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Thursday, September 10, 2009

iProvo: More Problems in Public Utility Paradise
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[This is part of an ongoing series about "Problems in Public Utility Paradise."]

According to this recent article by Donald Meyers of the Salt Lake City Tribune, five candidates for mayor of Provo, Utah are falling all over themselves to declare their support for continuing the public utility fiasco that is iProvo, the city's fiber-to-the-home network. According to Wikipedia, it is the largest municipally-owned Fiber to the Home network in the United States." Steve Titch of the Reason Foundation, who has been following iProvo for many years, has documented its millions of dollars of losses and risk to taxpayers, saying "iProvo is a dismal financial failure by any standard." But that isn't stopping city officials and mayoral candidates from proposing to throw more money at this massive "if-you-build-it-they-will-come" fantasy. "One thing most of the candidates running for mayor agree on: iProvo is too important to fail, even if it means bailing out the company that bought it," Meyers reports. Here's the relevant passages from his article, with the key bits of bad info highlighted:

The city sold the troubled fiber-optic network to Broadweave Networks in 2008 in a deal in which Broadweave would take over the payments on the city's $39.6 million bond. Since November, Broadweave has had the city draw on its $6 million surety deposit to make its bond payments in a bid to build up cash to pay for growth.

In August, Veracity Communications merged with Broadweave, becoming Veracity Networks. The company's leaders, Drew Peterson and David Moon, have asked the city to restructure the payment schedule to allow the company to cut back on its payments for 18 months while it strengthens its coffers. It later would pay extra money over a seven-year period and reimburse the city with interest. Provo would draw on its Energy Department's reserves to make up the shortfall in bond payments -- $1.4 million.

[Mayoral candidate Don] Allphin, chairman of the Lakeview North neighborhood and a real estate agent/professional bass fisherman, said the city would have to accept the proposal, since the alternative is too costly: Taking back the network and paying off the bond itself. When the city ran iProvo, it had to subsidize the network with about $2 million annually from Energy Department funds. Part of the problem was the city was restricted by law from providing an actual telecommunications service and had to rely on individual service providers to market the system.

[Another mayoral candidate, state Rep. Stephen D.] Clark said he was concerned about last year's iProvo sale since Broadweave did not have what he believed was enough financial backing to buy it. But since the deal was done, the city has no choice but to move ahead and make sure Veracity succeeds -- as long as it learns from the mistakes.

"As long as it learns from the mistakes"??? Sounds to me like the people who need to learn from their mistakes are Provo politicians who got behind this fiasco in the first place.

posted by Adam Thierer @ 6:57 PM | Municipal Ownership

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