The City of Provo, Utah, will have to transfer $1 million from its utility reserve to cover shortfalls in the iProvo municipal fiber service, Salt Lake City's Deseret Morning News reports. Although the project is ahead of schedule in terms of construction, it has only half the 10,000 subscribers its business plan had called for at this point.
The original breakeven point had been December 2005. It has now been reset for August 2007. City officials expect ongoing shortfalls into 2008 that may require additional transfers of up to $2 million.
We've heard this all before. Like Provo, most municipal broadband systems fail to achieve anywhere near their projected numbers and must turn to transfers, cross-subsidies or new loans. Most municipalities get so far behind, they can never dig out.
"The people paying their energy bills faithfully are now the ones paying for the iProvo shortfall," said Councilman Steve Turley, who was assured by [Provo Energy Department Director Kevin] Garlick that the reserves would be replenished when iProvo breaks even.
We've heard that one before, too.
iProvo is a city-owned fiber optic backbone and cable TV headend. The city sells bulk bandwidth to itself and to large users. Retail partners market voice, Internet and cable service to residences and small businesses.
That's the theory, at least. The iProvo shortfall is primarily due to the disastrous performance of HomeNet, the only retail service partner to sign on with iProvo. After barely a year and no gain in customers, HomeNet in July 2005 abruptly closed up shop, leaving iProvo scrambling to find replacements. Veracity and MStar, two local ISPs stepped in. While iProvo's numbers have been increasing steadily since then, they largely represent a migration of existing Veracity and MStar accounts onto the municipal backbone.
Until now, municipal proponents, including the American Public Power Association, have pointed to iProvo, which launched in mid-2004, as a successful model of municipal ownership. Provo mayor Lewis Billings has been a popular spokesman for the cause in policy circles and has endorsed municipal broadband programs in other cities, including Lafayette, where voters last year approved a $125 million municipal fiber-to-the-home system.