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The Tacoma Click Saga of 2015: Part 4: Accumulating Spillover Effects

This is the last in a four part series about the Click network in Tacoma, Washington, where city leaders spent most of 2015 considering a plan to lease out all operations of this municipal network to a private company. Part 4 highlights Click’s often unseen “spillover effects” on the City of Tacoma’s economy and telecom marketplace over the network’s nearly 2 decades in operation, contributions that Tacoma should expect to persist and even expand in the future.

We published Part 3, an analysis of why the municipal network is positioned to thrive in the years ahead within the modern telecommunications marketplace on June 21st. In Part 2, published on June 7, we reviewed why Tacoma Public Utilities considered the possibility of leasing out all of the Click operations. On May 31, we published Part 1, which reviewed the community's plans for the network.

Part 4: Click’s Accumulating “Spillover Effects”

Regardless of any impending changes with Tacoma Click’s operations, it’s clear that the network has and will continue to support and enhance the overall economic interests and the public good in the City of Tacoma. “Spillover effects” - the benefits to the community that don’t show up clearly in any financial statements - tend to appear after communities developing their own municipal broadband networks.

Click’s spillover effects start with the broad economic development benefits that arose when Click appeared. Before Click came to town, Tacoma was a city in economic decline. Many businesses had fled downtown for the suburbs over the 50-plus year period after World War II. 

While we can’t give Click all of the credit for the city’s efforts to rebound from that period of economic downturn, analysts like the U.S. Conference of Mayors cite the $86 million Click network as a major component. The network was part of an ambitious and highly successful economic development effort in the 1990s that helped to revitalize Tacoma. In 2005, the Sierra Club named Tacoma’s revitalization effort one of 2005’s top 12 economic development projects in the nation

As part of Tacoma’s revitalization project, the city opened a new downtown branch of the University of Washington that remains successful today. And as we noted in a 2010 article about Tacoma Click, more than 100 high-tech companies arrived in Tacoma within a couple of years after the network launch. This means that many current Tacoma citizens also arrived in town through jobs that Click helped create.

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Broadband Competition Spills Over Too

A recent study from the Organisation for Economic Co‑operation and Development (OECD) shows that the arrival of a municipal network in a city typically improves competition in the local broadband market. That is, municipal networks tend to prompt private broadband companies to lower prices and improve services in places where there are municipal networks. Indeed, a Tacoma resident reported a few years ago that Comcast customers had been consistently paying about half of what Seattle Comcast residents were paying for the same services. It’s also likely that Comcast would have delayed its 2008 upgrade of its infrastructure in Tacoma if the city had never built Click in the first place.

This evidence suggests that, were it not for Click’s impact on the ISP marketplace, the city’s Internet services from private ISPs like Comcast would likely be slower and more expensive than they are today. If Click disappeared and the city had no municipal broadband service to compete with Comcast, citizens, businesses, and government agencies in the city could expect prices to increase while customer service declines.

What many people in and outside of Tacoma may not realize is that, like most community-owned networks, Click strives to keep prices for telecom services below market rates for the good of the community. The city of Tacoma also saves on telecommunication costs because it uses Click rather than leasing. Click has essentially contributed untold savings to the City of Tacoma.

So who would be the big winner if Tacoma decided to lease out Click to a private company? Tacoma businesses and residents? The private ISP that would take over the Click’s operations? Leasing Click to a private company would almost certainly benefit Comcast more than any other party. The company with the dubious distinction as both the largest media company in the world and a perennial contender for most hated company in America has the most to gain.  

Another Historical Moment for Click

As the importance of broadband access expands, we expect the City of Tacoma to see the wisdom in the words of Tacoma’s former mayor Bill Baarsma, who in 1999 described Tacoma Click’s historical significance for the city and its potential for the future:

“This is the single biggest economic decision the council has made since the turn of the last century, when the City Council decided to move forward with the construction of the first hydroelectric dam on the Nisqually River. Things are happening here that are happening nowhere else."

In the years immediately following Click’s launch, this municipal network helped the City of Tacoma to re-emerge from a decades long economic slump. The question facing Tacoma between leasing Click to a private ISP and keeping Click as a publicly owned and operated asset will once again culminate in a pivotal decision with far-reaching implications for Tacoma’s future.

