iProvo sale called bad, good deal

PROVO — Though the city will have to shell out $2.6 million to seal the deal with Broadweave Networks, the sale of the fiber optic system will be a win for everybody in the long-run, two iProvo consultants said Thursday.

But others say the sale is a "bum deal for the city."

Earlier this week, Mayor Lewis Billings announced the city will sell iProvo — the city-owned network that provides phone, Internet and video services — to South Jordan-based Broadweave, a company that provides fiber optic infrastructure, for $40.6 million. Thursday morning, the Provo Telecommunications Board gathered to hear more details of the terms of the sale.

Initially, the city will receive the sum of the payment by taking out a $40.6 million loan for itself, said Provo Finance Director John Borget, which will be paid back over 19 years. After some number crunching, Borget said the sale will leave the city short $2.6 million.

But the long-term benefits of the sales transaction will far outweigh that sum, Borget said. And the consultants, who were hired by the city last year to provide recommendations regarding iProvo, agreed the sale is a win-win situation.

"Many deals are one-sided," wrote Doug Dawson of CCG Consulting in a letter to the Telecommunication Board, "but my analysis shows this to be a fair transaction for both parties."

According to the terms of the agreement, Broadweave will assume the remainder of the bond payments and almost all of the city's other financial obligations related to the network. Dawson said that arrangement is beneficiary for both parties because Provo will retain ownership of the network in case Broadweave fails. In turn, assuming bond payments effectively gives Broadweave a 19-year loan at interest rates lower than what they could obtain in the commercial market.

Scott Chandler of Franklin Court Partners said the terms of the agreement also provide bandwidth to the city departments to implement advanced meter infrastructure for electricity and water, as well as other technologies, for $300,000 per year. Both consultants estimate this agreement amounts to a benefit valued between $1.5 to $2.5 million per year.

Though Broadweave has yet to divulge its plans for current service providers on the system, Dawson includes one telling sentence in his analysis of the sales transaction:"The buyer wants to be the sole provider on the network."

Dawson said this spells out good news for the citizens for three reasons:

• A sole overbuilder will fare better both economically and in market share than multiple providers on an open-access network.