Last week I mentioned that Google Fiber was coming to Provo. This process would be accelerated because they were purchasing the existing fiber network, iProvo, instead of having to built out a completely new one.
Turns out the sale price of iProvo fiber network to Google is $1. It should come as no surprise that some people are less than thrilled about this price.
The original cost to build out the iProvo fiber network is reported at $39 million. To fund this the city of Provo issued bonds. Those bonds have not yet been paid in full. The $1 in revenue from the sale isn’t going to pay off the bonds. In an effort to help pay off the bonds in 2011 a surcharge was added to the utility bills of every household in Provo.
While most people seem happy to have Google coming in to upgrade and run the fiber network in Provo, others are concerned that the sale of the network does nothing to address the remaining millions of dollars in bond obligations.
Both sides are benefiting from this, but the $1 sale does feel a bit odd. I’d assume the existing fiber network has some value, less than the original $39 million and more than $1. Perhaps something on the order of $5 to $10 million would have been reasonable. Google would still have been given a great deal on existing infrastructure, and the city of Provo would have some money to pay down the bonds faster.
In the negotiations for this I’m sure Google held all the cards. The city of Provo was likely happy to bend over backwards and into a pretzel to make sure Google didn’t walk away from the deal.