Harrowing TV Saga : Plot Filled With Turmoil May Have a Happy Ending for Troubled CommuniCom Cable

For more than four years, viewers of CommuniCom Cable TV have watched the harrowing saga of a company gone bad.

The plot has been thick with turmoil. A difficult birth. Poor growth. Television-signal problems. Subscriber complaints. Service blunders.

The climax came a year ago when the West Los Angeles franchise, burdened under debts of more than $165 million, became the country’s first major urban cable system to file for federal bankruptcy protection. Its future, by many accounts, looked as dim as a broken picture tube.

But now-- Don’t touch that dial!-- changes are taking shape. A new story line is being patched together and played out under a new leading man--graying Richard E. Matthews, 53, a specialist at resurrecting bankrupt companies.

At a hefty salary of $20,000 a month, Matthews was hired last year by CommuniCom directors with the approval of a federal bankruptcy judge. He is the temporary chief executive officer--a clean-cut, unpretentious figure who could pass for a high school principal.

But associates know him as a hard-bargaining, no-nonsense Harvard graduate whose credits include a string of failed companies brought back to life.

CommuniCom under Matthews has drawn upon a pool of more than $10 million in court-approved emergency loans, has completed major reconstructive work on its Culver City offices and its problem-plagued, 1,000-mile cable system, and has entered what industry leaders consider a critical period in its battle for survival.

It is a turbulent time for the company, which serves just over 50,000 subscribers mostly located in a wide belt of territory reaching from Venice to downtown Los Angeles. CommuniCom’s pressing challenges range from lingering debts and operating losses to charges of mismanagement and questions of franchise renewal.

Chief among those challenges is the continuing effort to sell the company--considered a vital but difficult step toward erasing company debts. Twice before, proposed deals for the sale of CommuniCom have fallen through. New negotiations are under way, Matthews said. “We’ve got to find the right kind of (buyer),” he said, “and I’m sure we will in the near future.”

At the same time, the firm is continuing to battle consumer complaints. Despite a marked improvement over the last two years, CommuniCom still ranks last among Los Angeles’ 11 active franchise areas in quality of customer service, based on the number of complaints reported to the city per 1,000 subscribers.

Such struggles are drawing close attention from cable industry leaders, who see CommuniCom as a pointed lesson in the delicate art of cable expansion. In Los Angeles, where cable continues to grow, more than 220,000 households are plugged into cable systems.

To date, 11 of Los Angeles’ 14 cable franchise areas are receiving service, and a 12th, United Cable’s East San Fernando Valley system, is under construction. Construction in two other areas, East and South-Central Los Angeles, has been held up by disputes between the city and the designated cable operators. But city officials hope that those, too, will be built or be under construction by the year’s end, said Susan Herman, director of the city Department of Telecommunications.

Cable service promises wondrous improvements over standard-fare television. For fees ranging from $8 to $13 a month, viewers are told, they can enjoy consistent, high-quality pictures and enormous program variety--in some cases, 40 to 50 channels of sports, cultural arts, music, government and more.

Yet these are difficult years for cable television. Drained by heavy construction costs and unmet revenue projections, cable operators no longer see their industry in the rosy light of the late 1970s, when companies battled for franchises and boldly promised features like two-way communication and public programming that would turn every viewer into a potential TV producer.

“A lot of the benefits that people thought cable television could provide have simply not developed as people (had) hoped,” said William R. Cullen, president of the Southern California Cable Assn., a trade group representing executives from most of the area’s major cable firms. “Some of that technology that looked great on paper has never been implemented--either because there has never been the demand, or because fewer people subscribing has resulted in less money to do those things.”

In CommuniCom, industry leaders see a stark symbol of the leaner times. Even after a year of promising resurgence, CommuniCom reaches only about 15% of the homes in its franchise area--less than half the norm for most cable operators.

An appraisal of the firm, completed shortly before its aborted sale for $200 million to United Cable Television Corp. in 1984, attributed many of CommuniCom’s past problems to city construction deadlines in 1981, which required work crews to lay 200 miles of cable in 17 days.

“Perhaps the message is, ‘It’s very important to get off on the right foot and . . . (not be) required to build too fast,’ ” Cullen said.

Los Angeles officials now echo that sentiment. Today the city works closely with cable operators to establish reasonable construction deadlines, and, in the case of United Cable’s recent efforts to build in the East San Fernando Valley, it has even extended those deadlines.

Because of CommuniCom, the city also has begun developing consumer standards for its 14 cable franchises--guidelines for how fast service calls should be handled or how quickly refunds should be paid to subscribers who are due them, said Herman of the Department of Telecommunications.

