PROVO — The iProvo project that provides phone, cable TV and Internet services to residences over a city-owned network now has 7,700 subscribers, up from 5,000 in February and more than twice as many as a year ago.
City Council members welcomed news of the development during a meeting Tuesday but peppered city telecommunications interim director Kevin Garlick with questions about the health of the controversial $40 million project.
Their concern is magnified by $3 million in loans the council has approved from the city's energy department to the telecommunications department to make up for iProvo shortfalls.
The council first approved a $980,000 intracity loan to the iProvo project in March. In June it added another $2.1 million in a line of credit as part of the 2006-07 budget.
The project must average 60 new subscribers per week to operate this fiscal year without additional loans. Garlick said iProvo met that target during the first quarter, which ended Sept. 30.
The city's original projections called for 10,000 iProvo subscribers by the end of 2005, but city officials blame poor early growth on HomeNet, the company that signed the first contract with Provo to provide services to residents using the city-owned fiberoptic network. HomeNet left Provo last year and filed for bankruptcy in Washington.
Early this year, city administrators projected the 10,000 mark would be reached by August 2007, and Garlick said in an interview Tuesday that he expects to reach the goal by June 30.
However, Garlick told the City Council that iProvo will need 12,500 or more subscribers to reach the break-even point. The initial break-even target of 10,000 anticipated more residents would purchase all three services — phone, video and Internet, known as a Triple Play package — because those packages offer the biggest savings.
Instead, many residents are buying one or two of the services. Garlick said it's possible iProvo will need 12,000 to 15,000 subscribers to break even, depending on the mix of services purchased by residents.
Provo replaced HomeNet with two new service providers — MStar and Veracity — in June 2005. Veracity recently divided its business and residential accounts and now operates its residential division under the name Nuvont.
In March, when the council approved an interest-free $980,000 loan from the energy department to the iProvo telecommunications department, an attorney representing Qwest questioned the legality of the intracity loan.
At its next meeting, a nervous council attempted to placate Qwest by adding interest — 5.38 percent — to the loan.
Seven months later, Qwest has not challenged the legality of the loan, but the company maintains the use of public money to compete against private companies is unfair.
Qwest spokesman Gary Younger criticized the $2.1 million line of credit on Tuesday.
"The fact that the city is loaning taxpayer dollars yet again to this network is evidence of its questionable economic plan," Younger said. "Qwest welcomes competition, but competition should come on a level playing field. It is not the proper role of government to compete against private industry, using taxpayer dollars."
Mayor Lewis Billings repeatedly has said Qwest and other companies waited too long to provide the services he believed the city needed, so Provo sold $39.5 million in bonds to finance iProvo.
Provo's energy department has a multimillion-dollar surplus. The intracity loans to iProvo make the payments on the bonds.
E-mail: twalch@desnews.com