Reason complimented Provo for completing construction of the network on time, unusual for city broadband projects, Titch said. Also, the city's costs are lower and its risk lessened because it operates as a wholesaler, having built the network's backbone but hiring private companies — first HomeNet, now Veracity and MSTAR — to provide video, phone and Internet services. Those companies pay Provo a fee for each subscriber.

The model was forced on Provo when the state Legislature refused to allow cities to compete as service providers.

Other U.S. cities have tried to do it all, and residents of Lafayette, La., voted recently to fund a $125 million project in which the city plans to build the network and then market and provide services. Billings traveled to Louisiana to endorse the project.

"The cautionary tale of Provo is that operating as a wholesaler is not enough of a hedge against the financial and logistical problems that occur when a city seeks to compete with commercial service providers in a competitive business sector," the report said. Spokesmen for iProvo's chief competitors, Comcast and Qwest Communications, said again Tuesday their companies believe it is improper for governments to enter their markets.

Both companies said they haven't changed their prices in Provo, while Billings and the Reason study said they have. Billings also said those companies didn't offer cable and Internet services to every Provo resident before iProvo was built.

"Today, every home in Provo has the ability to have cable and Internet access," he said.

Comparing prices between the groups is difficult, though the study provided a chart. One issue is the differences in products. At 15 megabytes per second, MSTAR, for example, provides Internet services in Provo that are three times faster than Qwest (5 Mb/s) or Comcast (4 Mb/s). The Reason Foundation reported that before transfers, iProvo lost $1.36 million in fiscal 2003, $1.42 million in fiscal 2004 and $1.67 million in 2005. It expects iProvo will lose at least $2 million in fiscal 2006.

The previous losses were confirmed Tuesday by a source close to the project, but that source and others said several aspects of the report were incomplete.

"Our initial response is it has many inaccuracies we take issue with," said Kevin Garlick, recently moved by Billings from his post as director of the Energy Department to temporary full-time responsibility for iProvo. Garlick's leadership helped produce a $16 million surplus in the electricity fund that is the source of the loans to iProvo.