Thanks to the power of GRAMA requests, I’ve obtained all of the final documents related to the sale of iProvo to Broadweave. If you want to take a look at them for yourself, you can download them here (14.2MB ZIP). Be warned that this ZIP file contains 48 separate PDF files, so this is only for the highly curious and those needing to be put to sleep. If you find anything particularly interesting while browsing through them, do let us know in the comments.
The Final iProvo Sale Documents
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Jesse,
It appears that all of the exhibits and many other “TAB” documents are missing. This is an old game with Provo that is used to conceal important details. It makes it hard to evaluate anything.
I found the letters of credit document interesting. It looks like Broadweave has some good friends, but no actual assets.
As we all knew Broadweave actually brought nothing but debt to the transaction. It is intersting that the Energy Department came up with $3 million to get the deal done. When was that budgetted? This appears to be used for things such as paying off uncollected accounts recievable from the service providers in the amount of over $800,000. Do you suppose that the city would pursue this civily or is this just a gift from the people of Provo to Mstar, Nuvont, and Veracity (mostly Mstar I think). I suppose this infusion to the iProvo books provided the funds to make the first payments from Broadweave that the Mayor was so proud of. It looks like a case of “from my pocket to your pocket so you can pay me”. This has to stop now or it will become a never-ending subsidy to Broadweave. I don’t claim to be a financial analayst but these are my intial observations. I wonder if someone like the taxpayers association could do some auditting. But then I also wonder if anyone cares. The council doesn’t appear to care and they are the only hope we have of checks and balance in Provo. It would be nice to identify all the issues represented by the documents for use in the Mayoral race next year.
Ben
I could probably try pressing for the rest of those specific named documents to see if they are available, though I would bet they were intentionally not included in the packet. It’s possible that they have been deemed to contain trade secrets or some other proprietary information.
It’s interesting that Provo conjured up $3M (nearly three years worth of their current operating deficit) to make this happen. Provo has, essentially, subsidized Broadweave’s operation of the network for long enough for them to entrench their ownership past the point of no return. Combined with the retail revenues of the MSTAR customers and their planned rate increases, they could string along a series of operating losses for years before the chickens came home to roost. Provo didn’t stem their losses; they just paid for a lot of it up-front. I’m very surprised that the UTA hasn’t spoken up on this. It seems right up their alley.
I believe that the source of the $3 million should be clearly identified. This surely pre-positioned Broadweave with a pretty sweet entry point. How do you get this kind of deal in the real business world? It is esentially a case of, I am going to buy your failing business, but first you must fund all the outstanding accounts recieviable and debt. It looks like a clear case of inappropriately transferring public funds to a private entity. Whose interests were the Provo City Mayor and managers most concerned with?
Look deep enough and all illegal and pseudo-illegal activity will point to Kevin Garlick (Telecom and Energy Director) and his MBA whiz kid Bruce Riddle. This whole King-mayor-Garlick symbiotic love affair has to stop. November 2009 sounds like a good date.
I think the worse part of the deal was the “right of future use” of the network agreement. The city is paying $25,000 a month and getting nothing in return?? Well they have the “right” to use the network to read meters, but they may never do that. But they will pay $6-7 million to Broadweave even if they never use the network.
It’s a $300,000.00 yearly payment to Broadweave that will never bring that value to the city. In addition to this “money for nothing” payment, the deal appears to include a 75 year deal that provides Broadweave FREE facilities usage (Comcast, Qwest and others pay the city to use the poles (and in Broadweave’s case even the conduit)) owned by the power company.
This future use agreement is a sweetheart deal that is likely worth $10+ million dollars over it’s life. I guess that makes the actual sale price closer to $30 million or less?
Was this future use agreement signed to make the purchase price appear to be $40 million when everyone knew it was really selling for much less?
Of course I still think Provo got much more of it’s money back out of the network sale than UTOPIA will get when they sell.
I thought the $300,000 per year was to cover all the telecom type services the city uses like remote site connections and Internet bandwidth. Is that wrong?
Many city sites were already connected via fiber BEFORE iProvo was built.
I don’t know that bandwidth is included or the city’s phone services. I guess you could look in the city budget and see if bandwidth and phone service are being paid by the city?
The city could have gotten competitive bids for connecting the sites it needed and paid very little compared to the $25,000.00 a month (plus facilities usage) they are paying.
That part of the deal should have been more closely examined. But it could be it was done to allow it to “appear” the city was getting the magic number ($40 million) when they knew they were getting $10 million less?
…and it worked, the headlines were all about the $40 million price for the sale. Making it appear they sold it for what was owed?
I still think the city got a pretty good deal, getting perhaps 50-75 cents on the dollar?? I doubt UTOPIA will do as well.
As this is the Free UTOPIA site, we should focus more on UTOPIA and less on iProvo. I think we are talking about iProvo because the numbers are available. We have real numbers, hard facts to dig our teeth into. Much to Provo’s credit they have always released both subscriber and revenue numbers.
We have no such thing from UTOPIA. Is UTOPIA currently cash flow positive? How many customers do they have now? What is the revenue per customer?
I see UTOPIA is hiring customer service representatives….interesting as they have no customers??
I think that any municipal fiber optic network news is germane to this site’s purpose. After all, we have already learned a lot from iProvo’s failures and if UTOPIA decides to sell, this transaction is looking like a checklist of things not to do. Discussing iProvo is certainly relevant.
I agree with that 100%.
But I think we should have a focus on UTOPIA and the other fiber networks should be included, but not have more posts than UTOPIA?
I suggest it’s either that so much is happening with iProvo and so little with UTOPIA, or if UTOPIA is doing things…they are so secretive we just don’t have much but rumors.
