Below is an open letter to Click! Network management.
For nearly six months now, Click! Network subscribers in the City of Tacoma and surrounding areas have had to pay 33% more for their broadband Internet service than similarly situated customers of Comcast and Qwest.
Why is this? There really is no rational answer.
How could anyone have failed to notice that Comcast and Qwest had changed their product offerings, effectively lowering their prices? How could anyone have thought that Click could be competitive with the “big boys” by allowing their rates to remain 33% higher than everyone else?
Click’s management decisions defy logic.
I sent Mayor Baarsma and the Tacoma City Council a letter outlining these and other problems in great detail, about a month and a half ago. Councilmember Julie Anderson sent me back a note thanking me for the information, then later I heard from the Mayor that three council members were going to meet with Click management to hear their response to my charges.
And since then, nothing.
In all fairness, we’ve had a bunch of holidays in the interim.
But metro Tacoma citizens are still paying 33% more than Comcast and Qwest customers for the same exact service – and I for one, am getting tired of it.
My big gripe is that the only reason municipal utilities exist is to provide citizens with essential services at prices the same or less than the competitive market rates.
If Comcast or Qwest charges 33% less than Click for the same exact service, then what’s the point of having a city-owned internet service? So we have an option to pay more to get the same service? I think not.
Maybe it’s to help pay for the Tacoma Public Utilities executive’s recent raises? Or if not that, then what? I really don’t have a clue.
In Into to Business 101, they teach you that for a business to be competitive, it needs to set its prices in accordance with the going market rates. If you set the prices too high, you’ll eventually lose all your customers. Likewise, you need to have a similar range of product offerings if you want to attract and retain customers. These are some of the most basic concepts in marketing. Very, very basic stuff.
But apparently Click management does not comprehend.
To have allowed this situation to exist for nearly six months is prima facie evidence of gross incompetence on the part of the Click! Network management. The responsible parties need to be replaced with managers that understand basic marketing and the broadband internet business. And it must be done quickly – before our investment in Click is irretrievably lost.
I urge everyone to write the Tacoma City Council, requesting that the council replace the Click managers directly responsible for these problems as soon as possible and hire some new people that have a clue – before it’s too late.
Here’s a link to the City Council email addresses. City of Tacoma – City Council
If anyone has questions, please call me at 253-686-4946, or contact me via email.
Thanks for your time.
Michael Pellegrini
Below is my letter to M
Mayor Baarsma:
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November 16, 2005
The Honorable Bill Baarsma, Mayor
City of Tacoma
747 Market Street, Suite 1200
Tacoma, WA 98402-3766
Dear Mr. Mayor:
The purpose of this letter is to draw to your attention a critical problem that exists with the city-owned broadband internet provider – Click! Network.
Basically, through inattention or misdirection, Click has allowed itself to be priced out of the local broadband internet market. This has come as a result of Click choosing to maintain its existing price/service levels, even while the other local broadband internet providers have upgraded their product offerings and/or lowered prices.
Comcast, the largest broadband internet provider in the Tacoma market, upgraded its service levels nationally last summer. Their standard “Silver” tier currently has speeds of 6 mb/s, and is offered locally at $45 per month; their “Gold” tier has speeds of 8 mb/s and costs $55 per month.
Prior to the most recent upgrades, Comcast’s “Silver” tier had speeds of 4 mb/s, and the “Gold” tier had speeds of 6 mb/s – which at the time, were roughly similar in price and bandwidth to Click’s “Res 2” (3 mb/s) and “Res 3” (6 mb/s) service levels.
Comcast’s speeds were upgraded to the 6 and 8 mb/s levels without any price increase to the customers.
So while a Comcast customer pays $45 per month for 6 mb/s service, Click subscribers pay $60 per month – $15 per month more for essentially the same product. Click offers no product to compete with Comcast’s 8 mb/s service level.
To make Click’s price disadvantage worse, Comcast is also offering steeply discounted introductory rates for signing up – as low as $19.95 for the first six months for its “Silver” tier, and only $10 more for the “Gold” tier.
It’s been nearly four months now, since Comcast made these most recent upgrades, and Click has made no move whatsoever to match Comcast’s prices or product offerings. Nor has Click offered any comparable introductory rates. In truth, they have done absolutely nothing at all.
At the same time, Click has also allowed itself to be priced-out of the entry-level broadband market (the “Res 1” – 1 mb/s tier).
Starting last summer, Qwest began offering a 1.5 mb/s product for an introductory rate of $19.99 per month for one year – undercutting Click’s price for that product by $10 per month. Qwest also offers a 5 mb/s tier for $29.99 per month for one year (which could actually even compete with Click’s $60 a month “Res 3.”).
