Interview Location: Del Mar, CA USA
Interview Date: February 10, 1986
Interviewer: Max Paglin
Collection: Penn State Collection
Note: Audio Only
PAGLIN: I am Max Paglin, Executive Director of the Golden Jubilee Commission. This is one of the projects of the Jubilee Commission, Oral Histories of the Cable Television Pioneers, the Early Years of Cable, the 1940's to the 1970's.
What we would like to do today is refer to the copy of the outline sent to you on December 8th. We have broken the outline down into various segments; the first segment will be your early personal history. I would like to see how far we can get today and then make arrangements for further sessions to go through further segments as your career has developed.
DANIELS: That's fine.
PAGLIN: The first thing we would like to do is get some of your early personal history. I know there has been a great deal written about you and I have gone through many of the journal articles in Cable Vision, Forbes, and Channels and so on; we'd like to get for these purposes, as indicated in our proposal; information from the subject, the interviewee himself. So tell us a little about your early life, where were you born, and when, about your mother and father. What their names were, what their occupations were, where they came from, something about your personal history, of which there doesn't seem to be too much of a record.
DANIELS: Okay, Starting Max, you've got to remember I've got a terrible memory on dates. Looking back, I'm more interested in today and what's going to happen tomorrow and the history is not one of my strong subjects and going back on dates is a little tough on me, I'll do my best.
I was born July 1, 1920, in Greeley, Colorado. My dad was a candy salesman for the Woodward Candy Company in Council Bluffs, Iowa. I was the third of four children, I had two older sisters, Bobbette, the older one was killed in a car wreck about 10 years ago, that would be around 1975; I have a sister Dorothy who is retarded. Dorothy is 67 years of age, has the mind of about an eight year old, has lived with my mother all of her lifetime. I have a younger brother, Jack Daniels, not a bad handle, easy to remember. My mother was a housewife.
We moved from Greeley, Colorado, to Omaha, Nebraska, when I was four years of age. My dad at that time had gone into the life insurance business; this would have been in 1925-26, somewhere along in there. His job was traveling, did extremely well in those years, in the life insurance business. Came the Depression in 1929, the Stock Market crashed, and our family moved from Omaha, Nebraska, across the river to Council Bluffs, Iowa, because my dad's mother had a home without a mortgage on it. We had a place to live and a roof over our heads during that period.
Ever since I was old enough to talk, I worked, I think my first job was selling the Saturday Evening Post, door-to-door, and I was eight, living in Omaha at that time. I think I had 10-12 customers and I delivered the weekly Saturday Evening Post. Then I took on Liberty Magazine which was popular at that time and I had customers both for Saturday Evening Post and Liberty Magazine.
DANIELS: Max, I've forgotten, but I think the Saturday Evening Post was a nickel then, and I think I made two cents for every copy that I delivered. I think the Liberty Magazine was a nickel and I think I made a penny, penny and a half per subscriber. This is just before the Depression, just before the Stock Market crashed. My dad, as a supplemental income, had some peanut machines, scattered around Omaha, Nebraska, and I would go with him and fill up the peanut machines that you put a penny in and get a handful of peanuts. I enjoyed that 'cause it was a job, he didn't pay me much but he bought me a coke occasionally. Coke in those days was a nickel.
We moved to Omaha then to Council Bluffs. I had a newspaper route, at this time I was about 10-ll years old, and I carried out groceries in a local grocery market. We lived in Council Bluffs until 1937, and these were the years from 1929 to 1937 when things were really tough, this was the middle of the Depression. I can remember when my brother and I used to gather firewood out on the hillside to put in the furnace to keep us warm. My mother made hand lotion and sold it door-to-door, and my dad was selling life insurance to farmers and bringing home chickens and eggs as part of the premium payment to feed the family.
I got an idea one day that I could sell ice cream on the streets so I had a bicycle, I was 12 or 13, I would carry it on the back of the bicycle with dry ice and it was in Dixie cups. This was during summer months, rode all over the City of Council Bluffs, Iowa; my best customers were mechanics in garages. I bought them for a nickel and sold them for a dime and I built up a good clientele for a summer job.
By the time I was a sophomore in High School I worked as a short order cook in a hamburger stand. Now this was before McDonalds and before all the things you have today and it was just a bona fide diner type and I was an all night cook and at the age of 15, one thing nice about the job was I got all I wanted to eat. But it was tough because my hours were six o'clock in the evening to one o'clock in the morning. I had to get a lot of sleep because it was during school days, and on weekends, you bet, we all worked, we had to to survive.
In 1937, my father decided to move to New Mexico, he had an opportunity to have a state-wide insurance agency. My dad went out to New Mexico, we took the train out from Denver, from Omaha to Denver, drove to New Mexico, the town was Hobbs, New Mexico, where my mother still lives. She's 91, where my brother still lives and where my retarded sister still lives.
When we moved to Hobbs the public school system was a disaster, it was an old boom town, the streets weren't paved, boardwalks, typical boom town. This was in 1937, in the spring. Then in the summer of 1937, my dad decided the school system in Hobbs was not developed, and it wasn't, and he sent me to the New Mexico Military Institute. It was two years; I was going to enter my junior year in High School. He sent me to New Mexico Military Institute, I resisted, but it turned out that I loved the school and it taught me many of the disciplines that I enjoy today. During the summer, I worked every summer as an oilfield pipeliner as an oilfield roughneck; worked as a bellhop, worked anywhere I could to help pay my college tuition. I was very active in athletics and really had no interest in girls, too busy working and in sports.
PAGLIN: High school level too? What sports were those?
DANIELS: I played baseball, football, basketball and fought on the boxing team. Went to the New Mexico Military Institute for two years of high school and two years of Junior College which was all they offered there. It was a prep school. Known as a prep school for the service academy; Roger Staubach went to New Mexico Military Institute before he went to the Naval Academy. Several military people who went there prepping themselves, for one of the service academies.
PAGLIN: Where was it located?
DANIELS: In Roswell, New Mexico. In 1941, which was the year I graduated, I had an appointment to the Naval Academy, the appointment was made by Carl Hatch, the Senator, author of the Hatch Act, which I'm sure you're familiar with. I had the alternative of going to the Naval Academy or flying in the Navy. If I had gone to the Naval Academy it would have taken me three years, the "short" route, the Naval Academy curriculum then from four years to three because the government felt the war coming on. That was in 1941. Rather than go to the Naval Academy I entered the V-7 program in the Navy. Which permitted me to take pilot training and be flying Naval aircraft and be a Naval officer in 11 month period of time.
I had Naval flight training and I had no idea that there was a war coming on. People said "You were a Great Hero - You knew it was coming." Well, bullshit, I didn't know it was coming, I wanted to make $187.50 a month and I wanted to fly in the Navy. I graduated two weeks after Pearl Harbor, so my timing couldn't have been worse. So I spent from February of 1942, Pearl Harbor was December 7th of '41, February of 1942 I was in an active fighter squadron training in Norfolk, Virginia. Our country was about to invade North Africa, and I participated in that invasion as a fighter pilot on a small aircraft carrier, the Sangamon.
After the invasion we went through the Panama Canal straight to the South Pacific and the Solomon Islands at a time when we were vital against the Japanese. Then I was a land based fighter pilot for the Navy, spent a total of about 11 months in the Solomon Islands during the early days of the war. I returned to the States and was sent to fighter director school in St. Simon's Island, Georgia; this was about in '43. At that time I was assigned to the U.S.S. Intrepid as a fighter director. My job then was to control the fighter aircraft from the ship on intercepting the Japanese aircraft.
My experience as a fighter pilot, they then used us as ground controllers, 'cause we talk the same language as the fighter pilots. I then was assigned to a night fighter squadron VFN-101, and I served in a night fighter squadron for about a year and a half, operating off of various aircraft carriers in the Pacific. I participated in many of the battles of World War II in the Pacific. Returned to the United States about May of 1945, six months before the war ended. In my last duty in the Navy I was based at Floyd Bennett Field, near Brooklyn, and I was ferrying fighter aircraft from Floyd Bennett Field to San Diego, which was the only non-combat duty that I enjoyed during the war. The war ended in November of 1945, at that time we had a point system if you had so many points you could get out and I had all the points in the world. The war was over.
PAGLIN: VJ Day was August.
DANIELS: Well, one was August and one was November, if you recall. The Japanese surrendered in August, but we're talking about the Germans now.
PAGLIN: The Germans surrendered in May of '45.
DANIELS: Okay, pardon.
PAGLIN: In any event, it's all the same.
DANIELS: I can't remember now, anyway the Germans surrendered first.
PAGLIN: In May of '45.
DANIELS: And then the Japanese in August and then we became eligible to get out in about November. I elected to get out of the Navy, return to Hobbs, New Mexico; where my father had built a fine insurance business, specializing in the oil industry. I joined him, knowing nothing about the business. He wanted to send me to Wharton School of Finance; I elected not to go because I wanted to make some money. I thought about studying medicine but I didn't want to waste another seven or eight years in school, I wanted to get out into the business world and make some dough.
PAGLIN: Was he by this time better off than he was before?
DANIELS: Yes, the economy in our nation Max, didn't start to improve until after the War started. In 1939 to 1941 it was a little tough. Starting about 1941, right after Pearl Harbor, the economy got better because the government was spending so much on defense, pumping a lot of money into the economy. So yes, he was doing better. He was ill, my dad was an alcoholic and he had diabetes, he had a heart problem. My mother kind of kept the office together while my dad had his various periods of sickness. My return from the service was a big help to both of them. Although I knew nothing about the business, I learned rather quickly and we did okay as a family. Then my brother joined us a year later, he also was in the Navy, on a destroyer.
I was called back for the Korean conflict, I was in another night fighter squadron, August of 1950. The Navy told me I'd be in there another 24 months and they hit it right on the head, I was out 24 months later. By that time my brother had been running the office, I said "Okay, I'm home, I'm ready to take the business over again, move over," and my brother said, I'll never forget, "Move over, my ass, you've been gone two years." So I decided to explore new territory and I moved to the Rocky Mountain area. This was in 1952, I got out in '52.
I wanted to plow some new ground so I looked for another town where there was a big oil boom because my specialty then was oil insurance, as my dad had taught me. My brother and I did together. I drove all over the Rocky Mountain area and finally settled on Casper, Wyoming. At this time I was 32 years old and had no college education, two years only; had never had an accounting course, still haven't. I moved to Casper and did well in my oil insurance business but I had seen television for the first time on my trip from Hobbs, New Mexico, on my trip through Denver on my way to Casper.
The reason I had never seen television was during the Korean War they had a freeze on all TV stations, there was no TV station in Hobbs. I was never where there was a TV set or TV station and my first glimpse was in a bar in Denver where I stopped on the way to Casper. Most people you meet today, they were raised on television, but at my age and your age I didn't even see television until I was 32 and I thought, "My God, what an invention this is." When I had moved to Casper I had to go to work in my oil insurance business to make a living and to feed myself, and my then family. But I couldn't get it out of my mind, how do you get that great invention to a small town that didn't have any TV stations; that was my first exposure to television. Now during the war I had been exposed to radar, and though not electronically inclined, and I'm not an engineer, I was indirectly exposed to electronics basics because of radar.
PAGLIN: Could I interrupt? In your military experience particularly what was the nature of the training you got and some of the disciplines? Was it engineering? I mean, as a pilot, obviously....