Our observation of community-owned networks around the United States suggests that the benefits of keeping and remaking Click as a city-owned asset will only become more apparent in the years ahead. A renewal and restructuring of Click operations to meet the needs of the changing telecom landscape would help to optimize the network’s potential as a driver of local economic development and cost savings. These changes will allow the Tacoma leaders of today to carry on the legacy of the city officials who took the initiative to create the historic Click network nearly 20 years ago.

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Photo of Tacoma Skyline: Dean J. Koepfler, Tacoma News Tribune Staff Photographer, through Creative Commons

Photo of East 21st Street Bridge at Night: AFreeman, through Creative Commons

The Tacoma Click Saga of 2015: Part 3

This is Part 3 in a four part series about the Click network in Tacoma, Washington, where city leaders spent most of 2015 considering a plan to lease out all operations of this municipal network to a private company. In Part 2, published on June 7, we reviewed the main reasons why Tacoma Public Utilities considered the possibility of leasing out all of the Click operations. On May 31, we published Part 1, which shared the community's plans for the network. Part 3 covers why we believe the Click municipal network is positioned to thrive in the years ahead within the modern telecommunications marketplace.

Part 3: Positioning Click for the Future

If Tacoma leaders decide to move ahead with the “all in” plan that they're currently exploring, several factors suggest that Click can become an increasingly self-sustaining division of Tacoma Public Utilities (TPU). To recap, the “all in” plan would reportedly involve two major changes at Click. One, it would mean upgrading the network to enable gigabit access speeds. Two, the all in option would likely mean cutting out the “middlemen” private companies that currently have exclusive rights to provide Internet and phone services over the network. Instead of the current system, where Click only offers cable TV services while middlemen provide Internet and phone, the new all in plan would position Click as the retail provider for all three services.

Adapting to A Challenging and Changing Telecom Landscape

It makes sense for TPU to keep Click and improve it. TPU’s slide from Part 2 in this series reveals:

(1) Click’s subscriptions for Internet-only customers turned a corner in 2014 and started to exceed projections.  This data indicates that the most important component of Click’s future business prospects—its Internet access service—is growing.

(2) With a proposal on the table to upgrade the infrastructure to offer gigabit speed service, the city can expect Click to provide stronger local ISP competition on both broadband speed and price. In an age of increasing need for data access, any ISP that upgrades its infrastructure should reasonably expect to see increased demand for extremely fast Internet access services, a level of demand that didn’t exist 10 or even 5 years ago during the period when Click was having its greatest financial challenges.

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(3) The ongoing growth in Internet subscribers for Click’s ISP partners runs parallel to the growing cord-cutting phenomenon, a development led by younger generations that industry experts predict could eventually lead to an Internet-only model for all media programming.

(4) If Click goes with the all in option, the triple play proposal figures to create new revenues as Click would more easily attract those customers who see the triple play option as simpler and more cost effective. Indeed, as a private consultant once suggested to Click, Click’s previous inability to offer triple play services was almost certainly an obstacle to achieving a higher take rate

A decision to instead lease Click out to a private ISP, would mean losing control over a business that is now primed for faster and more sustainable growth than ever before. Tacoma Mayor Marilyn Strickland agrees that a reshaped Click is the way to go:

“I can’t support doing something with Click when we haven’t presented the best possible Click” she said. “It’s about the quality of the product. We’re here to compete. We’re here to compete hard. And we’re here to win.”

Beyond the city’s efforts to restructure the network’s technology and business model, a common challenge for community networks like Click is the disadvantage that any small ISP has in its ability to market its services. Indeed, a poll TPU conducted last year showed that only a small minority of Tacoma residents even understand the services that Click provides. This fact underscores the reality that Click is competing against a Comcast's national brand with far greater resources for reaching potential customers. It also suggests that Tacoma Click could benefit from improved future marketing efforts that might become possible with stronger revenue flow from the expected growth of a revamped Click.

More than a Telecommunications Provider

While the financial health of Tacoma Click is of paramount importance to the network’s future success, it’s also essential that the people of Tacoma recognize the wide-ranging spillover effects for the community over its nearly two decades in existence. These spillover effects are the broad impact that Click has had and will continue to have on things like Tacoma’s varied economic development fortunes, Click’s impact on competition, and on lowering local telecommunications costs. These factors, which we discuss in Part 4, clarify that Click’s actual value extends far beyond internal financial reports.

