iProvo: More Problems in Public Utility Paradise

by on September 10, 2009 · 22 comments

[This is part of an ongoing series about "Problems in Public Utility Paradise."]

According to this recent article by Donald Meyers of the Salt Lake City Tribune, five candidates for mayor of Provo, Utah are falling all over themselves to declare their support for continuing the public utility fiasco that is iProvo, the city’s fiber-to-the-home network. According to Wikipedia, it is the largest municipally-owned Fiber to the Home network in the United States.” Steve Titch of the Reason Foundation, who has been following iProvo for many years, has documented its millions of dollars of losses and risk to taxpayers, saying “iProvo is a dismal financial failure by any standard.”  But that isn’t stopping city officials and mayoral candidates from proposing to throw more money at this massive “if-you-build-it-they-will-come” fantasy. “One thing most of the candidates running for mayor agree on: iProvo is too important to fail, even if it means bailing out the company that bought it,” Meyers reports. Here’s the relevant passages from his article, with the key bits of bad info highlighted:

The city sold the troubled fiber-optic network to Broadweave Networks in 2008 in a deal in which Broadweave would take over the payments on the city’s $39.6 million bond. Since November, Broadweave has had the city draw on its $6 million surety deposit to make its bond payments in a bid to build up cash to pay for growth.

In August, Veracity Communications merged with Broadweave, becoming Veracity Networks. The company’s leaders, Drew Peterson and David Moon, have asked the city to restructure the payment schedule to allow the company to cut back on its payments for 18 months while it strengthens its coffers. It later would pay extra money over a seven-year period and reimburse the city with interest. Provo would draw on its Energy Department’s reserves to make up the shortfall in bond payments — $1.4 million.

[Mayoral candidate Don] Allphin, chairman of the Lakeview North neighborhood and a real estate agent/professional bass fisherman, said the city would have to accept the proposal, since the alternative is too costly: Taking back the network and paying off the bond itself. When the city ran iProvo, it had to subsidize the network with about $2 million annually from Energy Department funds. Part of the problem was the city was restricted by law from providing an actual telecommunications service and had to rely on individual service providers to market the system.

[Another mayoral candidate, state Rep. Stephen D.] Clark said he was concerned about last year’s iProvo sale since Broadweave did not have what he believed was enough financial backing to buy it. But since the deal was done, the city has no choice but to move ahead and make sure Veracity succeeds — as long as it learns from the mistakes.

“As long as it learns from the mistakes”???  Sounds to me like the people who need to learn from their mistakes are Provo politicians who got behind this fiasco in the first place.

  • http://enigmafoundry.wordpress.com eee_eff

    There exists public institutions that provide for the free flow of information. You've probably used one, and they are very popular. They are called libraries.

    If the free flow of information is deemed to be an important social good, why not use the institution of a library as a template for the provision of broadband services?

    What is free broadband but the up to date digital version of a library? (In fact several libraries in my area have started to offer free wifi) Why is that any different than the computers that I can check out and login to and use at the library?

    Are you against public libraries too?

  • http://www.freeutopia.org/ Jesse Harris

    As someone who's been following the situation with iProvo, UTOPIA, AFCNet, and SFCN, I must say that you have grossly over-simplified the issues at hand. SFCN, for instance, is a municipal network that has been running in the black since just after inception. The other three networks were saddled with the requirement that they split the revenue with service providers in an open network model. They were also prevented by the legislature from bonding for more than half of the total network construction costs. Could you imagine renting apartments in a half-finished building? That's what UTOPIA was expected to do and, in the process, find the money to finish it!

    The problem with all of your naysayers is that you have zero ideas and zero proposals of your own. Just endless carping with no solution other than a vague and condescending “let the free market reign”. Well, we tried that. We even dumped hundreds of billions into incumbent telcos to catch up to Japan and South Korean. They still dominate us with broadband networks that are both faster and cheaper than what we have. If this is the best the “free market” can offer, I say to hell with it.

