|
Critics of government-run fiber-optic networks see the iProvo sale as an "interesting counterpoint" to UTOPIA, another financially-challenged municipal fiber network in Utah that recently received an overwhelming majority vote to move ahead with a $185 million refinance to finish its buildout and repay its debts.
Of 11 Utah cities that have pledged their sales tax revenues to back UTOPIA's bond payments, 10 including Orem and Lindon agreed to increase their sales tax pledges by $55 million and extend their guarantees to 32 years. Payson, the only UTOPIA city to vote against increasing its tax pledge, will have to pay $259,920 per year for 22 years starting in June. If UTOPIA defaults on its bond payments and all the tax pledges were called upon, taxpayers could be liable for up to $504 billion on the project, according to the Utah Taxpayers Association.
"It will be interesting to see how Provo becomes a fiber city now, versus the UTOPIA cities," said Steven Titch, a policy analyst with Los Angeles-based Reason Foundation.
Fraser Bullock of Sorenson Capital, a key investor in Broadweave Networks, which is buying iProvo for $40.6 million, described the new business model as a "great solution to municipalities that are struggling with running fiber-to-the-home networks."
While declining to comment on the implications of iProvo's privatization for UTOPIA, Bullock acknowledged that the UTOPIA cities are in a "very difficult situation relative to the significant amount of debt they carry."
Several factors made Broadweave's acquisition of iProvo possible, he said.
"iProvo has been very prudent in how it spends its money in building the network. The city also made an excellent decision in going with an open network solution as opposed to a closed network. An open network solution means iProvo's network will be compatible with what Broadweave is using for its fiber technology," Bullock said.
Also significant, Titch said, is the fact that private capital is now available because real demand has emerged.
"The cities that got involved in fiber-optics did so because they feared if they didn't, no one would. But that's not the case," he said. "The difference between now and back in 2004 when iProvo was first proposed is that the market for household connections of more than 8 or 15 Mb/s is finally developing. Demand for bandwidth is now coming from high-end users of multiplayer Internet gaming, peer-to-peer file transfer of online movies, as well as video-on-demand services like those offered by NetFlix. Provo and the other cities anticipated that, but they put in fiber before the demand for that level of capacity is there."
Jim Reams, interim executive director of UTOPIA, in an e-mailed statement Tuesday, said the private sector has "clearly validated that there is consumer demand and a solid business model for the ubiquitous community networks that UTOPIA is building. Selling its network is a business model Provo has chosen, but it is clearly not the only model, as successful community-owned networks are operating in many parts of the country and the world." |
