Tacoma’s Rainier Connect makes bid for Click

Tacoma-owned Click now has another suitor seeking to take over operations of the city’s fiber network.

Rainier Connect CEO Brian Haynes said Wednesday he is ready to make a bid for the municipal cable and Internet company.

Click, which is operated by Tacoma Public Utilities, has been losing money for years, city officials say. TPU bosses suggest the utility is losing $9 million per year, and Tacoma Power’s 170,000 customers make up the difference.

Last month, Wave, a Kirkland-based broadband provider, offered to lease Click’s fiber network for 40 years, with an option to renew for another 10 years. Wave has 430,000 customers in three states. Click has about 19,000 customers.

Haynes said Rainier Connect would, at a minimum, match Wave’s proposal, dollar for dollar. Wave offered $2 million per year in payments to Tacoma Public Utilities and $1.5 million per year in infrastructure upgrades, which could include Wi-Fi hotspots in certain areas of the city. The payments to TPU and investments in the system would increase with inflation.

TPU board member Mark Patterson said Thursday the Wave proposal is “not a done deal,” and he welcomed Rainier Connect’s proposal.

“It's always nice to have competing proposals, particularly from a local, quality business like Rainier Connect,” Patterson said.

Haynes sent a letter of intent to TPU Director Bill Gaines on Wednesday. Gaines, in a note to TPU employees Wednesday night, said Click bosses had not had time to review the unexpected proposal.

“We will provide recommendations to the Public Utility Board and City Council about how to consider Rainier Connect’s proposal and other proposals that may come in,” he said in the memo. “In the meantime, we will continue our public outreach efforts and discussions about the Wave proposal.”

Haynes’ letter says Rainier Connect would contribute $500,000 each year to fund a project through Tacoma Public Schools. Called “family connect,” the program would supply laptops or tablets to families who need them. It also would provide free web access through the school district’s guest Internet network to students on the free and reduced lunch program. About 18,600 students — or 63 percent of the district’s pupils — are signed up for the lunch program.

The district’s Internet is filtered to prevent students from accessing adult content, said Deputy Superintendent Josh Garcia. He said he met with Rainier Connect officials within the past few weeks to have a “dreaming session” about broadband access for low-income students.

They talked about “what should we be thinking about when we think about connectivity and access and equity in the digital age,” he said.

The district has online classes available to students on the district’s network, Garcia said. “When they go home we lose opportunities to connect them with digital education abilities.”

The district’s chief information officer, Shaun Taylor, said students can already download Microsoft Office software for educational use. The district’s system also provides students with email addresses and the opportunities to complete homework and to make up classes online.

But families who cannot afford computers or Internet access are in a bind, Taylor said.

“Rainier Connect is trying to find a way to help address both of those,” Taylor said.

The company is working on a $9.95 Internet package for low-income households that want unfiltered access to the Internet, Haynes said.

Haynes said Rainier Connect would commit to hire at least 61 people to work in its Tacoma office. The company, whose employees are not members of a union, is open to discussions about unionization, company officials said. Click employs 93 people, about two-thirds of whom are unionized. Wave does not have a union workforce.

Rainier Connect told TPU that it would commit to not selling its company for the first 10 years of a lease agreement.

Rainier Connect’s cable, television and Internet services together have 15,000 customers, many of them in rural areas around Eatonville. The company also is one of the three Internet service providers that buy wholesale Internet access from Click to sell to residential customers.

The company was founded in 1910 as Mashell Telephone and Telegraph and has been in Haynes’ family for five generations. It began offering Internet service in 1995 and added cable TV service a year later, according to information it provided.

While Click officials have said the cable business is a money loser, Haynes said his company views cable as a valuable service for some customers who don’t want to watch programs online through streaming services.

“We see the cable side of the business as difficult but manageable,” he said. “We spend a great deal of our time trying to find ways to help our customers migrate off and cut cords.”

Rainier Connect expects to make Click more profitable by adding more subscribers to the network. Click serves about 20 percent of the homes its fiber passes. Haynes said he believes Rainier can sign up at least 30 percent.

However, Rainier Connect is proposing this offer without the benefit of the information Click provided to Wave, Haynes said. The company’s “biggest fear,” he said, is how much Rainier Connect would have to invest in the first year to upgrade the network.

With another party interested in leasing the Click network, Mayor Marilyn Strickland said the council needs to talk about asking companies to submit competing proposals.

The Wave proposal set the standard by which future offers can be measured, she said.

“I think it’s great that a local, Tacoma company is interested in doing this,” Strickland said Wednesday.

Gaines, the TPU director, has said he would open the deal to competition if asked to by the utility board or council.

Councilwoman Victoria Woodards said she’s happy other companies are interested in Click, but she’s “still open to the conversation about whether or not we need to lease Click,” Woodards said.

TPU board member Bryan Flint said the utility board needs to agree on criteria to evaluate the options — including not leasing Click at all.

Those criteria could include “what is the benefit of having the system, and what do we want to accomplish with this infrastructure,” Flint said. “One of the things Click has done is provide competition and moderate rates. Do we want to continue to do that?”

Cable customers within Click’s service area pay less for cable and Internet service than those who live outside of the service area. The TPU board is considering a 17.5 percent rate increase for the cable side of the business. With that increase, the standard 88-channel package will cost about $61 per month. Comcast customers outside of Click’s service area would pay $66 to $75 per month for a similar package.

The utility plans to conduct a phone survey of Tacoma Power customers about the future of Click, Gaines said. The results of the survey could be available in May, he said.

The utility also is preparing a report for a May City Council study session on another option that could help improve Click’s finances: Providing Internet service in competition with Rainier Connect and the other two residential Internet service providers that buy wholesale access to the network. A similar proposal failed to get support in 2012.

This story was originally published April 22, 2015 at 5:58 PM with the headline "Tacoma’s Rainier Connect makes bid for Click."