UTOPIA is gambling with public money, the public has a right to know more…much more!
This particular topic happens to deal with iProvo. You are more than welcome to ignore it if you think Utopia is where all the focus needs to be. I don’t get why you are so interested in Utopia since you are a Provo resident? Perhaps its just support for your friends who are employed by Qwest.
The city got nothing. Broadweave brought no cash at all! The city financed the whole deal and will be on the hook for 20 years or until Broadweave fails. Yea good deal. Right!
I’m all for discussing Broadweave. I’ve likely posted as much or more on Broadweave as anyone. Both in support of and critical of Broadweave and iProvo. I’m not against Broadweave discussions….
…but I do think there should be MORE UTOPIA discussion on the FreeUTOPIA discussion list than Broadweave and other networks.
…and while I have friends that work at Qwest (as well as Comcast, UTOPIA, Broadweave and Provo City)…six or so years ago I sent Qwest a letter telling them “monkies would fly out my butt before I ever have Qwest service again”. So I’m not sure you could call me a Qwest supporter.
I’m very interested in competitive networks as I think the current situation Duo-opoly (Qwest/Comcast) is not good for anyone (but them).
Currently many competitive models are being tested. (Municipal,(owned and run, open access, closed), Private Investment (Broadweave type), etc. Most will fail as it’s very difficult to go head to head with the big boys and survive.
By careful examination of each of these (both successes and failures) perhaps the model to compete with the Duo-opoly will emerge.
I do expect the city may get the network back from Broadweave. If this happens after Broadweave has invested and paid more of the bond than the city paid Broadweave (was it $3 million+) then the city will be ahead.
If Broadweave fails before they spend more than Provo paid them to close the deal, etc. Then the city loses. Current economic conditions will have cities reducing services and laying off employees, not have to support a money losing network will be welcomed by those running cities.
I will say that I have been running subscriber/budget number for Broadweave owning the iProvo network and am starting to think it is possible that they become successful.
With a monthly bond payment of $375k it only takes 6250 subs at $60 a sub to make that payment. (Of course you still have operating cost, etc.) (7500 subs if you lower the avg. revenue to only $50). That’s about a 20% penetration…which is reasonable.
Lower that subscriber number by 1000 when you add the city’s payment for future use.
In the past I was sure Broadweave would fail, I’m not sure about that now. (My opinion can and does change when the numbers suggest the change is reasonable. Currently my analysis shows UTOPIA to be dead and just waiting to be buried. When UTOPIA shows some numbers to suggest I’m wrong, I will change that opinion.)
What has softened your view of Broadweave’s demise? Was it their amazing grasp of marketing or their demonstrated technical prowess? I’ve seen no sign of either. Maybe it was their business accumen which guided their unbelievable handling of the Utopia video services agreement.
At the end of the day, there is nothing to be happy about. These “changed numbers” are nothing more than Steve Christensen’s pipe dream.
lol…I’m not disagreeing with what you are saying…but what softened my views was running the number. I was shocked to see how much better the business model was when you are both the network owner AND service provider.
It gets even better when you are already in the business, meaning Broadweave can spread or allocate management costs and some base operational costs across their existing business.
Broadweave added very few NEW employees when they took over iProvo. The cut out the 7X24 NOC and seem to be running “on the cheap”.
I’m not saying that’s the best for customers, but it’s good for the business model if they can do it and not lose customers.
I’m still not convinced that Broadweave can make it work….but I was surprised to see how few customers they would need to do so (compared to Provo City). Pushing business connects (as they are doing) and triple play (which they are not, as their attention to video is poor, (they have gone from 600+ choices on VOD to 16)), could allow them to be successful. (I expect Kim to solve his VOD problems one day.)
So while I think they have an uphill battle, but at least they have a chance. Which is more than I give UTOPIA when I run their numbers. I believe the odds of being successful (operating at breakeven or above) is much, much better for Broadweave than UTOPIA.
Remember, I lack access to actual numbers for either network and have to make some assumption.
…and I heard UTOPIA did equally poorly at getting a video services agreement renewal. You don’t go into a meeting and start by telling Broadweave “We don’t like you or trust you!”. While I think both companies lose by not renewing, UTOPIA loses more.
I really feel bad for UTOPIA, (why) well they have almost the same people working and running UTOPIA that worked for IProvo. Do i need to say more?
No one that was running iProvo is working for UTOPIA that I am aware of.
They have hired a few former iProvo employees perhaps 3-4 of their 30 employees? But none of them held any management position or had any say in how iProvo was run.
But I would also suggest that iProvo was run much better than UTOPIA ever was. They spend less than half the money UTOPIA spent and built fiber past more homes and signed up more subscribers than UTOPIA.
UTOPIA spent over $100 million dollars and has very little to show for it. iProvo has a completed, operating network, including a headend, network operations center and studio.
Someone mentioned on the Forum that some cities were responsible for $55 million in debt and do not have a single lit fiber in their city.
What do you base the opinion that UTOPIA is/was better managed than iProvo upon?
Just Me? Yea you need to say more. The folks from iProvo who now work for UTOPIA are making a solid contribution to the effort of getting UTOPIA to be more cost effective and in getting this listing ship back on an even keel. You clearly know nothing about what you’re talking about. I have heard specific examples that will result in hundreds of thousands of dollars in cost savings that they have put in place. The whole management team there is improved and the iProvo guys are key to this. You should feel sorry for yourself. You are uninformed!
I think Ben makes a good point. The people who caused the iProvo problems are folks like Kevin Garlick and Mayor Billings.