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Photo Credit: Dean J. Koepfler, Tacoma News Tribune Staff Photographer, through Creative Commons

The Tacoma Click Saga of 2015: Part 2

This is Part 2 in a four part series about the Click network in Tacoma, Washington, where city leaders spent most of 2015 considering a plan to lease out all operations of this municipal network to a private company. Part 2 explores the major reasons why Tacoma Public Utilities has considered the move to lease out all Click operations. Part 1, published on May 31, examines possible plans for Click in the immediate future.

Part 2: TPU’s Challenges with Click

When TPU officials proposed last March to lease the network to a private ISP for 40 years, they cited revenue losses for Click as high as $7.6 million annually, indicated by troubling financial reports in recent years. Some critics, however, such as those with the advocacy group “Stick with Click,” countered that this figure is inaccurate. They say that TPU manufactured the revenue losses through an accounting decision that resulted in a deceptively bleak picture of Click’s financial performance.

To shed light on the disagreement, we're examining relevant facts about Click.

Allocating the Costs of a Shared Infrastructure

When Tacoma first built the Click network in the late 1990s, the Hybrid Fiber Coax (HFC) infrastructure was to support services for two divisions of the TPU: TPU Power and Click. Besides the infrastructure’s function for supporting Click’s services, the city designed the HFC infrastructure to support a smart electrical metering program for TPU Power services.

This dual purpose meant that for accounting purposes, TPU had to allocate the costs of a shared network based how much each division would rely on the network. This cost allocation (a common accounting practice) would assign each division a portion of the original capital construction costs for building the network and a separate portion of the network’s ongoing operations and maintenance (O&M) costs. 

Ultimately, and with the help of an independent consultant, the city settled on cost allocation ratios in 2003, which determined how the TPU would assign capital and O&M costs to each division.

TPU Power would pay 73 percent of the capital costs to build the HFC infrastructure; Click would pay the remaining 27 percent. Click would then pay a 76 percent of the network’s ongoing O&M costs, with TPU Power paying the remaining 24 percent of O&M.

For several years, TPU Power used the HFC infrastructure to facilitate operations of a series of smart meters. But a few years ago, TPU made the decision to follow what they said was a trend in the power industry to instead start using wireless technology for their smart metering needs. This decision, they said, led TPU Power to begin phasing out its use of the HFC infrastructure for their smart metering program.

Now that TPU Power would no longer be using the smart meters, they determined that this change would justify significantly increasing Click’s portion of the allocated O&M costs for the HFC infrastructure. After some dispute over how to fairly adjust the numbers, TPU settled on a new cost allocation which raised Click’s portion of the O&M costs from 76 percent to 94 percent.

Is the Updated Cost Allocation Justified?

Using these new cost allocation numbers, TPU reported that the Tacoma Click network was experiencing annual losses of $7.6 million. But some observers in Tacoma were skeptical of TPU’s cost allocation decision and loss figures. For instance, an accountant for a Tacoma-based tech company suggested a view expressed by many others in town that the TPU has not been sufficiently transparent about the nature and causes of Click's reported financial problems.

Others note that if Click had simply kept the original cost allocation structure unchanged, Click’s current reported annual operating losses would sit at a more modest $700,000 rather than the $7.6 million figure. 

Justin Marlowe, a professor of public finance at the University of Washington, told the Tacoma News Tribune that cost allocation decisions by government agencies like this are always based on somewhat subjective criteria:

“Cost allocation for internal budgeting and cost analysis purposes is really the Wild West,” he said. "There is very little in the way of national standards. It’s nothing like financial accounting, where there are very strict rules about general accounting principles.”

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Regardless, TPU officials believe that TPU Power has paid its fair share of costs for building and using the network and that the new cost allocation for the two divisions is justified. For one, TPU Power retained responsibility for paying its full, originally established 73 percent share of the $86 million capital costs for building the network. TPU Power also paid the portion of the O&M costs originially agreed upon during the period they were using the infrastructure for their smart meters. Now that TPU Power no longer uses the network for the smart meters, utility leadership sees the adjusted cost allocation as a natural result of these changes.

