L.A.’s Largest Cable TV Firm Files for Bankruptcy

CommuniCom, Los Angeles’ largest cable television franchise holder, on Thursday became the nation’s first major urban cable system to file for protection under bankruptcy laws.

Insisting that the filing would not affect its 47,500 customers, the company attributed the bankruptcy to the collapse in December of a $200-million sales agreement with a Denver-based cable operator.

One of the country’s largest cable franchises, CommuniCom filed for protection from about 240 creditors. The filing, under Chapter 11 of the U.S. Bankruptcy Code, will allow the company to continue operating under current management while it attempts to restructure its debt of more than $165 million. The filing was made in Los Angeles federal Bankruptcy Court.

For years, the company has had more customer complaints filed against it than any other area system, and it has long been plagued by service and construction problems.

CommuniCom said that the filing would not affect its current customers and that it would offer new service to the more than 460,000 homes in its franchise areas, including Los Angeles, Culver City, LaVerne, Tustin, Covina and other parts of Los Angeles and Orange counties. By far the largest part of CommuniCom’s holdings is its 300,000-home Los Angeles franchise area, stretching from downtown through Hollywood-Wilshire to Venice. CommuniCom is also building a cable system in Bellflower.

Charles Firestone, chairman of the city’s new Board of Telecommunications Commissioners, said the board will consider whether to open an investigation of CommuniCom to determine what led to the company’s financial difficulties and how to avoid such problems with other systems.

Industry officials attribute much of CommuniCom’s long-term problem to the nature of the area it serves. The company has had great difficulty getting its service into apartments in Los Angeles and consequently serves only about 10% of the city’s residences.

Some in the cable industry said CommuniCom’s owners ran into trouble because of they are unfamiliar with the business.

Carl Pilnick, president of Telecommunications Management Corp., a Los Angeles consulting firm, placed much of the blame on Six Star Cablevision Associates Ltd., a New Jersey firm that won the cable TV franchise in an uncompetitive bid in July, 1979. Six Star sold the system two years later to Nielson Enterprises Inc., a Wyoming company with holdings in oil, gas and real estate.

“The system is very, very poorly constructed,” Pilnick said. . . . “I think this was a group of non-cable people (Six Star) who got this system as a gift . . . (and were) more interested in selling out than in building it and running it.”

Three of Six Star’s principal owners--Roger Maggio, Stuart Harris and Paul Skulsky--were convicted in a Trenton, N.J., federal court last Nov. 9 on 31 counts of tax fraud, mail fraud and racketeering in connection with cable television tax shelters in California and three other states. Two former Six Star systems--in Pomona and Inglewood--were used in the tax shelter scheme, but the Los Angeles operation was not.

CommuniCom’s bankruptcy filing comes as cable systems in major cities across the country are pulling out of a slump caused by declining consumer demand and higher-than-expected costs of building systems in urban markets. National cable officials said CommuniCom’s problems do not signal a nationwide crisis in the cable industry.

“The cable industry nationally is profitable and quite healthy. Those words could not be used to describe CommuniCom,” said James Mooney, president of the Washington-based National Cable Television Assn. “CommuniCom is simply going to have to get its act together and straighten out some of the chronic problems it has had.”

“This (bankruptcy) is the first and only one of its kind,” said cable industry analyst Paul Kagan of Carmel. “They (CommuniCom) made all the mistakes in the book. . . . This is what happens when everything goes wrong.”

‘Positive Move’

Firestone called the bankruptcy “a fairly positive move from the perspective of reorganizing and getting their business in order.”

The company’s principal creditors include First National Bank of Boston and Security Pacific National Bank, as well as equipment makers and program suppliers, including Home Box Office Inc. and Showtime/The Movie Channel Inc.

On the day before the bankruptcy filing, the company delivered a $294,535 payment to the City of Los Angeles to cover 1984 franchise fees, Firestone said.

In a three-page letter to members of the Los Angeles City Council and other officials, Glenn W. Nielson, president of CommuniCom, attributed the bankruptcy to the collapse of purchase negotiations with United Cable Television Corp. of Denver. Failure to consummate the purchase, Nielson wrote, “left CommuniCom in a very difficult financial position.”

United withdrew its offer on Dec. 7 when it was unable to put together suitable financing, a United spokesman said. United had taken over management of the CommuniCom system during the purchase negotiations, and the system experienced a significant decrease in the number of complaints logged against it.

The Chapter 11 filing “is in the best interests of the cable television subscribers,” Nielson wrote in his letter.

“Insofar as consumers are concerned, CommuniCom will continue to operate on a business-as-usual basis,” he said.

Over the years CommuniCom’s operations have been widely criticized by government officials, people in the cable industry and the company’s subscribers. In 1983, for example, the Los Angeles Department of Transportation logged 2,919 customer complaints against the company, more than six times the number reported for Group W Cable, which has three times as many subscribers in the Southland.