Callaghan: Council hears a bad-news, bad-news story about Click Network

Tacoma News TribuneMarch 23, 2014 

If members of the Tacoma City Council were hoping for the silver lining in a presentation on the future of the city’s cable and Internet utility, they had to look pretty hard.

Innovations from big companies such as Comcast, AT&T, DirecTV and Verizon that Click can’t always match, new ways of accessing programming via services such as Hulu and Netflix, and new entrants such as Google Fiber and Zayo — oh, and public disclosure laws — have changed the marketplace, Click Network manager Tenzin Gyaltsen said Tuesday.

At the same time, programmers from ESPN to local TV stations want more and more revenue from cable operators and are willing to play tough to get what they want.

Yet each resulting rate increase sends more consumers toward those alternatives. SNL Kagan, an industry research company, estimated that traditional cable lost nearly 2 million subscribers last year (from a 55 million customer base).

“We have to do rate increases to recover the cost, but as we do more and more of these, the consumers are going to get tired. There’s a rate fatigue element to this,” Gyaltsen said. Despite that truth, Click would be coming to the council soon for a rate increase.

No wonder the National Cable Television Cooperative reports 793 small and rural cable systems went out of business over the last five years.

So much “gloom and doom” led Councilman Marty Campbell to ask utility officials what the system is doing right.

Gyaltsen said it gets good customer service ratings, and some customers like that Click is local and publicly owned. But even that hasn’t been much help.

“If people really liked localism, then we should have more customers than (Comcast), but we don’t,” he said.

So Click has few advantages, and the few it has aren’t much of an advantage. Could it be that the city’s audacious 17-year-old David vs. Goliath battle with the telecommunications giant might finally fail?

Click emerged from Tacoma’s second-city status, from its admirable pugnaciousness. When Comcast’s corporate predecessor, TCI, was reluctant to invest in upgrades — even though it was making them in Seattle and Olympia — Tacoma officials got their backs up. The City Council worried that if new fiber-optic systems were installed elsewhere and not here, Tacoma would be shoved to the shoulder of the “information superhighway.”

At the same time, Tacoma Power was considering a fiber network to link its power-distribution system. It even said it could create a smart grid that connected each customer for two-way communication. For a few million more — OK, $70 million more — Tacoma Public Utilities could build a system to serve the power system plus bring cable programming and high-speed Internet to the area.

The threat worked. TCI started promising quicker upgrades and better service. TCI even brought Bellarmine graduate and company president Leo Hindery to town. Hindery, however, did more harm than good. His offer of a better deal for Tacoma was combined with threats. One council member recalled that in a private meeting, Hindery said he would bury his hometown if it opted for its own network.

No wonder, then, that the council in 1997 voted to move ahead. Soon, combined with TCI’s improvements and investments by phone companies, Tacoma went from an Internet laggard to a leader. Its residents and businesses had better access at lower rates than nearly any in the nation, leading to the slogan “America’s No. 1 Wired City.”

In 2007, then-News Tribune business columnist Dan Voelpel called Hindery in New York to ask what he thought of Click on its 10th birthday. An unconverted Hindery predicted that future technological innovations by the large cable companies would outstrip Click’s financial capacity. He suggested a sale.

At the time, Click was doing very well, and Hindery’s comments sounded like sour grapes. Now, they sound pretty accurate.

There is little question Tacomans benefited from Click. It helped the area get high-speed Internet access before much-larger and wealthier areas. Even today, its presence forces Comcast to keep rates lower than elsewhere. It also means customers can get Comcast’s added bells and whistles at Click prices.

But that means people might finally appreciate Click only after it goes away.

Peter Callaghan: 253-597-8657
peter.callaghan@thenewstribune.com
@CallaghanPeter

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