City officials and telecom board strategize on how to help ailing broadband network

It's been nearly two years since the build-out of iProvo was completed. But the poster child for government-run broadband still struggles to meet targeted subscriber counts, remains in the red and has incurred a staggering 14 percent customer churn or attrition rate since late 2006, Provo Municipal Council Chairman George Stewart said on Monday.

"A 14 percent churn rate, or 1,400 customers lost, is a serious, serious issue that has to be addressed. That's a very high customer attrition rate for the industry. That's a concern in terms of installation costs, since it costs about $800 to connect each new residential client to iProvo," Stewart said at a meeting Monday between Provo officials and the iProvo telecom board to discuss ways to help the struggling network.

At Monday's meeting, iProvo and city officials proposed strategies including creating a fiscal model to help cut iProvo's operating costs, getting feedback from iProvo engineers and strategizing with its existing retail providers, MStar and Veracity, upgrading the existing video product offering, and finding new ways to generate additional revenue including a possible sale of Provo's cable head-end, which originates and transmits cable TV and cable modem services to subscribers. Others proposed incentivizing retail providers to raise customer service and product standards and adding on potential new service providers including Xmission Internet, FiberNet and Emery Telcom by early next year.

"It's an opportunity to go after niche customers, some of these Internet Service Providers have existing clientele that they can bring with them to the iProvo network," said Kevin Garlick, iProvo's acting telecom director.

Wayne Parker, Provo's chief administrative officer, suggested the possibility of introducing loss-leader items to attract more subscriptions and reduce the churn rate.

"What is the appropriate level of churnfi How do you incentivize low churn ratesfi Can we provide discounts on transport fees or wholesale lease rates to retail providers if they meet certain benchmarks for customer servicefi" he asked.

Supporting federal legislation like the bipartisan Community Broadband Act of 2007, which aim to prevent states from prohibiting local government from providing broadband services to the public, was also proposed.

The city is also looking to hire a telecom division manager to help Garlick in getting iProvo on track.

In addition, the city is hiring outside consultants including CCG Consulting of Maryland and Franklin Court Partners to review iProvo's operations and costs. Their findings are expected to be ready by January.

But these proposals may not be enough.

For the first four months of fiscal 2008, iProvo has incurred an operating deficit of more than $614,000 -- which, for Stewart, poses concerns over whether the network can cover its projected shortfall for fiscal 2008 even though the city council has already authorized $1.2 million in sales tax revenues to help it pay off its debt.

To date, iProvo has 10,236 subscribers, which is currently between 3,000 and 5,000 below its break-even target.

The Provo fiber-optic network may be adding around 140 subscribers each month but it is still very much in the red, because it is underperforming its subscription target of 260 customers per month, according to Provo officials.

"Business customers remain a largely untapped market for iProvo," said Bruce Riddle, business operations manager for Provo's department of energy. Of the 10,236 customers, only 460 are business subscribers and the remainder are customers from residential and multi-dwelling unit apartment complexes.

"In October, only 17 percent of iProvo's subscribers were triple play (video, phone and Internet) customers, as opposed to the city's projections of 75 percent," Stewart noted. "Competition from the private sector is keeping us from getting the subscribers we need."

His solution : "In the end, we'll have to either get resources from the General Fund or through cost allocation to various departments of the city," Stewart said.

Stewart also asked for an update on the city's financial projections for iProvo.

But Garlick disagreed.

"It's premature to not hear the findings from the consultants before doing a financial forecast," he said.

According to the city's most recent budget projections, expenditures for iProvo will exceed total revenues by $1.19 million in fiscal 2008. In fiscal year 2009, the deficit is projected to be $1.73 million, and $1.4 million in 2010.