But supporters of the plan to keep Click believe TPU’s adjustment of O&M costs represents a broken agreement by TPU, a failure to follow the originally established financial conditions for building and then operating and maintaining the network. Moreover, Click supporters believe that the locally owned municipal network offers economic and other benefits to the city that TPU is failing to recognize.

Claims of Mounting Financial Challenges

When TPU’s constructed its HFC network in 1997, it provided speed, capacity, and reliability that far exceeded the standards in the telecommunications industry of the time. The only private competitor in Tacoma was TCI Communications and they offered inadequate Internet and cable TV services. Click’s arrival not only improved the quality of local connectivity, it also helped attract businesses to the community as part of a highly successful city revitalization effort in the late 1990s and early 2000s.

In 2001, a couple of years after Click got off the ground, Comcast bought TCI and in 2008, Comcast upgraded their telecommunications infrastructure to a DOCSIS 3.0 network throughout the city. One report said that this upgrade enabled Comcast to start providing more affordable prices than Click at each speed tier for Internet service in Tacoma. And yet a more recent 2014 report says that Click’s service prices would continue to be below or the same as Comcast’s local prices, suggesting that reports of better prices from Comcast in Tacoma may have been based on temporary bait and switch promotional rates that Comcast is known to use to attract new customers. Still, the reality is that many Tacoma residents have at times at least had the perception that Comcast has offered the best prices for service in Tacoma.

Comcast also has the advantage of being able to provide bundled triple-play services -- Internet, cable TV, and phone. With Click’s business model, however, Click serves as retail provider of Cable TV services while providing only wholesale Internet access and phone services through a group of private ISPs. This divided model prevents Click from offering triple-play packages. Some in Tacoma believe that Click’s inability to offer a triple play option has been a major barrier in Click’s efforts to increase their take rate

Comcast’s extraordinary market power gives them another advantage. The conglomerate has had unparalleled leverage to negotiate rates on programming costs that are as much as 20 percent less than what Click pays. Because Comcast has the luxury of being able to use revenues from other markets to cross-subsidize their services in Tacoma, this makes it easier for them to offer low rates and deep promotional offers to compete with or even at times undercut Click’s prices. These are all indications that the company has an unfair competitive advantage in a marketplace with a very high concentration of ownership.

Finally, as the slide below from a recent TPU presentation shows, TPU’s original 1997 projections for expected cable TV subscriptions never reached projected rates.  And in 2010, Click had to increase their subscription prices after programming costs started increasing at about five times the rate of inflation, far outstripping TPU’s original projections. Overall, it’s clear that factors on the declining Cable TV side of Click’s business have been a major source of the network’s struggles.

 

Figure from TPU Presentation Illustrating Click’s Actual Performance Vs. Projections

This slide from a recent TPU presentation shows that Click's Cable TV division has underperformed while seeing higher than expected programming costs. It also shows, however, that their ISP business is exceeding expectations.

A Look Ahead to the Future of Click

Comcast’s built-in competitive advantages in Tacoma have likely hampered Click’s capacity to grow a larger customer base. The above slide also tells another story: one of recent strong growth on the Internet side of the business, growth that has allowed Click’s Internet services to exceed TPU's original projections. As we discuss in Part 3, this trend suggests that Click can expect to see continued growth in its core future function as an ISP.

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Photo Credit: Dean J. Koepfler, Tacoma News Tribune Staff Photographer, through Creative Commons

The Tacoma Click Saga of 2015: Part 1

This is Part 1 in a four part series about the Click network in Tacoma, Washington, where city leaders spent most of 2015 considering a plan to lease out all operations of this municipal network to a private company. Part 1 explains Tacoma's plans for Click's immediate future.

Part 1: Tacoma Votes to Explore Keeping Click!

2015 was a tense year for Tacoma Click, the nearly 20-year-old municipal network in this city of about 200,000 just south of Seattle. In March of 2015, Tacoma Public Utilities (TPU) announced it was considering a proposal to sign a 40-year agreement to lease out the network to a private Internet Service Provider (ISP). But after months of deliberations, the Tacoma City Council decided in December with a resounding 8-0 vote at the last City Council meeting of the year to explore what the city calls their “all in” option: a plan which, if implemented, would include technological upgrades and major structural changes to the business model aimed at preserving Click as a municipally-owned network.

