CALEB WARNOCK - Daily Herald | Posted: Tuesday, March 13, 2007 11:00 pm
American Fork is again looking to sell its fiber-optic network.
In October, the city entered into a $2 million agreement to sell and lease portions of the network to Sweden-based PacketFront Inc., and its partner company, Homeport. On Tuesday the city announced the deal had fallen through, and council members voted unanimously to try to find a new buyer.
As part of the original agreement, PacketFront and Homeport had promised to invest $8 million into the system, upgrading it and making it profitable -- something city officials said they could not afford to do. The companies had also said they would offer Internet, cable television and telephone services to subscribers. The city now offers only Internet service.
The agreement allowed PacketFront and Homeport to purchase all of the fiber-optic cable within the city and lease a portion of the city-owned aerial fiber-optic cable that runs from Springville to American Fork and six strands of underground fiber-optic cables that are part of more than 100 strands the city owns running from Spanish Fork to Salt Lake City.
The PacketFront/Homeport deal was chosen from five proposals by companies that submitted bids. On Tuesday, Councilman Dale Gunther said PacketFront and Homeport had not been able to complete the deal.
"They have not been able to come up with funding," Gunther said.
The partnership had approached the city with "a different deal," Gunther said, but after discussion with legal counsel, city officials have decided to issue a new request for proposals.
"This will be open to anyone, it is not exclusive to Homeport," Gunther said.
Any proposal must honor the wholesale agreements the city already has in place with vendors, said Mayor Heber Thompson.
In 2002, American Fork purchased its fiber-optic system from SwitchPoint for $6 million, floating a bond to fund the purchase. City officials had said the system, which has 1,400 subscribers, could bring in profits of $300,000 a month. But instead the system has lost $1.2 million annually.
The city still owes about $5 million on the bond and is making annual payments of about $580,000, said city staffers. 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.
Caleb Warnock can be reached at 443-3263 or cwarnock@heraldextra.com
This story appeared in The Daily Herald on page D1.