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Switchpoint hikes rates to cover funding dearth

SPRINGVILLE — Switchpoint Network customers who don't want to pay the new doubled rates have two options, the company's vice president says.

"They can help pay for the service or go back to a dial-up service," said Rondo Fehlberg.

Company investors have made it clear they can no longer subsidize the high-speed Internet access in a marketplace where funding has virtually dried up.

"Here's what happened," Fehlberg said in a telephone interview with the Deseret News after subscribers in American Fork and Springville received sticker shock notices of a 100 percent price increase. "Basically, we built out a network in American Fork and Springville with the intention of building out all of Utah County. Had the markets stayed what they were, we'd be doing that. When the entire capital market imploded, the stock market went into the tank and over half of the technology companies closed their doors. All of a sudden there was no money out there."

Fehlberg said the existing investors told management to focus on what the company does best, which is develop new technologies, not build networks. The company's work force was halved, the call center shrunk in size and a decision has to be made about whether to continue to maintain the networks.

"We went out and asked people what they preferred, to pay higher prices or have us shut down the networks. Overwhelmingly, 90 percent said, "Don't take my Switchpoint!' "

As a result, the price for basic service jumps from $19.95 a month to $39.95, and prices for installation and various options rise comparably.

"Are we in trouble?" said Fehlberg. "No, we're not going to close our doors next month. But yes, we do not have the funding available to us that was really running down the streets 14 months ago."

Fehlberg said he's not surprised that customers are indignant at the price hike, but he actually expected more backlash.

"I thought we'd lose 25 percent of our customers. I've had many threaten to quit symbolically that have come back and apologized." Fehlberg said generally the returning customers have looked at the prices for similar speed connections like digital signalized lines and dedicated trunk lines and recognize that while they're paying more, Switchpoint access is still offered at a fair price.

Switchpoint Networks Inc. offers Internet access on a broad bandwidth that makes dealing with traditional slower-speed services almost unbearable, Fehlberg said.

"I know. I work here where I have the high-speed access and go home to Orem where I have dial-up service and I get shut down for two hours because a colleague will send me a monster file," he said. "It's terrible."

Fehlberg said Switchpoint is looking at partnerships and options that may enable the company to eventually finish connecting all of Utah County, but it will take some guaranteed funding to do so.

"It's very possible that the rest of Utah County could get built out with more Switchpoint networks, but we won't build them," he said.

"People hate change. They hate surprises, we know that," he said. "We were stunned by the collapse of the market. Hundreds of companies have gone bankrupt. We're just trying to hang on by our fingernails."


E-mail: haddoc@desnews.com