know enough to make the determinations needed. They are operating on “fear” of getting the network back based on inaccurate operating costs and revenues. They are not making decisions on a sound (current/accurate) business review. I believe a new Mayor will bring a fresh approach and demand a new updated look at the iProvo Problem.
A fresh look that starts not from what we should have done or not done, but very factually from where we are NOW. What is best going forward.
Meanwhile we should all support Broadweave/Veracity, subscribing to the network and supporting them so they can continue to pay the Provo bond. If we support them and they are successful, Provo will not have to use the “Plan B” they currently don’t have!
Capt: The city is likely to not make a decision based on the factors you list because there exists zero political willpower to get the network back. All of the current candidates for mayor agree that getting the network back is not an option. I imagine a lot of the city council feels the same way. It doesn’t matter which option is less expensive or better, Provo wants to run as fast as they can from this thing, cost be damned. Admitting that up front puts any purchaser or debtor in a position of power to dictate terms to the city.
I believe that “fear” of getting the network back will change as the new Mayor/Council begin to get more info. …and yes, it does appear that as long as Provo does not have the stones to operate the network again (IF NEEDED), Broadweave/Veracity has them by the short hairs. Not a good position for the City.
They should NOT want the network back, and work with Broadweave/Veracity to make the network successful and NOT get it back.
BUT…they should not be AFRAID (as they are now) of getting it back, should that be the best business decision. This is all just business decisions and should be made based upon the numbers and not outdated numbers (it will cost $2 million a year because that’s what it cost 2 years ago…).
So I agree with you 100%, but I do have hopes the fear will subside and cooler minds will get accurate numbers and make wise business decisions if and when needed.
It’s actually not bad that they are not ready to take it back yet….now is likely not the time to take it back! Give Veracity a chance….they are a good company and it appears the numbers are still positive for Provo.
While the next flash point is 18 months out when the bond payment goes up again, you must remember that with no money set aside as Broadweave had (to pay the bond), Provo could wake up one day to find the bond will no longer be paid (with little or no notice?) and the city must have a REAL “Plan B” READY. I mean really ready!
At this point I’m inclined to agree with you that it’s best to give Veracity a shot. Provo isn’t ready or willing to take it back, even if it ended up being the better option financially. Veracity isn’t a bunch of no-name yahoos with no experience; they’re professional, experienced, and (most importantly) properly capitalized.
Captain Video, aka Mr. Venturella, from a former subscriber, how in the world do you dare even partake in this conversation when it was your misinformed and misguided ideas and failed leadership that helped Garlick guide this ship into the iceberg? To claim that you have any idea what should be done now to save this pile is disingenous in the least, bordering on criminal at the best. Your ideas and terrible leadership launched what was a good idea had Provo taken the right they had to actually provide the services by not only not fighting the legislature but then terrible business decisions along the way that included the purchase of bad equipment, a bad business plan and terrible leadership and vision. After all this it is deplorable that should even feign the right to comment on what to do now. Move on!
We clearly disagree about the degree of control or decision making I had in the project.
I believe it is because of my involvement and knowledge of the project that I have something to contribute to the discussion.
davejame Their is no reason Capt. Video shouldn’t be in the discussion, Even tho i disagree with him on many issues I firmly believe that he knows exactly that he is talking. We have had many great and glorious arguments I would hate to miss out on those.
In defense of Paul, Kevin and the Mayor had the power. I have heard from someone who worked at iProvo, that Kevin did not listen to his staff even on important business decisions. In fact, Kevin’s main concern was covering how own @$$. How can you run a business that way?
I think the major issue is that the council never received all the pertinent information to make good decisions for the city. If blame is needed, most of the blame can be pinned on Kevin and the mayor.
Anyway, just my two cents.
Blaming Paul Venturella for the woes of iProvo is like blaming a deckhand for the sinking of the Titanic. Based on what I’ve heard from many sources, he basically took the fall for the HomeNet fiasco (along with a few other individuals) so that Mayor Billings and Kevin Garlick came away clean. Ask a former iProvo employee and they’ll all tell you the same thing: Lewis and Kevin killed that network.
Of course Mayor Billings is gone and now I hear that both Steve Clark and John Curtis are both prepared to handout some accountibility to Mr. Garlick and his cronies. I suspect there will be a new day for the way the Broadweaves, Veracitys, and other iProvo favorites are dealt with.
I’ll bet both Steve and John want to be sure this is done BEFORE they take office. It’s so easy to look back and say I would not have done that. Do you see anything on their web site that suggests they would do something different?
I saw some stuff on iProvo saying so canidates did not support it and would not have done it, but nothing that said “Here is what I WILL do if elected!”
