Tacoma weighs risk and reward with list of muni broadband suitors down to two

by Steve Blum • , , ,

The City of Tacoma has narrowed the list of possible buyers of its municipal cable system – aka Click – down to two local companies, Wave Broadband and Rainier Connect. A year ago, the city issued a request for information and qualifications and received responses from five companies. Only two initially met the city’s specifications – Wave and Yomura Fiber – but subsequent talks convinced Rainier to take on more risk, and led to Yomura’s exit, due to ownership concerns. Click is operated by, and operationally integrated with, the city’s municipal electric utility, which has a different set of federal rules to follow.

CTC Technology and Energy, an east coast consulting firm, helped evaluate the proposals and is recommending that the city go with Rainier, largely because it’s offering to lease the system for $2.5 million to $3 million per year, while Wave is only offering $1 million a year. But, CTC’s report acknowledges, Rainier is a riskier partner…

Wave is a large, private equity-backed, enterprise that is part of the sixth-largest broadband company in the United States. As such, it should easily be able to scale to meet the obligations contemplated in the term sheet and thus represents a very low risk proposition for the partnership.

Rainier Connect is a smaller, family-owned enterprise with far less scale and resources, and thus entails some more risk for TPU and the City than would a partnership with Wave. Rainier Connect does appear to have the capability to scale up operations to meet its proposed obligations.

Wave also has considerable experience building and operating broadband systems as the third player in markets with incumbent telephone and cable companies. Rainier doesn’t appear to have much, if any, experience as a facilities-based wireline cable company or Internet service provider.

Both companies promised to abide by network neutrality principles, and to offer discounted service to low income households, as required by the city. But they fudged on open access commitments.

As CTC’s analysis put it, both companies “will provide wholesale services consistent with its practices and policies in other markets”. Which really means that the access available to third party Internet service providers won’t be so open – in this case, probably a good thing because Click already competes with Comcast and CenturyLink in Tacoma. Forcing a private operator to cede space to other competitors on an unrestricted basis could very well lead to the kind of business case death spiral the Utopia project in Utah found itself in.

For now, the city is taking public comment before making a final choice.

City of Tacoma fact sheet, Click private/public partnership, 5 March 2019
CTC presentation, Click private/public partnership, 5 March 2019
CTC report, Rainier and Wave term sheets, 5 March 2019
CTC summary, Rainier and Wave term sheets, 5 March 2019
Rainier Connect, Click term sheet, 5 March 2019
Wave Broadband, Click term sheet, 5 March 2019

More documents regarding the City of Tacoma and Click are here, and more blog posts are here.