  • http://www.freeutopia.org/ Jesse Harris

    As someone who's been following the situation with iProvo, UTOPIA, AFCNet, and SFCN, I must say that you have grossly over-simplified the issues at hand. SFCN, for instance, is a municipal network that has been running in the black since just after inception. The other three networks were saddled with the requirement that they split the revenue with service providers in an open network model. They were also prevented by the legislature from bonding for more than half of the total network construction costs. Could you imagine renting apartments in a half-finished building? That's what UTOPIA was expected to do and, in the process, find the money to finish it!

    The problem with all of your naysayers is that you have zero ideas and zero proposals of your own. Just endless carping with no solution other than a vague and condescending “let the free market reign”. Well, we tried that. We even dumped hundreds of billions into incumbent telcos to catch up to Japan and South Korean. They still dominate us with broadband networks that are both faster and cheaper than what we have. If this is the best the “free market” can offer, I say to hell with it.

  • Brian Jacobson

    I agree with eee-eff and Jesse Harris.

    i-Provo failed because of legislative restrictions that were externally imposed by telecommunications competitors lobbying the state legislature. Veracity and M-Star, the two licensed privately owned service providers for i-Provo were dismal. Every time I dealt with either company for residential and commercial service, my customer experience was so poor that I chose not to sign up, in spite of being ideologically supportive i-Provo.

    My politically non-feasible solution? – socialism.

    Hey, it works great for the utilities that I'm provided by Provo City. Retake full control of the network. Provide every person, household, and business in the city with a free unlimited .provo email account. Provide full unlimited high speed internet access to Provo City government websites and city television channel to every household. This would enable everyone in the city internet access to interact with their utility bills, and city government. Establish a home page for each city neighborhood, directed and administered by neighborhood chairs. Send out automatic email notices for and real time broadcast neighborhood, planning commission, and city council meetings. Potentially, you could even enable web-cam based video question and answer from people participating from home. (This would be especially helpful to those who are disabled or home-bound.) Provide full and free archived streaming video of all city meetings. And finally, provide unlimited internet access to all Provo households at 128kbps speeds for free! For faster internet speeds, television, and telephone service, people would need to subscribe and pay a fee. Have the fee schedule sliding scale, so that peoples monthly service fees diminish as more people in the city subscribe. If all participated, then the fees would become quite low, as the cost for running the network became fully funded by full participation.

    Chances of any of this happening of course, are zero. We would rather pay exorbitant fees to for profit corporations than participate in government run self funding services that even carry a whiff of socialism.

  • Brian Jacobson

    I agree with eee-eff and Jesse Harris.

    i-Provo failed because of legislative restrictions that were externally imposed by telecommunications competitors lobbying the state legislature. Veracity and M-Star, the two licensed privately owned service providers for i-Provo were dismal. Every time I dealt with either company for residential and commercial service, my customer experience was so poor that I chose not to sign up, in spite of being ideologically supportive i-Provo.

    My politically non-feasible solution? – socialism.

    Hey, it works great for the utilities that I'm provided by Provo City. Retake full control of the network. Provide every person, household, and business in the city with a free unlimited .provo email account. Provide full unlimited high speed internet access to Provo City government websites and city television channel to every household. This would enable everyone in the city internet access to interact with their utility bills, and city government. Establish a home page for each city neighborhood, directed and administered by neighborhood chairs. Send out automatic email notices for and real time broadcast neighborhood, planning commission, and city council meetings. Potentially, you could even enable web-cam based video question and answer from people participating from home. (This would be especially helpful to those who are disabled or home-bound.) Provide full and free archived streaming video of all city meetings. And finally, provide unlimited internet access to all Provo households at 128kbps speeds for free! For faster internet speeds, television, and telephone service, people would need to subscribe and pay a fee. Have the fee schedule sliding scale, so that peoples monthly service fees diminish as more people in the city subscribe. If all participated, then the fees would become quite low, as the cost for running the network became fully funded by full participation.

    Chances of any of this happening of course, are zero. We would rather pay exorbitant fees to for profit corporations than participate in government run self funding services that even carry a whiff of socialism.

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