Cable TV Agreement Promises Better Service in W. Hollywood

Two major cable television firms involved in the sale of West Hollywood’s lucrative cable system have signed an agreement giving the city $395,000 and assurances of markedly improved service in the future.

The agreement also paves the way for the transfer of ownership of the West Hollywood cable franchise from Group W Cable Inc. to Century Southwest Cable Television Inc.

Approved last week by the two firms and the West Hollywood City Council, the agreement requires Group W to provide $395,000 worth of television equipment or cash by November and requires Century to provide better service, including more cable channels and the capability for live public and government transmissions. In return, the City Council consented to the transfer of the cable franchise.

The shift of the West Hollywood franchise is just one component of a $2.1-billion sale of Group W, a nationwide cable giant owned until last week by Westinghouse Electric Corp. Westinghouse sold Group W, once the nation’s third-largest cable operator, to a group of five communications firms, including Century, which is based in New Canaan, Conn.

‘Best Deal’ Available

West Hollywood city officials said they were pleased with the agreement, which they maintained was their only real option. “Under the circumstances, it was the best deal we could get,” said Ian Tanza, the city’s cable TV and fine arts administrator. “I think we came away in very good shape.”

Some cable customers and enthusiasts criticized the lack of public participation in negotiations and voiced fears that the city hurried into the agreement without seriously considering other alternatives, including public ownership of the city’s cable franchise.

“The whole thing was just so rushed and so secret,” said Nancy Taylor, a video producer and civic activist. Taylor asked the council at its public meeting last Thursday to delay signing the agreement for at least two weeks so that it could look into the option of public ownership. But the council turned down Taylor’s request and voted for the new agreement on the same night.

Negotiators for Beverly Hills reached a similar agreement last week with Group W (which would have included an $875,000 settlement), but unlike the West Hollywood council, the Beverly Hills City Council sent the agreement back for further consideration, delaying the transfer of ownership and extending the old agreement for 90 days.

No Public Ownership

In West Hollywood, Tanza said, public ownership is not an option. Under the terms of West Hollywood’s original franchise contract (signed in 1983 by Group W and the county of Los Angeles, which then governed West Hollywood), public cable ownership cannot occur until 1999, when the original franchise runs out.

In a report to the City Council last week, Tanza and City Atty. Michael Jenkins acknowledged concerns that Century had taken on “too much debt and that the extended burden will negatively impact the company’s ability to operate the systems it plans to acquire.”

But the report insisted that Century had strong financial backing from major securities firms. And Leonard Tow, Century’s president, said this week that he foresees no financial hardships once Century assumes complete control of the West Hollywood franchise later this year.

Tow also minimized concerns raised in the report that Century provided cable subscribers with only “the absolute minimum” of service. “I like to think that we run an efficient business and can provide the best possible service at the lowest possible cost,” he said. “I think that’s a worthy objective.”

Although Tow did not say what Century is paying for the West Hollywood franchise, his firm is paying $250 million for nine Group W cable systems, including the West Hollywood franchise.

Lucrative Operation

The city’s cable franchise appears to be a lucrative one, with low operating costs, a high subscriber density (11,000 subscribers packed into a 1.9-square-mile area) and gross revenues of $2.4 million reported by Group W last year.

“Virtually the entire community is wired (to receive cable transmissions),” said Ron Stone, head of West Hollywood’s Telecommunications Task Force. “That density makes this city a profitable market. If they don’t already get cable, they can be hooked up with a minimum of cost to the cable operator.”

Stone, who led West Hollywood’s incorporation movement in 1984, agreed with city officials that the city had no choice but to sign the agreement. “We’re not in the financial position to file a lawsuit against the sale,” he said. “And even if we could make that move and we won, we wouldn’t have the money to run it ourselves.”

But, like Nancy Taylor, Stone was critical of the city’s public handling of the contract.

“Secret negotiations are one thing,” he said. “Sometimes they’re necessary. But the public didn’t even know it was to be discussed and voted on (last week). The task force wasn’t even allowed to look over the contract before the council voted on it.”

Forced to Rush

Tanza and Jenkins said the city was forced to rush the vote because of Westinghouse’s decision last week to close the sale.

“We didn’t know that the sale would be final until the middle of last week,” Tanza said. “In order to win the ($395,000) concession from Westinghouse, the agreement had to be signed on Thursday (last week). Otherwise, Century would have had ownership and we would have had no leverage with Westinghouse.”

Until Westinghouse announced its decision to sell Group W last August, the city had been trying without success to force Group W to live up to the terms of its original 1983 franchise agreement.

The terms of the original contract included 54 channels (West Hollywood subscribers now get 35) and several other items that Century is now expected to provide.

Century President Tow said his firm will begin working on those commitments later this year. Tow added that he had no idea whether fulfilling those promises would boost cable subscriptions costs, which now average about $10 a month for basic services, according to city officials.

“We haven’t given any thought to pricing so far,” Tow said. “Once we’ve completed our obligations (under the new agreement), we’ll look at our returns. We’re hoping we won’t have to raise any of our subscription fees, but we can’t make any commitments.”