The Tacoma Click Saga of 2015: Part 3

Tuesday June 21, 2016

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.

(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.