SOUTH JORDAN Looks like Broadweave Networks will buy out two of the incumbent iProvo service providers one of which owes Provo $950,00 and integrate the other provider's operations and customers.
Broadweave, the company that plans to buy the city's fiber-optic telecommunications network for $40.6 million, announced this morning they've reached separate agreements with Mstar Metro and Nuvont Communication to acquire and service the two companies' Provo-based customers.
Broadweave will also acquire Veracity Communications in a cash and stock transaction. Under the terms of the agreement, Broadweave and Veracity will merge operations and combine companies. Two of Veracity's owners will join the executive ranks at Broadweave. Kevin Mayberry will become a member of Broadweave's board of directors and Veracity President Drew Peterson will become Broadweave chief of sales officer.
Mstar will continue to provide services on UTOPIA, Broadweave CEO Steve Christensen said. Nuvont CEO Brandon Grover will become a long-term customer of Broadweave when he launches Viapath, a new company selling VoIP services across the country.
Christensen said they came across Veracity, which provides voice and data services over the iProvo and Qwest, and they were impressed with the company's business model, but the wholesale model iProvo is based on wasn't benefiting them or anyone else in the network.
"The network wasn't achieving its potential," he said.
Veracity is one of the only service providers on the iProvo network that was turning a positive cash flow while Provo's fiber optic network struggled. Initially, Veracity executives Drew Peterson and Kevin Mayberry hoped to continue to be providers on the iProvo network, but said they were surprised when Broadweave offered to integrate operations with them.
"Sometimes, when you're not looking, the best opportunities present themselves," Peterson said.
Broadweave and Veracity executives declined to discuss the exact amount of the transaction in cash and stock. Christensen said there will be no layoffs in the transaction.
The city's history with service providers contracted to operate on iProvo has been rocky. Initially, Provo awarded the iProvo contract to HomeNet in July 2004, entrusting the $40 million public project to the company.
The deal gave HomeNet a period of exclusive access to the city's network of fiber-optic cables, granting the company a head-start on future companies expected to join the network and compete to win subscribers among city residents.
But those hopes soured when city officials' concerns over HomeNet's cash burn rate and business approach prompted them to cut ties with the company. HomeNet later filed for bankruptcy in Washington state in August 2005.
HomeNet's bookkeeper was later investigated by the Utah County Attorney's Office for allegedly forging a $50,000 letter of credit that helped the company land the exclusive contract with Provo in the first place.
The city replaced HomeNet with service providers Mstar, Veracity and Nuvont. But problems persisted as customers complained of poor service throughout 2005 and 2006.
Then Provo's annual financial report, issued at the end of 2007, revealed Mstar owed the city $950,000 in delinquent payments, prompting an investigation by the Utah state auditor.
Along with the financial woes, the relationship between the city's telecom engineers and service providers were shoddy at best. Doug Dawson of CCG Consulting, one of two consulting firms hired by the city last year to analyze iProvo, described the situation he observed as "operational dissonance."
"I found a lot of problems in the relationship between the two parties," he wrote in a report. "Almost universally, the telecom employees dislike or distrust the retailers and this is then manifested in the working relationship between the two parties."
Frazer Bullock, one member of Broadweave's board of directors, said this business transaction will allow the network to cut the inefficiencies and duplication of effort inherent in the wholesale model to increase competition with Comcast and Qwest."It provides another network that is viable in the long-term," he said.