When Tacoma Click, one of the first municipal networks in the U.S., launched its Hybrid Fiber Cable (HFC) system in 1999, the network provided Internet speeds that were among the fastest in the country. For the past two decades, Tacoma Click has provided community anchor institutions, businesses, and residents in Tacoma with access to retail Cable TV service and wholesale Internet and phone service. 

Click has never managed to pay for itself. However, nothing in Click’s financial reports can account for the municipal network’s numerous indirect contributions (both economic and otherwise) and overall value to the Tacoma community as a whole. There are also promising signs that the network is positioned for future growth.

Taking Sides

The tone of discussions at City Council meetings over the past year about Click’s future signaled a strong desire by some city officials to get out of the telecom business altogether. Before the December vote, two of five TPU board members favored the lease option, a proposal to lease the network that would have effectively marked the end of Click as a municipal network. Several other Tacoma officials have expressed deep concerns throughout the year about Click’s ongoing financial viability, including Tacoma’s Mayor and TPU director Bill Gaines.

Still, since the TPU’s first suggestion in March of 2015 that the city consider getting out of the municipal broadband business, some city officials have consistently pushed back. At a July meeting, Councilwoman Lauren Walker summed up a lot of the frustration among people in Tacoma who saw the proposal to dump Click as unnecessarily hasty and lacking sufficient support.

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"You keep coming back and telling us it's not financially feasible," she told TPU Director Bill Gaines. "What we're trying to figure out…, as crazy as it is -- there's so much value in the city keeping the damn thing -- is how can we do it and what would that look like? And so, I know it's more work, but that's why I think you don't have the council on board, and I think that's why I think there's so much disharmony in the community."

Plans Moving Forward

The December vote does not guarantee that the city will keep Click. Rather, the vote approved the creation of a seven person “Click Engagement Committee” that is now helping TPU officials create a new business plan -- expected to be completed in the coming months -- to map out a recommendation for a 5-year business plan for the network.

Among the city’s plans under this “all in” option include an objective to upgrade the network infrastructure. In the range of $3.5 to $6 million, city officials say they can make upgrades that would increase Click’s connection speeds from its current fastest available rate of 100 Megabits per second (Mbps) up to Gigabit per second (Gbps) speed levels.

A second major proposed change, according to reports about the “all in” option, is that the city is looking to revamp its current operating structure. Currently, Click provides retail Cable TV services while a group of private ISPs provide the retail Internet and phone services. Under the “all in” plan for a revamped Click, reports say Click will become the sole retail provider of Internet access, Cable TV, and phone services over the network.

The Will of the People Makes a Difference

When the city announced its plans in March to explore getting out of the business of operating Click, the public reacted strongly against the proposed plan. In one example, a group of concerned citizens created “Stick with Click,” a coalition of Tacoma residents advocating to keep Click as a municipal network.

Large groups of passionate Tacoma citizens attended town hall meetings last spring (see here and here) to express their desire to keep Click. At a September meeting where the City Council voted to keep TPU director Bill Gaines in his position, a vocal contingent of public commenters urged City Council members to fire Gaines over his management of Click.

Then in November, Tacoma citizens re-elected the City Council’s most vocal supporter of the “all in” plan to keep Click, Anders Ibsen, even as Ibsen’s colleagues on the City Council and Tacoma’s mayor endorsed his opponent. Of the more than 40 Tacoma citizens who spoke during the public comments portion of the December City Council meeting, all except one voiced their support for the “all in” option. 

In the end, consistent and vehement public support for Click as a city owned and operated network played an important role in the City Council’s decision to look for a way to keep Click and improve it. But how did we get here? In Part 2 of this series, we’ll cover in detail the varied financial factors that brought Click to this crossroads in the first place.

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Photo Credit: Dean J. Koepfler, Tacoma News Tribune Staff Photographer, through Creative Commons

Click! Network Rates Set to Increase to Cover Retrans Fees

Tacoma's Click! network raised prices in 2010 in order to cover increases in retransmission fees for its television feeds. Fees have continually risen for Click! and other networks and, according to Tacoma's News Tribune, will continue to rise. The market is fundamentally broken, with small providers struggling to keep up as sports programming shoots through the roof and companies like Comcast merge with content owners.