DANIELS: Max, when the war hit, they had to train us so quickly and get us into battlefields. I'm a lousy engineer, they taught us how to read their gauges and be able to report to the mechanics what was wrong, we didn't know how, have the qualifications to fix any problem, we just had to have an understanding of how to fly the airplane and how to shoot the guns. Or how to shoot the rockets or how to drop the bombs with very little training of what you and I call engineering. They were interested in only one thing, fly the airplane, shoot the gun, go get'em. And they had to, because as you may recall, we were badly outnumbered in those days. No formal electronics or engineering training at all, but as a fighter director I had to know how to read a radar scope and read blips on the scope so I could locate enemy aircraft from our aircraft and that was the only exposure to electronics ever in my lifetime until I got into Cable TV.
PAGLIN: Did you find it of interest or was it just a job you had to do?
DANIELS: A job I had to do. And I still know nothing about electronics, I can't tell you anything about how cable TV works. I know absolutely nothing about it, I know the basics of the business ends, but as far as how it works, I've always hired guys to do that.
PAGLIN: During the military experience did you learn some disciplines, ways of conducting yourself or habits, occupational or personal habits, which in fact stood you in good stead?
DANIELS: Oh, absolutely. Well Max, you look at all the disciplines of being in the military, Number 1, of being on time. When you're in the military and you're supposed to gather at 7:00, that doesn't mean at 7:01, that means at 7:00 or be a little early. So even today, I am extremely punctual, and in fact I probably carry it a little too far, and I expect people to be punctual who are coming to see me. I learned how to concentrate, I learned neatness, I learned to keep myself clean, in sports you learn don't give up. I had some marvelous coaches and instructors in military school that teach you that when things are going bad, that that's the time that you work three times as hard. So all of the things that I got not only in military school but in the Navy have been of great use to me in my business career.
PAGLIN: Were there some particular instructors, teachers or commanding officer that asserted a principle influence on you? Someone you remember.
DANIELS: Yes and he's still alive, his name is Babe Godfrey. He is a retired Colonel at the New Mexico Military Institute. He was my coach and the guy I probably admire most, next to my dad. To this day we correspond and talk and Babe Godfrey today is 82, and he has been a magnificent mentor to me and I have tried to follow his principles.
PAGLIN: What were the kinds of things you got from him?
DANIELS: Hustle, hard work, don't give up, you're a small guy - so what, you know, size doesn't mean anything. He (believed in) patriotism, love my nation, love my country, love my fellow man, just a magnificent man. I've never forgotten him, consequently, this is '85, I've known him for 45 years and I'm still in continual touch with Babe Godfrey. I see him about twice a year and let him know how grateful I am.
PAGLIN: Do you ever bounce problems off of him, seek his advice?
DANIELS: Not in business problems, because Babe was athletic coaching oriented, with very little experience in business. But personal problems, sure, he's magnificent.
PAGLIN: It's obvious that this kind of background had a very significant influence on your later life.
DANIELS: You went through the Depression, and it had to have had an effect on your lifetime. I'll never forget it, I don't think we will ever have another one in our country, I hope not. You couldn't have been raised in the Depression and not appreciate that you start off with hard work because you had to do it to survive.
PAGLIN: Now we're down to your first view of television, and I recall that there was an extensive magazine coverage of your early days. Would you say that the articles are accurate? The 25th Anniversary issue of CableVision, was it fairly accurate?
DANIELS: Yes, they are.
PAGLIN: Are they accurate reference materials?
DANIELS: Max, all the stuff that has been written about me, and I've benefited from great press, is 99% correct. Some of it, an overeager reporter would amplify, but the guts of the articles are right on and I've been entirely uncritical of them. People call me the "Father of Cable Television," I've never known why, maybe because of my age. I consider the "Father of Cable Television" to be either Marty Malarkey or John Walson. Both of whom were in the business longer than I was.
If there is any reason for them to call me the "Father of Cable Television," I would think it would be because I was the first guy to recognize it as a hell of a potential business, and I brought the financial community in to really make it a business rather than an extension of an appliance shop.
PAGLIN: I want to get into that because that to me was very significant in terms of the early years of cable television. Am I correct in my understanding that you were one of the very early operators in the western mountain area, right?
DANIELS: Yes, and the first in the world to use microwave to get cable to a place that wasn't just over the hill. Marty in Pennsylvania and all those guys, all they had to do was go over the hill. We had to microwave our signals over 200 miles to where we could pick up the Denver stations to get into Casper, and that was a real breakthrough.
PAGLIN: Tell me for example, which was the first system you set up?
DANIELS: Casper, Wyoming.
PAGLIN: Casper, Wyoming, and how did you get that first franchise?
DANIELS: I was struggling in my insurance business and I got on the airplane, and I'll never forget, I had cowboy boots on and a sort of cowboy suit, because I lived in Wyoming and I thought I should look like a cowboy. I went back to Pottsville to visit Marty Malarkey, I'd never met him.
PAGLIN: How did you find out about him?
DANIELS: Through Jerrold.
PAGLIN: Oh, through Milt Shapp.
DANIELS: But I think it was Zal Garfield who signed, you know Zal, and said I got to meet this guy Malarkey. We didn't even have a trade association then so I went back to Pottsville, I'll never forget, and Marty charged me 500 bucks a day to talk to me.
PAGLIN: You're kidding, and this was in 1953?
DANIELS: And I spent two days with Marty and happily paid him the 500 bucks a day to pick his brain. And I said how do I get it started and so forth. He said you just go to the city and get a permit, and I'm kind of sorry I did that because I don't think we needed them in those days, but I did it anyway. Cause by going to the City of Casper and asking for a permit, it started instant publicity in the newspaper. So that it was no problem at all but I got some ink saying some guy is going to, wants to build some kind of thing here, wants to bring television to Casper, and it was free publicity. So I got the permit, it was good publicity, people had no television.
The city wrote a one-page permit, it wasn't a franchise, just a permit to use the streets and alleys. I learned that from Marty and I did that. Then I had Jerrold come to town, and Zal Garfield came to town and he thought I was crazy, cause the TV signal was so far away, he thought I was crazy but he was eager to sell the equipment.
PAGLIN: Now what would you have gotten primarily?
DANIELS: We picked up Denver, all we could bring in was one channel, we picked it up on an antenna site on a mountain near Laramie where the University of Wyoming is. And then we pumped it through the Bell System , bought the microwave from them and pumped it 200 miles into the City of Casper.
PAGLIN: Did you lease a channel from them in the microwave?
DANIELS: Leased a channel, one channel, and we had to put up $125,000 in cash for a bond in case we couldn't pay the monthly rental, which I think was $8,000 a month. We didn't have one customer, we started out with one channel and they built the facility especially for us, they couldn't use existing facilities. Never forget that Zal Garfield said that he wanted to sell the equipment, but in those days Max, the deal was he so1d you the equipment but then they got 25 cents per month, per subscriber for every subscriber that we got on the cable system.
PAGLIN: In addition for what they got for the installation?
DANIELS: Yes, but in those days they had no competition, there was no competition in those days, so nobody else was making the equipment except Milt. We paid him.
PAGLIN: Now where were you getting the money at that time?
DANIELS: I got a group of local oil men together in Casper, I had no money, I had 5,000 bucks I think I put in the deal. I got a group of local oil men and a prominent lawyer who was later a judge, they had good solid names in the community and they were my stockholders. We raised a total of $125,000, a lot of borrowed funds that they borrowed at the bank, but I had the money to work on. Then we had another 250,000 bucks that we started on.
PAGLIN: And that came also from your investors?
DANIELS: It all came from the bank, they personally borrowed the money from the bank, which is the way you do business really. We were charging 150 bucks per connection, 'cause we had a monopoly, with every 150 bucks we got we would build a couple more blocks of plant down the alley to get more customers, and we charged $7.50 a month for one channel.
PAGLIN: And it was just one channel? Casper didn't have a local station?
DANIELS: No, and every 90 days we would send our then customers a poll, and they'd pick what programs they wanted to watch ‑ it was just black and white then. The majority ruled, if more people wanted to watch "I Love Lucy" than "Sid Caesar," then that's what we showed. On whatever night that was, they just checked what they wanted and the majority ruled, and that was true democracy in those days. We only had one channel capacity, but then through the years we gradually increased the number of channels so we didn't have to do that anymore. The system is still in Casper and is doing extremely well. It was part of United, it was the backbone of what is now United Cable.
PAGLIN: It was their first system, the first system they bought?
DANIELS: Yes, it was Gene Schneider and Richard Schneider, they both went to work for me, they're both engineers, out of the University of Texas, and they went to work for me, knowing nothing about the cable business, but they were engineers and they did one hell of a job. Gene, the older brother, is now Chairman and CEO of United, was the chief operating guy and his brother Richard was the chief engineer, and in United today Gene is still the chief operating guy and CEO and his brother is the chief engineer. They started with me in 1953 and United has done extremely well. But in Casper they ended up buying the rest of the stockholders out and that was the foundation of what is today United Cable.
PAGLIN: But for sentimental reasons, you don't still have an interest in the system, do you?
DANIELS: No, I have none. Only that I am delighted to see them so successful, delighted to see Gene and Richard doing so well.
PAGLIN: After Casper, when you saw that this would be a business that could be developed, where did you go from there?
DANIELS: I started looking at other communities, and all this time I was trying to earn a living because I drew no salary out of the cable, there was no money in it, we didn't have any money, the money was going into the building.
PAGLIN: Well then, what were you doing for living expenses?
DANIELS: Well, that was the oil insurance business. Had to keep up the oil insurance business for a living. We called the company the Community Television System of Wyoming. There's a bit of history in that Strat Smith at that time was active in the legal profession and he kept urging people to use the word "Community" which he felt would help us in law suits because it had the word "Community" like in community benefit. So we called it Community TV Systems of Wyoming. We then wanted to look at other communities, I went to Rawlins, Wyoming, built Rawlins, Wyoming, we then went down to Farmington, New Mexico, and built Farmington.
PAGLIN: But the problems were quite different there though....
DANIELS: Yes, the Albuquerque stations were closer, and in the case of Rawlins, the Denver stations were closer, so it wasn't as tough a project but I felt the people in the small towns who could not get television were ripe for cable TV. In those days we called it Community Antenna Television, CATV. About that time, Marty was the first president of our national trade association for two years and I was the next president, there were about 12 members I think. It was during that period of time that other people started taking a look at the business and wanted to buy systems or sell their systems or know more about the business.
PAGLIN: This was about 1956 or 57? That's when you served as the second president of the NCTA?
DANIELS: Starting in about '55 Max, and that's when it started dawning on me that there was a business here. I wasn't crazy about the oil insurance business but I did well in it. At about that time I decided I wanted to move to Denver, I'm going to establish a company that performs investment banking services for the community antenna business. And I did that.
PAGLIN: Can I just interrupt ‑ it's been written that your first inkling of the potential of this was when people came to you during your first term as president of the NCTA? Did you feel that your office and the business presented any conflict of interest problems?
