Broadweave Networks, a provider of fiber-based triple-play services in greenfield developments, has acquired the municipal fiber network of Provo, Utah, vowing to improve the operation by replacing its open-access wholesale model with one in which Broadweave both owns the network and offers services over it.

Broadweave has until now focused on delivering triple-play services to master planned communities in greenfield applications. The company serves a little over 1,000 customers today in two Southern Utah communities expected to expand over time and has obtained regulatory permission to provide service in other Western states as well.

Provo’s muni fiber-to-the-premises (FTTP) network, one of the largest of its kind in the country, today passes 36,000 homes and serves about 10,500 customers with some combination of voice, video and data service. It was based on a wholesale model wherein the city owns and operates the network and leases use of it to private service providers MStar and Nuvont Communications. The city called in consultants to help it revise that model late last year as customer churn increased to uncomfortable levels.

Broadweave is acquiring iProvo for $40.6 million, barely more than the amount of debt it is assuming from the city. (Accoring to the Deseret News, the city spent $7.5 million since 2003 constructing the network.) The company plans to announce next week how it will deal with the existing service providers using the network.

Central to Broadweave’s plan to add value to its purchase is to act as both infrastructure owner and service provider, thereby eliminating what Broadweave CEO Steve Christensen called “big inefficiencies in the wholesale model.”

Provisioning, managing and troubleshooting services in a timely way is much more difficult when the network and its services are not closely integrated, Christensen said, something that the iProvo network can’t do—at least presently—with multiple providers on the network.

“It’s incredibly onerous to activate a customer on the network because [service providers] don’t have hooks into the network,” he said. As Broadweave was conducting its due diligence on the assets, one of the service providers on iProvo’s network told Christensen that each new subscriber addition required customer data to be entered into 27 different data systems. “You just can’t do that and run a cost-effective company,” he said.

The same problem applied to trouble-shooting, he said. “When a customer calls in for tech support, immediately the question is: Is the problem with the network or with the services running over it? And the answer is always ‘yes.’”

Broadweave also found what earlier reports had suggested: That although Provo’s high student population contributed to its high customer churn level, the biggest contributor was dissatisfaction with the services, something Christensen also attributed at least in part to the wholesale model. “If you’ve fronted the capital for the most expensive part of the business, the network itself, it reduces the barrier to entry,” he said. “What you’re left with are marketing companies, basically.”

MStar, one of those companies, didn’t respond to repeated requests for comment from Telephony.

For now, Christensen is being tight-lipped on some of the changes it plans to make to iProvo’s network once the acquisition closes on June 30. Broadweave’s other network is based on active Ethernet, like iProvo, but the two don’t share the same equipment supplier. Christensen won’t say whether he will consolidate suppliers, but he did say that the iProvo acquisition would increase Broadweave’s buying power with equipment vendors.

Unlike the two service providers using the network, MStar and Nuvont, Broadweave already owns its own Class 5 switch and also works with voice-over-IP wholesalers for its overall voice offering. It also owns a video headend in Southern Utah, in addition to the one it is acquiring from the city of Provo. The company claims to have integrated both its telephony switch and its video headend with the active Ethernet network using MPLS, demonstrating an expertise it plans to apply to iProvo. Among the network changes Broadweave plans to announce next week are an MPEG-4 upgrade to the city’s existing video head end.

Once it takes over the network, Broadweave said it will push harder to win over the city’s more than 10,000 business customers, less than 400 of which have signed up for iProvo service so far. Christensen said the improvements he’s planning to iProvo’s historically weak voice service in particular should help win over those business clients.

As part of the deal, Broadweave agreed to keep its prices equal to or lower than those of competitors for similar services. And it will upgrade the system to allow the local electric utility to remotely read its meters for a fee.

Provo isn’t the only community to struggle with the wholesale fiber model, which some cities favor as a way to secure high-speed broadband for its citizens without getting into the business of offering retail services. Utah’s other well-known wholesale muni fiber network, the 11-city Utopia project, has struggled lately with disappointing subscriber growth. Christensen said Broadweave hasn’t discussed making an offer for that network, but added, “We will be actively pursuing other acquisitions. There are 41 municipal fiber-to-the-premises networks out there. We have a thoughtful, methodical plan for acquiring other municipal FTTP networks and other greenfield FTTP networks.”