Cable TV - co-op style - comes to Davis, Calif.
Davis, Calif. — American communities, their culture already entwined with electrical and telephone wires, are in the process of being wired again - for cable television. This university communitiy of 38,000, some 12 miles from Sacramento, has set out to see whether it can use the cooperative idea, so well applied to rural electrification in the 1930s and '40s, to provide its citizens with quality cable-TV service.
Although cable co-ops already exist in some remote areas of the United States where private companies see little or no profit, the Davis Cable Co-op (DCC) is the first such venture in an urban market that is attractive to cable firms.
The Davis City Council in 1981 gave DCC a conditional franchise without competitive bidding and told the co-op to demonstrate that it could provide services equal to or better than those provided by private firms.
On Dec. 8, 1982, the council licensed DDC to construct and operate a cable system for the city. This was done, admits City Manager Howard Reese, despite reservations about the co-op's ability to attract enough subscribers to succeed financially.
Mrs. Judy Corbett, chairwoman of DCC's executive board, and board member Robert Kahn say they are confident the system will succeed, not only financially but as a cultural, educational, political, and economic asset to the city.
''Davis residents are already well-served by many co-ops,'' explains Mrs. Corbett, ''including housing cooperatives, a craft cooperative, a food co-op, and two large credit unions. DCC will give people a choice in their own TV system.''
This view is supported by C. C. Wagner II, vice-president of Malarkey-Taylor Associates of Washington, D.C., a consulting firm that has helped DCC plan its system and work out its rather complex financing. Familiarity with co-ops, the support of the city government, and the promise of a substantial loan from the National Consumer Cooperative Bank (NCCB) made the cable co-op feasible in Davis , he says.
But Mr. Wagner adds, ''I don't see Davis setting the path for the future. I don't see cable co-ops sweeping the nation.''
What is occurring, he says, is that cities finally are getting the opportunity to choose between clear alternatives - including cooperatives, municipal ownership, and commercial franchises.
St. Paul, Minn., currently is accepting bids for a cable franchise, and among the bidders is a cooperative.
City manager Reese and others note that one factor making the co-op attractive to Davis was the opportunity to avoid the political controversy that has accompanied the awarding of cable franchises in many cities. Other features attractive to City Hall: Davis will get $60,000 a year of cable revenues to use as the city council sees fit, and it is guaranteed use of some of the DCC channels for whatever community purposes it deems appropriate - from setting up a fire-alarm network to televising City Council sessions.
Reese adds that the city would not be liable for any loss suffered by the cable system. Even should DCC fold in a few years, Reese argues, its assets probably would be sufficient to meet most obligations.
According to Reese, Davis set up a committee in the early 1970s to study cable TV options. That group recommended a municipal system, but federal regulations were being changed at the time, so ''plans were shelved for a while.''
Three years ago the city was approached by a cable TV firm, says Reese, and once more the council appointed a study committee. That panel recommended a cable cooperative, and Malarkey-Taylor put together a plan for the proposed system.
After the city council gave the committee - which meanwhile had become the executive board of Davis Cable Cooperative - a conditional franchise, the NCCB provided an $80,000 grant for feasibility studies. The council also engaged its own cable expert to assess the proposed system.
Although the city's consultant, George Page of Lake Osewgo, Ore., said the co-op had proposed a ''good state-of-the-art system,'' he had reservations on cost and earnings projections and forecast a deficit spiral. This was enough to convince one city councillor that the co-op was too risky.
Wagner says the questions raised by Mr. Page were resolved and plans for the system were refined. But Councilman Gerald Adler, who alone voted against both the conditional franchise and the final contract, says he feels the risk still is too high.
A general manager nominated by Malarkey-Taylor has been hired by DCC, and construction of the system is scheduled to begin March 1. Service is expected to begin July 1.
Of the 15,000 households in Davis, DCC needs 55 percent as subscribers. Ninety percent of those will have to take more than the basic $7.95-a-month service if the co-op is to meet its financial obligations. Subscribers will also become stockholders - paying a $25-dollar starting fee and $4 a month until each has invested $200 in the system. The investment is returnable on termination of service.
To help finance the $5 million project, DCC will have a $2.6 loan from the NCCB. The remainder will come from a limited partnership arrangement that is being handled by a New York brokerage firm. As the co-op's earnings grow, the limited partners - attracted by the opportunity for tax write-offs - will be bought out.
DCC board member Kahn admits that ''an aggressive marketing effort will be needed, since Davis is not as TV oriented as some other communities.''
But he expects residents to be attracted by the community access features of the system. Kahn foresees a lot of locally produced programming.
Consultant Wagner says the Davis system will be ''unique. The program lineup will be very different from the traditional cable offering because it will responsive to and determined by what Davis residents want.''
It will be as modern as any system today, he adds, with the potential for two-way communication. But extra features will be added, he says, only as it is determined that the people want them and will pay for them.
DCC will start with 52 channels and a dozen optional services; it will be capable of expanding to 100 channels.
Davis cable subscribers are expected to be ''far more than passive viewers,'' asserts Kahn. As a shareholder, each will have a vote for the DCC board of directors. (Mrs. Corbett says the date for election of the first new board members will be set when the present board decides there are sufficient subscribers.)
Advisory committees will help develop programming and will monitor the preformance of DDC's management.