DANIELS: Yes, and I didn't feel as president of the trade association I should use that for my personal gain. That thought bothered me, but I advised people on how to build their systems, who to call, who to talk to. In those days it was a little early to start buying and selling because we were all so damned new. But I could see that that was starting to happen. "Where can I buy a system?" Well, there were none for sale then. "How do I go about building?" Well, I put them in touch at that time with Zal Garfield and Jerrold, and tell them the same things that Marty had told me, and help them get on because we wanted the business to grow. The more people there were in the business, the better the association we'd have. As soon as I went out of office, as the NCTA president, I opened up my shop and picked the name Daniels and Associates and did it full-time.
PAGLIN: As the second president, following Marty Malarkey, of what is now NCTA, the trade association. In the period of 1956‑57, when the FCC was just beginning to become aware of its regulatory responsibilities, the television, the then infant UHF industry, and the local broadcast stations. What were your feelings with your associates within the trade association in terms of your problems with the federal government, with Congress, and later on the local municipalities?
DANIELS: We formed the association in the Necho‑Allen Hotel in Pottsville, Pennsylvania. There were about eight of us there, and Max I've forgotten why we formed it, but we were formed like all trade associations because we had a common problem. And frankly, I've forgotten what the problem was, it's been so long ago, but I can remember this, I can remember that having fought in World War II and Korea, and having been in the cable business such a short time, and having the government tell me what I could or could not do, I deeply resented, because I thought "Now wait a minute, god dammit, I've been out there busting my ass and getting shot at and all I want to do is make a living." I wasn't used to controls of any kind other than my military superiors, and you might remember, I don't remember what our first problem was in the cable industry. I know that when we got together, Marty got us together, and I can't remember what the hell the reason was.
PAGLIN: Well, having been on the FCC eighth floor so to speak, during that entire period, I was legal assistant to Bartley, so I was intimately conversant with the problems. To jog your memory a little, what was concerning the Commission at the time which was at the time of the so-called significant case....
The issue was the Commission issued a decision on the Carter Mountain case, which you recall, took place in Wyoming, I think.
DANIELS: Worland, Wyoming, or something like that.
PAGLIN: What happened there was, the operator, who owned the station at that time? Did you own the station?
DANIELS: Some lady owned it.
PAGLIN: Anyway, she applied for one of these microwave licenses. Now, until then, the Commission had not quite made up its mind whether it had jurisdiction, what this animal was....
If I may tell a little story here, you mentioned Strat Smith. Strat Smith and I go back to when he was my young associate in common carrier. I broke him into common carrier communications. He was on the staff that wrote the first memorandum on what the hell this new animal was. This was around '51, '52, the Commission couldn't make up its mind, was it broadcasting? Was it common carrier? Was it some kind of new animal? But when they applied for microwave, which was a radio license, the Commission said "Ah hah! We do have jurisdiction, there's our chance." And that's what they said, now everything they said was, "Fine, you want a microwave license, we'll give you a microwave license, but what are you going to use it for? And what are you going to use it for is now subject to our jurisdiction." Does that jog your memory?
DANIELS: It sure as hell does.
PAGLIN: Okay, now those were the problems that suddenly the industry now encountered, that the Commission now began to take full jurisdiction almost.
DANIELS: But you got to remember Max, they were nudged by Ed Craney, by Bill Grove, by broadcasters.
PAGLIN: But of course, that was the whole point, it started with the West Virginia People.
DANIELS: That's right, in the early days, not only the Commission, ....we could have gone much longer as an industry without Commission interference, had it not been for the reminders of our competitors. "Competitors?," "Broadcasters," who didn't want us bringing foreign signals into their markets. Now it was okay if we took their signals to another market, but they damn sure didn't want any more signals coming into theirs. So the Commission got a lot of nudging in our early days, if my memory is correct.
PAGLIN: Right, and it was coincidental at the time in the Senate, and the counsel by the way at that time was Kenneth Cox. Senator Magnuson's guy, and they had were just getting underway, and this was '55 already, a big Senate inquiry on the fate of UHF. Because when the freeze was lifted, that you mentioned earlier, in 1952, UHF was authorized under the new allocations, right? But it was going down the tubes, because it couldn't get any programming and therefore there was no programming and no sets, and so on. And the big Senate inquiry was, "What do we do with UHF and how do we help them?" One of the problems was cable bringing in outside signals for the few UHF stations. So the Commission's attitude was, "We must protect the local broadcasters."
DANIELS: And that was Bill Putnam, from Springfield, that crazy UHF guy....
PAGLIN: And so that was the problem that the Commission faced....[Interruption]So, we were talking then about the Commission's concerns with protecting the broadcasters because of the new infant UHF industry. And their concern that the new animal might interfere with the development of a national system of television, which was really opened up in 1952, after the Korean War. Right? So those were the problems, at least from my understanding from having been at the Commission were those were the problems that the infant industry was worried about. Who were some of the actors at the industry level who appeared before congressional committees? Yourself I'm sure....
DANIELS: Myself, Milt Shapp, who later became Governor of Pennsylvania, as you know, Marty, Strat Smith, and Max, that was about it in those days, 'cause there weren't that many of us.
PAGLIN: George Barco?
DANIELS: George Barco, and George was a natural because he was a lawyer, and speaks well.
PAGLIN: And Yvonne, his daughter?
DANIELS: Yolanda, she was not a witness then but supported us with legal information. But we were so badly outnumbered by the broadcasters in the early days Max, my God, the broadcasters had...., anytime a Congressman or United States Senator came back to his home town, getting on a TV station was the most important thing to him, we couldn't offer that to a politician.
PAGLIN: Because you had no origination?
DANIELS: That's right, and we still don't do a good job of that but we're getting better all the time. We were outnumbered politically and our enemies weren't just the broadcasters. Let me just list a few of them, and it amazed me because we were really just getting started. In 1955, the year I went in as President of the NCTA, I think we had something like 300 cable systems. Pennsylvania was getting pretty well blanketed because of the terrain, parts of the Northwest, Wyoming and our little operation, that was just about it.
Even at that early stage, the people who saw us as a threat started fighting us; the telephone company, they were concerned about us. We had a wire going into the home, capable of audio and video. They didn't have that capacity, they still don't have that capacity. Theaters, they were concerned about us bringing movies on television from the bigger markets into the small towns. The three networks were fighting us, they didn't know why, but it was the thing to do to be opposed to cable because we were spreading our signal out of the Denver market all over the Rocky Mountain area. They lost control of their signal, so to speak. City governments started to think, "Now what are these guys up to?" County Commissioners, Public Utilities Commissions, "What are these guys up to?" The FCC, Congressmen, because of the power that the TV stations had over their Congressmen and their Senators. That's a pretty tough group of enemies to have then.
PAGLIN: What friends did you have then?
DANIELS: We had none, except the public. I have often said that the two friends we have had since Day 1 have been Main Street and Wa11 Street. Main Street is the public, because the public wanted more television, or they wanted some television where there was no television; in markets where there they had only one or two stations, they wanted more. The people who financed us, the bankers and so forth, they were excited about us because they could see a new communications industry and we serviced our debt beautifully.
PAGLIN: We'll get to that later. That's interesting that you put it that way, that the only friends you had were Main Street and Wall Street. And that was true, I can remember when I was out in practice, the kinds of things that people in the boondocks, the lengths to which they would go to get a snowy picture. Some of the farmers out in the plains would put up a 200 foot stick, wouldn't they? Just to get a picture from Omaha or somewhere.
DANIELS: Yes, and we could always call upon our subscribers in Casper, let's say we were up to 2,000 and we had a problem with the FCC and they were going to take away or stop them from....All we had to do was write them a letter and boy they would write letters, 'cause, god dammit, that was the only way they could get any television.
PAGLIN: In fact I can recall in Rapid City, South Dakota, with old George Morrell's system up there, Black Hills, he'd get his public to write letters to their Senators, I was there representing him, I was by that time in the industry. It's true that the Commission was concerned about the future of cable television, and the pressures at that time were from the broadcasters.
DANIELS: But it's proved one thing to me, and that's who controls things in our nation, and don't kid yourself, the public does. Not the Commissions, not the Senators or Congressmen, because they answer to the public. But when Ronald Reagan says to the people "I'm going on the air and talk to the public about it," now that is heavy stuff, and we had that from the Day 1.
PAGLIN: And was it not because you were as close to the public as, let's say, even was the telephone company, in the sense that, as contrasted with the broadcaster, the cable operator, was, as you put it, on a door-to-door basis with the subscribers?
PAGLIN: And the broadcaster didn't even know who the hell was his listener.
DANIELS: No, and they were, we are one half the age of broadcasting. Broadcasting is twice the age of cable, and they still don't know who is watching, and we knew the names and addresses and phone numbers of everyone on the cable system.
Tell you a story: We had operated our service out of Casper, Wyoming, on January 1 of 1954. And January 1 is what day? It's the day that all the ball games are played. So we went to the petroleum club in Casper and a big gymnasium, we had TV sets all over those places. So people could come, for the first time, and watch television and what was the event they got, it was New Years Day and they could get all the ball games. From that day, all we had to do was, if we had a problem and needed letters written or help from our subscribers, all we had to do was contact them and they responded.
That's been the biggest single thing, I'm getting ahead of myself, other than Charlie Ferris, that helped this industry along; the public and Charlie Ferris. And you've heard me talk about him.
PAGLIN: Yes, maybe I'm getting a little ahead of myself also, but I think it works in, in the sense of a development because you talk about your interaction with the other cable television pioneers, in terms of the development of the industry's response to the regulatory policies, which, basically you're saying, was to get your subscribers to support you if they wanted the service. Was it as simple as that?
DANIELS: And they did that.
PAGLIN: Did you also have occasion to go to your own Congressman, again for the same reason, the local public being interested in a service they wanted?
DANIELS: Yes, and got no place for a couple years, because we didn't have enough subscribers, but as we built subscribers and we then get our subscribers to write their Congressmen, they start to pay attention to us. But in the early days, and you got to remember again Max, the broadcasting outlet for a politician was much more important than pleasing a few cable operators around the country and taking care of those customer.
PAGLIN: Sure, the broadcaster was his conduit to his constituents.
DANIELS: Absolutely, and most of them weren't on cable, 'cause we couldn't wire that fast. We were just starting to build in those days.
PAGLIN: Who were some of the early congressional supporters?
DANIELS: Well, we all remember Mike Monroney....[Phone interruption].
PAGLIN: Now, I was asking before the phone rang, who were some of the early supporters in Congress of the cable industry? Not much has ever been said about that, who were they?
DANIELS: I remember Mike Monroney, and the reason he was was he was a great friend of Henry Griffin. Henry Griffin was a big theater owner in the Midwest and he and Mike were great friends, in Oklahoma City. Monroney and Henry Griffin were great friends and Henry Griffin raised money for his election, and they were great personal friends. About the same time, you may remember, we started the first pay-per-view, which was in Bartlesville, Oklahoma. Mike was a pioneer, he was big on aviation, as you may remember. He admired the entrepreneur spirit, he had the guts to stand up and fight for us.
Now, in addition to that, I can't name names, but several Congressmen in Pennsylvania went to bat for us. It was because Pennsylvania was getting saturated, more and more every day, every month, with cable subscribers, so they had the base to use their Pennsylvania Congressmen and Senators. Those were the only early supporters that I can recall right now.
PAGLIN: And then later on of course, as cable began to spread, my recollection is that as you indicate, members of Congress, Congressmen and Senators, began to understand that this was a service, a public service, that their constituents wanted and they started to take a broader view.