The other players have not been idle: Earthlink offers cable broadband locally and has matched Comcast’s prices and product offerings; On the low end of the broadband spectrum, Verizon now offers a 768 kb/s entry-level product in the Seattle area for $14.95 per month.
None of these upgrades by the various companies has been conducted in secret: Comcast began widely publicizing it’s most recent round of upgrades early last spring; The Qwest upgrades have been public knowledge for almost as long.
But inexplicably, Click has made no move to adjust its prices or product offerings.
This is not the first time this sort of problem has occurred. Click actually has a long history of making similar marketing blunders.
To briefly summarize:
· March 2003 – Click cut its customer’s speeds in half and raised the prices. Click’s new entry-level 1 mb/s “Res 1” tier then cost $29 per month; the premium, 2 mb/s “Res 2” tier cost $45 per month. For the first week or so, actual “Res 1” speeds varied wildly, from a low of about 300 kb/s, up to 1.2 mb/s downstream.
Due to the heavy volume of protests from its customers, Click finally raised the cap on the speeds to 1.5 mb/s for “Res 1” and 3 mb/s for “Res 2.” The “Res 2” price was lowered to $39.95 per month (for Advanced Stream – HarborNet and NetVenture went to $44.95).
· February 2004 – Comcast upgraded the Seattle metro area standard “Silver” tier customers to 3 mb/s downstream and 256 kb/s upstream. These upgrades had been widely publicized many months in advance.
· April 2004 – After a two-month wait, Click finally matched Comcast speeds, but also at the same time implemented “traffic shaping” which made it impossible for users to play online games, because of extreme high latency. After numerous customer complaints, the traffic shaping was discontinued a couple weeks later.
· August 2004 – Click introduced a “Gamer’s Package” “Res 3” tier. This had a downstream rate of 3 mb/s with a slightly higher upstream rate – 384 kb/s. The increased upstream rate was the sole difference between that and the standard “Res 2” package. However, because it was such a small increase in upstream bandwidth, this upgrade was essentially worthless. It made no appreciable difference for online gaming or anything else.
Yet Click set the pricing for this “Res 3” tier at between $60-65 per month (depending upon provider). That works out to as much as $25 per month extra for a paltry 128 kb/s extra, worthless upstream bandwidth.
· September 2004 – A month after Click premiered its “Gamer’s Package,” Comcast introduced its “Gold” tier service with speeds of 4 Mb/s down and 384 kb/s up for $10 per month extra – $55 per month. The fact that Comcast would be offering this new tier with higher downstream and upstream rates had been widely publicized for months in advance.
Secure with their apparent tunnel vision, Click continued offering its “Gamer’s” package – a substantially inferior product that cost more money than the closest Comcast product – for another eight excruciating months.
· March 2005 – Comcast upgraded the Seattle metro area to speeds of 4 Mb/s down, 384 kb/s up for the “Silver” tier, and 6 Mb/s down and 768 kb/s up for the “Gold” tier. Prices remained the same.
· May 2005 – Click finally attempted to match Comcast’s “Gold” tier product offerings, by changing the “Res 3” level to 6 mb/s down and 768 kb/s upstream. However, because of technical problems – which for the most part, Click made no effort to resolve – most customers were unable to achieve the advertised speeds for the next several months.
The Click “Res 2” speeds were never changed and remain at 3 mb/s even while the comparable Comcast product at that price point was at 4 mb/s.
· August 2005 – Comcast once again upgraded its service to the present levels of 6 mb/s down and 384 kb/s up for “Silver” customers, and 8 mb/s down and 768 kb/s up for its “Gold” customers.
As stated above, in the four months since, Click has made no effort whatsoever to offer competitive products or prices.
At close to every step over the last several years, Click has misjudged its market. They seem to believe they exist in a vacuum; that they exist without competition.
They do not appear to understand the market, or their product.
Municipal utilities exist solely to benefit resident citizens by offering competitive products at or below market rates. This is their reason for existence.
If Click fails to provide a full range of products, or if they charge $10-15 per month more than the going market rates, then they have failed to meet their primary goal.
Tacomans should not have to pay $10-15 per month extra just to do business with Click franchisees. Contrarily, they should have a full range of products available at or below the going market rates.
Over the last several years, I have worked hard at getting Click to change its business practices. I’ve met with its management; I’ve written numerous letters to them and Tacoma Public Utility officials, highlighting these problems.
Uniformly, I’ve been unable to effect any real or lasting change.
But change they must.
I believe it’s time for the City Council to get involved in this – before our city’s investment is irretrievably lost. Click must offer market-competitive products and prices if it is to continue in existence.
And if it cannot offer market-competitive products and prices, then we should think about selling its assets while they are still worth something.
To help you better understand the market dynamics, I’ve included a price comparison of the local internet providers as an attachment.
I’d like to meet with you to discuss this situation next week. If you have any questions prior to then, please call me.