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NewsGlobe: Commentary
Commentary
FTTH: Leave it to the experts
iProvo throws in the towel
by Sean Buckley
If the city of Provo, Utah’s recent decision to sell its iProvo wholesale FTTH network to Broadweave Communications proves anything, it’s that sometimes building a telecom network is perhaps best left to the experts.
Not surprisingly, the deal has come with mixed reactions.
According to a story in Deseret News, Provo, Utah city council member Steve Turley rejoiced saying that “the grey clouds have parted and the angels are singing.”
But not everyone is happy about the deal.
Pete Ashdown, CEO of Xmission, a Utah-based competitive Internet and voice provider that offers services over the neighboring UTOPIA FTTH network, argued that the RFP the city issued last year did not address selling the network.
Feeling slighted when iProvo turned his company’s proposal down because it doesn’t provide triple-play services, Ashdown goes on to say the sale to Broadweave will create another network monopoly.
whether this deal creates a monopoly remains to be seen. Broadweave does have a track record building out FTTH networks. Under the terms of the US$40.6 million agreement, Broadweave will continue to operate the network for Provo then act as both a carrier and a service provider.
Although the network already has been built out, a number of questions linger.
The most obvious question for Broadweave will be how it will improve existing service and whether or not it will invite other operators into the fold.
What went wrong?
iProvo’s rise and ultimate downfall is not uncommon in the community- or municipal-led broadband arena.
With the obvious lack of involvement from local incumbent telephone and cable operators that often ignore smaller communities, there’s been no shortage of community municipal FTTH and broadband wireless network efforts in recent years.
Municipal wireless networks, while proving to be a solid network for public safety applications, did not work as a free network service concept. Stan Schatt, vice president and research director at ABI, believes the municipal wireless model is shifting toward one where the community becomes the service provider’s anchor tenant. (See: http://www.telecommagazine.com/search/article.asp?HH_ID=AR_4102&SearchWord=)
Of course, every municipally run network is greeted with opposition from the ILEC community. The ILECs argue government entities should not provide telecom services because they use taxpayer dollars to subsidize network buildouts.
After iProvo made its much ballyhooed debut in 2004, a number of problems quickly arose.
As iProvo went to launch, one of its service provider partners, HomeNet, went bankrupt. What’s more, other reports have emerged that Mstar and Nuvont have struggled to make their own payments to the city of Provo.
One issue critics point out about why iProvo was unable to scale was that the provider required any service provider it worked with to have a triple-play set of services. Obviously, this limited the pool of potential partners.
Late last year, iProvo issued an RFP for other service providers to enter its fold. Only five providers responded, and only three (i.e., Emery Telecom, FiberNet and Xmission) submitted an actual RFP.
Not only were there issues signing up network partners, but also the cost of customer installation—something not uncommon in rolling out FTTH—was about US$800 per customer.
While getting to the 10,000 nirvana was met, it still was not enough to make a real profitable business.
Community realities
Even though iProvo did not take off, some promising community broadband efforts are on the horizon.
Take the East Central Vermont Community Fiber Network. While it’s still early in the development cycle, what’s convincing me it can be successful is its leader Tim Nulty.
After helping to turn around the Burlington Telecom FTTH network, Nulty was tapped to run the emerging East Central Vermont Community Fiber Network.
Along with spending a number of years in telecom on the policy side and later as a venture capitalist, Nulty seems to understand how to build a sustainable business.
Nulty’s practical mentality as a VC, however, did not sit well with his investors. Founded right around the .bomb era, the investors wanted to inflate the price of the company’s portfolio, which actually was worth only $100 million to $2 billion.
Having the foresight to understand this idea was a lot of hot air, Nulty and his CFO took as much cash as they could and left. Ultimately, Nulty and his CFO had the last laugh when Venture Capital firm folded 18 months later.
In an interview last year with Business People Vermont, Nulty said “I don’t blow up balloons, I build real things.” Perhaps that’s a dose of reality the municipal FTTH and broadband market needs.
The moral of the story: If you’re going to build out any community network, make sure you not only develop good technology, but also do it with a solid business case that can scale.
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