PROVO Better to privatize iProvo now and end the bleeding than lose another estimated $2 million over the next year, a longtime critic of the city-owned fiber optic network said Wednesday.
Steven Titch of the Reason Foundation a Los Angeles-based think tank that promotes libertarian principles issued a eight-page policy brief that highlighted what he terms "iProvo's poor performance." Titch, a policy analyst specializing in telecommunications for the Reason Foundation, blasted the city's telecommunication network, saying municipal governments have no place in the high-tech infrastructure business.
"They don't do it well," he said. "And iProvo is an example of this."
Provo issued $39.5 million in bonds to finance the construction of iProvo. Since its inception, the network has experienced high churn rates among subscribers and relied heavily on subsidies to keep afloat. To date, the project has cost the city $8.4 million, Titch said, and there are projections iProvo will cost another $2 million. He sees only two options.
"Provo now faces the dilemma of continuing to fund iProvo with no break-even point in sight," Titch wrote. "Or sell the property and recoup as much of its investment as it can."
Provo spokeswoman Helen Anderson responded Wednesday saying the report is flawed throughout, and added the churn rates are not unusually high in comparison to other telecommunication companies. She said city officials had other problems with the report.
City Councilman George Stewart said he reviewed the report and found it a pretty accurate commentary on iProvo's current situation. Although the system provides the best broadband in the city, he's not sure it's worth subsidizing to the extent the city has gone.
"(Privatization) would be my preferred option because it would be a win-win," he said.
This report isn't the first iProvo critique offered by Titch and the Reason Foundation. The foundation issued another report by Titch in Dec. 5, 2006, that lambasted iProvo.
Among the findings in the 2006 report, Titch stated that iProvo was behind on its business plan and would continue to be forced to borrow money; iProvo's wholesale plan depended heavily on the performance of its retail partners; retail pricing for services using iProvo was not substantially different enough to prompt consumers to migrate away from service providers like Comcast and Qwest Communications; and iProvo was not contributing significantly to the growth of broadband in Provo.
On Dec. 20, 2006, Provo city officials fired back at Titch's findings in a 32-page response that called into question many of his assertions. They also stated the report's conclusions were not reliable because the foundation has an anti-government slant and "a definite predisposition against municipal broadband deployment."
Titch said the foundation does have an explicit goal to promote ideals including individual liberty, free markets and the rule of law. But he insisted the report is fact-based.
"The facts are there," he said. "The fact that Provo lost $2 million last year is not an opinion."
In their response, Provo officials also questioned Titch's credibility because he worked as a consultant for Qwest, a competitor to iProvo.
"Mr. Titch can hardly be considered an independent or unbiased source for objective information about iProvo," the report stated. "Particularly in light of his business relationships."
Titch said he did consulting work in 2003 for Qwest Communications, but that was long before he joined the Reason Foundation in 2005. He said his past affiliation didn't color his harsh critique of iProvo.
City Councilman Steve Turley called Provo's response to Titch's first report a "knee-jerk" reaction that trashed the messenger, not the message.
"The truth hurts," he said. "When it comes to iProvo there's a lot of hurt."
The latest Reason Foundation report comes amid a massive effort to assess and retool iProvo's operations. Last year, the city hired CCG Consulting and Franklin Court Partners to analyze the network. Acting telecom manager Kevin Garlick said they will release draft copies of the consultant reports today, and the City Council is planning to meet Monday to discuss the findings.
Titch stated Provo stands to join other cities such as Ashland, Ore.; Lebanon, Ohio; Jackson, Tenn.; Marietta, Ga.; Tacoma, Wash.; and Trion, Ga., as cities that have thrown away millions on broadband programs that failed to deliver promised benefits.
Stewart said he suspects they'll discuss three different options: bringing on extra providers, having city departments pay for their use of the network, and privatizing.
Turley said he'd be happy if he could vote to privatize iProvo if the opportunity came his way in the next four years.
"The iProvo thing was a bad idea from the start," he said.
The latest Reason Foundation report can be found at www.reason.org.The city's response to the first Reason Foundation report can be found at www.provo.org/downloads/util/building_a_digital_community.pdf.