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Paragon Gains Five Group W Cable Franchises

April 02, 1987|JULIO MORAN | Times Staff Writer

The transfer of five former Group W Cable franchises in the South Bay to a subsidiary of the nation's second-largest cable television operator has been completed, and Hawthorne has emerged looking like a million dollars--all in cash.

Hawthorne will receive $1 million as part of an agreement approved this week that allows Paragon Communications, a subsidiary of American Television and Communications Corp. (ATC), to take over operation of the city's cable system.

Torrance and Lawndale also approved of Paragon this week, while El Segundo and Gardena approved the transfer last week.

Each city negotiated separate agreements, but the result is more uniformity in the five systems, city officials said. For El Segundo it will mean an upgrading of an antiquated system, but for the other cities it means the end of 120-channel capability and less money from the cable operator for public-access programming.

Final approval of the transfer culminates a year-and-a-half effort by Westinghouse Electric Corp. to sell its Group W subsidiary to a consortium of five cable firms, including ATC, and ends pending litigation filed by four of the cities against Westinghouse. The cities had alleged in separate suits that Westinghouse violated their franchise agreements because the cities had not approved the sale.

Gardena, the least resistant to the transfer, had reached agreement with Westinghouse last year over changes in the system. The approval of Paragon last week was considered routine.

But for the four other cities, the negotiations were hardball.

Paragon had been seeking changes in the franchise agreements of those cities similar to concessions unsuccessfully sought by Group W in 1985 to offset what it said were higher-than-expected construction and operating costs.

The separate deals struck between the cities and Paragon are as follows:

Hawthorne will receive $1 million in cash, $75,000 for the purchase of three wall-mounted cameras for the council chamber and about $250,000 worth of equipment that would allow the city to have its own in-house cable system for electronic conferences.

Paragon will be allowed to reduce channel capacity from 120 to 60, reduce its payment for public access programming from a minimum of $150,000 or 5% of annual gross to 1.5% of annual gross revenues. About $500,000 in penalties to the city will be forgiven.

The city will put the $1 million into an account and use the interest to subsidize public access programming.

Lawndale will receive $336,000 in cash and equipment, about $100,000 worth of equipment for teleconferences and three additional channels for public access. Paragon will be allowed to reduce channel capacity to 60, reduce its annual payment for public access programming from 3% to 2% of gross revenues and have the franchise agreement extended to 18 years.

El Segundo will receive $150,000 in cash and a $1 million upgrading of its system that will include increasing channel capacity from 30 to 54 and moving its satellite feeds from Santa Monica to Gardena or Torrance. Paragon will no longer have to make a 2% public-access payment and will be allowed to negotiate renewal of its franchise within the next 12 months, four years ahead of schedule.

Torrance will receive $300,000 and its annual public-access payment will remain at 5% of gross sales. Paragon will be allowed to reduce channel capacity to 60. Any other changes will be negotiated later.

In 1985, Gardena agreed to the reduction of channel capacity and the elimination of an annual 3% of gross revenues for public access in exchange for an annual payment of $50,000. The city also received a $64,000 advance on franchise fees.

Rates are also expected to rise in all cities because of a federal law that removed local control over rates as Jan. 1. Rates in the five South Bay cities are among the lowest in the country, averaging about $10 for basic service. An industry spokesman said the national average is about $15.

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