PROVO Long before Broadweave Networks came along with a deal to take iProvo off the city's shoulders for $40.6 million plus benefits, MSTARmetro made its own offer to lease the network.
Documents obtained by the Deseret News reveal that in May 2007, MSTARmetro an iProvo service provider made an offer to lease the iProvo network.
MSTARmetro said it would assume the city's bond payments plus interest and pay back the estimated $13.5 million the city transferred from the energy department to buoy up iProvo.
But that proposal was rejected, MSTARmetro executives said. Now that Provo is looking at the Broadweave offer, they want another bid process where the city specifically states its intent to sell iProvo.
MSTARmetro's Jon Hansen said the company has been advised that the process was "closed, procedurally unfair and ... very likely illegal."
"Make the process fair and open," Hansen, the company's interim president, said. "Let qualified competitors have a shot at it."
MSTARmetro's initial offer was in response to a city-issued request for proposals in April 2007. The company told the city it had financial backing from Clear Creek Partners and had other interested investment firms such as Waller Capital, Prospera360 and Deutsche Bank.
To back up the deal, MSTAR-metro said it would front guarantees for the first three years of bond payments, totaling $7.8 million.
MSTARmetro executives said that when the deal was rejected, they were told it was because their vision "strays from (the city's) original goal of an open access network." Now that the city has turned around and agreed to privatize the network, MSTARmetro executives are questioning the legality of the city's decision-making process.
Hansen spoke to Provo's City Council during its nearly six-hour meeting Tuesday night.
In a letter dated May 23, MSTARmetro executives asserted the April 2007 request was in violation of Utah's Procurement Code.
"The code requires ... that an RFP for the sale of a municipally-owned asset be prepared with specificity and detail as to the asset being sold," Hansen wrote.
City Council Attorney Neil Lindberg said he doesn't think the city did anything inappropriate. "I'm convinced that we have properly followed the legal process," he said.
On May 15, 2007, MSTARmetro proposed to enter into a lease agreement with the city to operate the network and maintain it as an open network. The offer came in response to the city's April 18, 2007, notice that it is "seeking proposals to provide telecommunication services and business opportunities on the iProvo network."
MSTARmetro said it would assume the city's bond payments for the network, plus interest, and, in return, MSTARmetro would assume a role as a hub, or anchor tenant on the system, while allowing other service providers to operate on the network. According to MSTARmetro's response to the RFP, the arrangement would be similar to a municipally owned airport that allows multiple private entities to operate, with one acting as the hub.
But apparently it was an offer the city could refuse.
In a letter dated Sept. 17, 2007, interim telecommunications director Kevin Garlick told MSTARmetro CEO Ben Gould that city staff concluded the proposal was not in the city's best interest.
"Among other reasons, the primary concern with the new proposal is that it strays from our original goal of an open access network with multiple providers and many telecom service choices," he wrote. "In addition, it raises the city's risk by placing its future success and security solely on (MSTARmetro's) ability to perform."
MSTARmetro executives were puzzled, especially now that Broadweave announced it would integrate Veracity Communications and take over MSTARmetro and Nuvont Communications customers effectively making Broadweave the lone provider on the network.
"We are at a loss to explain why we were not given the opportunity to compete in a fair and open bidding process," Hansen wrote in the May 23 letter.
Provo spokeswoman Helen Anderson said the quote from the letter is taken out of context. She said there were other reasons MSTARmetro's offer was turned down. She also said at the time there wasn't a compelling reason for Provo to stray from the open-network model, but since Broadweave came along, they now have a compelling reason.
Tuesday night, City Council members were less than sympathetic to MSTARmetro's situation. Councilman Steve Turley said it was noteworthy MSTAmetro owed the city $950,000 in delinquent payments, yet thought it could lease the network.
"Come on, buddy, that's a difficult pill to swallow," he said.
Hansen conceded MSTARmetro experienced significant difficulties under the wholesale model because it wasn't allowed control over its product offering. He said the company's business proposal would provide a "stabilizing force," create healthy business opportunity and drive innovation and economic development.
Councilman George Stewart said Provo can't afford afford to go through another bid process because the uncertain political climate is costing the network customers and money.
"We've already lost 250 customers from where we were two months ago," he said.
Provo finance director John Borget reminded the council the city stands to gain value from the network between $1.5 million to $2.5 million per year if officials sell to Broadweave, whereas the city stands to lose between $2.5 and $3.4 million over the next five years for a total of about $15.6 million if they don't.
"The bottom line is if we stay the course ... the future doesn't look very bright," he said.
Veracity President Drew Peterson said if the atmosphere of uncertainty persists for too long, he will take his customers off iProvo.
"We can't subject our customers to that uncertainty," he told the City Council. "It's not worth it."
Also at Tuesday's meeting, Broadweave CEO Steve Christensen unveiled the pricing packages that customers can expect. Starting at $19.99, Broadweave will offer Internet connection of 3 megabits per second for downloads and a 512 kilobit per second for uploads. Broadweave will also provide customers with a $180.89 premium option of 60 mbps for downloads/uploads.
Broadweave will also provide customers with a variety of triple-play services, Christensen said. Customers will be able to choose from a variety of packages, such as the Economist, which offers Lifeline TV, Entry VoIP telephone and fiber basic 3 mbps/ 512 kbps for $52.22, or Media Maven, which provides 15 mbps connection, standard VoIP telephone, 2-gigabyte PC backup and basic TV for $121.09. A custom option will allow customers to handpick their lineup of services, he said.
Public comments on the pending sale were divisive. Provo resident Gary Thornock, 37, said he's been a satisfied customer of HomeNet, Veracity and MSTAR, and the pending sale leaves a lot of customers like him feeling like the city threw them under a bus.
"I would not like to see the iProvo network close and become another Comcast," he said.
Eric Griffeth, a 32-year-old Lehi resident, said he lives at Traverse Mountain where Broadweave currently provides services. He's a self-professed "techno geek," and he's impressed with Broadweave.
"I love the service that I have with Broadweave," he said.
As the meeting closed, Billings assured council members they were considering the best proposal.
"They've been flat and flimsy," he said of other offers. He again defended the legitimacy of the city's RFP.The City Council decided not to take action on the proposed sale of iProvo to Broadweave. It will revisit the issue when the council reconvenes Tuesday. The council study session will begin at 5 p.m., and the City Council meeting will start at 5:30 p.m. in the Council Chambers at 351 W. Center.
Deal documents online:
Documents related to the proposed agreement between Provo and Broadweave can be viewed at iprovo sale documents.
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