The head of Click Cable TV is asking for rate hikes totaling a cumulative average of 25.7 percent over the next two years, which would be the highest increases for the cable network in at least eight years.
The proposed hikes would also help put Click more in line with what its competitors charge. Click hasn’t seen a rate increase since 2014. Rate hikes were budgeted in 2015 and 2016, but were never implemented. Revenues are down and costs are up, according to Tenzin Gyaltsen, Click’s general manager: In the last two years, costs exceeded revenues by a total of $8.9 million, or 24 percent.
“We’re losing customers at a rate of about 1,200 customers a year on average, and there’s a myth if you don’t do rate increases you’re going to keep customers, but clearly … rate increases or not, customers are leaving for new technology,” Gyaltsen told the utility board at a study session. “The industry has changed so much — people are leaving for other reasons as well.”
Programming costs have risen 16.3 percent since 2014, Gyaltsen continued, and wages and benefits per employee have risen 15.5 percent in that time.
What’s more, competitors — such as Comcast — have rates that are so far above Click’s that if their rates continue to rise as they have, the city-owned system would be slightly cheaper even after the proposed rate increases, Gyaltsen said.
A standard channel package on Comcast costs 17.5 percent more than Click, according to the most recent information the cable giant has on file with the city, and a broadcast TV package — which gives customers access to the low channels on the dial such as ABC, CBS, NBC and some others — is priced 32 percent higher.
Click’s revenue would rise from an estimated $32.3 million across 2017-18 to $40 million with the proposed rate hikes. It would be an improvement, Gyaltsen said, but still wouldn’t completely cover cable TV costs.
We’re losing customers at a rate of about 1,200 customers a year on average, and there’s a myth if you don’t do rate increases you’re going to keep customers, but clearly … rate increases or not, customers are leaving for new technology
Tenzin Gyaltsen, general manager of Click Cable TV
Under the plan, broadcast rates would rise 9.5 percent on March 1, then another 6.6 percent in March 2018. Standard package rates would rise 13.2 percent in 2017 and another 11.7 percent in 2018. A broadcast package would go from costing $17.99 to $20.99 in 2018, and standard would go from $52.99 now to $66.99 in 2018. Historically, rate increases have been in the range of 5 to 7 percent, Gyaltsen said.
Most utility board members seemed to agree that rate hikes are overdue and should be approved for 2017. While Gyaltsen asked the board to approve the rate increases for both years together, some board members were hesitant to consider 2018, since Click’s planned transition to selling retail broadband and phone service in addition to cable could change the pricing equation.
In September, the utility board approved a funding plan for Click’s expansion that directs power revenues to subsidize Click if it can’t make enough money to meet expenses as it transitions to its new business model. The funding for Click’s expansion is baked into Tacoma Power’s 2017-18 budget, but the business and funding plan is still awaiting approval by the City Council.
“It doesn’t seem to me that it’s really a positive thing for us to be setting a rate that assumes the status quo for 2018,” said board member Karen Larkin. “If I’m looking forward to implementing the plan we passed and that the City Council is supportive of, I would want to get a rate increase in early 2017 while we worked on that plan, and then look forward to approving that total rate package before the end of 2017.”
The utility board could take a vote on upping Click cable rates at its meeting on Jan. 11. If approved, the proposal would go to a City Council committee, then to the City Council for approval.
Tacoma Public Utilities staff also are recommending rate hikes in power and water over the next two years, staff told the utility board at the study session on Wednesday. Those hikes are the same as what was proposed in the city’s 2017-18 spending plan: 5.9 percent each year on average for power customers and 4 percent each year on average for water customers.