Last week I mentioned the concerns over the $1 sale price of the iProvo fiber network to Google. Well, the Provo Google Fiber project continues to get even stranger than that. From the Daily Herald article on the Provo city council vote:

Curtis also introduced new information and obligations that had not been discussed during the initial excitement of last week. There will be a need to spend some money. For one, the map on where the fiber conduits are actually laid is not available and it may take some guessing at a few locations as to what side of the street the fiber backbone is under. There is also an agreement the city will have control of the fiber to the schools and the city operations. Money has already been set aside from the telecom fund to take care of those needs. An insurance policy will also be needed to protect the city from the unknown. The total cost for city outlay will be approximately $1.7 million.

Emphasis at the end is mine.

A more detailed breakdown was reported by The Salt Lake Tribune:

• $722,000 “for equipment in order to continue using the gigabit service for government operations already using the network, such as the operation of traffic lights and police and fire services.”
• $500,000 “to a civil engineering firm to determine exactly where the fiber optic cables are buried, a requirement by Google”
• $500,000 “for an insurance policy to help mitigate any possible legal damages should Provo’s network not be presented to Google as promised”

Of course Google is paying Provo $1 for the network, so the real cost to Provo for selling their existing fiber network to Google is only $1,721,999. Still a fair bit money to pay someone to take an asset off your hands.

Then there is the issue of not even knowing where all of the fiber in the ground actually is. Didn’t they have to file permits with the city when they installed it in the first place? If they moved it later on, wouldn’t that require getting permits from the city as well? For something that they paid $39M for I would have thought they would keep a close eye on it.

The Salt Lake Tribune also reported numbers on how much is still due on the original $39M in bonds:

With interest, taxpayers still have to pay $3.3 million in bond payments per year for the next 12 years.

For a total of $39.6M that Provo will have paid out over the next 12 years.

This story may still have a happy ending. If Google Fiber in Provo blossoms into everything it could be, then all of this may have been worth it.

The money thing doesn’t really freak me out though. What really freaks me out is that the city of Provo has connected “operation of traffic lights and police and fire services” to the same fiber network that connects to the Internet. That strikes me as a really, really, really bad idea.

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.