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Reason Foundation

Study: iProvo's Financial Woes to Worsen

Taxpayers will likely never recoup the millions poured into municipal broadband system

December 5, 2006

Los Angeles (December 5, 2006) — With revised subscriber figures showing iProvo is still nowhere near breaking even and likely to lose well over a million dollars for the fourth consecutive year, a think tank's analysis of iProvo, the municipal fiber optic network owned and operated by the city of Provo, Utah, finds the operation's current financial problems were inevitable and will get worse.

The Reason Foundation study concludes iProvo's net assets will continue to decline as its debt and interest load grows. While iProvo still has positive net assets, Reason shows it owes more than the system is worth. Overall, assets grew by $2.2 million in 2005, but liabilities grew by $3.9 million. The report finds this gap "shows every sign of increasing and will slowly eat away at iProvo's value and prevent the city from ever getting out from under the debt."

After originally forecasting it would take 10,000 subscribers to break even, iProvo recently revealed that it needs 12,000 to 15,000 subscribers to break even. There are currently 7,700 subscribers who get various combinations of phone, cable and Internet services.

"Provo entered a fast-moving broadband market that it, like most local governments, is ill-equipped to compete in," said Steven Titch, the study's author and a policy analyst at Reason Foundation. "At this point, taxpayers can only hope to limit their losses."

iProvo lost $1.36 million in fiscal 2003, $1.42 million in 2004, and $1.67 million in 2005.

"Provo, like some other local governments, operates its own electric utility which officials thought prepared them for expanding into telecom," stated Adrian Moore, Ph.D., vice president of research at Reason Foundation. "Broadband and Wi-Fi is a different beast. Competition is fierce and technology changes rapidly. Unfortunately, Provo isn't the only place we're seeing that the municipal broadband plans and forecasts didn't reflect reality."

Full Reports Online

Reason's analysis of iProvo can be found online at http://www.reason.org/ps353.pdf.

Reason Foundation's new study, A Dynamic Perspective on Government Broadband Initiatives, outlines seven key factors that municipal officials should fully address before moving forward with plans for municipal broadband and Wi-Fi to ensure that the projects are technologically and financially viable. That report is available online at http://www.reason.org/ps349.pdf.

Reason's municipal broadband research and commentary is here: http://www.reason.org/telecom/index.shtml.

About Reason

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason produces respected public policy research on a variety of issues and publishes the critically acclaimed monthly magazine, Reason. For more information, please visit www.reason.org.

Contacts

Steven Titch, Telecom Policy Analyst, Reason Foundation, (281) 571-4322
Adrian Moore, Vice President of Research, Reason Foundation, (661) 477-3107
Chris Mitchell, Director of Media Relations, Reason Foundation, (310) 367-6109



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