Overbuild Clicks with Consumers.(Tacoma Power's Click! Network service)

With the Click! Network video service, municipal overbuilder Tacoma Power gives AT&T Broadband a run for its money.

THE CLICK! NETWORK, the municipal telecommunications system in Tacoma, Wash., is lending new credence to the old axiom that it's not what you know, but who you know.

In Tacoma's case, that means marketing cable from the customer-service coattails of a municipal electrical utility with a 106-year reputation for quality control.

The result is Click! -- the Tacoma Power enterprise that is the largest municipal overbuild of an incumbent cable operator. It launched last year, challenging Tele-Communications Inc., now AT&T Broadband & Internet Services.

By seeking to associate its new cable service with the former Tacoma City Light, Click! had signed up 6,000 subscribers as of last month -- most of them TCI defectors.

However, its 660-subscriber-permonth growth rate hasn't come without problems.

"We're in the enviable position that there's so much demand for our service," Tacoma Power superintendent Steve Klein said. "At the same time, we want to control growth. We've already got a two-week waiting list for service. We don't want that stretching our to three weeks. We want to maintain quality control."

In the true spirit of free enterprise, the success of Click! inspired TCI to pull out all the stops in an effort to recreate itself in the eyes of its 50,000 Tacoma-area cable subscribers.

The MSO began by upgrading a 36-channel, 350-megahertz network to a full-blown 750 MHz system capable of programming 185 channels once its TCI Digital Cable package is factored into the equation.

In just one year, 600 miles of plant were upgraded, evidence of the priority TCI placed on the project, said TCI of Tacoma general manager Anne McMullen, who came in as part of a completely new management ream.

"A year's time for an upgrade is pretty good for a system this size," McMullen said. "It's given our customers a lot more channels and increased reliability."

DIGITAL CAME QUICKLY

The MSO wasted little time in capitalizing on its network's new capabilities. TCI used digital cable as the foundation for a series of new programming packages it is offering consumers.

As areas of Tacoma were rebuilt, a TCI direct sales team would fan out neighbor by neighbor, touting the MSO's new offerings to consumers and emphasizing its renewed dedication to customer service, said Lars Lofas, TCI of Tacoma marketing manager.

"We wanted to be able to say, 'Hey, we've got a new story to tell,'" Lofas said.

To further help its image, TCI added 100 customer service representatives, who are reportedly empowered to make special offers, including free service, to customers calling in with cancellations.

Home to the nation's 19th largest municipal electrical utility, which provides power to some 140,000 customers, Tacoma began eyeing a municipal telecom network in 1996 after TCI and US West Communications indicated they had no plans to upgrade their local networks.

Dissatisfaction with cable, however, was not the impetus for a government-owned network. Tacoma Power was looking ahead to the pending deregulation of the nation's electric industry, which would allow Tacoma residents to shop fur the best possible deal on power.

One method of enticing consumers to stay was to build a network capable of delivering cable TV, Internet access and telephone services on a single bill, city officials reasoned.

"This is a $250 million power business," Klein said. "Building something of this nature was not a reflection of dissatisfaction with the incumbent cable operator. It didn't hurt that people were dissatisfied. But that wasn't the reason.

Some marketing experts agree that government-owned networks with ties to municipal electric companies have a leg up on the incumbent. Consumers feel like they have more of a personal stake in their local power company than in a cable outfit whose headquarters may be thousands of miles away.

"The only contact a lot of people have with a cable company is the monthly bill," said Hal Ross, chairman of Mapes & Ross, a Princeton, N.J.-based market research firm. "And most cable operators don't have a lot of equity with consumers that the municipal system is going to have to break down."

However, maintaining Click!'s momentum won't be easy once TCI starts marketing under the powerhouse AT&T brand name, which will be used on everything from cable to high-speed Internet access to local and long-distance phone services. "AT&T knows a little something about customer service," Ross said.

Nevertheless, city officials believe Tacoma Power is also a powerful brand, and will continue to attract disaffected Pearce County cable viewers.

Early market studies show evidence of the public's confidence in Tacoma Power. A random telephone sampling of 606 area households found that 81 percent of respondents supported a municipally owned telecom network, while just 7 percent opposed it.

Among supporters, 13 percent saw the municipal utility as "a good company," while 9 percent felt it would provide "better service."

Not surprisingly, when respondents were asked for their preferred service provider, 44 percent named Tacoma s municipal utility. TCI was a distant second, with 15 percent.

