It's one down, three to go for Group W Cable in its effort to raise rates and reduce service in four of its South Bay cable systems.
The Gardena City Council was expected to sign a contract last week granting Group W's request to increase rates and reduce the channel capacity of the system, but lack of a quorum forced cancellation of the meeting. Formal approval of the changes is expected at the Gardena council's meeting May 28.
City officials in Torrance and Hawthorne, however, are moving more slowly on the proposed changes--which would be the first reductions in service by a cable company in the South Bay since cable television was introduced there Feb. 28.
"We're not in any hurry," said Harry Reeves, who oversees the cable system for Hawthorne.
"I don't hear any panic to move faster," said Torrance City Manager LeRoy Jackson.
Reduce Channel Capacity
In Lawndale, where the system recently went on line, Group W is seeking only to decrease channel capacity.
Officials in those cities said it is too early to determine what effect Gardena's tentative agreement with Group W will have on negotiations with the other cities.
Group W's Richard Waterman, who is involved in the negotiations, said he does not expect much effect.
"I would like to think that it would help," he said, "but each city is unique."
In the agreement with Gardena, Group W will be allowed to:
- Increase rates from $6.95 to $8.95 for basic service, and from $7.95 to $9.95 for pay channels such as HBO and Showtime.
- Decrease channel capacity from 120 to 60.
- Eliminate a fee equal to 3% of the firm's annual gross revenues to pay for community programming in exchange for a flat annual $500,000 payment to the city.
In addition, Gardena will be allowed to keep a $64,000 balance from an advance of franchise fees. The franchise fee in Gardena and the three other cities is 5% of the company's annual gross revenues. This does not include the fee for community programming.
Group W is seeking similar changes in Torrance and Hawthorne to offset higher-than-expected construction and operating costs. In Lawndale, rates are already at $8.95 for basic service and $11.95 for pay channels. There are no community programming fees written into Lawndale's franchise agreement.
Gardena officials "looked at the problem correctly, and saw that what we were saying is that we have a problem operating a business in town," Waterman said. "They were willing to work with us."
Gardena City Manager Kenneth Landau, who negotiated the contract with Group W, was out of town and could not be reached for comment.
Gardena City Atty. Michael Karger, however, said Group W's modifications could have been challenged in court, but he said that negotiations were advisable because "we're going to have to live with these people for 15 years."
Group W's franchise with Gardena--and most franchises in other cities--is for 15 years.
But Torrance and Hawthorne do not appear to be so conciliatory. City officials have asked Group W for financial records to prove it cannot reasonably reach a 15% to 18% profit without the changes. The cities have also asked Group W if it intends to invoke federal law for the modifications.
No Intent to Use Law
Group W has responded that it does not intend to use Section 625 of the Cable Communication Policy Act of 1984, which allows for modifications in franchise agreements, but reserves its right to do so for any future changes.
"Clearly we can't waive our rights to federal law forever," Waterman said. "But if we reach a stalemate in these negotiations, then we would have to reevaluate our situation and perhaps have to use the federal law to make the changes."
Under Section 625, Group W would have to prove in court that without the changes it would be "commercially impracticable" to operate, and that the "mix, quality and level of services required by the franchise at the time it was granted will be maintained after such modification."
The law also requires the city to decide within 120 days after a company seeks a modification. If proposed modifications are denied, a company could file suit.
Waterman said he had hoped the negotiations could be completed in time to implement the changes by July 1, but concedes that it may be Aug. 1 before actual changes are completed.
"There have been some misunderstandings," Waterman said of the proposed changes. "What we are trying to do is reach an agreement that is mutually acceptable. Going to court is a process that I don't think either the city or we want to pursue."