For several years now, Tacoma, Washington, has pondered the fate of its Click! municipal open access network. In the spring of 2018, the community issued an RFI/Q searching for interested private sector partners that would lease the network from the Tacoma Power Utility (TPU). After reviewing responses, consulting experts, and comparing potential arrangements, Tacoma has narrowed the field of possible partners. The goal is to put the network on a sustainable and competitive footing both financially and technologically. Tacoma is following a path that will retain public ownership of the Click! network as the network continues to expand.

Click! has offered considerable benefits during its lifetime, but the network retains considerable debt even as it will soon require more upgrades to continue competing with Comcast. The cable television system is rigged against small operators and while the open access Internet side creates many benefits, Click!’s ISPs just don’t have enough subscribers to make the network financially viable into the future.   The discussion around Click’s finances are complicated because the broadband network is used for both external customers and internal utility uses -- the rate modeling around how to allocate costs is a process that requires subjective analysis (e.g. should the costs be allocated based on bandwidth or evenly split among each service). Some have credibly accused past TPU officials with cooking the books to make Click!’s financial status worse than it actually was. Nevertheless, Click! still doesn’t appear to be financially sustainable when costs are allocated more reasonably. Given the upgrades needed by the cable system, we fear that preserving the status quo will do more harm than good to the community over the medium and long terms; Tacoma needs to make a change to avoid being stuck solely with the broadband monopolies that plague the rest of us.

In recent years, leadership in Tacoma, Washington, has debated the future of the Click! Network. They recently released a Request for Information and Qualifications (RFI/Q) to gather ideas and proposals from potential partners. Responses to the RFI/Q are due by April 27.

A Dozen Goals

The Tacoma Public Utility Board and the City Council have established a list of 12 policy goals that they plan to adhere to while moving forward. At the top of the list is, “Continuing public ownership of the telecommunications assets, especially those assets necessary for Tacoma Power operations.” Back in 2015, the Tacoma community began discussing the possibility of leasing out operations of the network. In our four part series, "The Tacoma Click! Saga of 2015", we examined the history, challenges, and potential future of the municipal network.

Other goals are designed so that low-income residents will not be left behind, network neutrality principles are respected, user privacy remains protected, and open access is preserved to encourage competition. The City Council and the Public Utility Board also want to be sure that the infrastructure continues to be used for the city’s power utility and that the telecommunications business operations are financially stable. You can review all the goals on the city’s press release.

Click!

Tacoma invested in its network back in the 1990s. The coaxial cable network passes about 115,000 premises in the Tacoma Power Utility (TPU) service area. In addition to wholesale Internet connectivity in keeping with state law, the network offers cable television service. TPU used the network for smart metering in the past, but is switching to a wireless system, which will only require the fiber backbone. They feel that now is the time to find a partner to take over broadband operations to reduce their operational costs.

Recently, state lawmakers in Minnesota passed legislation to protect Minnesotans’ online privacy. In Tacoma, the City Council made a similar move by passing a resolution asking the Tacoma Public Utilities board to prevent ISPs on the city’s fiber network from collecting and selling personal online data. The resolution was an example of local authority stepping in to fill the gap when federal policy fails.

When The State And The Feds Don't Act

Bills were introduced in the Washington State Legislature this session, but state lawmakers didn’t turn them into law. By mid-April, it appeared that the bills weren’t going anywhere so City Council members felt the need to address the issue after the Trump Administration’s FCC allowed privacy protections to lapse.

“I’ve just heard lots of concerns from community members and from boosters of the Click network about privacy,” said Councilman Anders Ibsen… “This also ensures that any private entity that rides our fiber, that uses the Click network, is held to certain ground rules, just really basic ground rules about respecting the privacy of their customers.”

Tacoma's Click! publicly owned network serves about 23,000 people. Over the past few years, the community has debated the future of the network and is still considering several possible scenarios. For more, check out our four-part series on the network's history and an analysis of the benefits from this public investment.

Local Network = Local Control

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. 

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.

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.

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

When communities decide to proceed with publicly owned infrastructure, they often aim for open access models. Open access allows more than one service provider to offer services via the same infrastructure. The desire is to increase competition, which will lower prices, improve services, and encourage innovation.

It seems straight forward, but open access can be more complex than one might expect. In addition to varying models, there are special challenges and financing considerations that communities need to consider.

In order to centralize our information on open access, we’ve created the new Open Access Networks resource page. We’ve gathered together some of our best reference material, including links to previous MuniNetworks.org stories, articles from other resources, relevant Community Broadband Bits podcast episodes, case studies, helpful illustrations, and more.

We cover: 

• Open Access Arrangements
• Financing Open Access Networks
• Challenges for Open Access Networks
• U.S. Open Access Networks
• Planned Open Access Networks

Check it out and share the link. Bookmark it!

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 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.

RainerConnect, Advanced 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.