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Sale Sparks Talk of Public Ownership of Cable TV Systems

January 16, 1986|JULIO MORAN | Times Staff Writer

The pending sale of five Group W Cable Inc. systems in the South Bay to Century Communications Corp. has raised hopes for better service, fears of higher rates and calls for public ownership.

The Gardena City Council on Tuesday night directed City Administrator Kenneth Landau to contact officials in El Segundo, Hawthorne, Lawndale and Torrance to see if they are interested in forming a consortium to buy the Group W systems in their cities.

Gardena Councilman Mas Fukai said he suggested looking into joint public ownership because both Group W and Century have had almost no communication with the city since the announcement of the pending sale last month. He said he also does not like being virtually forced to accept Century as the new operator.

Under their franchise agreements, the cities have the right to stop the transfer of ownership before it is complete, but only if the new owners lack the money or technical experience to operate the system or refuse to accept the obligations of the franchise agreement.

Outdated System

"Century's only system in the South Bay is in Redondo Beach and it is very outdated," Fukai said, referring to a system Century has operated since 1973. "We should look into the feasibility of owning the systems ourselves. If we are all together we could probably use some kind of municipal bond to buy it."

There are no city-owned cable systems in Southern California, and only one, in San Bruno, in the state, according to the California Cable Television Assn., a cable operators group.

Westinghouse Electric Corp. reached an agreement on Dec. 24 with a group of five operators, Century, Tele-Communications Inc., American Television & Communication Corp., Comcast Corp. and Daniels & Associates, for the sale of its entire Group W Cable subsidiary.

The group will pay $1.6 billion in cash and assume $500 million in debt and taxes. The five companies will divide the 135 Group W nationwide systems among them. Century, based in New Canaan, Conn., will take over most of the Group W systems in Los Angeles County.

Several phone calls in the past few days seeking comment from Century officials were not returned.

Individual Price

No price has been announced for any of the individual cable systems, but an accepted industry formula places the value of a system generally at $1,000 per subscriber. The five Group W systems in the South Bay together have about 43,500 subscribers, suggesting a sale price of about $43.5 million.

At least one official in another South Bay city is interested in public ownership of its cable system. El Segundo Councilman Jack Siadek said his city should "do Century a favor and take over the system."

"I think the private sector has done a very poor job of providing cable service," he said. "We have obsolete equipment and antiquated hardware that is always breaking down. It's just not a good system and really not worth their time."

Last October, before the Group W sale was announced, Torrance officials began preliminary inquiries into taking over operation of its system, but Torrance cable administrator Warren Carter said the city is no longer pursuing the idea.

Willing to Discuss

Torrance City Manager LeRoy Jackson said he would be willing to discuss Fukai's idea of joint public ownership, but he said he would need more information.

Officials in Hawthorne and Lawndale also would not commit to the idea, but said they would participate in the discussions if asked.

Cable television consultant Wally Siembab, of McAdams and Siembab in Los Angeles, said that cities may need to take over operation of a cable system to ensure that the system is available for such uses as the dissemination of public information, as well as for entertainment.

He said franchise renewals and transfers of ownership give cities an opportunity to impose new requirements on operators and make them abide by provisions of existing franchise agreements.

"If the person who intends to take over does not intend to fulfill the obligations of the existing contract, then it would seem to me that the owner is over a barrel," Siembab said. However, in practical terms, if a transfer is not approved the issue could end up in court, he said.

Could Consolidate

Even if a public consortium is not formed, Century could still consolidate the South Bay's five Group W systems and its Redondo Beach operation.

In any case, the Century takeover could mean better service for subscribers but could also lead to higher rates, city officials and other observers said.

Carl Pilnick, a cable consultant with Telecommunication Management Corp. in Los Angeles, said Century would probably follow a growing national trend to consolidate adjoining systems' services, such as public-access channels, studios, equipment and billing.

"It gives them that opportunity for economy of scale," he said. "Common maintenance, motor pools and technicians are all areas for lower costs."

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