DANIELS: We finally convinced a lot of them that people who lived in Casper, Wyoming, or Farmington, Mew Mexico, or Midland, Texas, were entitled to as much television as the people in New York City or Los Angeles were entitled to and they should not be penalized because they lived in a small community.
PAGLIN: And that was the key, because as you said, the Congressman from Alice, Texas, and in places like that, that were dependent on cable began to come to the fore. Is that correct?
DANIELS: Sure, see in the early days, Max, the channel capacity we had was three channels, that's all we could transmit down the cable because amplifiers only take three channels so at that stage we were going either into towns where they had no TV or they only had one TV station and then we could bring in two additional plus carry the local station and give them a better picture. The next step in Jerrold's development was five channels and boy we really thought we had the....
PAGLIN: Moderate (?)
DANIELS: Oh, yes! About the same time, Ameco came along, that was Bruce Merrill's outfit, which unbeknownst to us at the time because we weren't that smart, provided competition for Jerrold. And then Spencer‑Kennedy Labs, Don Spencer, we had three manufacturers in the business. And then the competition for better equipment really benefited the industry. Five channels, Bruce came out with twelve channel equipment.
PAGLIN: And that was about when? The early sixties....
DANIELS: Max, I can't remember when, but I remember it was a real big deal, going from five to twelve channels. And we stayed at twelve channels for quite some time. But the important thing was, when we got to the five and then the twelve channels from the three, we then were able to so into a market where they had two TV stations or three TV stations and bring in other outside programming. Plus, we always carried the local stations, 'cause we could clean up that picture. We could go into those markets and we had a product to sell.
Now all this time we were fighting the microwave battle, this was long before satellite. And indirectly we had battles with the Commission on microwave permits, I'm going to get ahead of myself on the freeze and so forth....
PAGLIN: No. At this same time was when I started getting into it. When you got into the twelve channel capacity, so as you say, you already had the flexibility. When the Commission issued its first report in order, that was really a bombshell for the industry, where they were having 24-day elapsed time before you could duplicate, you remember the non-duplication?
DANIELS: Twenty-four hour.
PAGLIN: Twenty-four hour, and then they had 14-day non-duplication and they had channel simultaneous. The industry really began to have some real problems with the economy....
DANIELS: Well sure they did, because that was an obvious move on the Commission to protect the broadcasters.
PAGLIN: It was 1962 already, somewhere around 1962, '64, the second report and order was in '65, it was even more strenuous, right? What was your recollection of the trade association's position and you as an operator at the time, because you were still operating?
DANIELS: Well, primarily as investment banker and broker, I operated a little but primarily as investment banker and because of the nature of my business, the bigger the business got, the bigger my business could get in a free enterprise society. We were in continual battles over the same subject, protecting the broadcasters and everybody was entitled to receive as much as anybody else. I remember the story, "Look, a guy can subscribe to the L.A. Times or the New York Times and have it mailed anyplace in the country, and you don't protect the local newspaper in our society." We were really frustrated Max, those days were tough for us, and I forgot who was Chairman of the Commission then, Dean Burch came on the scene....
PAGLIN: Dean Burch didn't come on until 1969.
DANIELS: Was it that late? Who were the Commissioners, the Chairman between, well, when was Newton Minow there?
PAGLIN: Newton Minow came on in 1961.
DANIELS: He was no help to us.
PAGLIN: No, and he was followed in '63, because I was his General Counsel, and I was still General Counsel when Bill Henry came to succeed him.
DANIELS: We saw a little bit of daylight with Bill Henry.
PAGLIN: Right, and when Bill left in 1966, Rosel Hyde became the Chairman.
DANIELS: Okay, well the first Chairman where we really started to get someplace with was Dean Burch.
PAGLIN: That would be 1969.
DANIELS: Now see, my God Max, '69, back it up to 1955 it was 14 years before we got a Chairman in there that really said, "These guys are entitled to some consideration."
PAGLIN: Now, by that time already, UHF was well established, wasn't it?
DANIELS: Um hum, it was coming along.
PAGLIN: To refresh your recollection, Fred Ford was the one who started it, in '59, '60, which was the all channel receiver legislation. Which then made it possible, if you remember, to require that every television set that was manufactured, distributed and sold had to be capable of receiving the entire band, which they didn't before then. Right? [Right.] So that's 1960, '62, the all channel set legislation was passed, right? And that really then permitted the potential of a television station to have an audience. Okay? In other words, things were then beginning to settle down, for television and the hearings were over at the time for the competitive channels, right? 'Cause that went from '58 to '62, mostly '55, '56 to '62. So that they had their innings already and now was the time for CATV to come up. I'm now into '65, '66; when I came in, Fred Ford was Chairman of the Association, President, I mean, it was 1965, the Commission had issued already the second report and order, remember? [Yes.] And that was even tougher, and it wasn't until, as you say, 1969, but the broadcast stations had already 900 stations. So as far as the FCC was concerned, there wasn't the fear about development of television that caused them to strangle, if you will, cable. Does that plug your recollection?
DANIELS: Yes, that plugs in very well, yes. Dean Burch was Barry Goldwater's campaign manager, and a lot of us had a pipeline to Barry. I worked on his campaign, Bruce Merrill was close to him, and we were able to get Dean's ear, and Dean started to go to bat for us. The Commissioners part of that Max, played some lip service but in the back of their mind, we always felt they were "controlled" by the broadcasters very well.
PAGLIN: Like you said, they had a history.
DANIELS: Sure, and we understood that, because the Commission was an animal that had been dealing so long with broadcasters and telephone companies so long, and we were a new animal to them. They were afraid of the unknown, rather than say, "Hey let's take this industry and let it blossom and let it grow." Then, when did we have our freeze in the top markets, when we couldn't bring anything in? That killed us for awhile.
PAGLIN: Yeah, that was about '65, the second report and order, it was '65 to about '69.
DANIELS: That was bad news to us because we had plans to go into the bigger markets and so forth. When was that lifted? Do you remember?
PAGLIN: God, it was in '70...., '70...., I'd have to check it out, it was in the early '70's.
DANIELS: That happened, I don't remember who was Chairman in the early '70's , was Dean there?
PAGLIN: Yes, it would be Dean, Dean Burch stayed on until around '74, I was telling you earlier about the Golden Jubilee Commission, which was 1974, it started out with Dean Burch, and before the thing was done, Dick Wiley, at the time of the 40th anniversary dinner, in 1974, in November, Dick Wiley was already Chairman. He succeeded Dean Burch, right?
DANIELS: Okay, Dean Birch, then Dick Wiley and we finally started to get some relief and it opened up a whole new era for us, which were the bigger markets.
PAGLIN: Now, ....[Interruption]. So, as you were mentioning, about the time that Dick Wiley took over as Chairman, which would have been 1974, shall we say the clouds began to lift and a clear horizon for the development of cable television in a really progressive manner really looked possible then.
DANIELS: That simultaneously with the launch of the first of the HBO satellite, Max, and that's been 10 years ago.
PAGLIN: So that was like '75. Now, before that, one of the things that I mentioned in our earlier conversation that I saw, Bill Daniels had a unique role in the development of cable television and I mentioned the fact that you were one of the earliest, if not THE earliest operator in the Western Mountain area. The uniqueness also of being the second President of the trade association. Marty was the first and you were the second in '56 and '57.
Now, the third unique aspect, I see four, was something I think has an aspect which does not exist elsewhere in the people we are talking to. And that is to say, what I am about to ask you about is, you being the pioneer, and attracting the financial institutions to the cable industry, in a significant way, and to me, the importance of that is not only important in terms of the cable television industry, but I see it and I've talked to people about it and they agree, I see this as being (of) tremendous significance to people interested in business administration. I could see that the business administration schools, if they had their heads on their shoulders, would be fascinated by how did Bill Daniels get Wall Street and the other financial investment houses interested in something which the rest of the financial community thought to be some kind of dumb operation in the boondocks? What I'd like to ask is, what I think is one of the most significant developments in the industry, and that was getting the money into it. So, give me, if you would, a specific example, let's say, of the first large or significant contact that you had. Where was it, what criteria were they using, what response were you having, what kind of persuasion techniques (did you use on) these staid establishment guys who say "Who the Hell is this guy?"
DANIELS: Well, the first people I had to convince were buyers of cable properties, this was before Wall Street, and if you recall in our earlier conversation, I had never had an accounting course and I don't have a formal education, and I never been in investment banking business and I never worked for a bank.
The first transaction of any size was a system that I sold for one million bucks, and it was owned by a fellow named Joe Saricks in Bradford, Pennsylvania. He wanted one million bucks, in cash, for his property. [In cash? What year was this?] He priced it, I didn't, this was 1956. And he knew that I was in the business because I had sent out a little mimeographed mailer saying "I have now formed this company and I will act as negotiator and investment banker." We had no idea what Joe's property was worth, he put the price of a million bucks on it. So I went back to see Joe and put some numbers together, and I struggled with those, 'cause I'm not an accountant but I knew what cash flow was, "I said Joe, what I'll do is I'll get you a million, fifty thousand bucks and you pay me fifty thousand bucks for getting you the money." And I admit, a guy named Charles Sammons in Dallas, who was at a dinner in Rapid City, South Dakota, that George Morrill put on, I was a speaker there, and Mr. Sammons sat next to me and he had written me when he got back home and said "I like that business, bring me a deal." Well, I took it down to him and the figures were an 18 months payout on cash flow. So whatever 18 is into a million bucks that's how much the cash flow was per month in Bradford, Pennsylvania. Well, Sammons, having been around the business world for years, you know you usually buy a company on five to ten times earnings, today is ten times cash flow, but what I didn't realize, Sammons did, was here's a hell of a business, it will pay out in 18 months and even if the business goes to hell and there's some kind of a wave that brings television over the mountainside, or the FCC puts them out of business, I have minimal risk. So the first deal I made was with Mr. Sammons, 'cause he was smart enough to see, this is a hell of a business.
PAGLIN: How did you know him or where did you find him?
DANIELS: I spoke at a meeting in Rapid City and he was sitting on my left. He heard me talking about the business and he picked up on it. And I sold several properties to him and his problem was he didn't know how to manage them. I said "Hell, I've got a management company." (Which I didn't have, but I formed mentally that minute.) He knows this, I've talked about this many times. "We'll buy'em, I'll manage the company, you pay the expenses, let me have a little bit of the equity." He did, 20% of the equity, and I earned that out and that's how I really got my equities going, because in those days, I could find people to buy properties, but there weren't guys around that could manage them. And I saw an opportunity to form a "management company." Okay.
PAGLIN: So he was the first.
DANIELS: Yeah, Sammons was the first, and he is still alive by the way, and Sammons is a big operator today in the cable business, he loves the business. Then we started to have more demand for properties and as we got a demand, obviously the prices went up. The free enterprise system again, it got to, you know, two times cash flow, well....that was still a helluva buy, but I was too stupid to realize it was, and my job was to get maximum price for the seller. I was trying to do my best, but I just wasn't educated there. Well gradually, the broadcasters came in, the first one was Leonard Reinsch
PAGLIN: From Cox?
DANIELS: Yes, Sol Taishoff (Publisher of BROADCASTING Magazine) called me one day and said "Bill, I want you to meet a friend of mine, we're going to be in Scottsdale at some kind of a broadcaster's meeting." And I met with Sol Taishoff and Leonard Reinsch in the coffee shop of the Mountain Shadows Hotel.
