IProvo nearing 10,000 clients

Published: Monday, March 12 2007 3:25 p.m. MDT

PROVO — After a rocky start, iProvo is closing in on the project's original Holy Grail — 10,000 customers.

In July 2005, as iProvo's first business partner was about to file for bankruptcy, the project had fewer than 2,000 subscribers.

Less than two years later, 9,480 Provoans now use city-owned iProvo for high-speed Internet access, digital cable TV and telephone service.

"It amazes industry observers who know we have naysayers," Mayor Lewis Billings said. "They say, 'You have 9,000 subscribers, right? And you had 7,700 three months ago, right? Sounds like things are going great."'

The boom in subscribers is a positive development, but city leaders are still tiptoeing their way toward some problems on the horizon.

One is that the Holy Grail became a moving target. Initially, reaching 10,000 subscribers would give iProvo the cash to make the payments on the $40 million bond that funded the project.

Now, iProvo director Kevin Garlick estimates the project won't reach that break-even point until it reaches somewhere between 12,000 and 14,000 customers because most subscribers aren't buying all three services.

So, the city is making the bond payments from the surplus funds of other departments. Last year, the Energy Department loaned $980,000 to iProvo. This fiscal year, which began in July, the City Council gave iProvo a $2.1 million line of credit, again from the Energy Department.

"I think Kevin Garlick will come in under ($2.1 million) this year," Provo Finance Director John Borget recently told the City Council, "but we should plan and prepare for coming in at budget."

Another problem is that the subscriber rate is slowing, though Garlick said that may be seasonal.

The bigger possible issue is that the bond money might run out before iProvo hits its break-even point.

The bond paid for construction of a vast network of fiber-optic cable throughout the city and for the installation required at each home.

The city still has $3.1 million left from the bond sale, but some of that will go to pay off construction costs. The rest might not be enough to cover all of the installations — $300 to $500 per home — that it will take to break even.

And if iProvo goes beyond 15,000 subscribers, more money will be needed to make those installations.

"As we prepare next year's budget, that's something we'll have to really address," Garlick said. "How much will we need? What funds are available? Where will additional funds come from?

"One option is to start charging for an installation cost. How will that affect sales?"

A year ago, Garlick and Billings told the City Council the $2.1 million loan this year would be enough if iProvo generated 60 new subscribers a week.

So far, so good.

The city met that standard through the first half of the fiscal year, through Dec. 31. The rate has slowed since then.

"We're beholden to our two service providers," Garlick said.

The city does not provide the Internet access, television and phone service over the iProvo network. Those come from MStar and Veracity, which lease the network space.

"Veracity tends to gear up with summer sales," Garlick said. "They add the college population to their sales force and aggressively sell. They were great last summer. Right now, MStar is currently better at sales."

Garlick said Veracity is making a $1 million investment in its phone service. MStar added a new phone switch in November.

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