A local provider is the preferred alternative to enter into a public-private partnership to operate the Tacoma’s Click Network’s internet and cable service.
At Tuesday’s City Council study session, council members and members of the Public Utility Board heard the term sheet proposals offered by Wave Broadband and Rainier Connect. Consultant Joanne Hovis of CTC Technology and Energy presented the term sheets in a slide presentation that offered side-by-side comparisons.
CTC helped the city to develop its request for information from the companies and to help define the 12 policy goals for such a partnership.
Wave and Rainier Connect both offered similar terms, and Hovis said the city could be confident in both coming to the table with financial and technical strength.
The consultant recommended the city and Tacoma Public Utilities begin negotiations with Rainier Connect, a local, family-owned company.
The main concern with Wave, Hovis noted, was a higher risk of sale of that company. Wave became part of TPG Capital in a deal that created the sixth-largest cable operator nationwide last year.
While Rainier Connect is smaller, it “has the capacity to scale to meet the partnership obligations,” Hovis noted in her presentation.
Rainier also offered more favorable terms in different sections of its term sheet, specifically when it came to compensation.
The compensation comparison from the presentation (all amounts to be adjusted annually for inflation):
▪ Would pay TPU approximately $1.5 million annually during each year of a lease, of which $500,000 would be applied to Wave’s electricity costs.
▪ Net revenue to TPU: $1 million.
▪ Would invest $1.5 million each year to deliver service that meets or exceeds federal definition of broadband
▪ Would pay TPU $2.5 million in the first year, increasing incrementally to $3 million annually beginning in year six.
▪ Net revenue to TPU: $2.5 million increasing to $3 million over the first five years.
▪ Would invest $1.5 million each year to maintain state-of-the-art network.
Rainier also stood out in terms of low-income affordability through its participation in the federal Lifeline program, which offers a monthly discount to reduce costs for low-income customers.
Concerns were raised in the study session that the program might end depending on future action by the FCC. Rainier was committed to the program for as long as it existed, Hovis noted.
Both companies offered commitments to net neutrality and equitable services throughout the city, with no market or neighborhood left behind, and “same price, same service” offered throughout the network.
The term sheets are based on 20-year Indefeasible Right of Use (IRU), effectively a long-term lease of the network, with two, 10-year extensions possible.
Hovis also recommended that when final terms are negotiated, the parties not get locked in on the TV cable side details in a long-term manner based on current trends, as the industry is up for more radical change than the internet side.
Meanwhile, a third entity, Yomura Fiber, which had previously been in the running, was out after it became clear TPU would maintain the network, citing licensing mandates. Yomura wanted to maintain the network itself, according to a Yomura representative.
“Of course we wouldn’t allow a third party to maintain our network; equally we understood that they, too, didn’t want a third party to maintain their network,” Owen Stephens, marketing manager for Yomura Fiber, told The News Tribune via email in response to questions.
As a result, the company plans to compete with Click in Tacoma, offering gigabit internet service as an independent entity, along with Comcast and CenturyLink.
The public can review and weigh in on the public-private partnership plans for Click Network.
▪ Public comment to be taken at Public Board of Utility meetings on March 13 and 18, 6:30 p.m., Tacoma Public Utilities, ground floor auditorium, 3628 S. 35th St., Tacoma. Comment also taken online: MyTPU.org/ClickUpdate
The board could make a recommendation at its March 18 meeting to the City Council. If that happens, the City Council then would take comment at its regular March 19 meeting, with possible action at its March 26 meeting.
▪ Copy of term sheet comparisons: https://www.documentcloud.org/documents/5759686/Click-term-sheets.pdf