“CommuniCom’s experience has been instrumental in the city finally deciding to establish standards in those areas,” she said. “And they (CommuniCom executives) have worked cooperatively with us to establish such standards.”

Cable Service Theft

Herman said the company also was one of the first to “raise the flag” over the problem of cable service theft--the illegal tapping of cable television signals. That problem, considered a significant contributor to CommuniCom’s decline, will be attacked with public information campaigns and tough new enforcement policies, she said.

CommuniCom’s crowded business agenda includes a variety of pressing challenges:

- A Monday court date to submit plans for resolving company debts, which exceed $170 million. If the firm does not meet the court date, CommuniCom could be subject to a forced sale to any firm that presents a debt payment plan acceptable to the court. However, Matthews insists that that is unlikely, even if the company does not meet the schedule.

- Operating losses that are still running $100,000 to $150,000 a month. CommuniCom officials believe they must boost the subscriber list past 60,000--a 20% increase--before the company begins to break even.

- A diminishing pool of emergency loans. Through December, the company had borrowed $7.5 million of the roughly $10 million made available by the bankruptcy court and the banks that are financing the firm. If the company is not sold or does not begin operating at a profit by June, Matthews said, the firm may have to seek additional emergency loans.

- The scheduled expiration in January of its Los Angeles franchise. Despite a large viewer base in Culver City, Los Angeles remains the core of CommuniCom’s operation with more than 31,000 subscribers. By year’s end, the company must prove to city regulators that it deserves to reclaim the franchise or find a buyer for the company.

- Mismanagement charges filed by a former CommuniCom employee who was fired in December. The charges involve deposits and refunds allegedly due but never paid to subscribers. CommuniCom officials scoffed at the allegations, saying the firm has paid and will continue to pay all appropriate refunds. Los Angeles officials are investigating the charges.

Customer complaints range from missed service appointments and billing errors to poor television reception. Occasionally, there are still stories about callers who try for 20 minutes to reach the company by telephone.

“They’re a long way from an acceptable level of service,” said Chuck Winner, a member of the Los Angeles Telecommunications Commission. “But they’re trying to get there. I think Matthews has done a hell of a job. They’ve taken longer strides in this period than I would have expected them to.”

Since filing for bankruptcy protection on Jan. 31, 1985, CommuniCom’s strategy has been to make the company more appealing to any well-financed potential buyer who could rescue the company from its debts.

Technological Improvements

Matthews said progress is ahead of schedule. The company has undertaken extensive technological improvements by replacing or repairing signal amplifiers and damaged sections of cable line, by introducing a new line of home converter boxes and by installing a computerized phone system designed to log complaint calls. It has also reconstructed the Culver City-based hilltop transmission tower than receives satellite signals and feeds them into the cable network.

That signal tower was described as an electronic “rat’s nest” in the recent company appraisal.

The company has boosted its number of customer service representatives from 12 to 24, better enabling it to handle complaints and schedule service appointments, said Paul Bechelheimer, the firm’s executive vice president. Marketing efforts, which had stopped when bankruptcy petitions were filed last year, began anew in September with regional advertising and direct mail flyers.

A direct mail promotional campaign hails seven new programming additions to CommuniCom’s 43-channel system, including the Disney Channel, MTV and the Movie Channel. In a minor coup, company officials were able to negotiate an agreement to offer the Disney Channel to subscribers at $6 a month, about half the rate being charged by most other Los Angeles franchises.

Such deals have become critical in today’s cable market, according to the cable association’s Cullen. “A lot of people have the misconception that these cable companies are big cash cows,” he said. “But we are lean, mean operations out there scraping for every dollar we can get. We have to be cognizant every waking minute of the costs of doing business.”

Concern for Efficiency Noted

After touring CommuniCom’s two-story, vine-covered offices last year, the city’s Herman came away impressed by what she called Matthews’ concern for efficiency.

“He wanted to get rid of extraneous movements,” she said. “Instead of getting papers from here to here to here, he wanted to get them from here to here.”

Over the last year, Matthews said, even without extensive marketing efforts, CommuniCom’s subscriber list has risen by about 9,000. He said the growth will continue.

“We feel comfortable now the company runs like a business,” Matthews said. “It’s not a matter of saying, ‘My God, the ship is sinking!’ ”

Yet there are critics who say otherwise. Former employee Randall Mitchell, whose allegations of missing customer refunds triggered a Los Angeles investigation that began last month, said continuing mismanagement at CommuniCom is costing subscribers time and money.

Mitchell said service technicians continue to miss appointments and company officials have willfully withheld credits to customer accounts when deposits or refunds are due to be paid. Mitchell said he was fired for objecting to the practice.

