Paragon Cable's announcement this week that it will raise basic television service rates to $10.95 came as no surprise to officials in the five South Bay cities it serves.
"For the last four years our $6.95 rate for basic service has been perhaps the lowest, or among the lowest, in the country," said Larry Bender, Hawthorne's cable television administrator. "We are not surprised by the increase. This is still very low compared to other systems in the county and in the South Bay."
Other cable administrators agreed.
"While we do have the rate increase, it is still among the lowest in the country," said Warren Carter, cable television administrator in Torrance, where the rate for basic service is $7.50. "But I would hope that the cable operator will show restraint and sensitivity to the marketplace in any future rate increases."
Officials in the three other cities served by Paragon--El Segundo, Gardena and Lawndale--also acknowledged that their rates are currently below the national average. Basic service is $9.50 in El Segundo and $8.95 in both Lawndale and Gardena.
Rates for so-called premium channels, such as HBO and Showtime, will also change in four of the five cities. The new rate, effective Nov. 1, will be $9.95, which is already the rate in Torrance. The $9.95 rate will be an increase in Hawthorne and Gardena, but a decrease in El Segundo and Lawndale.
Paragon has 47,000 subscribers in the South Bay.
City officials said the rate increases were an inevitable result of the federal Cable Communications Policy Act of 1984, which stripped cities of their authority to regulate rates as of December, 1986.
"The city no longer has any authority to regulate rates," said Paula Cone, Lawndale assistant city manager.
Cable television consultant Carl Pilnick of Telecommunications Management Corp. in Los Angeles said Paragon subscribers will still enjoy among the lowest prices in the country--the national average for basic service is about $16--but that may not last very long.
"Deregulation means whatever the market will bear," Pilnick said in a telephone interview this week. "If the company believes that it will lose too many customers, then it may not raise rates as high. But as long as they feel the pluses outweigh the minuses, they will continue to test the waters."
Pilnick said that in general, cable subscribers in Southern California have lower rates than other parts of the country because cable is not as vital here for good reception or for a variety of programming.
"Generally, the only thing cable offers subscribers in Southern California is movies and some specialty programming for sports freaks and news freaks," he said. "It's a little more difficult to raise rates if you already get a large choice of channels and the reception is pretty good."
Pilnick said video tape machines have also cut into the cable market, which he estimates is only about 40% of households in Southern California, while the national average is about 55%.
Still, Pilnick noted, rates for basic service will eventually go up because premium channels are no longer the money-makers they once were for cable companies.
Pilnick said that from 1975 to 1980, cable television experienced a tremendous growth, primarily because subscribers wanted access to channels such as HBO and Showtime.
"You could almost afford to give away the basic service then and make your money on the premiums," he said.
But as more movie channels entered the market, Pilnick said, and duplication of programming by the different premium services increased, subscribers began canceling the channels and the overall number of subscribers leveled off and even declined in some areas.
"The cable industry then took a look and realized that basic service was more important because they could keep every dollar that came in for basic service rather than 50 cents of every dollar for the premiums," he said. "Industry officials are now talking about $20 to $25 a month for basic service."
The $9.95 rate for premium channels will be for HBO, Showtime, Disney, Z Channel and the Movie Channel. Rates for less popular premium channels Galavision and Bravo will drop from $7.95 to $6.95.
The $2 fee for the monthly television guide will be waived if subscribers purchase at least one premium channel. The $4 fee for a remote control device is waived if at least three premium channels are purchased.
Paragon's subscribers in the South Bay will be notified by mail of the rate changes and packages that will be offered.