That tells me they don’t actually have an iProvo plan and will welcome the opportunity to say things like “I would have!!” Do you see either one saying the decision should be left for the new Mayor?
The problem is Provo has limited options and I don’t see any change in course.
Exactly what would you do Ben? Or anyone else that thinks they should NOT accept the Veracity deal?
Describe what you would do? Assuming you don’t take the Broadweave/Veracity offer. What if Broadweave stops making bond payments in Feb.?
Remember Provo owns the network, but NOT the subscribers, those were purchased in a separate deal from MStar and NuVont. They can be sold to Provo (for cash? Does Broadweave owe Provo anything in the contract?) or to another provider (including Comcast).
Provo no longer has an NCTC (cable tv co-op) membership or any video licenses.
Please share your plan? What does a “new day” look like?
This Veracity merger being done before they take office just delays the city getting this thing handed back until thay are in office. Why not let the people who voted for it figure it out?
The city has two options here and option one is to sell it to the highest bidder and accept the remaining debt. A very bad thing. Option 2 is to re-take control with some competent management and gradually find the niche that works. It may be selling transport only or it may be the Spanish Fork model. I do believe that option is the only reasonable method of protecting the city’s investment and avoiding continuing huge losses.
What good are Broadweave’s subscribers to anyone who does not have the connectivity? Not much, I’m betting. However if Provo actually left the subscribers on the table in the event of Broadweave’s demise then this is just another of the long list of blunders that have been perpetrated by Provo City where they failed to protect the city’s best interest and have gave away the store.
Same goes for the video licenses. If Provo lost control of these with no way to recapture them, then shame on Mayor Billings and Mr. Garlick. The city may find their hands tied due to yet another idiotic move.
Damn Ben….we seem to be in very close agreement!
I have always said I expect the network to go back to the city. Where we differ is on the timing.
I don’t think Provo is “ready” to take it back now. Additionally, IF Veracity can be successful we should let them as if that were to happen…Provo wins!
If we take it back now, the full bond payment is paid by the city. IF Provo waits hoping Veracity turns it around but they don’t, Provo steps in THEN and is in the same position they are in by taking it back now, EXCEPT the total bond debt is lower, as Veracity/Broadweave has been paying some of that payment for an additional few years.
I think Provo will have to buy back the customers (or just continue to operate with Veracity as the service provider).
But allowing Broadweave/Veracity more time will not hurt Provo and it will lower the bond debt. Why not wait? Why do it now?
Capt: I have to take exception to some of your math. Provo is only ahead if the amount paid by a third party exceeds what they would take in via transport fees should they control the network. So what if Broadweave/Veracity is paying $195K/mo if they would have been paying that amount anyway under city control? That’s the difference we should all be looking at.
I think that’s exactly what I said in a previous longer email.
I’ve looked at the numbers as best I could find…including some non-public sources and believe that is the case.
Should the number change to where the subscriber revenues (after operating costs) plus the city contribution ($82k a month plus the $25k a month payment for the right to use the network) is greater than the bond payment, then Broadweave/Veracity is making NO contribution to the bond payment and it is no longer in Provo’s best interest to pay anything on the bond.
BUT….I do not believe that is the case, based upon my best information which I believe is accurate.
UNTIL we cross that financial point, it makes sense to allow Broadweave/Veracity to pay on the bond payment. When (IF) we reach that point Provo should not by paying on the bond, giving Broadweave/Veracity a free ride. But unless you or someone can tell me we are at that point….I support the deal as the best CURRENT option for Provo.
Remember that the city HAS seen the numbers and they should be making the decision based upon known facts.
If all goes really well and we all support Broadweave/Veracity they will turn the network around and Provo will never get it back. If Provo get’s it back, it’s likely they will lose money for years before they are able to change things…if they can ever change them.
Success will be difficult to reach. But as I have been saying for well over a year now…I believe they have a much greater chance or being successful than UTOPIA does. If UTOPIA does not get the federal grant money they have requested, they are all but dead in the water with no chance for success. Provo (or Broadweave/Veracity) actually have a chance, as long as they are paying something significant on the bond (as I believe they are) I support giving them our support!
The City could not take the network back and run it. The reason that Spanish Fork is successful is that they have a great manager at the helm who knows what he is doing. From what I have heard, no one at Provo City is competent to run the iProvo network.
Veracity on the other hand is very competent. They have managed their business well and have made it successful. I think they will make the iProvo project successful.
If the deal does not go through, why not have Veracity manage the network, but Provo still retain ownership? If the deal does not happen, I think this is the best course of action.
But please, do not have the City manage it. That is all we need is more Kevins.