Meanwhile, the Stanford Research Institute found that 73 percent of local cable viewers would jump to a new service provider offering comparable programming at a lower price. Of those, about 44 percent said they would take a comparably priced service specifically offered by Tacoma Power, an indication of local-market brand recognition, said officials.

The SRI study also found dissatisfaction with TCI was so high, the city could gain a 50 percent penetration rate, which would pay for the cost of the network within two years.

From the beginning, Click! Network executives knew enticing consumers to sign up for a myriad of telecom services would require piggybacking on 106 years of quality customer service offered by the municipal power company.

"We thought that [identification with Tacoma Power] was very important," said Cyndi Wilkstrom, a former TCI employee who defected to Click! as marketing manager. "We were aware of the impact an endorsement like that could have on our name, just like we knew about the possible effects of a negative association."

HAMMER THAT LOGO

In order to associate the Click! name with the utility, the words "Tacoma Power" sit beneath its logo, which is displayed on everything from the simplest correspondence to transit advertisements, monthly statements shipped to customers, technicians' uniforms and service trucks.

The network also plays up its ties to Tacoma Power in ads on local radio and in newspapers.

It's the fleet of service trucks, with the logo deliberately angled across the doors, which is perhaps the most prominent instrument for keeping the Click! name before consumers.

"It's eye-catching, it's playful, it's different," said network spokeswoman Diane Lachel.

Outdoor marketing has also become a crucial instrument in the battle for local cable viewers, with both sides selling themselves off of billboards that have popped up all over town.

For Click!, the billboards are an opportunity to repeat its claim of quality service, while touting the arrival of competition with a none-too-subtle tagline: "Just like that, no more cable monopoly."

TCI, which had never used much billboard marketing in Tacoma, responded with ads pitching programming that appears "Only on TCI," and announcing that its local upgrade was officially "a wrap."

"Tacoma City Light has a great reputation, I'm not denying that," Lofas said. "They have a long history in the market. But we've been around a long time as well."

Ultimately, however, the two sides must compete on rates, with both refusing to engage in any price hikes--so far.

TCI, which has held the line on rare increases, has not waited for the ability to use the AT&T brand to start giving area customers an array of new offerings.

Without an increase in price, it's boosted its expanded basic lineup to 72 channels, priced at $23.94 a month. Click! countered with its Standards Package, which offers a broadcast tier, 45 additional channels, 31 digital music channels and a set-top converter for $23.50 a month.

TCI has been pushing the advantage that TCI Digital provides. In Tacoma, the 117-channel offering is enjoying what's believed to be one of the highest penetration rates in the nation for digital cable--31 percent.

"We want to get digital into every home that we can," Lofas said.

NEW PRICE PITCHES

TCI is abandoning the typical "layered" approach to marketing cable in favor of one-price-point packaging which incorporates digital service with basic and expanded basic, as well as premium programming.

For example, subscribers can now get a streamlined Digital ValuePak 1 package that includes digital, along with expanded basic, one set-top converter and remote, as well as one premium service and Encore for $44.99 a month. The high-end Total Value Pak 4 sells for $69.99, and comes with digital, expanded basic, four set-top receivers, four premium services, Starz! and Encore.

"It has simplified the buying process for the customer, and the selling process for us," said Lofas. "And because of the number of offerings we now have, it gives us a lot more flexibility in our packaging."

Click! responded with a new offering of its own. Late last year, it introduced WorldGate, a high-speed service that allows its subscribers to access the Internet and send e-mail via their television sets.

Marketed at $7.50 a month, WorldGate attracted some 500 customers as of last month.

For those who prefer to surf the Web on a computer, Click! plans to sell system access to area Internet service providers, who would use it in competition with @Home, Stewart said. AT&T has balked at offering that kind of access to competing ISPs, prompting legal action in several communities.

AT&T'S TACOMA TRIAL

Meanwhile, AT&T was eyeing future bundled offerings with a recent marketing trial in Tacoma designed to test reaction to a package of discounted long-distance telephone service and digital-cable service.

"We're pleased with how things went," Lofas said. "And we think we've laid the groundwork for other bundled offerings."

Klein conceded the competitive landscape has shifted dramatically now that AT&T is officially the incumbent cable operator in Tacoma.

"TCI was a mom-and-pop shop," Klein said. "It got by with Band-Aids and patches, supplemented by a digital offering used as a stopgap. But AT&T wants to make this system telephony-capable. They're upgrading all over the Puget Sound area With AT&Ts management and money, I imagine they'll get it right this time."