Proposal to lease Click merits serious consideration

If business projections are correct, Tacoma could either lose about $60 million in the next decade with its Click network or, if it takes a different path, come out $78 million ahead.

So what’s the choice here?

In truth, there are several choices for ending the money drain that Click has become in recent years as costs increased and cable subscriptions declined. It could be sold or shut down, for instance.

But many Tacomans have a pride of ownership in Click, which began in the early 1990s as a way to provide greater Internet access while forcing the existing cable company, TCI (now Comcast), to improve and keep rates reasonable. Click was the reason Tacoma could boast about being “America’s most-wired city.”

A consultant hired by Tacoma Public Utilities suggested another potentially attractive financial model: leasing Click’s infrastructure to a third party, essentially creating a public-private partnership in which Tacoma would still own Click but the private partner would assume the costs of operating it.

On Tuesday, the Tacoma City Council heard a proposal from TPU and Click for Wave Broadband, a Kirkland-based telecommunications company, to enter into a 40-year lease agreement with TPU. Wave proposes to operate the Click broadband and cable TV network, which now is heavily subsidized by TPU ratepayers to the tune of $8 million to $9 million a year.

Instead of losing money, TPU would be paid a $2 million annual lease. Wave would pay all costs of network operation, saving TPU millions each year, and would commit to a minimum of $1.5 million a year in capital upgrades to the system. Because the company’s focus is providing high-speed Internet, it would offer cable packages at cost and also commit to a low-income rate for eligible customers.

Click customers would benefit, too. Wave plans to upgrade Tacoma’s network to deliver faster speeds. And it would offer a bundled package of cable, Internet and phone service, something Click hasn’t done out of deference to the private Internet service providers that buy wholesale access to Click’s fiber network. Those ISPs would have to negotiate with Wave if the proposed deal goes through.

Wave also offers more video-on-demand programming than Click currently does. And because Wave is a major cable player in the region, it’s better positioned to negotiate fees with content providers.

Wave has committed to keeping cable rates slightly under Click’s main competitor in the South Sound, Comcast. If TPU were to continue operating Click, rates would almost certainly have to rise above Comcast’s. If Wave’s offer is accepted, it says rates will not rise more than 5 percent per year in 2016 and 2017.

One way Wave can keep operating costs down is that its workers would not be city employees, who typically have higher wages and better benefits packages than in the private sector. In a pro-union town like Tacoma, that may be no small consideration for the City Council.

Council members and the TPU board have a decision to make. If they accept the TPU consultant’s numbers on how much Click stands to lose in coming years, they can either go with Wave’s proposal or ask whether another company could offer a better deal. A close look at Wave’s customer ratings is a matter of due diligence.

But continuing along the path Click currently is on isn’t financially feasible, either for its customers or ratepayers. Something needs to change, and this agreement with Wave appears to be a good starting point for discussion.