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Public-Private Partnership Considered to Improve Click!
Tacoma's Click! Network is experiencing problems. That's not news. What is newer is a proposal to lease the public network to a third party operator to try to address those problems.
A brief summary of Click!'s history would go something like this: Back in the 1990s the City of Tacoma and its citizens were unhappy with the level of service they were getting from TCI, the only cable provider in Tacoma at the time. So Click! launched in 1997 to provide competition in the marketplace, bring service levels and quality up, and put downward pressure on rates. Initially Click! was successful on those counts, but over time market conditions have shifted, and the network has lost its competitive advantage. Meanwhile, Click! has also not been financially self-sustaining. The shifting marketplace has put the small network at a disadvantage in terms of economies of scale and negotiating power with content providers.
Over the years the City has worked with consultants to keep Click! viable, and various things have been tried, including a deal with ISPs currently set to expire in 2016 that locks in rates while the ISPs grow the customer base. More recent assessments show that's not working either, and look at a range of alternatives for moving ahead. Alternatives were evaluated in light of goals for the network (see the above chart). The options of selling or shutting down Click! were considered, but it was determined that the cons outweigh the pros, with the elimination of a publicly-owned network leading to a decrease in options for customers, and an eventual decrease in services.
Two alternatives were identified as potentially workable: either reduce labor costs and try to operate with fewer employees or leasing to a third party. The option of leasing to a third party was determined to have the greatest potential for cost recovery while maintaining services, and TPU has been pursuing a conversation with Wave Broadband to do that. Wave offers 24/7 customer service, and is the largest gigabit network provider in Washington. The analysis provided by TPU found them to be financially strong, and committed to net neutrality, while offering competitive value-oriented pricing that could compete head-to-head with Comcast.
TPU currently has a non-binding letter of intent with Wave, a locally owned, independent company headquartered in Kirkland. The agreement being disucssed would have Wave continue to make investments in the Click! network, and performance measures over the life of a 40 year contract (with the option to renew for an additional 10 years). Wave would provide increased services to Click! customers, with rate increases capped at 5% per year. They would continue to offer a low-income cable internet option for qualifying households, and a bundling option of internet, cable, and phone.
TPU is negotiating with Wave exclusively at this point, as an RFP is not required for this kind of an arrangement, and because there are very few suitable partners for such a public-private partnership.
The idea of leasing Click! to a third party operator is seen to have several advantages - the third party company can offer economies of scale and better negotiating position. If this happens the City will maintain ownership, and thus some degree of control over the network, but the Click! brand identity would go away, and become something new. Overall the assessment is that the deal with Wave would relieve TPU and its ratepayers of most, if not all, of the financial burden of the Click! network.
The proposal worked out with Wave is good for the next 60 days. During that time there will be continued discussion with the City Council and labor groups, followed by a couple of town hall meetings for the public to learn more and weigh in (those are currently penciled in for April 9 and 15). If the decision is to move forward, it will require the support of the council and the TPU board.
The council hasn't committed to anything, and some seemed a little wary when presented with the proposal at yesterday's study session. Councilmember Thoms in particular expressed a desire to ensure that the third party assessment was sufficient, and to ensure that all internal management solutions had been exhausted before pursuing a third party arrangement.
We're sure to hear more about this in the coming weeks, but what's your initial reaction?
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