A group tasked with developing a business plan for the municipally owned Click Network emerged at a joint study session of the Tacoma Public Utilities Board and the Tacoma City Council to present its conclusion. The committee met behind closed doors for the last five months and presented its work earlier this month.
The seven-member committee included two TPU board members, two City Council members, a member of the Tacoma School Board, a retired Click worker and a technology company CEO. It was named the Citizen Engagement Committee, although its meetings were neither open to citizens nor allowed engagement through comments as it developed ways to pay for the system upgrade and cover the projected losses until the system becomes profitable as a telephone, cable and internet provider alongside private companies who also would be providing “all in” packages.
The committee’s three recommendations about going “all in” projected the cost of upgrading the system would be about $35 million over five years. All of the options call for $1.5 million in labor concessions. Two options would continue a $3 monthly surcharge on all Tacoma Power customers. The main difference between these two options is who would pay the rest. One option calls for $1.7 million a year from the city’s general fund. The other option would cover that cost increasing the monthly surcharge to $3.83 per account. The third option would have the city pay for the startup and upgrade costs and removed the month surcharge on customer bills over time.
“Our job was not to save Click,” Mayor Marilyn Strickland said, noting that the committee’s goal was to develop ways to best leverage a municipal asset.
The all-in bundle of phone, Internet and cable in the options would compete in the fiercely tough marketplace with current cable and Internet providers as well as upgrade to faster connections and offer low-income programs through a federal subsidy that could cost about $5 a month for qualified customers as a way to promote residential Internet connectivity. One out of every four Tacomans currently doesn’t have Internet access at home.
“To me, this is not a business plan,” TPU Commissioner Monique Trudnowski said. “It’s a cash flow summary.”
She noted that the committee failed to address what would happen if goals aren’t met or expenses continue to outpace revenues. She also questioned the legality of spending utility dollars on anything that isn’t associated with water or power generation. That question was also raised by Janine Terrano, CEO of Topia Technology, who served on the committee.
She also blasted the committee process for not being open to the public and being little more than a group tasked with finding ways to use taxpayer and ratepayer dollars to financially prop up a risky plan.
“It is a bail out with no guarantee of success,” she wrote in a letter Strickland read into the record.
The effort to broaden Internet access isn’t new. A similar idea died in 2012 and was first pondered when Click formed in 1997. At a cost of $200 million, the web of fiber optic lines was created allowing TPU to install “smart meters” on homes to monitor energy usage. The excess capacity on that high-speed data system allowed the birth of Click Network. The municipally owned cable television provider also sells that capacity to private companies that then connect customers to the Internet. Costs of running the network were split with Click covering 75 percent of the bill and TPU assuming the rest. TPU then backed away from smart meters, however, and shifted 94 percent of the costs of running the network onto Click’s balance sheet. TPU officials then set out to explore ways Click could cover that gap of about $7 million a year.
That review process bubbled up an offer last year from Wave Broadband to lease the network for $2 million a year for 40 years. News of that lease proposal prompted Tacoma-based Rainier Connect to match that offer and also promise to provide low-income Internet access plans. Wave then matched that. Often heated commission and city council meetings regarding the proposed leasing of a municipal asset last fall then led to the creation of the committee to further review options for Click’s future, with a focus on the projected costs and benefits of upgrading the system to provide cable, phone and Internet access.
The TPU board will now evaluate the all-in financial models and make recommendation to City Council by late September, with two public hearing being planned before then. Those meetings will most certainly heat up with questions of accounting methods, the role of government should play in promoting Internet connectivity and the role private companies would have if plans move forward.
Among those people preparing to attend those meetings is Net Ventures CEO Mitchell Shook.
“It is a misconception that Click has huge capital expenses and is wildly expensive to maintain,” he said. “In fact, Click is a very profitable business… With the profits substantially offsetting the costs of constructing a telecommunications plant that Tacoma Power required anyway. If we stay the course, Click will continue to prosper far into the future. Now is not the time to make drastic changes.”
Click Cable currently has 7,200 television customers while the third-party companies also using the system provide Internet services to about 23,000 customers.