PAGLIN: This was in 1965?
DANIELS: That'd be about right.
PAGLIN: Fred Ford was the President of NCTA, and it was at that meeting that I delivered the first paper on the legal background of how the Commission got into cable. I still have a copy of it right here, and when Fred appeared before the House Committee, the old man who was the Chairman had him put it in the record because it was the first time that anybody had tried to trace how the hell the FCC got into cable. So Leonard was at that meeting?
DANIELS: Leonard was there, Sol made all the introductions, I thanked Sol many times for it over the years, but Leonard was a very aggressive communicator, he not only was a broadcaster for years but he was part of a newspaper publishing empire, radio, television, anything that had anything to do with communication ions.
PAGLIN: He's Cox Communications.
DANIELS: You bet, Leonard was interested, and he was the first broadcaster in cable. I sold him the cable system in Aberdeen, Washington.
PAGLIN: Now was it on his own, or was it for Cox?
DANIELS: For Cox.
PAGLIN: Leonard was also Treasurer for the Democratic National Committee, wasn't he?
DANIELS: But as a result of that, see, Leonard was selling cable systems at that time for three times cash flow, but (cable) was still a hell of a buy. Well, I didn't realize, but Leonard who, because he had been buying broadcast stations, and he figured "My God, I'm paying six and seven times in those days for a broadcast operation, and I can buy these for three times, that's a hell of a return on equity." So he bought that one, and he had no management so we ran that one for him.
PAGLIN: How big a system was it?
DANIELS: Oh, 12 thousand, 15 thousand, but we ran it long enough for him so he would get those monthly cash flow statements, and he knew what was going on. So he invited me to Dayton, Ohio, to a luncheon which he had there and he introduced me to Jim Cox, his boss, and I put on a very informal seminar on where I thought cable TV was going and why. After the luncheon, Jim Cox made the commitment to go much heavier into cable TV, and that's how Cox got started then. The important thing Max, was that when other broadcasters with Leonard's fine reputation saw what Leonard was doing, it got their attention, and then I got more and more broadcasters in the business. The next one was George Storer, following Leonard, Leonard was the first.
Now, at the same time there were several small broadcasters around the country that were building systems in their own towns. It didn't amount to much but they could see where they could make money on their TV stations, plus importing others. Of course later they ruled that they couldn't own one in the same town. George Storer came in, god damn, I'm reaching way back now, well those were my first two broadcasters
Irving Kahn called me one day. No, I called Irv in New York one day because I'm a big fight fan and Teleprompter was producing the fights and putting them in the theaters. And I thought what would really make sense was for Teleprompter to produce fights and put them on cable systems, and let them pay money and we'd have an additional draw for programming, so I went to see Irving. So I had two properties to show him, Silver City, New Mexico, and Rawlins, Wyoming, which was one of our properties. I went over the numbers, he didn't understand the numbers, he assigned Monty (Rifkin) to the numbers. Monty came out and looked at the properties, went back, and I know the story now, said "Irving, this has got to be a hell of a business because it pays out in three years, it's a hell of a deal." And Irving from that day on was bullish on cable TV. And I sold him a lot of properties over the years.
PAGLIN: I've known Irv for a number of years and I've always wondered, "How the hell did Teleprompter get to Silver City, New Mexico? What are they doing there?"
DANIELS: They didn't have any money, it was a small enough deal that he could finance it. He had enough money laying around that he could buy that deal and work with it until he learned something about the business. Of course you know the end of that story, today the Group W $2.2 billion sale to the Consortium. I'm trying to think of the broadcasters of that time, God Max, I talked to all of them at that time, all over the country, Jesus Christ, trying to convince them, they're in the communications business, here is another arm of communications. Storer, Leonard Reinsch, jeez, if I Looked at my list I could tell you.
PAGLIN: Also on the West Coast, the McClatchy people, did they get into it early?
DANIELS: They waited a long time, I talked to them early, but they waited, they drug their feet for a long time.
PAGLIN: The people from New Orleans, the Maison Blanche people, did they get into it?
DANIELS: No, Albert Sterne did, worked for NBC, (I) got him in the business. Then I went to work on the newspapers, 'cause again, they were in the communications business. It's a fair statement that I talked to all the major broadcasters, including the three networks. Had a deal with ABC once to buy all of Freddy Lieberman's stuff, they hired Marty Malarkey as a consultant. We were going to close the deal in a hotel in Philadelphia, and one of the Board members of ABC didn't like something about cable and it blew the deal. ABC would have made a hell of a deal if they had gone on with it. I talked to CBS, they finally got into the business, Viacom is the result of that. That's a spin‑off from CBS. NBC, I couldn't ever get to Bobby Sarnoff, Jr., but I talked to his dad, David. I loved him because he was a guy of vision
PAGLIN: Oh, he was one of the best, General Sarnoff WAS Communication!
DANIELS: He could see, I remember him saying, "Young man, if you can solve your political problems, I think this is very exciting because, (He pegged right away) audio and video into the home" and then he said, "If you ever get a two‑way, then you've got something." We've got that today, and this was 25 years ago.
PAGLIN: You know the old man, he saw FM coming, he saw TV color, compatible color; he made the industry wait until the war was over. You remember that story.
DANIELS: But I never could get an interview to see Bobby, he wouldn't even see me, but I think that was common.
PAGLIN: Then, getting the major investment houses involved, how did that come about?
DANIELS: Well, then I would find buyers for properties who were not as wealthy as Cox, not as wealthy as Storer, who wanted to buy properties but did not have the financing to do it. Then my job as investment banker was to find banks, the bigger banks who believed in the business.
PAGLIN: How'd you go about that?
DANIELS: Went to New York, first bank I talked to was a bank in New York, and they were the first lender in the cable TV business. They turned out to be the worst in later years but they were one of the first banks to go along.
PAGLIN: Who was that?
DANIELS: The Bank of New York, and the reason they were was they were Sammon's banker. And my job was to sell Sammon's banker and show them cash flow figures and why it was a hell of a business. Now we had then and we still have today, fast write‑offs, because technically the business changes so quick. So while you can buy a building today and get 20 years depreciation, we could get five to eight years. And we have that steadily, and our business has been a cash flow business since the Day 1. And that means that we pay no taxes because we are continually replacing the equipment. But it was also high cash flow so we could service a lot of debt, well bankers love that.
PAGLIN: Well, that's their language.
DANIELS: You bet! And today even, one of the reasons we have winners standing in line in our business is we're a cash flow business and not an earnings business. We don't pay dividends, if you own any stock in cable you see the value of the stock rise but you're not seeing any dividends, to speak of. 'Cause we're thinking about cash flow and buying more properties, building more plant, servicing our debt.
PAGLIN: So it's capital growth.
DANIELS: We compete with the phone companies and the utility companies for capital. But the banks loved us and they loved the high cash flow; that has never changed. I went from there to insurance companies and they loved it, we helped service their debt.
PAGLIN: What were some of the leading companies that got interested?
DANIELS: Travelers Insurance Company, Allstate, John Hancock, Equitable, and Teachers.
DANIELS: And that was the language that you used with them?
DANIELS: Ability to Service Debt. And insurance companies, they'd lend you a considerable amount of money, they'd get warrants at the end and they'd want a little equity on the deal which we'd give them. And looking back on it, they all did extremely well and we have never in our industry had one, a financial institution lose a dime on a loan to the cable TV industry until the last couple years. Now there have been loans in trouble, with banks, but they've always worked their way out of it, they've gotten their money back. The last two years to 36 months, because of the dynamics involved, the growth of the business, there have been some loans in trouble. But the percentage of losses in the cable TV industry on bad loans has been far below the national average of other kinds of business. Up until two to three years ago we had a perfect record, and that's unheard of.
PAGLIN: We had a recession three years ago, the economy went down a little bit.
PAGLIN: We were at the situation where you were trying to interest the networks, you mentioned some things, but I'll get to that later. I want to finish up with the financial investment houses.
So if you would Bill, continuing then, that was the way in effect you were able to interest the various financial houses, the insurance companies, in terms of the criteria that they understood.
DANIELS: Sure, and we went through three layers. In the early days, in my dealings with the banks, and investment bankers, the principals in the company had to personally guarantee the loans, now that leaves very little risk to the bank. The next step they agreed that they would lend money from three to five years without personal endorsement on the loan. And then it grew from that to five to seven years, which were pretty long terms for banks then. Five to seven year loans. Today now, the normal bank loan is ten years, interest only for a couple years, almost any kind of terms you wanted to work out with them, they got the first mortgage on the property. The cash flow is high and everything is rosy today. But the early days was convincing them that some kind of invention wasn't going to put us out of business overnight.
PAGLIN: That was their concern?
DANIELS: Yes, and I think you see some of that today, and I think, "Today is, is DBS (Direct Broadcast Satellite) going to put us out of style?" But what has happened is, we're so firmly entrenched now, that that doesn't really concern any bankers, they know that there are other ways to get television into the home other than cable and broadcast, such as DBS, such as satellite directly into the home, such as the development of VCRs. After all, we're in 60% of the homes now, and growing, at the rate of about 500,000 a month so our foothold is strong enough so we're really in great shape with financial institutions. It wasn't that way in the early days, it was just a tough sell.
PAGLIN: At that time also you mentioned for example, earlier, that one of the early guys talked about two‑way interactive cable, it later came out of Bartlesville. When you went to the financial institutions, was there any effort on your part or people that were in your situation, and/or interest on their part in terms of the technology, the future technology? That is to say, cable television is a reception, it's cable television. But long ago, as you mentioned earlier, when even Fred Ford in '64 and '66, we tried to persuade, and I'm glad that you saw it, that you shouldn't call it cable television, you should call it cable communications. Were they interested in the future technological development or were they interested strictly in the financial aspects?
DANIELS: Strictly in the financial aspect, because those things that you mentioned Max, are what we call "B1ue Sky" for years. But they slowly are developing, they're here now and we can do all these things technically and those things are going to happen. But no, they were interested in what's the cash flow now, let me see a balance sheet, how fast do you think you can make this thing grow. Future technology did not interest them one bit, because that was what they called lip service, and it was Blue Sky and it was bullshit, and they weren't interested. We all knew in the back of our minds that it had to happen, if we didn't get blown out of the tub by some kind of crazy invention, and that never happened, thank God.
PAGLIN: But now, today, as you say, with the technology, having the capability, the capacity, for cable to be something other than a reception conduit. Where you know with the channels that you have available, you can control utility power management, video techs, polling systems, God knows. Are financial institutions now beginning to wake up to this or are they still only interested in the money?
DANIELS: Yes, they consider it an additional security for when that happens. Bankers still look at today the profit of the company and how much more profit can you make under today's society and the way you're applying the services and not what it is capable of doing later....[Cat appears]. This is my cat Sidney, that's Max, Sid....[Recorder cut off for feline pleasantries.]
PAGLIN: Now after the interruption of Sidney the cat, okay. So the financial institutions are now becoming interested in the technological potential.
DANIELS: You'd be interested in knowing that throughout my years in beating the pavement to talk to broadcasters, there was only one broadcaster who would never see me and that was John Kluge. He wouldn't answer my correspondence, I could not get an appointment with him, he wouldn't return my phone calls. About six months ago, it was about a month before ABC had announced that Tom Murphy had bought its company, in Tom Murphy's office and the guy who's now President of ABC network, the newspaper guy that Tom put in there....
