Cable TV Firm Balks at Rental Agreement

As part of an effort to make its five South Bay cable television franchises profitable, Paragon Cable wants out of its rental agreement to take over half of Torrance’s new $1.2-million telecommunications center, city officials said.

Torrance, however, is counting on Paragon’s monthly rent payments to help pay off the bonds it issued to build the center.

Paragon Division President John Bickham would not discuss the matter, except to say: “We will not abrogate our obligations to the city.” But city officials confirmed that Paragon has asked about paying a settlement to get out of paying $9,400 a month for about half of the 15,000 square feet of office, production and studio space.

The two-story center, named for City Atty. Stanley E. Remelmeyer, is on Prairie Avenue on the northwest side of the city’s Civic Center complex. Dedication is scheduled for Sept. 10.

Group W Agreement

The city’s former cable operator, Group W Cable Inc., had agreed to rent half the structure, and that portion was built to Group W’s specifications. Paragon assumed the rental agreement when it took over the franchise in March.

But while the city’s Office of Cable Communications has already moved its furniture and equipment into the new building, Paragon has not done anything with its space. Walls remain unpainted, the central air conditioner has not been connected and floodlights remain absent from the large studio.

City Manager LeRoy Jackson said Paragon has also sought to remove satellite dishes and other equipment from city property that it rents for about $3,000 a month, and has asked for a reduction in the fees it pays the city to support public access programming.

The company currently pays 3% of its annual gross revenues, or a projected $270,000 in the current fiscal year. The company is seeking a flat fee of $83,000.

Since Paragon took over operation of the five South Bay cable systems, it has sought to reduce costs from what one company official described as an “extremely unprofitable” operation. The company would not disclose figures on its losses.

“Our effort in the last four months has been to put the business on a sound financial footing, which didn’t exist with Group W,” Bickham said. “Our goal is simply to provide good service at reasonable rates and make a reasonable profit.”

Jerome Ramsey, a Paragon vice president in Torrance, said the company is seeking to consolidate services among the five cities, including studio space for community programming.

“We have two studios in Gardena, one in Hawthorne and one in Del Amo Mall,” he said. “That’s too many studios. Plus Torrance will open a studio at its new center.”

Rate Adjustment

Ramsey said the company will also adjust monthly subscriber rates later this year, with some customers paying a lower rate while others will see an increase, depending on the services purchased.

Congress deregulated rates as of Jan. 1, allowing cable companies to charge whatever the market will bear without city approval.

The five Paragon systems have comparatively low rates for basic service, ranging from $6.95 in Hawthorne to $12.95 in El Segundo. The national average for basic service is about $15, cable officials said.

Ramsey said modifications are needed because the South Bay franchises have been unprofitable, primarily because of “murderous franchise provisions” that Group W accepted.

Among those provisions were 120-channel systems, community programming subsidies amounting to hundreds of thousands of dollars, low monthly basic service rates and donations of video equipment.

Group W realized in 1985 that it would not meet its financial projections and asked the cities for relief from many of those requirements. Only Gardena agreed. However, Paragon persuaded the other cities to drop some provisions from the franchise agreements when it took over the systems in March.

On Sept. 15, cable subscribers in Hawthorne, Lawndale and Torrance will find the number of available channels drop from 120 to 60. Only about 68 have been used for programming, however, and the company said no current programs will be dropped because several channels are not used full time.

Gardena dropped to 60 channels two years ago. In El Segundo, the system will be rebuilt by late next year to increase channel capacity to 60. Currently only 30 channels are available on the nearly 20-year-old system.

Council Channel

In addition, viewers in Hawthorne and Gardena will find live broadcasts of City Council meetings on a different channel. The Hawthorne meeting, which is currently seen on Channel 126, and the Gardena meeting, which runs on Channel 19, will be seen on Channel 22. Torrance already broadcasts its meetings on that channel. Lawndale will broadcast on Channel 58 or 59.

Each of the cities will continue to have a separate channel for community programs.

Paragon had said it was considering dropping Prime Ticket Network, a popular regional sports and entertainment channel, because it was too expensive. However, Mark Mangiola, Paragon vice president for marketing and customer service, said the company will carry the channel while continuing negotiations with the provider for a lower price.

Unlike pay channels such as HBO and Showtime, where the subscriber pays directly for the channel, cable companies pay for Prime Ticket and offer it as part of the basic cable channels. Neither Prime Ticker nor Paragon would say how much Paragon pays for the service.

Five-Year Contract

However, Tony Acone, president of Prime Ticket, said Paragon assumed a five-year contract that Group W had signed two years ago, and said he expects Paragon to honor it. Acone also said that because of the contract, Paragon is receiving a preferred rate for the service that normally would not be offerred to a company with only 50,000 subscribers. Paragon has about 47,000 subscribers in the South Bay.

Torrance City Manager Jackson would not disclose the specific amount that Paragon was offering to get out of the rental agreement at the new cable center, except to say that it was less than the full value of the 12-year lease.

“We expect them to live up to all obligations of the franchise,” Jackson said. “We have a good-faith agreement.”