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City-owned network moves forward

Cities interested in building their own fiber networks are closely watching developments in Utah.

A municipally owned power company in Utah has just taken a major step forward in a plan to bring high-speed communications services to residents and businesses over the city's high-speed fiber network.

On Thursday, Provo, Utah, Mayor Lewis Billings signed a contract with Video Internet Broadcasting to provide residents with voice, video and data services over the fiber network, called iProvo. The power company is among the nation's first municipal networks to wholesale access to its fiber communications network.

iProvo and another fiber project in Utah called Utopia, which plans to link several cities together in a fiber network, have been two of the most closely watched fiber projects built by municipalities. Municipally owned networks have been growing in popularity, particularly in rural regions, where incumbent service providers are less likely to introduce cutting-edge services.

Attention has been drawn to these projects, in particular, because they are among the first to adopt a wholesale business model. This means that the city puts up the cost to build the network and actually owns the infrastructure. It then leases capacity to different service providers, which offer advanced communications services at competitive prices.

The ultimate success or failure of iProvo could affect the survival of Utopia, which is still securing funding from cities that have pledged to be a part of the network. The last few months have been rocky for Utopia. Originally, 18 cities planned to be a part of the project, but now, only 11 remain. Salt Lake City voted against funding the project back in March.

"There's been some controversy as to whether or not this kind of business model can work," said Jim Baller, a principal attorney for the Baller Herbst Law Group and a leading expert on municipally owned networks. Baller represents iProvo. "Municipally owned wholesale networks haven't been around very long, so that's why people are interested in what is going on in Utah," he added.

Work on the iProvo network first began in the late 1990s, when the city-owned power company, Provo City Power, decided to offer telecommunications services over its already installed metropolitan fiber network.

The city launched a small pilot program, and in January of 2004 received approval from the city council to raise a $40 million bond to extend fiber directly to 27,000 homes and 4,100 businesses in the city. Organizers of iProvo are expecting about 30 percent of the city's residents and businesses to sign up for a service.

"The pilot far exceeded our expectations," said Mary DeLaMare-Schaefer, director of marketing and customer relations for Provo City Power. "More than 50 percent of people who had access to the pilot network signed up for services. I wouldn't be surprised if we saw something similar in the full deployment."

iProvo supporters have reason to be optimistic. A similar network launched by Grant County Public Utility District in Washington state in March 2001 has signed on nearly 42 percent of its residents and businesses.

Grant County, which has 87,000 residents and roughly 35,000 electrical customers, built the first major municipally owned fiber network that leased infrastructure to private service providers. Today, the county has 17 Internet service providers, two video providers and one telephony provider using its network to deliver services.

Some experts argue that iProvo is even better positioned for success than Grant County's network, because Provo is much more densely populated than Grant County. While Grant County has roughly 13 homes per square mile, Provo has 110,000 residents in 43 square miles. This should make the cost of running fiber to each home much less expensive.

Provo City Power doesn't expect to make a profit from iProvo anytime soon, DeLaMare-Schaefer said. But the city hopes that access to high-speed communications services at competitive rates will attract more businesses and residents to the community, she added.

Video Internet Broadcasting will sell services in Provo under the brand name HomeNet Communications. HomeNet will offer telephony, television and video service, and high-speed Internet access at 100 megabits per second for between $89 and $109 per month, said Jonathan Moore, chief technology officer of HomeNet in Provo. This is far below prices of similar services from incumbent providers Qwest Communications International and Comcast. What's more, transmission speeds over the HomeNet service will be much more than what's available through DSL and cable modem services today.

Provo City Power expects to begin rolling out the HomeNet service on iProvo in September, and it plans to add new service providers by the end of the year.