PAGLIN: Yes, Samions? or....
DANIELS: It's four letters, Siea or something like that. Right, two of them were there and I was there and I'd told Tom and he said "Who's the only broadcaster who would never talk to you?" and I said John Kluge and this guy walked in and Tom Murphy says to him "Guess who's the only broadcaster Bill could never get an audience with to talk about cable?" And the guy right away says John Kluge, and Tom says "You're right." And I really don't know why, to this day I don't know why. He never would talk to me. I never tried to see Bill Paley, I never tried to see Frank Stanton, because I was dealing with guys on a lower level, if you follow me. But Kluge sticks out in my mind.
PAGLIN: That's Interesting, because in recent years, Kluge branched out into cellular and paging and mobile radio, and all kinds of other things, manufacturing and stuff, it would be interesting, I wonder why?
DANIELS: Someday I hope to meet John and I'm going to tell him, never met him, I'd know him if I saw him because I've seen his picture, never met him.
PAGLIN: That's interesting, but you know, he held on to his non‑broadcasting stuff after his deal with Murdoch. Now that's going to be interesting, what happens now. So that's the kind of technique you used to interest and bring, finally bring the financial community. Would it be fair to say that bringing the financial community into the industry was one of the principal reasons for the expansion of the industry?
DANIELS: It enabled people to form MSOs as we call them today.
PAGLIN: Right, Multiple System Operators.
DANIELS: Yes, and the reason is because they could then finance and as they bought more property, you don't have cash laying around, you always go to the banks and it enabled MSOs to be formed.
PAGLIN: And it led not only to the interest of the broadcasters, but other aspects of commerce and industry, and newspaper publishers too.
DANIELS: Sure, and today your three biggest segments of the cable TV industry were the people who were the pioneers in cable, people that bought those companies and/or newspaper publishers, and the broadcasters.
PAGLIN: Have you read this article? (Refers to Georgia Institute of Technology story on commonality of cable people and the broadcasters).
DANIELS: Max, you know you mentioned Henry Geller a minute ago on your panel. A combination of Ed Craney, Bill Grove, Augie Myer from Illinois, who owns a station here in San Diego by the way, and Henry Geller. Those four guys together really caused us some problems. Henry has never been a real friend of cable and I would be curious if whether or not he is today or what his current thinking is.
PAGLIN: Well, his current thinking is, anything goes. Everything is allowed, competition, that is his current thinking. And you would be surprised to see some of the things he's said. Now, how about Ken Cox?
DANIELS: Ken was a bitter enemy of ours, I'll never forget him in the hearings, he was "Maggies" (Senator Warren Magnuson) counsel, wasn't he? Ken was a big problem.
PAGLIN: Well, somebody told me when I told them about our three pilot oral histories in cable; first one of the early operators, one of the early operator‑entrepreneurs' and one of the early regulators, Marty Malarkey, Bill Daniels, Henry Geller, the response was, and he was a cable guy, he said "Why haven't you used Ken Cox as the regulator?" And I said, "We haven't forgotten it."
DANIELS: Ken was trouble.
PAGLIN: Yes, he was broadcast oriented, he was chief of the broadcast bureau.
DANIELS: The other side of that coin was Maggie, Maggie was from Washington and Washington was loaded with cable systems because of the terrain problems in the state of Washington, you know.
PAGLIN: Yes, right, but Maggie didn't take that kind of interest. He was up there, and in other words, in my recollection, and I shouldn't interpose myself, was that Senator Magnuson was pretty high up in the politics, you know, he wasn't that responsive to the constituent in the small little town.
DANIELS: Well, he didn't want to mess with it and he lived with this good-looking woman and he was big in Washington Society. He was a real character though, he and Scoop Jackson together, two fun Senators at the same time.
PAGLIN: Yeah, they sure represented that state, they did.
Now the fourth item of uniqueness is, as I perceive the problem, is that with all due respect and using the phrase, I have my notes here, that Bill Daniels was the "Godfather" to now some of the major MSOs in the industry. That is to say, he alone, more than anyone else introduced people to the industry who are now the major company owners. And isn't that a fact?
DANIELS: I think that's true, sure.
PAGLIN: How did that come about?
DANIELS: We'll start with the big operators, TCI‑Telecommunications, Inc., the head man there is Bob Magness. Now I convinced Bob to leave Texas and come to the Rocky Mountains, and when he came up here he really started to grow, and I've put him in a lot of deals.
The second largest company is ATC, now owned by Time Incorporated. This is American Television Incorporated, now owned by Time Incorporated, that was formed in my shop. I put together a group of cable companies, with Royal Little, Narragansett Capital Company. We bought a lot of properties out of my shop, and Monty Rifkin joined me, and then we took that company public, and it's the second biggest one in the country today.
I was the co-founder of ATC which is now your Time Incorporated Cable Company, the second largest. United Cable is in the top six or seven, well United Cable came out of Casper and the Schneider Brothers, that originated with my company in Casper. Storer, a big operator, I convinced George Storer to get into the business, and I nursed them along for years on their acquisitions. Cox, I got him into the business, managed them, nursed them along, sold their properties. Sammons we talked about, he's a big operator. And you know my experience with Mr. Sammons. The interesting thing is, there are others but I can't remember their names. There was old Irving Kahn, which is Group W, I got Irving in the business, bought his properties for him and educated him.
PAGLIN: That was Teleprompter first?
DANIELS: Teleprompter, then it was Group W. But if you go all through these people somehow you will find me connecting with them, talking them into it, nursing them and bringing them along. Then the other thing I'm proud of, Max, is so many of the alumni of my company are running big companies and they are doing extremely well and that pleases the hell out of me. People who started with me and my company and they wanted to go out on their own, got hired away by bigger companies, and I've never minded it at all, if the young man or woman were improving themselves, hell, they're scattered all over the country. Monty Rifkin ended up as Chairman of the Time Incorporated Company, Glenn Jones was with me, he's head of Jones Intercable, Doug Dittrick was with me at one time, he's with the Tribune Company, Bud Hofstetter, Continental CableVision, got his start on one of the boards of one of my companies.
There must be a dozen of them out there that are top executives that used to be with me and I think that's super, I'm very proud of them.
PAGLIN: So it wouldn't be disrespectful if in fact someone called you the "Godfather?."
DANIELS: I don't care what they call me Max, as long as I continue to do well and I help folks. No, it's not distasteful at all.
PAGLIN: We've been going for quite awhile now, for two and a half hours. What I'd like to do is, I think that this is a good break point. As you can see from the outline that we've given you, we only have about a half page left. What I'd like to do is, on our next session talk to you about your overall assessment of the industry as a whole. You can see some of the last three items of the outline, you see, the future in terms of the industry and yourself, and the other major factors in the industry. That would be a pretty good wrap‑up, and then we can go back to pick up some of the things as we see in the transcript that need further development.
DANIELS: You might be interested in knowing that today we are very active in the cellular radio business. We've established a separate department in my shop. Um hum, we already have handled about 80% of the transactions in that type of business that have been made. I personally think I'm not high on mobile telephone business Max, because it's too competitive. We bought a paging company in Baton Rouge, Louisiana, we bought one in Denver, and we're trying to buy another one. We're looking at about 10 markets. I think the paging business, potentially has got the same excitement as the cable business when I first went into it.
PAGLIN: Are we talking about cellular radio or paging?
DANIELS: Paging has to do with cellular, but I'm talking about paging. Mobile radio is super, and mobile phones are great, I have one in my car, but as a business for me to be in, it's too competitive, it's too confusing. In the paging business, the cost is coming down, the little paging units are becoming more clever every day, with miniaturization and all. Sure, and the guys that are doing the research in paging, tell me that in 10 years, you're going to be able to talk to anybody in the world from your wristwatch. Now THAT to me, Max, is exciting!
PAGLIN: What I'd love to do in our next session is take you, now I didn't expect this, but because of my particular interest, when I was in practice, one of the clients I represented was John Palmer's Company, MCCA, in the two major applications that were in Houston and Los Angeles. I share your excitement for this and I will branch out into it in the next session when we talk about the future.
DANIELS: Kids, school kids are going to have it, I can just see it coming. Babysitters, they have to call in, when people are at a restaurant, they'll have a pager because the cost is coming down. It's exciting as hell to me, and if you want to get a pager today in Washington, you'd probably have to go to the Yellow Pages and say "Who do I call?" They've never been marketed. John Kluge is right on, and I agree with him, it's going to be fantastic.
PAGLIN: So the wind-up for today's session might very well be what someone asked me, not so long ago, was, and I'll say it, I'll use your name, the "excitement" that you exhibit, with the respect for the new technology, in the development and the expansion of this new technology, makes me want to ask you in closing, "Bill Daniels, have you decided what you want to do when you grow up?"
DANIELS: Max, I'm 65, I'll be 66 in July, I've lived a fantastic life. I've had a ball, I've done everything that a guy could want to do. I came out to retire here, right where you're sitting, about eight years ago, did that for about six weeks, then I got bored, and I've never been busier. But I think the challenge has been the thing in my life. I think if you look back at people like John Kluge, with all due respect, people like Tom Murphy, people like David Sarnoff, that have the entrepreneurial spirit. Hell, they never die, to me, I've got all the money I can ever spend, to me the excitement is "What's next? What contribution can we make?" That's where all the fun is, what the hell, what are you leaving on the face of the earth after you leave that your fellow man can remember you by? Have you made a contribution? So you ask me what's next? Well, I don't know Max, when it's no fun, I'm a lousy operator. I've never been a good operator but I've been an idea guy and I like to put things together.
PAGLIN: But also what I said before the taping session, when I was telling you about the Golden Jubilee Commission and what excited me, the potential of a National Institute, and you said something about my enthusiasm came through. I've been in this business 43 years, 44 now, and I still share what you've just said and that's that this is the most exciting field known to man.
DANIELS: Max, wouldn't it be fun to come back to the place here in 50 years? And I've said this publicly, and see what the hell has happened? It would be mind boggling.
PAGLIN: It's mind boggling now. Again, you're 65, I'm 71, you remember when there were crystal sets, you remember when there were little earphones for the radio on the market?
DANIELS: Oh yeah, listening to Jack Benny, and Fred Allen and Fibber McGee and Molly.
PAGLIN: And when I talk to these University people, and I say "Look at me, I'm just an individual, do you realize that in the lifetime of this particular individual we started with little crystal sets and you put together the cats whiskers and we have progressed to the point, in the lifetime of one person, we are receiving computerized pictures from two billion miles away?" Now that is mind boggling.
DANIELS: Sure, and we couldn't have put a man on the moon had it not been for communications.
PAGLIN: Right, exactly, and that's what's exciting as you say, I've never thought of it that way but yes, I'd love to be here 50 years from now.
DANIELS: Or just look, walk around, the automobiles, my God, go back 50 years, and the homes that people are moving into, and how they communicate, the clothes they're wearing. My God it's not only communications, it's everything, but communications, that's where the romance is for you and I. It's for your Commission.
PAGLIN: So I'll tell you what, let's make a date, you and I. Fifty years from now we'll meet again.
DANIELS: God, we'll have to be frozen Max.
