Tacoma considers a private bailout plan for muni broadband system

by Steve Blum • , ,

Local choice is not a free ride.

The City of Tacoma might back out of the cable TV and broadband business, and lease its municipal cable system to a private operator for 40 years (h/t to the Baller-Herbst list for the pointer).

The muni system – branded Click – was built on the back of a fiber optic network originally installed to support the city-owned electric utility. It competes against Comcast and CenturyLink, which is a benefit to local residents in the sense that they have a third option and a source of pressure on what would otherwise be cable and telephone monopolies. But it comes at a price: the electric utility is subsidising the broadband and video operation to the tune of $9 million a year according to the most recent articles.

A few months ago, the annual loss was pegged at $3 million – I’m not sure where the discrepancy lies, but accounting for cross subsidies between an electric utility and a co-owned and operated broadband system is an art, not a science.

Wave Broadband is offering to lease the system for $2 million a year, with another $1.5 million a year pledged for investment. Wave, and its sister company Astound, have experience in the overbuild business, operating systems in the San Francisco Bay Area that also compete with Comcast, as well as AT&T. It promises to upgrade at least some customers to what it calls a “Gigabit broadband service”.

The decision is up to the Tacoma city council. Some members have expressed serious reservations about turing Click over to a private operator, but current losses combined with increasing television programming costs and the need to keep investing in system upgrades makes an exit strategy of some kind increasingly attractive.