The Daily Herald quotes Broadweave’s acting CEO David Moon as saying that Broadweave doesn’t have the capital to agressively sign up new customers right now. The money required to hook up hundreds of new customers each month just isn’t there and they plan to continue making bond payments from the reserve fund for the next eight to ten months. This move will end up spending over half of the reserve fund on the bond payments and, unless replenished, puts Provo in danger of picking up the pieces should Broadweave default on any payments when it runs out.
I’m having a tough time figuring out how Broadweave can’t make rent. The price increases of around $5 per month per service would have been enough to break even under city ownership, but Broadweave is also taking in all of the retail revenues. Where is all of the money going? And just how short is Broadweave on making those bond payments with its own money? I’m guessing very far out based on how long they intend to keep on using the reserve fund. Broadweave was given what should have been a slam-dunk sweetheart deal and they’ve somehow managed to bungle it all up. Good luck filling the CEO slot, guys.
This sounds like they are just going to bleed money until they eventually fold. Isn’t the idea to grow a business? Why wouldn’t you want to sign up customers and increase revenue? Something is missing here.
It’s the same problem UTOPIA was/is in. The upfront expense of getting a new customer creates a temporary cash flow problem until the monthly revenues have paid down that cost. If you don’t have enough cash in reserve, you can’t afford to do too many installs at a time. That’s probably why Broadweave is reportedly trying to get subscribers to take on a hefty up-front install fee.
The biggest problem I see is that they don’t have cash in reserve to hook up those customers despite using a line-of-credit to make bond payments. That kind of cash flow situation should terrify everyone involved.
Well, it’s that time of year again when thousands of residents (students) leave Provo as the semester ends. Broadweave took credit for all the signups that happened in the fall due to the typical influx of students. It will be interesting to see how they handle a loss if about 1500 customers plus several thousand they count as MDU customers. It’s not really their fault that this happens, but they shouldn’t have touted themselves so highly last fall for adding customers.
When Provo owned the network they generated free cash flow to pay operating costs plus about 1/3 of the bond payment.
I believe Broadweave is operating more cost effectively than Provo was, however one MAJOR difference is that Provo was paying for new installs from the bond proceeds so the cost of installations was NOT included in the money listed above. If you added those costs to the numbers, Provo would not have been able to make operating expenses AND pay 1/3 of the bond payment.
This may in part answer the question Jesse asked as to why thing are different for Broadweave?
Very few (really none that I know of) MDU’s have contracts that allow them to stop paying or lower their rate during the summer. The student loss each summer has been getting smaller and smaller as more and more BYU students take summer classes. While I have no doubt it will have some effect on Broadweave (and all other providers and businesses in Provo, I don’t think the change will be near as significant as Manstin suggests?
Within 30 days, Broadweave will be adding service to a 100 unit bulk account I’ve been consulting with. So Broadweave has not stopped adding new customers.
I think the real difference in cost/profit between the network when iProvo operated it and now that Broadweave is operating it is the payments for the cost of the install.
iProvo was able to pay all operating costs and about 1/3 of the bond payment….but that did not include paying for installs. iProvo was still paying for installs out of the bond proceeds and not from the operating revenues.
Broadweave (I believe) is running the network more cost effectively but they are required to cover install costs from revenue (or cash on hand) and do not have the bond proceeds to cover that very large cost?
As far as the summer sub loss…I believe Manstin have significantly over estimated it. MDU contracts very rarely have a clause that will lower the rate in the summer so the MDU loss is not likely to be “several thousand”. Over the years BYU has had more and more students attend the summer session and while Broadweave (and all service providers and local businesses) will see some loss, I don’t think it will be major?
Whoppee, they are adding a 100 unit MDU! What’s the ARPU? You and I both know that this is not the point. Mr. Moon has stated that they cannot afford to add new customers and he is referring to new single unit residential and even new commercial single unit installs.
So it looks like you do work for Broadweave after all. (“consulting”)
If your point on the cash flow is that this is a business plan that will never work for either Provo or Broadweave then you’re right. Neither entity had a clue as to how to be successful in business. If you want to be sucessful, you better find a way to add new customers and you better do it fast, because the one thing you can count on is that you will be losing some customers all the time.
I believe Manstin’s point was about spin. If you claim returning students to exisiting contracts as new customers, don’t you also have to see them as lost customers when they leave?
I will give you credit for being consistent. No matter how catastrophic Broadweave’s performance is, you will be out there spinning a sow’s ear into a silk purse.
I am not consulting for Broadweave, but for the MDU. They are designing their own on site network.
Mainstin’s point may have been about spin but he suggested that Broadweave would lose 3500+ subscribers due to the student change and I think that is not accurate. I explained why. Are you saying I am wrong or should I just not suggest there might be a mistake in the numbers? I have likely written or signed almost 100 MDU contracts and have a fairly good idea about how they deal with students leaving in the summer?
On another post I noted that not doing installs is not good for anyone, Broadweave or UTOPIA. I don’t support not doing installs, but I do understand the economics better than most.
Adding 100 MDU units is not near as good as adding 100 single family homes, but it’s also an indication that they are still trying to move forward where they can.
I make no apology for supporting Broadweave because that is what is best for all Provo residents. I have spoken strongly both for and against Broadweave in the past, based upon their actions at the time.
Read back and you will see where I have raked Broadweave over the coals….and where I have praised and supported them. Can you say you or most on this blog have done the same?
“Read back and you will see where I have raked Broadweave over the coals….and where I have praised and supported them. Can you say you or most on this blog have done the same?”
Praise is given when earned. There is no requirement here to conjure up praise for failing to be successful. So far their foray into municipal fiber has helped no one and has cost Steve Christensen everything. Oh yeah the investors financed surety fund has made the bond payments. (As you were about to say) That is still bad since it is lost capital from investors who will never see a dime and has allowed the city to evade their true responsibility.