PAGLIN: Bill, this. has been absolutely fascinating. What I want to do is, we've covered your early life, and we've covered your early period, the segments we've done. And of course we'll get this transcribed and send you the transcriptions and what I'd like to do is set up at your convenience another session, about the overall situation and the way you see the future going. I'll get back to your people for here or Denver, or wherever it's convenient for you.
DANIELS: I'll come to Washington or wherever you want to do it Max.
END OF INTERVIEW 1
INTERVIEW 2 – May 13, 1986
PAGLIN: We will continue with our oral history of Bill Daniels in his early years. Today we will also go into Bill Daniel's position, views and opinions as to where television is going and his opinion in regards to some of the issues facing the industry today.
Bill, you remember on February 10th we had our first session at your home in Del Mar, California. You will recall we went into the early years of your life, how you got into cable television and how it developed, and how you proceeded to form Daniels and Associates. Basically, we brought you up-to-date. The transcript was produced and you edited it and made some corrections. I've just now giving you a copy of the edited transcript.
This morning, with your permission, we're going to get into the last section of the outline that I sent to you first in December and then in my letter of March 31st, which refers to the last three sections of the outline that we want to cover. With your help, we will cover today, the Bill Daniels overall assessment of the early years of cable television, and their impact on the opportunities and problems of the industry today. Secondly, your predictions for the future of the role of cable in the development of telecommunications and finally, your views on the future course of cable technology and the need, if any, for federal and/or local regulation of the cable industry in the years ahead.
What I'd like to do, Bill, is get to a series of issues as they were articulated and came out in the recent NCTA Convention in Dallas in a series of panel sessions. They seemed to be a summary of the problems and issues facing the industry today.
One of the first problems is because of the advance of technology, and that is the scrambling of the satellite signals. In our first session, you were of the opinion that the use of satellites has changed the nature and scope of the cable television industry.
Now there seems to be a difference in the reports at the NCTA Convention in Dallas as to the positions of the programmers as against the CATV operators. Particularly in those situations where they are forecasting direct-to-home satellite telecasting and with regard to what the role of cable operators will be in terms of satellite programming. What is your view as to where the cable industry's position is and should be with regard to the scrambling of satellite signals.
DANIELS: Well, Max, let's give credit first to HBO for launching the first satellite. They made history when they did that and that really was a turn‑around in our business.
PAGLIN: When was that? What year was that?
DANIELS: Well, Max, ten years ago? Not that long ago, over a long span of time, it was a very small part, ten years ago, or less. Their first customer was Bobby Rosencrans, United Cable Television, a system in Florida. That started a new era of cable because it eliminated the need for expensive and hard to get in place microwave. Overnight it made it possible to distribute a television signal from one point to a satellite in space and cover the entire country. Far cheaper than we could have ever done with microwave, but more important, instantaneously. If we had had to microwave all over the country Max, we never could have done it, it would take forever.
PAGLIN: You said a single signal?
DANIELS: A single signal, and now of course, with all of the programming that is used, they all have a single signal going to a satellite, there are different ones floating around out there, that provide us with our services. It made us a better business overnight. We'd a gotten there eventually, but it accelerated, by my opinion, about 25 years.
What did it do? It provided cable systems with a method of receiving signals from outside our coverage area instantaneously. It provided farmers, ranches, uncabled areas with a way to receive additional programming not in the usual broadcast manner. But, following that, a lot of people wanted to sneak in a movie. Scrambling became necessary because program producers have large investments in their products. Cable television operators had an even larger investment in their cable systems around the country. We simply to protect ourselves, had to find a way to protect our product and be able to charge people for a ticket to get into a movie show. When I was a kid, I used to sneak into the movie and you're not supposed to do that. People who were getting unscrambled signals were not paying for it.
PAGLIN: These were the backyard dish owners?
DANIELS: Yeah, sure, on their ranches, in their backyards, on their apartments, wherever. So it made sense, and we had to have it, and it's in place, pretty well, we're right in the middle of going through the scrambling process right now. And we're getting a lot of static, from the people mainly who sell the satellite dishes.
PAGLIN: These are the so-called TVRO industry?
DANIELS: Yes, now the static is not really coming from the guy that owns the dish, as much as it is from the guy that sells the dishes. Now that's the free enterprise system.
PAGLIN: And why's that?
DANIELS: Well, overnight their sales dropped dramatically. They can't sell dishes near the way they used to because the signals are being scrambled. And people are finding out, especially in the big cities, that they can get on cable and get more programming for less money than they can on a dish where they're having to pay for the dish and for the unscrambling fee. So, we've got a better product for less money.
The TVRO industry, far as I can remember, three years prior to the scrambling, were telling the homeowner, "They're never going to scramble, don't worry about it." And we know that, and we've documented it in this office 'cause we've got a guy that we sent around to the TVRO dealers and played like he was a country guy from out of town and asked about a dish. It's true, and he planted questions "Are they going to scramble the signals," "Oh, no, they're never going to do that." So they've misrepresented their product to the public. On the upside, I will also say that the satellite dish industry has provided a real service, and the reason they have is that there are several areas that we're never going to be able to cover, Max, in my opinion, at least not in my lifetime. Unless we end up with REA‑type financing. If we do, if you recall, that was what, 2% interest financing?
PAGLIN: Rural Electrification Administration?
DANIELS: Yeah, the REA, if we ever got to that point and the government thought it was that important to get cable TV out to the wide-open spaces'.
PAGLIN: That would be hard wiring.
DANIELS: That'd be hard wiring, sure. Then, we'd be able to do that, but I don't see that happening. I don't see entertainment, I hope I'm wrong, and additional programming information being as important to the farmers and the ranchers as electricity and the telephone. So its provided service to those people out of the cable area, and it's taken the heat off of us.
PAGLIN: So, that's exactly so, in other words it has afforded a service to the areas outside the normal cable operator's jurisdiction.
DANIELS: Absolutely, if they want to pay for it. They're paying for it in the town, why shouldn't they pay for it out in the country? (Why) scrambling?
PAGLIN: During the panel sessions, they raised the issue, there didn't seem to be a difference of position but the programmer, the HBO, the Showtimer, seemed to be taking one position in regard to scrambling; the cable operators seemed to be taking another position. Correct me if I'm wrong, I want your views on it, that insofar as the dishes within their territories, is it true that the cable operator would want to be the distributor.
DANIELS: Yes, and Max he should be the distributor. He's there, he knows who's on the cable and who isn't, he's got an office; we've got technicians who go out and put the unscrambler on so he can get it, it makes sense for him to do it. I think that's the way it's going to end up quite frankly.
PAGLIN: In other words, he's going to get the distribution rights within his area, and outside, it would be between the programmer and the customer?
DANIELS: Or the TVRO people who sold the dish to the guy.
PAGLIN: It would be a fee in other words, a monthly fee for the code? How would it be handled in the cable operators own area?
DANIELS: Well, simple, we have to do some advertising to let people know what this is if they want to unscramble their signal, to call this number and we'd have a man come out, just like we do to a home on a cable. He'll put the unscrambler on and they'll be charged a monthly fee, depending on how many channels they want unscrambled. We'll bill them out of our office and send them the program for his portion of the fee. We'll keep a portion of the fee, we won't keep as big a portion as we do in the cable business where we've got the major investment, it will be less of a proportion than kept by the cable operator, but it will be profitable.
PAGLIN: Now this will be on the perimeter of the cable operator's area where he doesn't have it wired now?
DANIELS: Where it's practical, wherever it works, sure.
PAGLIN: Now this is the way you feel it will work?
DANIELS: It's the logical way to do it from the public standpoint, from the program producer's standpoint, and from the cable operator's standpoint, to have the cable operator service it on behalf of the program supplier.
PAGLIN: Do you see the TVRO industry making waves, getting hearings going in Congress, they seem to be making a lot of noises about investigations by Congress....
DANIELS: Yeah and they've got one thing going for them, Max, which we had in the early days. They're the underdog and the little guy. They're using it and I don't blame them 'cause we did it, but it's falling on much deafer ears than our story did in the early days and the reason is is that they have been warned and warned and warned publicly that they're going to be charged and they ignored it.
PAGLIN: It's a different kind of thing, isn't it?
DANIELS: Well, it's a different mood in the Congress today. Everybody's not going to get everything for free and if one guy pays, another guy should pay, we should do it fairly.
PAGLIN: One other point on this particular subject, which is the scrambling. As you are well aware, the Justice Department has started a kind of an informal investigation. There have been charges that anti-trust, well, there have been relationships between programmers and the cable people with regard to scrambling what's going to be scrambled, how it's going to be scrambled, how it's going to be divided up. There was some publicity during the convention about the Justice Department sending out these "CID's," the Civil Investigative Demands. Did your company ever get any of that?
DANIELS: I have long ago stopped trying to read what a division of the Federal government is going to do, what a judge is going to rule. My only comment there is "wait and let's see what happens." I'd hate to predict, and if I was a lawyer I might try, but you know I'm not a lawyer.
PAGLIN: Yeah, but it seems like this, what do you think, Bill, motivated this?
DANIELS: Greed, by everybody. You've got a piece of pie, and everybody wants more than their share. That's human nature, you understand that, I understand it, future generations will understand it, the free enterprise generates greed. So the big battle is who gets what.
PAGLIN: Then I take it from what you're saying, that it ultimately, the basic marketplace will probably resolve the question as to how scrambling will be done?
DANIELS: It always has in the past, the marketplace will make the decision. The market sure did in cable, you bet.
PAGLIN: Another issue that has cropped up as a result of the same developments in the industry, the so-called "must carry" rule. As you know, there has been an effort at reaching a compromise amongst the cable people and the NAB, the broadcast people, the independent television people, and even the so‑called space, the earth station people. They now put it before the FCC and the FCC, at least Mark Fowler at the convention said he was concerned about the relationship between "must carry" and the current compulsory license problem. First, do you see that the two things are intertwined? Secondly, whether or not they are, what are your views?
DANIELS: Well, from a practical standpoint, a good cable operator, and I wish all the cable operators were as good as the best ones; he is not going to take anything away from the public that the public really desires....[Interruption]....And the reason is, they're not going to take away any programming from the public that would hurt public relations, if they do they're silly. What the good operator is going to do is eliminate a lot of the duplication, a lot of the programming that nobody watches.
I've said this publicly, if we publish a monthly newsletter that goes throughout the industry, and I urge all the operators, not just one, to take off stations, to be fair with local stations, and to provide the public with what they want to see. Now, that's a broad statement, every market's different, but if that's done, it'll minimize any of the static that we get for being too rough because of "must carry." Secondly, if I understand the Supreme Court decision, the Court of Appeals decision, we didn't have to do anything to compromise on this. We had the law in our favor. Jim Mooney, because of his excellent work, and our guys, said "Okay, we'll try to work out a compromise" and I think we hung pretty tough. The thing that's distasteful to me is that I've been fighting the Broadcasters for 30 years and I've about had it with them. Although most of them are in our business today, after the compromise was struck, then they go back to the Commission and they ask for more.
PAGLIN: They filed a petition for rulemaking which goes a little beyond the compromise.
DANIELS: But I'll tell you, I think we'll be treated fairly by the Commission. We've got a de-reg-minded Commission, the public is de-regulation minded, and we'll just have to see what happens.
