PROVO — Veracity Communications won't be merging with Broadweave Networks, but it intends to stay on the iProvo network as a service provider.

And some fear that will plunge the system back into the bifurcated model that caused profuse financial bleeding.

Provo Mayor Lewis K. Billings said Broadweave has the same obligations to Veracity as iProvo did. That means, he said, Broadweave will remain a wholesale provider of connectivity for retail providers like Veracity.

"They will take over the role we play," Billings said.

Although Veracity's decision to remain independent changes the dynamics of the network's future, it does not affect the city's deal with Broadweave, he said.

"Veracity is a good player," he said. "They bring value whether they bring it as a retail provider or as a part of Broadweave."

Veracity President Drew Peterson said the merger agreement the company had with Broadweave was scheduled to close June 30 with the closing of the sales agreement between Provo and Broadweave.

"The deal was supposed to close on the 30th and it didn't," he said.

From an operational and financial standpoint, Peterson said, Veracity's board of directors decided to opt out of the merger.

"We felt that the timing at this point is to focus on continuing on the path that we have been going rather than to wait 60 more days," he said.

Veracity plans to continue servicing its commercial customers on iProvo. He also said they wish Broadweave the best in their future endeavors, and the two entities will continue their working relationship.

Peterson said Veracity's departure from the merger agreement shouldn't affect the final sale of iProvo to Broadweave because the merger was not included as a part of that anticipated transaction.

Broadweave CEO Steve Christensen also said in a prepared statement that the purchase of Veracity is not an integral component in the purchase of the network, and Broadweave looks forward to working with Veracity on iProvo's commercial customers.

City Councilman George Stewart said he's disappointed the merger didn't pan out, because the move was supposed to create a single entity that would manage the network and provide services.

"I feel that having a single provider ... is the best," he said. "That's the retail model."

Now it appears iProvo will still have a bifurcated model that is similar to the wholesale model to which he attributes the system's downfall.

Regardless of this latest development. Stewart said he hopes all the details of the sale will be ironed out.

"I'm still very hopeful that Broadweave will finalize the agreements so we can get on with what else we need to do in the city," he said.

Provo officials and Broadweave executives were supposed to close the deal June 30 on the sale of iProvo, but they were unable to tie up every loose knot on Monday night. Instead, Provo and Broadweave signed a "modified closing" while Sorenson Capital continues to complete due diligence and analysis of the transaction.

"It's taking more time than we'd hoped or wanted, but we are moving forward," Billings said.

As of Tuesday, Broadweave executives have been handling operation costs, Billings said. The remaining iProvo employees have been transferred.

Shortly after the city announced the sale of iProvo in May, Broadweave reached an agreement to merge operations with Veracity Communications in a cash and stock transaction. It also agreed to buy MSTARmetro and Nuvont Communications' customer bases. At the time, Christensen said the move would cut down on the profuse financial bleeding the city and network endured under the wholesale model forced on the system by state statues.

Under the terms of the agreement, Broadweave and Veracity were to merge operations, with two of the latter entity's owners joining the executive ranks at Broadweave. Kevin Mayberry was going to become a member of Broadweave's board of directors and Peterson was going to become Broadweave's chief of sales officer. But now the two will maintain their current titles with Veracity.

E-mail: [email protected]