In Tacoma, the situation was so bad it led to a fee dispute between KOMO and Click! network that resulted in a channel blackout on the network. The News Tribune pursued document requests early in 2014 to obtain copies of the retransmission agreements at the center of the dispute between the network and KOMO. The documents revealed that agreements with several broadcasters rewarded broadcasters significant increases in retransmission fees. Over a six year period, KOMO's rate increased 416 percent.

In a recent update, the News Tribune reports that the new contracts include yet another significant increase:

New contracts that took effect Jan. 1 show the broadcasters’ fees are rising far faster than inflation.

No fee has increased over the years more than that of Seattle broadcaster KOMO. In 2009, the broadcaster received only 31 cents per month per home from Click. That amount has soared this year to $2.43 — a 684 percent increase.

Had the broadcaster’s fee risen equal to inflation, KOMO would earn only 34 cents per subscriber — or approximately $78,000 for all of 2015.

Instead, the new fee structure will mean Click pays about $561,000 this year. That cost is likely to be passed down to the utility’s 19,250 subscribers.

Chris Gleason, speaking on behalf of Tacoma Public Utilities, said the utility board will now have to consider a 17.5 percent rate increase for 2015. The original plan was to incorporate a 10 percent increase in 2015 and a similar increase in 2016. Four other channels are instituting similar increases:

“We don’t really have a lot of bargaining power with these broadcasters,” Gleason said. “... We do negotiate with them but there’s not a lot of leverage for us.”

Escalating fees could accelerate the trend of “cord cutters” — people who don’t have a cable subscription and who watch shows online.

All providers must contend with these increases in retansmission fees but small networks are particularly hurt because they cannot afford to buy the entities that create the fees. Comcast can hedge against increasing prices by demanding an ownership stake in the channel or buying them outright.

The largest cable companies also have more leverage - a channel is more reluctant to go dark across Comcast's millions of viewers than the 20,000 on Click!. The idea that we can have a competitive market for these services while content owners hold all the cards is misguided and we believe the FCC and Congress should be addressing these problems before more small cable companies are forced out of the market.

Tacoma's Click! Introduces 100 Mbps; CenturyLink Lies to Steal Click! Business

We have watched Tacoma's Click! Network for years, sharing its advances and benefits with you. The latest achievement in Tacoma is a new option for customers - 100 Mbps.

The network is a division of Tacoma Power, which has been  providing electricity to the community for over 100 years. The municipal utility upgraded recently to DOCSIS 3.0, increasing Internet speeds for customers. 

Click! allows independent service providers to offer Internet access on the network rather than offering that service directly. This approach has resulted in less revenue for the publicly owned network, creating delays in paying down the debt from the infrastruture investment. Nonetheless, Click! has create benefits far in excess of costs -- from increased investment from incumbents to much lower prices for residents and businesses.

RainerConnectAdvanced Stream, and Net-Venture all offer retail services on the Click! network.

Customers from the three ISPs have multiple choices in speed and price, varying from $29.95 for up to 6 Mbps to $189.95 for the new 100 Mbps option. The choice allows consumers to tailor their Internet (and their Internet bill) to the their individual needs. Vibrant competition continues to create choice and affordable consumer prices. Regardless of what network they subscribe to, Tacoma residents tend to pay less than their Seattle brethren.

Unfortunately, it was no surprise to come across a recent news story that describes CenturyLink's misleading sales tactics. CenturyLink salespeople have gone door-to-door and told people Click! is closing. C.R. Roberts from the News Tribune covered the story in mid-July. According to the report, even after Click! contacted CenturyLink to complain, the lies continued in parts of the city. This is no single anomaly, we have heard of similar tactics being used in the past.

Seattle's Short History of and Bleak Future for Community Broadband

We have followed Seattle's on-again, off-again consideration of a community broadband network for years and have occasionally noted the successful cable network in nearby Tacoma.

Seattle Met's Matthew Halverson has penned a short, impressive article explaining the trials and tribulations of Tacoma while also exploring why Seattle's Mayor has abandoned his goal of a broadband public option.

Before the massive cable consolidation that has left us with a handful of monopolists, we had a larger number of smaller monopolists that abused their market power to limit competition. One of the worst was TCI, which refused to upgrade its awful services in Tacoma, which pushed Tacoma to build its own network. TCI suddenly decided it did care about Tacoma.

