PROVO The city's announcement that iProvo the fiber optic network that has registered financial losses since its inception will be sold for $40.6 million should not be interpreted as cut and run, Mayor Lewis Billings said Tuesday.
"This isn't about unloading it and walking away," he said.
News of the city-owned fiber optic network's pending sale to Broadweave Networks, a fiber optic service provider based in South Jordan, comes after numerous calls from a think tank, the Utah Taxpayers Association and other critics to sell the system. Several City Council members have also voiced their support of privatization, but Billings said that didn't factor into the city's decision to sell iProvo. The city has always been open to the private sector taking over, he said.
"If the private sector would step up and the private sector could step up, then city government should let them step up," Billings said.
Now is the time to pass it on, he said.
The city sent out requests for proposals April 2007 seeking qualified companies to offer options to provide telecommunication services and business opportunities on iProvo, and Broadweave appeared to be the pick of the litter, Billings said.
"If I were the pretty girl waiting to go to the prom, (Broadweave) would be the most popular guy in school," Billings said.
Steve Christensen, CEO of Broadweave, was equally complimentary to the iProvo network at a press conference Tuesday afternoon.
"It's an amazing accomplishment," he said of the system at the Network Operations Center on 744 N. 300 West.
The iProvo system, originally touted as a moneymaker, has cost the city $7.5 million since 2003, despite signing up 10,400 subscribers. It's on track to cost another $2 million this year. The city also initially bonded $39.5 million to construct the system, but, with interest, the total bond payment would have been around $64.3 million by 2025.
But the network has matured, Billings said. The iProvo system is said to be one of the largest municipally owned fiber-to-the-premises networks in the country, reaching all 36,000 residences and businesses within the city.
While the technology offers high speed and great reliability, Christensen said, the business model was hedged up by laws that prohibited the city from being the network operator and the service provider.
"There are inefficiencies with the model that the city could not solve," he said.
During the acquisition, Christensen said they will continue to maintain competitive pricing levels, and customers won't feel any heat as the city passes the torch to Broadweave.
"It's going to be a smooth transition for (customers)," he said. "We're gonna take an already great service and add to it."
Christensen declined to comment on what plans they have to correct those inefficiencies. But he said Broadweave will make two huge announcements within the next week regarding service providers and future investments in the system.
"Stay tuned," he said.
According to the agreement terms, Broadweave will assume the remainder of Provo's bonds and almost all of the city's other financial obligations related to the network. Broadweave will own and operate all components of iProvo. In addition, it will grant the city a license to use dark fiber for city uses, capacity on the network for connecting government agencies for $300,000 per year and up to 3 mega-bytes of bandwidth for utility services to every residence and business connected to the network.
Provo will also have a non-voting representative on Broadweave's governing board. If Broadweave chooses to sell the network to a third party, in addition to any amount due on the sales price, it will be obligated to pay the city 10 percent of the remaining amount due or $2 million, whichever is greater. The parties tentatively plan to close the transaction by June 30.
Whether the deal goes through depends on the City Council, which has final say over the matter. But council members present at the mayor's announcement expressed elation. "Hallelujah," Councilman Steve Turley said. "The gray clouds have parted and the angels are singing. ... Hopefully, this will end the suffering.'"
Council members Cynthia Dayton and Midge Johnson also expressed excitement about the announcement.
Councilman George Stewart congratulated the mayor for completing the transaction.
"Right company, right place. ..," he said. "With the information provided so far, I'm persuaded to support what the administration is proposing."
But not everyone is satisfied with the process. Pete Ashdown, CEO of Internet service provider Xmission, called the sale a "government-installed monopoly" because the request-for-proposals process was completed away from public scrutiny.
"This is the first time I heard about this sale," he said. "This was done behind closed doors."
Provo spokeswoman Helen Anderson explained the city had to sign nondisclosure agreements with the business it contacted during the process to protect its investments.
"You don't want your competitors to know what you're doing," she said. "That's just business reality."
There are still several meetings scheduled where the public can voice thoughts on the sale, Billings said. But, with the pending sale on the horizon, he said he hopes the city has given everyone critics included some resolution."As best we could, we tried to create a win-win for everyone," he said.
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