Disbanded: No Broadband Utility for Seattle
For years Seattle has welched on its promise to build a municipal broadband network. We may have Tacoma to blame—and thank—for that.
For Seattleites desperately in need of a break on their Internet bill, it had to be a drag to discover in early May that their last best hope was fizzling. “Seattle Pulls Plug on its Broadband Network,” read the Seattle Times headline, suggesting the City was abandoning its years-old plan to offer a municipal Internet service that would operate like a public utility. That wasn’t entirely true: What Seattle’s Department of Information Technology actually dumped was a project launched in 2005 to blanket Columbia City with free Wi-Fi. But it was another harsh reality check for anyone in Seattle banking on one day having a legitimate alternative to Comcast.
Plans for a municipal network began back in 2004, when then–city council member and former NBC News foreign correspondent Jim Compton floated the idea in a formal resolution: Why couldn’t the City string its own fiber-optic lines on every utility poll from Lake City to West Seattle and elbow its way into the Internet market? The following year there was even talk of establishing an Office of Broadband to see the plan through. Two years after that the City commissioned a 42-page report that outlined the cost of such a network and whether Seattle could pull it off. (The answers to those questions: $400 million and yes.) And then…nothing.
In 2009, Mike McGinn, then just an upstart candidate for mayor, courted the tech vote—and won the election—in part by promising to make good on that five-year-old plan to make citywide broadband a reality. “Due to a lack of vision and political will, the current administration has left the plan to sit on the shelf gathering dust,” he wrote on his website. Weeks before taking office he even went so far as to meet with Tacoma mayor Bill Baarsma to discuss Click Network, the wholesale broadband service that Tacoma Power built in 1998. Baarsma and members of the Click team were all too happy to show off their system, which had long since become a nationally recognized success. But they warned McGinn that the marketplace had changed dramatically. “I say this all the time, and I said it the last time I met with Mayor McGinn,” says Diane Lachel, Click’s government and community relations manager. “The utility would not make the same decision today.”
In fact, for all it did to transform Tacoma into a digital utopia of zippy download speeds and affordable rates, the Click Network may make the best argument for why Seattleites will never enjoy the same luxuries.
Tacoma city council members knew that funding a municipal network was the right thing to do when Leo Hindery called them stupid. Hindery was the proverbial local boy done good, a Bellarmine Prep grad who’d gone on to become the CEO of a major national company. Unfortunately that company was TCI, Tacoma’s only cable provider—and the barrier between the city and the modern age. In 1997 Tacomans had access to just 31 cable stations. If they wanted to watch a pay-per-view boxing match, they had to pick up a set-top box for that event from the company’s local office, hook it up themselves, and return it when the match was over. And before reaching some customers’ homes the standard cable signal passed through more than 30 connection points, picking up more noise at each one, until the picture was reduced to nothing but snow. Yet TCI (along with Tacoma’s telephone provider at the time, U S West) refused to upgrade its woefully out-of-date system. So Tacoma Public Utilities decided to build its own.
When news of the utility’s plans made its way up TCI’s corporate chain to Hindery, he made a trip home to sweet talk the city council into blocking the unorthodox proposal. Municipal cable systems weren’t unheard of in the late ’90s; a handful had sprouted up here and there in Iowa farming communities where cable companies couldn’t be bothered to invest. But building one where a provider already had infrastructure in place? That was dumb, Hindery told the council. And if they’d just forget about the whole thing, he’d string new wires and smooth out the kinks in service, no questions asked. But the council balked—they could see he was more interested in stifling competition than in serving their constituents. Legend has it Hindery flew into a rage and stormed from the room so abruptly that he knocked his chair over on his way out.
TCI wouldn’t go down easily, of course. For the next year, as the City built out its system, the cable giant took advantage of the utility’s biggest weakness: All of its plans, from the kind of equipment it would buy to its construction schedule, were public information. So when Tacoma Power put in an order with its supplier for, say, coaxial cable, it found that TCI had already bought every foot of it. “But we started in one area of town and luckily we were able to get just enough material,” says Pat Bacon, Click’s technical operations manager. “We just inched our way through it and, before you knew it, we were a presence.” By July 1998, Click had its first cable subscriber, and the first broadband Internet user signed on in December 1999.
