Utility board, Tacoma council could decide Click’s fate next month

The Tacoma Public Utilities board is poised to decide next month whether it will recommend the city keep or lease out Click Cable TV, the publicly owned cable and Internet network.

Any decision the board makes would go to the Tacoma City Council, which has final say on what happens to Click. Mayor Marilyn Strickland said the council could make its own call next month as well.

The question before both bodies: Should the city lease the fiber network to an outside company, or should it double down by keeping Click and taking over the Internet side of the operation?

Right now, TPU operates the cable TV side of the business, while other private companies contract with the city to provide Internet service over the same lines.

A decision would follow months of debate and PowerPoint presentations prompted by the March announcement that a Kirkland-based broadband company wants to lease Click. A few weeks after the proposal from Wave became public, Tacoma-based Rainier Connect made its own pitch.

Both companies have been invited to the TPU board’s Dec. 3 meeting to make their case before the board decides which direction to recommend, said TPU Board chairman Bryan Flint.

Rainier Connect is one of two residential Internet service providers that currently buy wholesale access to Click’s fiber network. Advanced Stream is the other one. In late October, representatives of the providers asked the TPU board to decide the future of Click within 30 days, arguing that the companies currently doing business with the system deserve to know what their futures hold.

Brian Haynes, CEO of Rainier Connect, said Click’s uncertain fate means his company is investing elsewhere.

“I’d like to know if I can focus on this market,” Haynes said. “We have a tremendous amount of resources we could devote just to this market.”

Tim Thompson, a consultant who represents Rainier Connect, said a decision is “long overdue,” and that the city should commit to a transition period during which it would not compete with the ISPs.

“All they’ve done is hurt their own asset,” by delaying the decision, Thompson said. “It doesn’t make any sense to me. I don’t know what the big controversy is.”

Around 90 Click employees are also worried about their jobs. Some managers are trying to negotiate retention packages for sticking with Click through the duration of the debate.

If the city decides to lease Click, it will have to select a company and negotiate contract terms, along with any other requirements. For instance, if the city wants to make closing the digital divide a priority, it could ask companies how they plan to serve the poor.

Details also would have to be worked out if the city opts to keep Click and take over the Internet business. That “all-in” choice would require a new business plan for Click, TPU Board chairman Bryan Flint said. A consultant has said if TPU keeps Click, it should buy out all ISPs to reduce competition and maximize future revenue.

To stay in the black, Click would also have to attract tens of thousands more customers than it has now, the consultant wrote. Tacoma would have to upgrade the speed of its network to compete with companies like Comcast and CenturyLink.

TPU estimates Click’s annual losses at $7.6 million for this and next year. Electric customers are footing the bill for that shortfall, TPU officials have said.

The City Council blocked a 17.5 percent rate increase earlier this year that would have brought more money to the flagging cable system. Every month the increase is delayed means $206,000 less revenue for Click, TPU staff have said.

Losses have mounted as Click cable’s customer base has eroded from a high of about 24,400 in 2009 to fewer than 18,500 in August this year.

Customer losses are not unique to Click. The entire industry faces a seismic shift as customers flock to online-only services like SlingTV and Netflix. Some networks are carving out their own paid, streaming-only services to capture revenue from customers fleeing $100-plus monthly cable packages.

One thing is clear, Thompson said: Something has to change.

“I support (TPU Director) Bill Gaines’ premise that you can’t stay with the status quo,” Thompson said. “It wasn’t working for the utility, and it wasn’t working for the customers.”

This story was originally published November 21, 2015 at 4:50 AM with the headline "Utility board, Tacoma council could decide Click’s fate next month."