If the deal is approved, nearly every one of Provo’s 115,000 residents could soon have free Internet access in their homes for at least seven years with a one-time $30 activation fee. Everyone will have access to a minimum of a 5Mb connection (following a $300 construction fee). A gigabit connection is $70/month.
Google proposes to buy iProvo, a network valued at $50 million, for $1, reports Xmission, an ISP that runs on the network. But Google will not assume any of the debt, the Provo city taxpayer will continue paying that.
Founded in 2002 the Utah Telecommunications Open Infrastructure Agency was one of the first regional fiber networks to serve municipalities and individuals. UTOPIA planned to boost the broadband competitiveness of Utah cities, although the largest city, Salt Lake, did not participate, and Provo built their own. UTOPIA only supplies the fiber optic network. Private companies provide the content and services, and pay fees to the network to make their products available.
iProvo is the Fiber to the Home service in Provo, providing fiber backbone for homes and businesses throughout the city, as well as municipal buildings, schools, power stations, and traffic signals. iProvo was run as a public-private partnership.
The city owned and maintained the fiber optic lines and fiber optic equipment, while private companies provide television, telephone, and Internet services to homes and businesses. The network had two service providers: Mstar and Nuvont Communications/Veracity Communications. In 2008, the network was sold to Broadweave Networks.
When the city ran iProvo, it had to subsidize the network to the tune of $2 million a year because it didn’t bring in enough money to cover the bond payments.
“Veracity customers, both commercial and non-Provo network residential customers will be unaffected by the announcements. “Veracity remains committed to maintaining seamless and high quality delivery of services to all of its customers, including any currently on the Provo network that eventually will have an opportunity to be on Google Fiber,“ said Drew Peterson, CEO of Veracity Networks, on their web page.
iProvo coordinated work with the Utah Telecommunication Open Infrastructure Agency (UTOPIA), a consortium of 16 Utah cities engaged in deploying and operating a fiber to the premises network to every business and household (about 140,000) within its footprint.
UTOPIA operates as a wholesale fiber optic network and is prohibited by law from providing retail services. There are currently 7 service providers on the UTOPIA network and the network is open to additional service providers.
In all, 11 of the founding UTOPIA cities, from Brigham City in the north to Payson in the south, pledged about $500 million over 32 years to back the bonds that UTOPIA sold to finance network development. Some cities, it noted, “have begun to raise property taxes to keep their municipal services whole while making UTOPIA payments.”
The Audit (pdf) has led The Salt Lake Tribune to question whether the 11 cities paying the bills for the agency should just “pull the plug.
For UTOPIA, the newspaper said, “The audit suggests providing broadband infrastructure at wholesale to independent content providers may never work”, but it stops short of drawing a final conclusion.
UTOPIA has reacted to Google’s decision to take over Provo’s public fiber optic network by touting it as a vindication of its own business model . It “validates the vision our member cities have been working toward…” a statement on the consortium’s web site says.
iProvo passes 36,000 homes, businesses, government buildings, and schools at speeds up to 1,000 times faster than cable or DSL.
Provo spent $47.5 million total, they sold for $40.5 million, so in the end the city’s out about $7 million. iProvo was the largest municipally owned fiber-optic network in the United States.
iProvo was struggling with churn and other problems similar to Utopia’s. They ditched the wholesale-only model, which Utopia still shares. Separating service providers from the network operator created inefficiencies, said Steve Christensen, iProvo’s new CEO.
Provo sold the network three years ago to Broadweave/Veracity, becoming the sole owner and operator of what was the largest municipal fiber-to-the-premises network in the United States. Since the payments from the sale go toward the city’s bond payments, that’s millions of dollars the city has not had to pay over the last three years.
Ten months ago, Provo put out a request for proposals, hoping to attract some group or entity to buy the thing, reports the Deseret News.
“Originally, we wanted to sell it for cash,” he said. “But it became evident no one would pay cash.” The thing was worthless. “Potential buyers looked at the network and said it’s not worth anything.”
And why was it not worth anything? Because the technology the city bought with bond proceeds several years ago is now hopelessly outdated.
In a nutshell, this is the problem when public entities try to compete in a fast-moving industry such as Internet delivery.
While the fiber optic cable the city had planted remained good, everything else about the system needed a serious upgrade. Curtis said he faced the prospect of either asking Provo residents to assume a lot more debt to bring everything up to date (only to watch it deteriorate again with time), or eventually having to shut it all down.
Instead, Google Fiber came along and saved the day, offering to assume the fiber optic infrastructure and make Provo the fourth city in which the Internet giant will provide broadband virtually free to anyone willing to pay a $30 hookup fee.
Verizon gained 188,000 FiOS broadband customers, as part of its strong first-quarter 2013 results, taking its total to 5.6 million, and added 166,000 video service subscribers, taking that total to 4.9 million. Internet service penetration jumped from 37.3 percent in the fourth quarter of 2012 to 38.2 percent in the first quarter of 2013, while video service penetration jumped from 33.3 percent to 34.1 percent.
Construction of a $1.2 billion NSA data center in Utah is expected to be completed in September, according to an April 15 Reuters report.
Related Dailywireless Fiber articles include; Trouble in UTOPIA?, NSA’s Utah Data Center, UTOPIA: FTTH Now Focused on Business, FiOS: Too Risky?, Municipal Fiber: Fits and Starts, Be Your Own Fiber Net, RUS Awards $1.2B for Broadband, City Fiber Strategies, US Broadband Sub Count, Hawaii Plans Broadband Initiative, Unlicensed Muni Broadband: Take Two?, Ten Largest Data Centers, The Fiber Utility, 1 Gbps Fiber Comes Home, City Fiber Networks, National Broadband Policy?, Connecting the Nation, Utopia Spreads,
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