After a rancorous battle between incumbent
Tele-Communications Inc. and the municipal public-utility company, and against a backdrop
of uncertainty about the economic feasibility of overbuilds, cable competition is coming
to Tacoma, Wash., this week.
Click! Network, a division of Tacoma City Light, announced
its programming lineup and prices last week, and it plans to inaugurate cable-television
service this week to a 6,000-household area of the city that is wired for 750-megahertz
hybrid fiber-coaxial cable service.
Tacoma's overbuild received greater prominence than others
as a result of the high-profile efforts last year by TCI president and chief operating
officer Leo J. Hindery Jr. to derail the city's scheme in his hometown by offering a
partnership deal, which the City Council rejected in an acrimonious session with Hindery.
Deb Stewart, manager of Click! said the new cable company
hopes to complete its overbuild in Tacoma by the first quarter of 2000, and to achieve a
25 percent penetration rate. After the municipal rebuild, Stewart said, Click! plans to
expand into the outlying suburbs.
TCI currently has nearly 50,000 subscribers in Tacoma,
representing 60 percent penetration, and 200,000 subscribers in the Pierce County
metropolitan area.
System also offers eight premium, four general PPV and two
adult-movie services
Source: Click! Network
Click! is offering customers a "broadcast"
service level of 17 channels -- including all local-broadcast channels, Northwest Cable
News, preview channels and education and government channels -- for $5.95 per month.
Cyndi Wikstrom, the system's marketing manager and a
20-year cable veteran (most recently for a TCI system in the San Francisco Bay area),
noted that TCI's lowest-priced tier was a basic service offering 23 channels for $11.87
per month. Wikstrom said she anticipated that Click!'s broadcast service would appeal to
both nonsubscribers and direct-broadcast satellite customers.
Click!'s basic service includes seven additional cable
channels, 31 digital-music channels and a set-top box for $9.95 per month, and the
standard level of service offers 42 more channels for a total monthly fee of $23.50.
Click! also plans to begin offering high-speed Internet connections by the end of the
year.
TCI 's expanded-basic package sells for $23.94 per month,
and it includes 72 channels. The system, which is being upgraded from 550 MHz. to 750 MHz
, is also preparing to sell digital service -- with an additional 30 channels available --
for an extra $10, plus $3.50 for a set-top box if the customer doesn't have one. And TCI
is offering @Home Network high-speed Internet service to upgraded homes.
Stewart said she doesn't expect a price war in the market,
but she promised to wage a full-scale marketing campaign to win customers, capitalizing on
such "differentiating" factors as the broadcast level of service and channels
that TCI doesn't carry, including Country Music Television, BET on Jazz, Speedvision, Toon
Disney and Spanish-language network Univision.
Click! has hired design and public-relations agencies
specializing in branding, Stewart said, and she expects to launch a "full media
plan" as more neighborhoods are wired.
Stewart said Click! received about 1,000 phone calls after
announcing its lineup and rates last week.
TCI spokesman Steve Kipp said it's "too early to
tell" what TCI's marketing response to its new competitor will be, considering how
few customers Click! has and how long it will take to overbuild the city.
Kipp characterized Click!'s goal of achieving 25 percent
penetration in less than two years as "ambitious," and he said TCI is taking
Click! "very seriously," and that it is prepared to do "whatever it takes
to be the cable company of choice in Tacoma."
Asked about recent studies that claim that overbuilds do
not generate sufficient cash flow to recover upfront costs and ongoing operating expenses,
even when significant market penetration is achieved, Stewart said she agreed.
But, she said, Click! is different because it is a case of
a utility company building a fiber optic network that will "enhance management of
energy services" in a deregulated and competitive environment.
She argued that TCL's move into cable is "more
significant" than a cable overbuild because it's also designed to protect the core
electric-utilities business and to offer telecommunications and high-speed-data services
that will pay back the high cost of capital to build the fiber system.
She declined to pin down a payback date, but she said
Click! was a "multiple-revenue-stream business" that based its business plan on
"conservative" assumptions.
"The upside," she added, "is
tremendous."