TCI wouldn’t go down easily, of course. For the next year, as the City built out its system, the cable giant took advantage of the utility’s biggest weakness: All of its plans, from the kind of equipment it would buy to its construction schedule, were public information. So when Tacoma Power put in an order with its supplier for, say, coaxial cable, it found that TCI had already bought every foot of it. “But we started in one area of town and luckily we were able to get just enough material,” says Pat Bacon, Click’s technical operations manager. “We just inched our way through it and, before you knew it, we were a presence.” By July 1998, Click had its first cable subscriber, and the first broadband Internet user signed on in December 1999.

A substantial portion of the article is devoted to the dynamics around open access between the utility and independent providers -- an important read for anyone considering the open access approach.

Halverson did his homework on this article and I think he got it mostly right. I think the FiOS-wired suburbs do present a larger threat to Seattle than suggested, but it certainly does not compare to the approaching-existential crisis faced by Tacoma fifteen years ago.

I wish I could disagree with his conclusion that Seattle is unlikely to get a community fiber network but unless the community rises up to demand it, elected officials are unlikely to see any benefit to making such a long term investment.

10 Years Later - Tacoma and LaGrange

In January 2001, or about 1 million years ago in tech time, Site Selection Online published "Wired Cities: Working-Class Communities Build Next Frontier of High-Speed Connectivity". I found it years ago when reading up on the Click! network in Tacoma, Washington.

I recently stumbled across it again and thought it might be interesting to evaluate its claims after a decade (or close to it) had passed.

The lead of the article discusses Tacoma its relationship to Seattle. Tacoma had extremely poor connectivity from the private sector and its public power utility decided to build an HFC network to extend broadband to everyone in the community. Tacoma's Mayor notes that over 100 companies poured in after the community solved its own broadband problems - generating some 700 jobs in 18 months.

Fast forward to today, and this paragraph:

As a result, the next frontier of information companies isn't being confined to the Silicon Valleys of the world. It's taking root where you might least expect it: in places like Tacoma, LaGrange, Ga., and Blacksburg, Va.. And in most cases, it's government taking the lead, beating business to the punch by stringing fiber and building networks in working-class communities that most bottom-line corporations would otherwise ignore.

The principle of self-reliance is timeless. And we see the same idea in news articles today: local governments bringing broadband to areas the private sector cannot. In 2010, the fastest and more affordable broadband networks in the US are not in Silicon Valley -- they are in Lafayette, Chattanooga, Wilson, Utah, and other places where the community decided to prioritize big broadband.

Because of the competition in Tacoma, prices for telecom have remained lower than in nearby Seattle - as I quoted a Tacoma resident previously:

I have Comcast in Tacoma and all I know is since there is competition down here Comcast is about half the cost as it is in Seattle. They give you a rate good for a year. When your year is up you call up and just say Click! and bam back down you go. A friend in Seattle once called Comcast with both of our bills with similar service and mentioned my price and they said I must live in Tacoma and they wouldn't match the price.

Seattle continues to be plagued with traffic jams, one of the factors that had previously led some businesses to relocate to Tacoma when the bandwidth had become available. Now, Seattle has asked Tacoma for broadband advice on building a network.

In Georgia, LaGrange was noted by Site Selection for its fiber-to-the-business infrastructure (which helped it win the "Intelligent City of the Year" award. A Wired article noted:

"The city could have died when its textile industry faded. But instead they built fiber-optic networks, and offer(ed) low-cost broadband services to local businesses and the town's citizens. They should be commended. Too many small towns simply build an industrial park and offer relocation assistance to lure companies in. LaGrange offers all of that, and sophisticated Internet infrastructure. They understood that big bandwidth wins business for small cities."

Communities similarly afflicted by the loss of textiles and tobacco have used public investments to build impressive broadband networks, reversing their decline -- most notably Bristol and Danville in Virginia and Wilson in North Carolina.

Back in 2001, LaGrange had also snagged headlines with an experiment - offering free Internet access to everyone in the City via a TV-web interface. These are the kind of experiments communities are free to do when they control the infrastructure.

Once again, the trends we see today have changed little over the previous ten years - quoting again from the Site Selection article:

Like most rural towns its size, LaGrange faced a choice in the early 1990s: either build this network itself or get bypassed by the New Economy. "The big telecom companies in Atlanta made a business decision not to provide broadband service here," says Jeff Lukken, mayor of LaGrange and operator of the local Chevrolet dealership. "We approached BellSouth about partnering with them to build such a network, and they said no."

