Questions linger over performance

iProvo, the poster child for government-run broadband, finally achieved its 10,000th subscriber last week, Provo city officials announced Wednesday.

But that's one year behind its initial projected schedule, and the city now says it needs between 13,000 and 15,000 subscribers to break even by summer 2008. According to a financial report released at an iProvo telecommunications board meeting Wednesday, there were 9,884 iProvo subscribers as of Aug. 30, 428 of whom are business customers.

Kevin Garlick, iProvo's acting telecom director, blamed iProvo's failure to meet subscriber and revenue targets on the problems of its first retail partner, HomeNet Communications and its bankruptcy in 2005 -- problems he said set back iProvo's subscriptions and revenue targets by at least a year. MStar and Veracity -- now known as Nuvont -- have replaced HomeNet as retail providers on iProvo and are adding subscribers and revenues again.

But would iProvo's report card be different had Provo city done more due diligence on HomeNet's financial viability and opted to partner with someone elsefi

That question is now raised following a criminal investigation by the Utah County Attorney's Office of alleged fraud by HomeNet that came to light in court documents filed two weeks ago. The investigation centers on allegations that HomeNet's bookkeeper may have forged a $50,000 letter of credit to land the $40 million iProvo contract with the city, according to a Deseret Morning News report.

The County Attorney's Office has since received court approval to subpoena the financial records of HomeNet and several former employees, the media report said. Criminal charges haven't been brought against the company.

Garlick said the city had done its homework while investigating HomeNet's operations.

"The letter of credit was a kind of surety. We didn't know it was a forgery at the time until HomeNet terminated the contract. Until then, we didn't have any reason to check on the letter of credit to make sure it was legitimate. It looked all right," he said.

The city discovered the letter of credit was a forgery after it was rejected when the city tried to cash it in to settle HomeNet's outstanding network lease fees. Garlick couldn't immediately specify the amount owed at the time HomeNet entered a settlement agreement with the city to terminate the contract in July 2005. But he said HomeNet's debts have since been written off, and have no financial impact on iProvo's operations.

"We're very disappointed that an individual will go to that extreme to represent their financial viability. But we're not responsible for how people misrepresent themselves," Garlick said. "I'm not saying it's good what they did. But it didn't affect iProvo's subscribers and operations."

Provo Municipal Councilman George Stewart at Wednesday's meeting expressed concerns over why the council members weren't notified of HomeNet's fraud.

"We knew HomeNet went bankrupt. But we were not aware that the Provo administration knew about the fraud. We could have had an executive session on such legal matters. The council could have been informed of it without the matter becoming public," Stewart said.

Garlick disagreed.

"There's no reason for us to cover it up. There was an illegal act. We turned it over to the city attorneys, who turned the case over to the county attorney," he said. "The FBI said it wasn't a large enough amount to get involved."

Provo approved a $39.5 million bond in early 2004, and with interest, Stewart said it could ultimately cost the city as much as $64 million. According to the city's budget projections, expenditures for iProvo will exceed total revenues by $1.19 million in fiscal year 2008. In fiscal year 2009, the deficit is projected to be $1.73 million, and $1.4 million in 2010.

At Wednesday's meeting, Provo city officials and the iProvo telecom board discussed the possibility of hiring an outside consultant, CCG Consulting, to examine the overall health of iProvo's operations and to identify retail revenue generators for the city.

"The telecommunications project should benefit the city's systems such as traffic monitoring and meter reading on the broadband network. This could help create new retail revenue streams for the city," Garlick said.

Provo is also considering proposals from new potential service providers including Xmission Internet, FiberNet and Emery Telcom to join MStar and Nuvont.

"Dynamic City, which manages the UTOPIA fiber-optic network, was bought by PacketFront last month. PacketFront wants to play a role in iProvo, in terms of helping us manage the network operations," Garlick said. "Xmission, FiberNet and Emery Telcom want to be retail providers on our network. We've looked at their financials. But we need the consultant to lay out new pricing and standards."

The city also will launch a campaign Friday to help iProvo customers with service concerns. Called iCare, the campaign will provide a gift incentive to residents who identify former or existing iProvo customers who have had problems with the service and provide that person's contact information.

"We don't want to interfere with the retail providers' role in dealing with customer service problems. But we've received an escalated number of calls from customers who call iProvo after they don't get what they need from the retail provider," said Peggy Andersen of iCare.

"We strongly encourage telecom customers to contact their retailer directly first," Andersen said. "If an issue isn't resolved to the customer's satisfaction, or if they need extra assistance, we invite them to call a member of our iCare team."

iCare members can be reached at 852-6873 or 852-6802 Monday through Thursday, 7 a.m.-6 p.m. If they need assistance after hours, they can call 852-6000.