City utilities: electricity, water, - cable?
As latest round of cable deregulation kicks in, more cities enter cable
Consumers unhappy with cable rates and service haven't had many options: Make do with a rabbit-ear antenna or buy a satellite dish.
In some cities, however, there's another option - one that's growing in popularity around the United States: Switch to a competitor run by the city.
That's what almost 4,300 cable customers in Tacoma, Wash., have done. Last year, the city's utility department introduced what it calls the Click! Network, offering residents not only cable television but digital music, Internet access, and high-speed data connections for small and home businesses.
The National Cable Television Association counts 67 municipally owned cable systems around the country; Tacoma appears to be the largest city to get into the cable business.
That number may grow, analysts say. In the wake of the latest round of cable deregulation, which took effect yesterday - the result of the 1996 Telecommunications Act - many of the nation's largest cable companies announced rate increases hovering around 5 percent.
Municipalities trying to answer consumers' complaints about prices and services may start shopping around. While the options aren't excessive, they range from replacing private cable companies to introducing a second cable company to starting a city cable company.
Municipal cable companies like Tacoma's are going head-to-head with private companies with considerable success - and attention. Diane Lachel of Tacoma Public Utilities reports many inquiries and visits from cities and utilities around the country.
It also attracted the attention of Seattle, just 30 miles north, where city council members were irked by Tele-Communications Inc. (TCI), the resident monopoly in much of the city, and its failure to meet deadlines for upgrading service. Last month, the council decided to fine TCI for failing to meet those deadlines. It also authorized a study of the city's telecommunications infrastructure and will explore options for improving it.
One of these options is a public cable system modeled on Click! (Seattle also experimented with another approach more cities are considering as a way of holding prices in check: introducing more private-sector competition. That opened a portion of Seattle to a second cable company to compete with TCI.)
Tacoma didn't start out with the intention of getting into the cable business. Instead, the electric utility, Tacoma City Light, wanted to improve its internal communications system linking hydroelectric dams, substations, and offices. A study found that the whole city could be wired with an advanced fiber-optic system, which would allow for many different options, including cable and the Internet.
Tacoma now offers a bare-bones package for $5.95 a month of over-the-air channels and two basic cable channels. At $9.95 a month, customers get a basic cable package that adds a few more cable channels as well as 31 music channels. The standard package, at $23.95 a month, includes 71 channels and music. And for $40 a month, viewers also get four premium channels and six pay-per-view channels.
Tacoma hasn't wired the entire city yet. So far, Click! has about 4,300 customers and is adding about 100 a week.
Steve Kipp, TCI Northwest spokesman, says the cable company has lost only about 800 customers since Click! began, suggesting its gains are coming primarily from customers who have not had cable before.
It didn't come without some effort. Mr. Kipp acknowledges that when Click! was first proposed, TCI didn't have a good reputation in Tacoma. So TCI invested in upgrading its service as well as its system; it now offers customers as many as 136 channels, high-speed Internet connections, and digital television. "The new kid on the block has not made much of a dent on our business," he adds.
That's not to say that cable operators aren't concerned about the idea of city governments getting into their business. They cite studies of what they term "cable overbuilds" - "the delivery of video cable television services via duplicative wired networks," as defined by The Strategis Group in Washington.
Strategis's study argues that "cable overbuilds typically are not financially viable and do not present prudent investments," even if a telephone company or municipality operates it.
But while the cable industry tries to make its case, cities are also hearing from disgruntled consumers like James Reuter, a Tacoma photographer who after 25 years as a cable customer switched to Click! when it became available in his neighborhood.
For Mr. Reuter, the decision was based less on price (Click! is slightly cheaper) than on the quality of picture and service. TCI, he says, was "not super-friendly and not too quick about customer needs."
Since the switch, he says, he's received "super-sharp images and no outages whatsoever.... It's a whole lot better than what I had before."