21st: The little city that could

The little city that could By Doug McLellan A Tacoma power company's move to provide Net and cable service counters the trend toward megacorporate control of telecommunications

By Doug McLennan
Published February 3, 1998 8:00PM (EST)

Last summer -- a year after Congress passed telecommunications deregulation in a move supposedly intended to increase competition -- critics looked around and wondered where that competition was. While we're offered an ever-increasing array of choices about how we get our information and entertainment, those choices seem to be controlled by an ever-shrinking cast of players.

And yet, as technology gets cheaper, it keeps reordering the media landscape, making it almost impossible to predict what any one regulatory change will mean.

Who, for instance, would have thought that, six years ago, when President Bush stood on an oil platform in the Gulf of Mexico signing energy deregulation legislation, it would mean more television choices for a small city a continent away?

Here's how it came about: Energy deregulation meant that electric utilities suddenly had to face the possibility of competing for customers. Managers at Tacoma City Light in Tacoma, Wash., looking for ways to offer cheaper, more efficient power, decided they had to modernize.

Power utilities are a pretty low-tech business. The delivery of electricity hasn't changed much in the past 100 years. When the power goes out, for instance, utility officials often don't know about it until a customer calls in a report. Even then, crews have to be sent out searching for downed lines.

New technology allows better monitoring, and new "smart" meters allow customers to help control their own energy consumption. Tacoma City Light officials hired a consultant to explore the technology.

It turned out that rewiring Tacoma for the new equipment would bring an array of unexpected benefits. Not only could you run the monitoring equipment, but you'd have room on your new lines for 70 channels of cable TV, super-fast access to the Internet for any customer who wanted it and even space left over to offer telephone service. It's no mystery why Microsoft has recently decided to take a $2 billion plunge into the cable business.

Rewiring Tacoma isn't exactly cheap -- about $100 million initially -- and City Light officials weren't exactly interested in getting into the TV business. But they commissioned a marketing survey and discovered, as Tacoma City Light manager Steve Klein put it, that customers ranked TCI, the city's cable TV provider, "somewhere down around Satan."

Tacoma's experience with cable TV is pretty typical for communities its size (185,000 population). The city was wired for cable decades ago by a variety of small companies that were eventually bought up by TCI, the nation's largest cable provider. TCI doesn't make its money from programming or offering the latest technology; it's in effect a real estate company. The company owns the cable, and month after month customers pay rent to access it.

But Tacoma's system hasn't kept up with changing technology, and TCI's Tacoma customers receive often fuzzy service and as few as 20-something channels rather than the more typical 50, 60 or 70 available in larger markets.

Catching wind of City Light's plans, TCI executives rushed into town at the end of last year offering to upgrade, but the city decided it was too little too late. Tacoma City Light is now choosing a contractor for its wiring project, and the first customers ought to be hooked up by spring. Klein expects the entire city and outlying areas will be rewired within two years. TCI, unwilling to concede defeat, announced plans last week to go ahead with its own upgrade.

Whether City Light is able to woo away lots of TCI customers or the cable giant delivers on its new promises and holds onto its viewers, cable bills should drop and subscribers will receive more TV channels. Klein says six channels on the city system will be set aside for community use, and the company intends to let customers help decide what channels the new system will carry.

High-speed Internet access is the most interesting wrinkle of the new system. City Light plans to extend its Internet system to schools and libraries and other public facilities. But if the utility was reluctant to get into cable TV, it's even more wary of becoming an Internet service provider. So third-party ISPs will lease cheap space on the system and offer it directly to consumers. Competition should ensure low rates. Cheap phone service will follow. "We're interested in being a public highway other businesses will ride on," says Klein.

"We've traditionally been a smokestack-lunch bucket town," he says. "But smokestack towns have been dying and cities like us have been passed over. Now we have the means to build some of the best infrastructure in the country."

Klein says the company conservatively expects about 25 percent of Tacoma's households will sign up initially for the new TV package. Between the TV, Internet and phone services, as well as the upgrade to City Light's own systems, Klein says the city should recoup its investment within 10 years.

Tacoma isn't the only city setting up its own cable business. A number of small communities -- in Iowa, Georgia, Massachusetts and Kentucky -- have discovered it's suddenly within their means to wire themselves.

Current trends suggest that even though Tacomans will get more TV choice, their viewing time won't likely increase. On the other hand, high-speed access will finally make the Internet a useful everyday tool for thousands of city residents.

Best of all, what some utility managers in Tacoma have offered is a ray of hope that the entire world isn't going to be owned by five companies.

Doug McLennan

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