Broadweave Network executives fielded tough questions from the iProvo Review Committee Tuesday morning, but declined to specify the role current providers will have on the fiber-optic network once the company takes over or how current subscribers' prices may change.
"I feel like I'm in an impeachment hearing or something," said CEO Steve Christensen, smiling. "There are some offers on the network that aren't wise financially, but we've already committed to give Provo the best service in the industry at competitive prices. "I think people will be pleasantly surprised when we make our announcement later this week."
Christensen said Broadweave plans to make significant investments into the network to make it profitable, and did his best to assuage concerns it's spreading itself too thin. Broadweave currently has just over 1,000 customers - about one-tenth the number of current iProvo subscribers - and is rumored to be negotiating the purchase of another fiber-optic network in Houston.
"There are rumors, but the only thing we're concerned about until it's up and running well is the iProvo network," Christensen said. "Claims that we're spread 1 million miles wide and 2 inches deep are unfounded. Being a service provider on someone else's network is not the same as running, owning and operating your own network. We know the technology really well, and the transition should be seamless."
The specifics of the deal, which until recently have been subject to a non-disclosure agreement, require Provo to come up with $2.9 million dollars to close out its bleeding Telecom fund. That includes the $875,000 service provider Mstar still owes the city, other outstanding loans to cover customer installation expenses and a half-million-dollar payment to Broadweave to cover customer transition expenses.
Broadweave assumes the $36 million in bonds Provo used to construct the network, pays a deposit of $268,000, and agrees to dedicate 3 megabytes of bandwidth for city services for an annual $300,000 payment.
The total $40.6 million sale price, which Broadweave will pay over 19 years, covers all but $2.5 million of the city's obligations, but Mayor Lewis Billings and the city's finance department point out the benefits of Provo's network connection outweigh the annual connection fee and compensate for the difference.
"As it stands now this is an owner-financed transaction," Billings said. "But the benefits far exceed $2.6 million."
According to John Borget, the city's finance director, two independent consulting groups estimated the actual cost of Provo's network usage at $2.5 million and $1.5 million.
"We'll see a real benefit of anywhere between $1.2 million to $2 million per year. The deal really does offer good benefits over the long term," Borget said.
Some committee members, like Utah Rep. Steve Clark and Utah Senate Majority Leader Curt Bramble, expressed concerns that Broadweave isn't assuming enough risk in the deal, despite a $6 million letter of credit guaranteed by Broadweave investor Sorenson Capital should the company default on its payments.
"They're walking in without a dime and taking over a $40-million network," Clark said. "Six million just isn't enough. They have no skin in the game."
Christensen responded by reiterating how much his company has already planned to invest in the network and pointed out how much trouble iProvo is already in. According to the Telecom Fund's five-year projections, iProvo would cost the city more than $3 million a year.
"I'm less concerned with how much cash we're getting than I am in whether or not the network is successful," Provo city councilman George Stewart said. "Is it a fair deal to the city when you no longer have to pay out $3 million a year for the next five years? I think so."
The city council will invite input at a public hearing May 27 at 7 p.m. in the council chambers. People can also e-mail comments to council members before the meeting. Contact information is available at provo.org.
