Click Cable TV customers would see their monthly bills climb by about 9 percent next year under a proposal headed for the City Council today.
If approved, the rate hikes would range from an extra $1.25 per month for the lowest-level Click subscriber, to as much $10 more for patrons with premium cable packages. Late payment charges would also increase – from $3 to $5.99 – but equipment costs would not be affected.
The new rates would kick in Jan. 1.
Diane Lachel, Click’s government and community relations manager, told the council last week that increased carriage fees charged by local broadcast stations and national programmers are driving up operational costs for the city-owned cable network.
“In some instances, programming rates have doubled year-over-year,” Lachel said.
Even with the higher rates as proposed, Lachel said Click’s in-city monthly costs would remain 2.5 percent to 7 percent lower than those of Comcast – Click’s in-city competitor – and as much as 28 percent lower than cable providers outside of Click’s service area.
“With this rate increase, the competitive advantage inside Click’s service area will remain,” she said.
The planned rate hikes are part of a $1.1 billion proposed budget for Tacoma Public Utilities for the next two years. Click is a subsidiary of Tacoma Power.
The increases also come at a time when the council is considering a variety of rate hikes for 2013-14 between Tacoma Public Utilities and the city’s general government utilities. Tacoma Power and Water, as well as the city’s surface water and wastewater utility rates, all would see rates climb under various proposals. Rates for garbage services – proposed to drop to an every-other-week collection schedule on March 1 – are not expected to increase.
Tacoma City Councilman Ryan Mello said Monday that passing the network’s rising programming costs on to Click customers is unfortunate, but it’s the only way to ensure fairness in balancing Click’s budget.
“If we don’t raise the rates, because of the costs that are coming to Click, Tacoma Power ratepayers would end up eating any shortfall,” Mello said.
About 23,000 customers in and near Tacoma subscribed to Click’s discounted cable TV service as of last December. Comcast and DirecTV largely serve remaining customers within Click’s service area of about 110,000 households, TPU officials have said. Click also sells broadband access at wholesale to three local Internet providers that collectively serve about 18,000 customers. Click gets a 60 percent cut of those revenues.
TPU officials said the number of cable TV customers is declining both locally and nationally. That’s because “over-the-top” services, such as Hulu and Netflix, are winning a bigger share of the market.
To stay competitive, officials said Click must add more high-definition service, video-on-demand services and sports programming, such as the Pac-12 Network, which was added in August. But steep costs come with adding new cable channels and services, they said.
“Programming costs continue to be our single largest expense,” Lachel said.
In a recent memorandum to council members, TPU Director Bill Gaines wrote that the proposed rate increases were initially anticipated to kick in this year, but Click delayed them “to allow sufficient passage of time between rate increases.” The last increase took effect in April.
Rising programming costs likely will warrant more rate hikes over the next two years, Gaines added in his memo.
“The practical approach has been to recover rising costs through staging the rate increases over time,” he said. “As such, Click has budgeted subsequent rate increases to take effect July 2013 and July 2014, pending board approval.”
In January of this year, TPU officials unveiled a new business model for Click that proposed the network move beyond just cable and begin selling bundled Internet, data and phone services. Selling a bundle is necessary for Click to stay viable, compete with Comcast and cover its own capital expenses, officials said.
Proposed cable TV rate hikes also were part of the new model to close a $3.6 million budget shortfall facing Click.
The TPU board passed the rate hike proposal on to the council. But the board opted earlier this year to put the bundle idea on hold, after representatives from the private ISPs hosted by Click complained that their wholesale partner would suddenly become a competitor and put them out of business.
Lewis Kamb: 253-597-8542
Click Cable TV customers face about a 9 percent rate hike under a proposal before the Tacoma City Council. Here’s how rates would be affected:
Service: Current City of Tacoma rate / Proposed Tacoma rate / Current outside rate / Proposed rate
Broadcast: $13.65 / $14.90 / $14.75 / $16.20
Basic: $18.35 / $19.60 / $19.75 / $21.25
Standard: $40.50 / $44.25 / $43.75 / $47.75
*Effective in January
Source: Tacoma Public Utilities