Group W TV Softens Stand on Rate Hike

Group W Cable has softened its position on a proposal to increase rates and cut services that enraged city officials last month, saying its request was simply a starting point for negotiations.

Richard Waterman, Group W’s regional director of corporate affairs, said the company’s proposal was never intended to be non-negotiable.

“This is simply one set of alternatives on how to solve our problems,” Waterman said. “We are very open-minded.”

The proposal was expected to be a part of Tuesday’s public hearing to evaluate the cable television company’s performance in its first three years of a 15-year non-exclusive franchise. But Warren Cater, the city cable administrator, said there is still a question about what Group W wants to do with the system and none of the proposed changes will be discussed this week.

Financial Data Sought

“We could be here till 5 in the morning if we discuss them in the public hearing,” Carter said.

Carter said additional information has been requested on Group W’s financial condition. The company has been asked to prepare detailed financial projections with and without its proposed modifications. Waterman said that information will be provided to the city within two weeks.

“We need to know what the impact is of those two scenarios,” Carter said. “We can’t just say, ‘Yes, we’ll give you that,’ and not know what the effect will be.”

Carter said the city would respond to Group W’s proposal within 45 days after the financial statement is submitted. The city has hired a cable consultant, Cable Television Information Center of Washington, D.C., to assist in its analysis of the proposal.

$1-Million Loss

City officials had criticized Group W almost immediately after it submitted the 20-page proposal, which said modifications were needed because the company was not achieving its goal of a 15% to 18% return on its investment. Waterman said the company had a $1-million net operating loss through 1984, compared to projected losses of $170,000 for the same period.

Waterman said the company has spent $31 million rather than the $16 million it had estimated to build the system for 48,000 homes. He said the unexpected costs stemmed from additional cable that had to be installed because the city miscalculated the distance by 108 miles.

The company has proposed to:

- Impose a rate increase to $8.95 from $6.95 for basic service, and to $9.95 from $7.95 for pay TV channels such as HBO and Showtime.

- Deactivate the second of a dual-cable system, reducing the number of channels from 120 to 60.

- Consolidate Torrance’s community programming services with Group W’s systems in Lawndale, Hawthorne and Gardena.

Not ‘Cost Plus’

An unsympathetic Councilman Bill Applegate said it was simply “too bad” that the company is not getting a favorable return, adding, “We didn’t guarantee them a cost-plus contract.”

Carter had called the proposal an “unconscionable act” and accused the company of “playing dirty pool” for asking for the rate increases after the company had agreed last year not to raise rates until 1986.

Waterman said company officials were caught off-guard by the initial negative reaction and said city officials had misread the company’s intent. He said he believes an amicable solution can still be reached.

“I don’t think it will be that much of problem because what we are asking for is reasonable,” he said. “Ultimately, we and the city have to think of the customer. If we keep the customer in mind, I think we will come up with the right solution.”