It’d be easy to stop there and say the project has been a success. For years after the network went live, Tacoma rode a wave of good press and “most-wired city” praise that brought more than 100 new businesses to the downtown core. The City saves nearly $700,000 annually by providing the Internet to its own buildings. And today 18,000 customers get their broadband through Click. Compared to the total number of homes that Click could serve, roughly 110,000, that number seems low. But you can spin it—and the City does—by noting that whether or not Tacomans subscribe to the municipal network, they’re enjoying its benefits: TCI (now Comcast) had no choice but to improve service and lower its prices to compete. Today the monthly charge for Internet in Tacoma is about $30—nearly $25 less than what we pay in Seattle.
There is one slight kink in Click’s wires, though: While it provides cable television directly to its customers, it sells access to the broadband network wholesale to three local ISPs, which turn around and sell it to subscribers. That hybrid wholesale-retail arrangement seemed like a good idea at the time, in part because the utility didn’t have the manpower to provide customer support for two retail operations when Click launched. But the network’s management team has chafed under the system since day one. For starters, it puts a burden on the customer. “They have to call us to sign up for video service, and then we have to refer them to the three ISPs to make an appointment for Internet service,” says Tenzin Gyaltsen, Click’s general manager. For those accustomed to snagging a bundle of services—phone, cable, and Internet—from one provider, that’s too much work. So they say, “Thank you very much. I’ll switch to Comcast.”
When Tacoma Power put in an order with its supplier for, say, coaxial cable, it found that TCI had already bought every foot of it.
And that contributes to what’s become a more pressing issue for the City’s accountants: money. Sixty percent of what Tacoma Internet customers pay their ISP gets passed along to Click, but that hasn’t been enough to pay down even a fraction of the network’s initial $100 million price tag. And for the 2011–12 biennium, the operation—which also maintains a digital metering system for Tacoma Power—is expected to run $5 million in the red. That discrepancy is a point of frustration among the Click management team: “We do 90 percent of the work, but the revenue share is 60 percent to 40 percent,” Gyaltsen says. But what may have been even more difficult for them to swallow was a failed attempt to shore up Click’s finances.
In early 2012, Gyaltsen proposed a radical change to Click’s model. Based on a recommendation from CCG Consulting—the same group that weighed in on Seattle’s municipal broadband plans in 2007—Click would begin selling Internet services retail, rather than wholesale to the three ISPs. The strategic plan even suggested buying customers “from one or more of the ISPs as a way to jump-start the new business line.”
The ISPs—all based in Tacoma—shot back, defending their digital turf. To plead his company’s case, Mitchell Shook, founder of longtime Click partner Advanced Stream, set up a website, wrote an editorial in the Tacoma News Tribune, and sent a letter to the public utility board. Allowing Click to sell a retail service (and thereby offer a cable TV-Internet bundle), he argued, would squeeze out the smaller providers it had helped to build up and undercut the competitive market it had created. The utility board agreed, and this spring Gyaltsen—for the time being—abandoned the idea.
If he knows how he’s going to right the ship now that his first option has been spiked, he’s not saying. “If you want to call it frustration, that’s your word,” he said when I asked if tension was growing between Click and the ISPs. “What we’re trying to do is balance things out so that the actual beneficiaries of the network are paying for the usage of the network.”
Viewed as a for-profit operation—and as a model for Seattle to emulate—it’s hard to sing Click’s praises. But that may be the wrong way of looking at it. “A municipal network should be evaluated on the same basis of how we evaluate roads and other infrastructure,” says Christopher Mitchell, founder of muninetworks.org, which tracks community broadband issues. “Which is to say that the point of the road is not to produce revenue for the general fund. It’s to produce economic development and other benefits.” Viewed that way, Click was an irrefutable boon to Tacoma’s economy. “We wouldn’t be talking about Tacoma right now if they hadn’t made that investment,” he adds.
Unfortunately for Seattleites, that may be why we’ll never see a municipal broadband network in Seattle: We don’t need one, at least not in the way Tacoma did in 1997. And the risks of building one, both financially and in terms of pushback from the cable industry, outweigh the rewards. “That’s why no major city has taken this on yet,” Mitchell says. “Any good that can come from it will take at least four or five years to materialize. And if anything goes wrong, the mayor will be pilloried for it.”
Mayor McGinn knows all about being pilloried on the Internet. The last thing he needs is to be pilloried for ruining it.