Hoping to make good on a bad investment, American Fork has sold another piece of its fiber-optic network.

Orem-based Surpha will pay $500,000 for the in-city network. The deal is expected to be completed on June 5. The company recently purchased AF Connect, which had been the largest Internet service provider in the city.

American Fork will retain an underground fiber network that goes from Salt Lake City to Spanish Fork and an elevated network that goes from American Fork to Springville, said Mayor Heber Thompson.

"These are available for lease," Thompson said. "We will look at a marketing plan for leasing them."

The city took out a $6 million bond to purchase its networks and start its broadband business, which at one point was hemorrhaging $1.2 million a year.

In an interview, Councilman Dale Gunther said he believed American Fork paid about $900,000 for its in-city and American Fork-to-Springville networks. At one point the city had been offered $2 million for the in-city network but the company making the offer was not able to secure financing.

In December 2005, the city announced it had sold 24 fiber-optic strands -- 16.5 percent of the city's total capacity along 60 miles of cable -- to the Utah Telecommunications Open Infrastructure Agency for $1.5 million.

That deal, combined with the latest sale of the in-city network, will allow the city to recoup a third of its original investment, and the city hopes to make more money.

"The ideal would be if we could lease [the remaining fiber] and get enough revenue and then pay off the bond and then we'd have a revenue stream that would benefit the city for other purposes," Gunther said.

Just after the city purchased its networks, the state Legislature effectively tied the city's hands, passing a law that cities could not retail broadband services. As a result, the city had to find ISPs for the system.

"The retailers American Fork was able to attract were sort of mom-and-pop small operators and many were unable to pay for the service and there were a lot of delinquent accounts," Gunther said.

In addition, the city's network had been connected to individual homes with copper fibers, which wore out, and service became unstable, he said.

"When it storms and lightnings the system goes down so it is very maintenance intensive," he said. "Basically we have an auto dealership with Model-T Fords trying to compete with Cadillacs and Lexuses."

Meanwhile, American Fork has been making annual bond payments of $580,000 and the business was doing so poorly that some of the borrowed bond money had to be used to pay the bond payments, he said.

"So it was a bad business investment from the get go," Gunther said.

The city's remaining fiber-optic strands are its richest asset and the city hopes to begin leasing them in the coming months.

"We are right near where we can go to market," he said, noting some of the fiber connections are still under construction.

Speaking in a council meeting this week, Thompson said city officials "are relieved that we don't have responsibility for the current in-town network. We have sold it to someone who has the capability to develop it."

Budget director Cathy Jensen said the city still owes $4,385,000 on the bonds.

"We will be able to lease our fiber network and as those leases come about that should get us enough revenue to make the bond payments," Thompson said. "That's the plan. It's an emerging market."

He said George Schade, the city's broadband director, would work toward creating a marketing and business plan.

Schade said the residents would not notice much of a change in their broadband service. The two ISPs which currently have contracts to provide the service will still be able to continue those.

"That company will honor the ISP contracts that were in place and continue to move forward," he said.

Thompson said future plans call for Surpha to provide additional services.

"They eventually want to offer the triple play for the citizens," he said. The triple play includes Internet, telephone and television. "That will take some time to get some fiber to the homes. This organization is going to work at getting fiber to the home. It would have the bandwidth and speed to offer all three services. I don't think the citizens are going to notice any blips at all."