Choosing the small city of Provo, Utah as the next location to receive Google's high-speed fiber internet service must have been a no-brainer, as the online giant will reportedly pay just $1 to set up shop in the area.
Instead, the Chocolate Factory will take over operations of iProvo, an existing municipal fiber network that has provided internet, telephone, and television service to area residents since 2006.
iProvo was originally developed as a public/private partnership, with Provo retaining ownership of the physical fiber and other infrastructure while the internet, phone, and TV services were managed by private companies.
Provo has reportedly sunk $39m into the project so far, but the network has never been profitable. In 2008, the Reason Foundation, a libertarian think tank, estimated that the city's losses on the project had reached $8m and were still climbing.
Under the terms of the deal announced on Friday, Google will take the lossmaking network off Provo's hands for the measly sum of $1 – this, despite the fact that the city must still make bond payments of $3.3m per year for the next 12 years to pay off debts related the original build-out, the Salt Lake Tribune reports.
Google will also take over management of internet and television service from Provo's current network provider, Veracity Networks. The Google Fiber package doesn't include telephone service, however, and the Chocolate Factory has hinted that it may allow Veracity to keep offering that.
In the return for the sweetheart deal, Google will provide city facilities with free gigabit internet service for seven years. Google has also agreed to connect the network to the remaining two-thirds of homes that are not yet wired up to it, in addition to upgrading some of the network infrastructure.
"Our fiber is still good, but they have to replace the infrastructure around the fiber. That stuff has been around for years," Provo Deputy Mayor Corey Norman told the Associated Press.
The Utah Valley Chamber of Commerce estimates that Google will probably need to invest around $18m to complete these upgrades to the iProvo network – a fraction of the $94m it will have coughed up to build out its Kansas City network by the end of 2013.
There's even an "escape clause" built into the deal. If Google gets cold feet about its Provo service, it has the option of selling the network back to the city, again for just $1. Provo would then be free to find a new suitor, presumably with Google's network upgrades intact.
The search giant says it expects the network to be profitable, however, and it is even rumored to be planning to expand the current service by building out a citywide Wi-Fi network, although this has not been confirmed.
Pricing for the Provo service has not been announced, except that Google has agreed to provide residents with basic, 5Mbps internet service for a fee of $5.35 per month if they pay a one-time connection fee.
That's a pretty good deal for Provo residents, given that they already pay the $5.35 now. The city tacks the fee onto their utility bills each month to help underwrite the network, whether they use the service or not. Actually getting set up to use the iProvo service, on the other hand, has carried a $700 activation fee, will which be reduced to just $30 under Google's plan.
If pricing in Provo ends up being anything like that in Kansas City, subscribers will pay $70 per month for gigabit internet connectivity, and for another $50 per month they will be able to get Google's high-definition TV service, too.
But the deal isn't done yet. The Provo City Council still must conduct a final vote to approve the sale, which will take place at its upcoming regular meeting on Tuesday. Between now and then, Provo residents can weigh in at any of six public hearings scheduled to take place on the matter. ®