“CommuniCom calls it . . . the ‘credit black hole,’ ” he said in an interview. “Staff and management joke about it. The customer doesn’t know . . . he’s stuck with a bill and he’s got to pay it. I would say 99 1/2% of their subscriber base deserves (a financial) credit.”

Matthews countered by saying, “There’s no problem. . . . Everybody who’s entitled to a refund has gotten it.”

Los Angeles officials expect to conclude their investigation of the charges sometime this spring, Herman said. Depending on the results, she said, the city could refuse to renew CommuniCom’s franchise, require the company to pay rebates to subscribers, or even file criminal charges if there appears to be intentional wrongdoing.

But the firm also could be cleared, she said.

Culver City Mayor’s Criticism

Culver City Mayor Richard Alexander, another critic, said he subscribes to the service but gave up long ago trying to report service problems by telephone. Recently, he said, he discovered that his family was being charged for a remote-control device it did not have. He said he has yet to receive a credit.

“It’s not the amount,” Alexander said. “It’s the fact they can’t do simple things. I think we just gave up (making complaints).”

Two of the company’s service representatives, who asked not to be named for fear of losing their jobs, said customers often must insist on credit refunds before they are paid. The employees also spoke of poor morale, high turnover among CommuniCom’s 250 employees, and staffing that remains inadequate to handle the great number of complaints and service calls that still pour in.

“At first we used to go six or eight days before we could get a technician out to a customer’s house,” one employee said. “Now we’re taking two or three days. But half the time they don’t show up.”

Matthews acknowledged that more improvements must be made. But he said phone calls to the company--usually to report complaints--have fallen from between 11,000 and 12,000 a week last spring to about 6,000 per week. He also said most employees have taken pride in the progress that has been made.

“This has really been a team effort to turn this company around,” he said.

Yet controversy developed late last summer when CommuniCom attempted to replace about 6,000 signal-converter boxes with new, remote-controlled devices in customers’ homes. To deal with subscribers questioning the higher cost of remote-controlled converters, the company issued a script to its customer-service representatives, instructing them on what to say.

That script told service representatives to indicate that less costly converters were not available unless customers absolutely refused to pay the additional charge. In that case, representatives were allowed to disclose that a limited number of less-expensive, non-remote-controlled converters were available.

‘The Smoking Gun’

City Councilman Zev Yaroslavsky, who obtained copies of the script, called it an “intentional and malicious” deception of the public. “We have the smoking gun,” he said, calling attention to the script at a recent City Council meeting.

Matthews argued there was notHing wrong with the script. The company stopped using it last year after completing the substitution of new converters, he said.

In January, a divided City Council at first approved, then rejected, a rate hike that would have made CommuniCom the most costly cable service in Los Angeles. In rejecting the increase--from $10.10 to $14.90 a month for basic service--council members made it clear that they had little respect for the company’s track record.

“It’s a total indictment of their abilities, if half of what I’ve heard is correct,” Councilman Gilbert Lindsay said.

At the same time, Yaroslavsky, Lindsay and other critics agreed that the picture was improving.

“I’m going to vote for them,” Lindsay said. “But I’m going to spank them in the meantime if I have to.”

CABLE TV COMPLAINTS

Figures Collected by the Los Angeles Department of Telecommunications of customer complaints about cable television service show how the city’s franchise holders compare. These are complaints to the city per 1,000 customers over three years; they do not include complaints made directly to the companies.

1983 1984 1985 Company Jan. Apr. July Oct. Jan. Apr. July Oct. Jan. Apr. July Oct. CommuniCom 16.20 14.30 9.90 2.30 2.75 2.85 4.33 11.10 2.05 2.18 6.59 1.88 Copley/Colony 1.07 0.45 0.00 0.30 0.0 0.39 Dimension 0.26 0.24 2.50 0.24 0.25 2.56 0.73 0.00 0.00 0.22 0.00 0.00 Group W 0.66 0.30 0.35 0.37 0.41 0.42 0.43 0.30 0.11 0.27 0.85 0.39 Jack Barry 0.00 0.42 2.00 0.17 0.00 0.84 0.33 0.16 0.00 0.00 0.15 0.00 King Video 0.52 0.25 0.19 0.19 0.51 0.06 0.76 0.18 0.24 0.12 0.18 0.12 Sammons 0.95 0.93 0.92 2.60 0.00 0.74 1.29 1.30 0.35 0.18 1.94 0.34 Valley 2.20 0.95 0.51 0.92 1.69 1.25 0.73 0.19 0.24 0.26 0.16 0.16 Average 2.90 2.70 1.90 0.82 1.04 1.03 1.20 2.00 0.46 0.55 1.51 0.50