Details on Click Cable TV’s possible future begin to emerge

The Tacoma Public Utilities board could decide between two distinctly different futures for Click Cable TV and its fiber-optic wires at a public meeting Thursday.

The board’s choice — a long-term lease or a city-run network — is not final. A City Council vote, tentatively scheduled for Dec. 15, could decide the system’s future.

Both votes would follow years of debate on how to improve Click’s finances. In 2012, TPU officials proposed a model that would have had the city compete against the three private Internet service providers that were contracting with the city to use Click’s wires. The plan was shelved after the three retail ISPs voiced opposition.

Click’s cable subscriptions have fallen to 18,500 today from its peak of 24,400 in 2009. At the same time, costs for television programming have continued to climb. The system is projected to lose about $7.6 million in 2015 and again in 2016, according to TPU Director Bill Gaines.

One of the factors holding Click back, according to one consultant, is the inconvenience of paying two bills: one for Click’s cable TV and another to an outside company for Internet service. Bundling the services together would help the flagging city network attract more customers, a consultant has said.

Utility staff have drafted two resolutions laying out the city’s options.

Lease option

Under the proposal to lease Click, TPU would bypass the city’s standard open bid process and instead hire a consultant to seek proposals for the system.

So far, two companies have expressed interest in leasing Click’s wires: Wave of Kirkland and Rainier Connect of Tacoma. They and any other interested parties would have to submit offers to TPU’s consultant by Feb. 15. Tacoma Power, which operates Click, would present a recommendation to the TPU board and City Council by March 1.

A winner would be selected based on a long list of criteria, which include providing $9.95 per month phone, cable and Internet access to low-income households, deploying gigabit speeds within the first few years of the agreement, paying Tacoma Public Utilities $2 million per year and making regular investments in the network.

In this scenario, the winning company would also be required to hire at least 81 employees in “living wage jobs” and to interview all interested Click employees. The document does not provide a definition of “living wage job.”

The resolution also says TPU and Click can provide severance payments for those not hired by the third-party operator. Around 90 people would lose their jobs if the city leases Click, including an unknown number of managers who have been privately negotiating severance and retention agreements for several months.

After five years, TPU would be $6.9 million in the black under the lease option, according to the resolution, which also says status quo would lead to a deficit of $37.4 million over the same period.

Proposal to keep Click

Another proposal says there is value to Tacoma residents in keeping Click. This resolution refers to a city charter provision that says city government cannot sell or lease a utility or major part of one without a vote of the people, a step not mentioned in the resolution outlining the lease option.

If the board and council opt to keep Click, utility staff would present “a detailed business, financial and marketing plan” in April, followed by utility board and council approval within 60 days. The business plan would lay out whether the city would enter into new contracts with the ISPs or buy them out.

The business plan also would separate Click’s finances from Tacoma Power’s, which would make it easier to assess the health of the system.

The cost allocation model that determines how much Click and Power pay for jointly used assets was most recently updated in May. An independent auditor largely agreed with TPU’s 2013 plan to shift more costs to Click and away from Power.

TPU leaders estimate that under the keep-it scenario, Click would lose between $28 million and $31.6 million over five years. Both numbers assume Click invests in the upgrades necessary to offer gigabit Internet speeds. By year eight, the system could start making money under an optimistic model.

Utility board member Mark Patterson is proposing an amendment that would start the clock ticking on Click becoming financially solvent. Under his proposal, any money Tacoma Power uses to subsidize Click would be considered a loan. After five years or $31.6 million in debt, whichever happens first, Click must either pay back the money or city leaders must find money elsewhere in city government to make Tacoma Power whole.

Some council and board members have said Click’s future is about more than money, calling its ability to connect Tacomans to the digital world a public good.

This story was originally published November 27, 2015 at 8:21 AM with the headline "Details on Click Cable TV’s possible future begin to emerge."