According to Martin Gidron, managing editor of the UT Digest in Silver Spring, Md., LaGrange is far from alone. "Generally, the small towns around America tend not to be able to get the broadband networks from the big companies," he says. "But for the towns it's a matter of economic development and economic survival. The tier-one cities are already pretty well served, so the movement now is toward second- and third-tier markets."

The Site Selection article also discusses Virginia's strategy for expanding broadband access:

Virginia also deregulated its power industry last year -- a move Upson says will encourage companies like Virginia Power to accelerate the growth of broadband services throughout the state. "Unlike some other states, we rely completely on private networks and encourage the building of those," he adds. "Virginia Link is the answer for businesses. There has to be that private-sector initiative."

How well did that work out? Virginia's hopes for the private sector to build the infrastructure has hardly distinguished the state. Over the last ten years, investments in next-generation networks have come from the public sector where they are able as Virginia has since preempted local authority to duplicate the successes of BVU in Bristol. One wonders if another ten years have to pass before the state legislature understands the private sector has no interest in building the networks Virginians need to be competitive in the modern economy.

Too often we fail to look back and see what lessons we can learn. Communities that help themselves tend to succeed whereas those dependent on absentee businesses tend to suffer.

Tacoma Offering Tips to Seattle

Seattle's new mayor continues to impress me as he makes good on his pledge to build a publicly owned fiber-optic network in the City. He has just met with the mayor of Tacoma to discuss lessons learned from the Tacoma Click! network.

We have previously discussed Click!, an HFC network run by Tacoma's public utility. Here are some additional benefits from the article:

Since its approval in 1997, Tacoma’s hybrid fiber coaxial network has, among other things, ushered in a cable television service, offered customers three high-speed retail Internet service providers, enhanced Tacoma Power’s electrical system and created a communications network among government institutions. In turn, the network and its programs have drastically reduced market rates for cable TV and Internet subscribers; saved local governments about $700,000 in annual expenses; and created several promising projects, such as “smart meters” that can gauge utility consumption electronically and “pay as you go” account options for electricity customers, she said.

I was glad to see the article noting the many differences between when Tacoma built their network and the present situation in which Seattle finds itself. Seattle certainly has bigger difficulties than Tacoma did, but they should continue examining their options to determine if the community should build its own network.

A local blogger was more pessimistic after reading the article, but one of the comments on the post bears repeating:

I have Comcast in Tacoma and all I know is since there is competition down here Comcast is about half the cost as it is in Seattle. They give you a rate good for a year. When your year is up you call up and just say Click! and bam back down you go. A friend in Seattle once called Comcast with both of our bills with similar service and mentioned my price and they said I must live in Tacoma and they wouldn't match the price.

Photo used under creative commons license from flickr.

Schrier Stays in Seattle, Fiber Network to Follow?

After campaigning on building a publicly owned fiber-to-the-home network in Seattle, Mayor McGinn has decided to maintain leadership at the Department of Information Technology. Department head Bill Schrier will stay on, continuing his work that lays the groundwork for a community-owned network.

He said he expects the city to apply for federal stimulus money in the first part of the year to move toward that goal. In addition to improving broadband access in homes, the initiative could help Seattle City Light implement smart-grid infrastructure, and improve public safety communications.

Another article further notes their shared ambition:

"Mayor-elect McGinn ran on a platform of bringing fiber to every home and business in Seattle, something I've advocated for several years," Schrier commented.

No post discussing broadband in Seattle is complete without a reference to Glenn Fleishman - who both wrote another story discussing the situation and then patiently responds to many comments in the thread below it. Discussing Tacoma's publicly owned Click! network, he notes that Tacoma's investment benefited everyone:

Click being built actually helped what has become Qwest and Comcast: by creating a market and making it feasible for professionals who need high-speed Internet access in Tacoma to live there, Click spurred the two incumbents to improve their networks, compete, and gain new revenue. Comcast actually thanked Tacoma Power publicly years ago; not sure it would today, but it was seen as a big boost for the viability of competitive broadband.

Photo used under creative commons license from flickr.