Click! Network Moves to Put Independant ISP’s Out of Business

Click NetworksAfter years of operating in blissful ignorance of the markets they allegedly compete in, Click! has come to the conclusion that they’re in trouble and have to do something, and do it quick!

The fact that they haven’t upgraded their system to DOCSIS 3.0 – like Comcast did three years ago isn’t to blame. The fact that people are ditching traditional cable TV in droves – “cutting the cord” – in favor of streaming media over the internet (like Netflix and Hulu) isn’t to blame.


According to a presentation at the Tacoma Utilities Board meeting last week, and based on a consultant’s study that is over two years old, Click! Networks has finally come to the startling conclusion that their cable TV customer base has stagnated and revenues are down — mainly due to Comcast offering bundled services. But wait, there’s more – they have a remedy:

“Click needs to offer retail ISP services directly to customers, which means competing side by side with the three existing ISP’s. The wholesale model where customers have to buy data somewhere other than Click is the primary reason for the total stagnation of sales that has occurred since Comcast added the bundle…”

What is the connection here? “The wholesale model where customers have to buy data somewhere other than Click is the primary reason for the total stagnation of sales that has occurred since Comcast added the bundle…”

I challenge Click to prove that.

The whole thing is asinine. The wholesale internet-service business model doesn’t have anything at all to do with stagnation of TV sales. Has anyone at Click! even heard of Netflix? Do they read the news? Have they heard of TV antennas?

What Click really means is that TV sales have dropped off in the past couple years, and they need to make up the difference somewhere else.

Cutting the ISP’s out of the picture and selling internet retail gives them the extra revenue they need. It’s a handy remedy that they can implement right away. A quick fix.

Of course, it’s clear that ISP revenues will decline with Click selling retail. Having Click sell retail internet service will obviously change the competitive landscape greatly.

Quite probably drive the current ISP’s out of business.

So the question at issue then, without mincing words, is:

Is it good public policy for the City of Tacoma to put three local ISP’s out of businesses simply because Click wants the additional revenue for themselves – basically, to prop up an unprofitable, poorly run cable TV franchise? Where the effect will likely eliminate the jobs of the ISP’s employees, and maybe bankrupt the owners?

I believe it is not good public policy.

Click was expressly set up in the late 90′s as a wholesale internet provider. They contracted with three ISP’s (Rainier Connect, Net-Venture and Advanced Stream) to provide retail sales to the public.

Those independent ISP’s have been operating now for over 10 years. They’ve made a tremendous investment of time and money in making Click’s internet operations a success. And the internet side of the operation is a success. Subscriber levels have remained relatively constant, even despite Click’s failure to upgrade its network to the faster DOCSIS 3.0 standards, a move Comcast did nationwide over three years ago.

So now, Click’s TV revenues are falling and they decide to make up the difference by cutting the ISP’s out of the picture?

That’s a very bad idea, from the public policy standpoint. Governments are supposed to promote local businesses, not deliberately send them into bankruptcy.

But Click didn’t stop there with their bad ideas: They have a magic mantra that they believe will for sure make things better – they want to offer bundles. Cable TV, internet access, VoIP landlines, cell phone service, all sorts of neat things all wrapped up together.

Sadly, where bundles were the rage a few years ago (when Click’s consultant’s report was written) lately they’ve lost their popularity. Why? Because they aren’t economical from the standpoint of consumers. Click is a couple years too late. They clearly haven’t done their homework.

The current rage is “un-bundling.”

Comcast’s bundles are for example, a really bad deal – way overpriced. You can get much better deals from other providers on VoIP. But landline phones are a dying breed in any event. The trend in moving away from landline phones is accelerating to the point where some market analysts predict the last landline phone will have its cord cut by as early as 2025.

I disconnected my landline in favor of a cell phone more than 4 years ago, and have never regretted it. Landlines are an unnecessary expense for anyone with a cell phone.

Bundling is not going to save Click.

The truth be known, cable TV service is on a decline everywhere. Comcast uses the bundling mainly as an enticement to prop up its withering TV service – withering for exactly the same reasons Click’s cable TV customer base is “stagnating.” Why? Two words:

Cord cutters.

I cut my cable TV cord over a year ago and I don’t regret it for a minute. I spent maybe $100 on an antenna, and now get about 40 (mostly HD) channels off the air for free (in North Tacoma). For movies I have Netflix and Hulu and other streaming sites from the web. There’s a humongous amount of premium content legally available on the internet if you know where to look.

In metropolitan areas with lots of free, over-the-air channels – like Tacoma – cable TV’s days are absolutely numbered – it’s an obsolete, archaic, outmoded business model. The cord-cutters phenomena is accelerating. Comcast sees that and they’re doing everything in their power to prevent it (along with all the other content providers). Comcast’s biggest fear is that they’ll become simply the owner of big pipes – while losing all the content provision business to upstarts like Netflix.

Streaming media (ala Netflix) is the wave of the future; it’s just too convenient, and too good a product not to prevail. Cable TV – where you pay for 400 channels and usually only watch a half dozen – is a dead man walking. Comcast may be able to stall-off the death of cable for a short time, but that’s it. It can’t prevent it. It’s inevitable.

Who would have thought Hollywood Video would go toes up? Or Blockbuster Video? Or for that matter, the DVD, which is dying a slow death? The whole content delivery landscape is in the process of changing; with as profound and disruptive changes as when the automobile was first introduced, or electricity.

Cable TV is going down, soon, and the only logical, rational course of action is to get out now while the getting is good. Not prop it up at the expense of local businesses.

If Click wants to remain a player, they need to realize the internet access business isn’t at all static. They’re going to have to ditch the AOL mentality of “all they’ll ever need is 56k” – look what that did for AOL. Click will always have to continue to make periodic speed and bandwidth improvements to their networks if they want to remain competitive.

They need to bite the bullet and upgrade their network to DOCSIS 3.0 – and soon.

And more importantly, they need to figure out some way to get out of the cable TV business, gracefully. If their revenues are down now, just wait another five years.

But most expressly, Click needs to drop their plans to do away with the independent ISP’s that built their internet business