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El Segundo Plans to Go Into Cable Competition

August 17, 1986|JULIO MORAN | Times Staff Writer

EL SEGUNDO — Rebuffed in its effort to buy the cable franchise already serving the city, the City Council plans to construct its own system and compete for customers.

The council last week directed its staff to send out requests for proposals for the construction of a new cable system to serve the city's 6,400 households. If it goes through with the plan, it would become only the second city in the country in which a city-owned cable company competes with a private company, industry sources said.

Mayor Jack Siadek, who has pushed for a city-owned system, said the city wants to build a 60-channel, state-of-the-art system for about $2 million and hopes to begin providing service in 14 to 16 months.

City Reserves

The money will come from city reserves or bonds issues, Siadek said.

The mayor said the city was left with few choices after it learned that Century Communications Corp. would assume control of the 14-year-old El Segundo system from Group W Cable, Inc., a subsidiary of Westinghouse Corp.

As part of a massive nationwide sale involving four other cable companies, the Group W franchises in El Segundo, Torrance, Hawthorne, Lawndale and Gardena are being sold to Century. Officials in all of those cities except Gardena have expressed fears that Century, which borrowed heavily to purchase the systems, will raise rates and cut service. Century has long owned the cable system in Redondo Beach.

In El Segundo, residents were complaining about the cable system even before its sale was announced, Siadek said.

Snowy Picture

"We are forced into this (building a system) because of the poor service and poor quality of reception," Siadek said. "We would still rather buy the existing system, but they don't seem to want to talk.

"Residents here are simply saying to hell with it and canceling their service. A lot of folks think that because they have cable service the picture is supposed to be snowy."

A spokeswoman for Century at its headquarters in New Canaan, Conn., said company president Leonard Tow was on vacation and could not be reached for comment. In the past, Tow has said that he would rebuild the El Segundo system.

Bill Koplovitz, a New York attorney representing Westinghouse, Century and the other cable operators involved in the sale, said he was not familiar with the situation and could not comment.

The existing cable network in El Segundo is a 30-channel system with outdated equipment that is corroding because of the salt air of the oceanfront city and poor maintenance, according to a consultant hired by El Segundo to determine the cost of building a new system. The existing system has about 3,200 subscribers out of a potential 6,400.

In the past, officials in the four disgruntled cities have discussed public ownership of their cable systems, but none has gone as far as El Segundo did when the council voted unanimously last week to seek proposals for a rival system. The city hopes to get proposals within 30 days.

Cable television consultants said it would probably be impossible for two cable operators to survive in the same city, although the U.S. Supreme Court paved the way for such competition earlier this year when it said that exclusive cable franchises were illegal.

"I think it would be real tough," said Jerry Yanowitz, a spokesman for the California Cable Television Assn., an industry trade group. "It's very risky financially for one operator. It has to be tougher for two."

Unfair Advantage

Yanowitz said there is also concern that a city would have some unfair advantages over a private firm. For example, he said, "a city would not have to pay property taxes and has a lower cost of borrowing money.

"I'm hard-pressed to see why a city would want to get into the cable business," Yanowitz said. "I would be astonished to see a city conclude that it makes sense for a second operator to come into a city."

David Korte, vice president of Washington, D.C.-based Cable Television Information Center, a consulting firm for cities, agreed that having two systems competing against each other, private or public, would not make sense, especially in areas where less than half the potential subscribers receive service.

"Over time, only one company is going to survive," Korte said. "It is too expensive for two companies."

However, Korte has recommended such competition for one city, Paragould, Ark., about 150 miles northeast of Little Rock.

"Paragould is the exception," Korte said. "It's conceivable there because of the high (number of subscribers). . . . The two can co-exist."

Cable for Reception

Paragould's population is about 16,000 with about 6,300 homes, numbers similar to El Segundo's. Paragould Cablevision Inc., a subsidiary of Adams-Russell Communications Corp. in Waltham, Mass., has operated in the city for 21 years. Because of the city's location, cable is needed for reception; as a result, the company has about 5,500 subscribers, or 85.5% penetration.

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