Google to pay $1 to buy fibre-optic system that cost $39 mn to build

Salt Lake City: Google will pay $1 for a municipal fibre-optic system that cost $39 million to build, according to terms of the Internet company's agreement with Provo.

The deal is widely expected to be approved Tuesday by the City Council, making Provo the third city selected by Google for high-speed Internet and television service.

Google is already operating a fibre-optic system in Kansas City, Missouri, and earlier this month it selected Austin, Texas, as a second candidate.

In Provo, a city of 115,000 about 45 miles south of Salt Lake City, Google is making its first plans to take over an existing fibre system and will start operating it long before it can build the service for Austin.

Even as Google takes ownership of the municipal network, Provo will have to pay off loans for its construction for another dozen years, according to agreements released Thursday by city officials.

For nearly as many years, households have been paying $5.35 a month on their utility bills for a system that provides Internet, television and phone service - whether they use it or not.

But Provo officials say Google's deal is a good one for the city and its residents because the system hasn't been able to support itself. Google Fiber will offer residents something in return for the utility fee - basic Internet service at no charge if they pay a $30 hookup fee.

That's far less than the current $700 activation fee.

Google, which reported Thursday that it earned $3.3 billion during the first three months of the year, pledged to spend "considerable funds and resources" to upgrade Provo's system. The agreement doesn't specify a level of spending, but Deputy Mayor Corey Norman estimated it will cost Google around $30 million to upgrade computer server and switching gear for faster Internet speeds and to dig trenches for final fiber connections.

"This will be huge," Norman said. "Our fibre is still good, but they have to replace the infrastructure around the fibre. That stuff has been around for years."

The agreement gives Google five years to build out Provo's system. The Mountain View, California, company has 180 days to take over the network after the City Council acts.

In another clause city officials haven't publicized, Google is holding out the possibility that it will build an extensive public WiFi network, which would enable people on the go with mobile devices to tap into the Internet.

The WiFi option is at Google's sole discretion, and no guarantees were made.

The agreements also contain a bail-out clause - Google can sell the network back to the city for $1 if things don't work out. The company, however, says it expects to make the network successful.

"Clearly, we think there's a good business opportunity here," Google Fiber spokeswoman Jenna Wandres said Thursday.

The Provo deal contains no published rates for Internet or TV service. In Kansas City, Google charges $70 a month for a gigabit connection, which is 1,000 megabits per second. Google's free Internet service will run at 5 megabits a second.

For another $50, Kansas City customers can sign up for Google Fiber TV, which features 200 channels, many in high-definition and featuring mainstays such as ESPN, Nickelodeon, FOX News and MTV, as well as recent newcomers HBO and Cinemax.

Google says it doesn't provide phone service and may leave that to Provo's current fiber-optic operator, Veracity Networks. Veracity bought the fiber system from Provo but couldn't pay off construction bonds and sold it back to the city.

Veracity CEO Drew Peterson didn't return a phone message Thursday from The Associated Press.