Santa Ana Votes 6-1 for Scaled-Down Cable System

The Santa Ana City Council voted 6 to 1 Monday night to alter its contract with Group W Cable Inc., thus ending a bitter dispute over the company’s efforts to cut services and raise customer rates.

Council members said their action would preserve the integrity of the cable system that Santa Ana has been promised, but some critics said the city made too many concessions to Group W.

Under the new agreement, Group W will be allowed to scale back nearly $23 million worth of promised services. It will eventually reduce the number of available channels from 120 to 56, and will drop a $16-million commitment to produce local programs.

In return, the city will receive from Group W $9 million in commitments, including $2.5 million to build and operate a city-owned television studio.

The basic $6.95 monthly rate for cable service in Santa Ana will remain fixed until July 1. After that, the company will have the authority, under state and federal law, to increase rates without any local regulation.

Mayor Notes Timing

In addition, the city agreed to lift a $10-million penalty it imposed on Group W for failing to build the system on time and as promised.

Voting for the contract changes were Mayor Daniel E. Griset, and council members Wilson B. Hart, John Acosta, P. Lee Johnson, Dan Young and Robert Luxembourger. Voting against was councilwoman Patricia McGuigan.

Griset, noting the political controversy over Group W’s requests, said, “The council labored long and hard over this issue. Each of us personally could have made a lifelong political career out of kicking Group W around, but the needs of our community for a financially sound cable system took priority over our personal political advantages.”

Carl Pilnick, a consultant the city hired to review Group W’s proposals, said the proposed changes would result in a stronger cable contract for the city, because the company would no longer be held accountable for what Pilnick called “financially unreasonable promises.”

He said, for example, “It would be difficult to keep Group W or any cable company to its promises to provide $16 million for local programming if they felt it was uneconomical.

“Under the revised contract, Santa Ana is receiving hard commitments, as opposed to earlier promises it received that were almost mythical.”

James McGuigan, an attorney who chairs the city’s Cable TV Advisory Committee, criticized the proposed changes, however. He said, “There’s no nice way to say it. . . . You’ve cut the size of the residential system in half. I have never seen a city give away so much and get so little back. I think the community is the one that came out on the short end.”

The cable TV settlement appears to conclude a turbulent political chapter in Santa Ana’s recent history.

Ever since the city awarded its cable franchise to Group W in 1982, council members have been stung by accusations that their votes were influenced by campaign contributions from the nine competing firms.

The controversy spilled over into last year’s City Council races, when challenger Wilson B. Hart charged that his opponent, former councilman Gordon Bricken, had been “compromised” by more than $6,000 in Group W contributions.

Hart made the issue a centerpiece of his campaign and beat Bricken handily. Other candidates also raised the issue, focusing on the controversy over Group W’s requests to scale back Santa Ana’s cable system.

“Cable television has become a political football in Santa Ana,” City Manager Robert C. Bobb complained during the campaign, adding: “I think it’s important to get this dispute behind us.”

Promises in Bid

The problem developed early last year, when Group W told Santa Ana officials it could no longer afford to keep many of the services it had promised for the 70,000-household franchise.

Group W, a Westinghouse subsidiary, won a fierce competition for the cable award in 1982 by promising a “state of the art” system that would offer dazzling, futuristic technology and millions of dollars for local programming--all at low customer rates.

But, like other cable companies in cities across the nation, Group W now believes those promises were excessive and should be scaled back.

Norval Reece, the company’s vice president for governmental affairs, told Santa Ana officials last February that Group W’s construction costs had soared from an estimated $16 million to $32 million. He explained that subscribers were fewer than expected and said Group W could not operate the Santa Ana system profitably without significant cuts.

The proposals included a 60% increase in the monthly customer rate, a sharp cut in funds for local programming and elimination of a Tijuana, Mexico, channel for Santa Ana’s large Spanish-speaking population.

The requests sparked immediate controversy. Bobb and several City Council members charged that Group W had made elaborate promises to win the coveted Santa Ana franchise but had no intention of honoring many of them.

City officials eventually decided to negotiate with Group W, but they also took steps to protect Santa Ana’s interests.

The city hired two consultants to verify how much of the cable system Group W had actually built, as well as the company’s claim that construction costs had increased more than 100%.

Michael Ann Thompson, a former Group W employee, determined that the company had completed most of the system, but she found sizable discrepancies between the number of miles Group W claimed to have built and what was actually constructed.

The discrepancies were significant because Group W had contended that its construction costs had risen because the city’s cable system was larger than had been anticipated. The company subsequently scaled down the number of miles it said it had built.

Consultant Pilnick, meanwhile, reviewed Group W’s financial records and also advised the city on potential tradeoffs with the company.

Local Program Funds

He recommended, for example, that Santa Ana let Group W scale back the cable system, but urged city officials to insist on an “ironclad” commitment for local programming funds.

Finally, the city levied what eventually amounted to a $10-million fine on the company for its alleged failure to build the cable system on time and as promised. Specifically, Bobb said Group W had refused to provide cable service in commercial and industrial areas.

The company appealed the fine, which was by far the largest ever imposed by a municipality on a cable company. Reece, in a strongly worded letter to Santa Ana, contended that the company had never agreed to serve those areas.

Bobb and Group W officials agreed on a proposed settlement last year, three weeks before the November elections. But council members, fearing voters would not support candidates who supported cable service cuts, suspended the talks.

Negotiations resumed after the election, however, and were quickly concluded.

Bobb said, “Some council members might want to take a hard line on this and become political heroes.

“But we aren’t here to make political heroes. We’re trying to provide a cable television system for the people of Santa Ana that the city and the company can live with.”