EXCLUSIVE: Veracity Pulls Out of Broadweave Merger, Sorenson Possibly Backing Out, iProvo Sale on Verge of Failure

High placed sources, speaking on condition of anonymity, have confirmed that Veracity has pulled out of the merger with Broadweave and that Sorenson Capital may have withdrawn financial backing as a result. The 60-day delay cited by Broadweave in the papers is rumored to be buying time to find new backers. The loss of Veracity combined with the iProvo NOC employees who have left means that video experience is almost non-existent and staff resources will be stretched dangerously thin. This may account for anonymous commenters who have reported issues reaching customer service over the last several days. When asked about these details, Provo City employees involved in the deal were unaware of the failure of the merger.

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The Transition of iProvo Customers: A Rocky Road Ahead?

An anonymous tipster raised a lot of good points concerning the transfer of customers from Mstar to Broadweave. There's less than three weeks left until the planned cutover, yet customers haven't been getting written notice of such. Despite intense media coverage and multiple public hearings, many customers could be left without any idea as to how to obtain technical support or change services. It's also concerning when you consider that the FCC requires at least 30 days written notice when changing channel lineups or pricing, the former of which is highly likely and the latter of which is already confirmed.

Internet customers are likely to be the most widely affected. Mstar customers with static IP addresses are certain to see a change as I'm sure that Mstar did not also sell their valuable assignments from ARIN. Broadweave will also need at least 40 class C assignments from ARIN to provide enough IP addresses just for existing customers, yet they currently have only 12 and is probably using most of them in Traverse Mountain. Veracity has around 16, though a large number of those are likely already soaked up by customers on UTOPIA, Off-Campus Communications and their business customers over Qwest's network. Nuvont doesn't even have a whole class C to bring to the table.

All in all, they're falling VERY short of the necessary IPs to run the network. The only way they'll have enough is if iProvo is also selling the rights on their IP assignments, a chunk of over 70 class C blocks. There's no documentation on the Provo City website to show one way or the other if that asset is part of the deal, but it would be foolish for the city to include it in this environment of tightening IPv4 assignments without a nice premium. Then again, I don't think they've shown that negotiating is their specialty.

If you're a current iProvo customer who will be transitioning to Broadweave, I'd encourage you to leave your experiences in the comments section. 

Details of the Sale of AFCNet

As usual, David Rodeback is on top of the AFCNet situation in American Fork. According to him, Surpha will buy AFCNet for $500,000 and make interest-only payments for the network with a goal to pay it off by the end of 2012. They'll lease fiber capacity from the city from American Fork to Orem (ostensibly to connect up to their POP) and become the big bad bill collector for ISPs behind on their payments to the city, keeping half of the money and putting the other half into the purchase price. The city isn't dumping the debt incurred as a part of network construction, but they also aren't ditching their fiber lines going to other cities.

Without more details about Surpha, I don't know if this particular owner-financed deal fares any better than Provo's current boondoggle. On the one hand, the purchase price is low and the financing is for just 3.5 years. Surpha also has a working relationship with the city as an ISP on the network. On the other hand, Surpha hasn't updated its website in almost 2 years, their stock price is in the sewer and there are rumors of investors who want blood. I'm approaching this one with cautious optimism.

Is American Fork Nearing a Deal to Sell AFCNet?

Remember the reports back in September that American Fork was negotiating the sale of their municipal broadband network to Surpha of Orem? According to a post at LocalCommentary.com, those negotiations are about to bear fruit. According to David Rodeback, Surpha has become an ISP on the network and has acquired customers from at least one of the other ISPs. He also noted that, as a user, the transition was seamless to him and resulted in a nice speed bump.

I don't know much about Surpha. They appear to be a publicly-traded company on the Frankfurt (!) stock exchange and haven't updated the news section of their website since 2006. Given that they've primarily been a provider of commercial services and have been pacing themselves with the purchase of AFCNet, I have better hopes for this deal than certain other "sale" proposals.

Leaks: Broadweave Will Buy Out Customer Lists From Existing iProvo Providers

This morning, an inside source disclosed the fate of the existing iProvo retailers. According to this source, Broadweave plans to announce on Thursday that they will be buying out the customer lists from MSTAR, Veracity and Nuvont to become the sole retailer on the network. This move comes as MSTAR has been found to be about $950K in arrears to Provo for their use of the network, only $75K of which is expected to be paid prior to the transition. As part of the acquisition, Broadweave will assume the remainder as a debt due to it from MSTAR.

Between this debt load and their recent layoffs, there is serious concern that MSTAR could fold in the very near future leaving UTOPIA without a triple-play provider. This comes as Todd Marriott announced at the Payson City Council meeting that some new triple-play providers are on-deck to join the network and increase competitive choice, no doubt a result of his experience in the telecommunications field. Since the sale of iProvo to Broadweave looks likely to close and the deadline for sale in June 30, there's little time left to pick up the pieces if MSTAR's financial condition rapidly deteriorates.