The Provo City Council voted 5-1 to pay down part of iProvo's debt using a surplus of sales tax revenue. This replaces the previous proposal to fund another loan from the city's electric utility to make the remainder of this year's debt payment. The Council felt that it was wiser to pay down debt now rather than incur more of it in the form of additional loans. Now that iProvo can pay its debts for the year, what's it going to do to pull itself out of debt?
Current, the project is able to cover operating costs and about 2/3 of the debt service, so it's not like it's that far from being able to break even. Most of the drive, though, is built around the idea that additional subscriber growth will somehow make up the 6,000-8,000 subscriber shortfall. While adding additional service providers and pushing to get more high-margin commercial accounts will certainly help, it's about time they started raising prices just a little bit.
With $1.2M in red ink to cover between 10,000 subscribers, they only need to come up with another $10/mo per subscriber. Adding $5/mo per service would immediately put the project on break-even ground and is a necessary step until the subscriber numbers improve and the loans from the electric utility are paid back. Even with the price increases, iProvo services would still be less expensive than comparable offerings from the incumbent carriers. I'm hoping that someone over there will get past the "if we build it, they will come" mantra and start trying to get on more solid financial ground. In addition to being expensive, the bad press distracts from doing the job right.
(See full articles here, here, here, here, here, and here.)