PAGLIN: Do you agree with Mark Fowler's views, apparently as expressed by him and his legal assistant at one of his panels that if they do adopt the compromise or something like it, which would obviously alleviate the cable operator's requirement to carry a certain number of stations. That then they should give up the compulsory license requirement.
DANIELS: Yeah, sure. It's never bothered me, that problem is so minor compared to the big problems that we have had over the last 25 years that to me as an old-timer, it's a piece of cake and we can live with it. It's not the end of the world and I'm not one bit concerned about it.
PAGLIN: There are though, several of these cable operators who feel that if they had to give up compulsory licensing they would quote "be at the mercy" of the broadcasters and the programmers.
DANIELS: Well sure, and there's some at the opposite, that they thought about charging a ton of money in order to carry some of the local stations. Now wouldn't the broadcasters love that? That could happen one day, sure, look how things change on a month‑to‑month basis.
PAGLIN: Now let me jump to another area, then there would also be a relationship in terms of how things are developing now in terms of the leading cable operators themselves beginning to get into the whole area of programming initiatives. Trgyve Myhren in his speech, TCI, now getting into it as programmers.
DANIELS: And I wish he hadn't said anything. Well, John Malone has been telling the world we needed another network and Trygve Myhren has picked up on it and Ted Turner has picked up on it. One part of our industry that's fine to talk about it but wait until you've got something planned, wait until you've got some plans, then come out and announce the plans. It's harming the plans that are on the drawing board now, by coming out way prematurely and just saying an opinion, "I think we ought to have our own network and our own blockbuster programming." I'd rather see them quietly put it together and then announce it.
PAGLIN: And test them with the public first?
PAGLIN: Of course Turner has gotten his MGM library, I happened to be watching his screen last night at the hotel and he's already selling the video cassette of the old‑time movies.
DANIELS: There's another bigger development than that and we'll talk about it later on.
PAGLIN: Yes. Another issue is the uh, what is your view on, again from a technological situation, the direct broadcast satellite, satellite to home. What impact, if any, assuming the thing will develop, we're not talking about the thing we have how, but DBS as a whole, which some people think is down the road, how do you think that would affect the overall growth of CATV development?
DANIELS: None whatsoever, and I'll tell you why. Every day that it takes for further development of DBS, they get in a worse position. This is because every day will warrant something like 150,000 homes in our country.
DANIELS: Something like that, you might want to check that.
PAGLIN: You're talking about expanding the standard operation?
DANIELS: Every customer that we get on the cable is less likely to ever get on DBS. Because, once we get them on the cable and we're in place, we as businessmen are going to see that DBS (Direct Broadcast Service) cannot give them anything that we're giving them for less money. We solidify our position every day, Max. Once we get that cable into the home, and once we get the subscriber, the subscriber has no incentive to go to DBS, unless we mistreat him, unless we charge too much, okay? Unless the technical service goes bad, every day we get more set in cement and eliminate the problem of DBS competition.
The other thing is there have been millions and millions and millions of dollars lost in trying to get DBS going. Take a look at Prudential Insurance Company, Comsat; that discourages other investors when they look back at that history. But as we expand, the threat of DBS gets less and less. I'm not worried about it one bit.
PAGLIN: It's developing in foreign countries, in Japan and Europe and places like that.
DANIELS: Fine, let it develop there but I'm not worried about it developing in the United States.
PAGLIN: Let me understand. My understanding about DBS, and I know something about it. We're talking strictly about one or two or three signals, aren't they? Right now it's really one signal. Am I correct in that?
DANIELS: Yes, you're right.
PAGLIN: So, would it be true then to say, that as you are implying, they can't compete with cable which is a multi-channel operation?
DANIELS: Of course they can't, and the second thing is the cable operator would put up a dish if they had enough inside. And put that DBS in the cable system and either give it to the subscriber for free, or charge them a hell of a lot more per month than it cost them on a year basis to maintain it. So let it come!
PAGLIN: Okay, okay! I think from knowing you Bill for what's been 25 or more years, I expect I know what you're answer's going to be, but for the record, you know there's been a lot of litigation in CATV having to do with "First Amendment Rights" of the cable operators. I was pleased to be able to attend at the Supreme Court oral argument a couple of weeks ago on the "Preferred" Los Angeles case, "Preferred Communications." Harold Farrell and Perez or Lopez argued that case, it was interesting to see what the Supreme Court Justices said, what their attitudes were, in terms of the Ninth Circuit Opinion.
What is your feeling about what is the right of the municipality, just in terms of "First Amendment Rights?" The things that Mark Fowler talks about, as against the municipalities right to govern the use of its streets and areaways and things like that? Farrell argued claiming that a community has no right, because cable is a First Amendment operation.
DANIELS: Max, in the early days, when we applied for permits, I'll never forget the one in Casper, Wyoming, the first cable system. I did not go to the City Council and ask for a franchise, all I wanted was a permit to use the streets and alleys, and we called it a permit. We did that purposely in the early days, we didn't want to call ourselves a franchise, if we did, we felt we were throwing up a red flag to be a public utility. That's always been in the back of our minds, we'll talk about that later
I think the city has the right to have some say over who can and cannot use the streets and alleys in their community. And, I have always respected that. One of the main reasons I do is because, unfortunately, our industry is not blessed with 100% good, public-service oriented, PR-oriented cable operators. If they didn't have the city authority, and therefore a quasi‑control system, the public in some towns could literally be raped. And there could be no way to get the cable operator "shaped up," if you follow me. So I think the city permit deal has been fine, I have no problem with more than one permit in a city, providing what they should do is have some provision that you can have two permits but that you serve different sections of town rather than duplicate the plant because that is just childish and stupid. That's my feeling on it.
PAGLIN: So, I don't want to put the words in your mouth, so all of this about the First Amendment is kind of a cloud thrown up, it's not the real issue.
DANIELS: Of course not, I'd love to hear Harold Farrell try that, I'm a Harold Farrell fan....[Recorder turned off]....
PAGLIN: All right, now that's an interesting point of view. Two more sections on this, briefly, there's been a controversy with the motion picture people like Jack Valenti on this flat‑fee proposal. He went up the Hill and he came back down again. Do you have any views on what cable should be doing in terms of the motion picture industry, in terms of the flat‑fee proposal? Or isn't that a major issue in your view?
DANIELS: I don't have much feeling on it, and it's not a major issue as far as I'm concerned. But I will tell you this, approximately 25% of the total revenues obtained by the studios today and the movie producers is from cable TV, and we've only been doing this for seven or eight years. That is an impressive figure. We are therefore a very big part, and going to become a much bigger part, of the financing methods of the studios and the independent producers. And Jack Valenti is an expert at crying "Poor baby and we're very mistreated," and that's what he's paid for, and that's what he's been there so long for. I don't know what the outcome is, I have no opinion on it, but frankly, our industry is doing so well we can afford to pay a little more and he can afford to tack off. Without us, 25% of their revenue would be cut off overnight. We'd be in trouble too, but it's a two-way street.
PAGLIN: To the extent that cable people, like Turner and the rest of them, and TCI and whoever, have their own libraries now, they have exclusive rights to them. They won't be as dependent on the Motion Picture Associations.
DANIELS: Sure, and it's building up, all the time. Well, they'll probably never be completely independent, but not as dependent. You're right.
PAGLIN: Finally, on the current issues, cable advertising. How has it grown, where is it now, where do you think it's going?
DANIELS: Max, it's going to be unbelievable. I have long said that we are not going to believe how much income our industry has and how much profits are going to come from advertising. Even having said that for six or eight years, I still say it's going to be unbelievable what happens. We have sadly underestimated what an important source of income it has become for the cable operator. Both as local, regional and national. Let me tell you what's going to happen, I don't know that I'll be here to see it, I hope I am.
Cable operators, one day, are going to be treated just like local affiliates. When USA network and ESPN and Ted Turner and the rest of them start getting large amounts of money, part of that money is going to be distributed to the local cable operator, just like it is to a local TV station today. That's going to be found money for us. It's going to happen, it hasn't been important before now because we have been too busy with other things. But one of these days, the big operators, like John Malone or somebody, is going to say to Ted Turner, "Look Ted, we've been carrying these programs a long time, and I don't mind paying you X amount of money per month," but Ted Turner agreed early in the game that if he ever got to where the advertising would pay, he would start to drop the cable monthly charge. I don't see that happening, because that just never happens in business, but I do see the day when he's going to cut up his revenues as are other program suppliers with the local operator. I think it's going to be fantastic, really.
PAGLIN: What effect do you think that would have on the distribution of programming to the customer? Do you think there will be any adverse reaction by the customer because he's paying for a service?
DANIELS: We are now very high in the paging business today, and I'm almost as excited about it as I was about the cable business TV years ago. The day is coming, the engineers tell me, when you can talk to anybody in the world on your wristwatch. I don't know how to compare, but if you can do that with the paging business, then what we have in place in our communication system is just unlimited what the possibilities are. And it's so mind boggling that I don't know how to tell you about it. The plant is there, the facility is there, and scientist, research and development and the free enterprise system is going to develop more services.
PAGLIN: And right now, they are, of course, even now using the satellites for paging. But would there be a tie‑in to cable as such, or would there be an expansion of a general telecommunications service?
DANIELS: Oh, sure. Expansion. And you know, at Penn State, that's one of the things they want to do there. They want to have a course and they're calling it Telecommunications, where you breed computers with satellites, with cable, with DBS and with paging, with world-wide communications. And see, how we mold all this together so we have the best of all worlds.
PAGLIN: And it would truly become a telecommunications complex. In which various segments and facets of the industry would have a role, depending on their technology.
DANIELS: Another reason I want to come back in 50 years.
PAGLIN: We still have a date. Do you also foresee, in terms of the future range of CATV services, an expansion of program origination by cable?
DANIELS: Yes. There's no question, we've got to do it. We've got to be as innovative in the cable business as the three networks have been, as the independent producers have been, we've got to do the same thing.
Max, you're going to see the day that all NFL football is on cable. You heard me right, it's all going to be on cable. It's going to be on basic, in my opinion, for about three or four years, and then overnight bang, during that three to four year period we'll be gearing up for pay-for-view, not enough of us are now. Then when the time is right, we'll flip the switch and NFL football will go to pay-for-view, including the play-offs and the Superbowl.
Following that will be NBA, (it) will fall right behind, and baseball. All of your sports will be on cable. Now why? We have a method of collecting, by adding to the basic fee. We're packaged, there are 50 million, approximately, cable TV homes in the country today. If we just charged an additional $2 a month on basics, that's I think ($)10 billion a year. The current NFL contract pays the NFL 400 million bucks a year, and the networks are NOT going to pay them anymore. If you read the same things I do, you'd know that.
The reason it's going to happen is because, ....[Phone rings - recorder off]....the price of the athletes is going up, the stadiums are about as large as they're going to get, sports have got to have some additional revenue. They're not going to get it from the broadcasters. Following football, you're going to see other sports fall in line. We have the ideal theater in the home for sports. The networks will survive without sports, but that's going to happen, you can just write that down in your book.
PAGLIN: You've just reached over into the very next subject, that is the future growth of CATV. What do you perceive, the current, now you say 50 million homes, subscribers, in CATV, what do you see as to the penetration in the 1990's to the year 2000?
DANIELS: Well it's going to be unbelievable. Let's assume we have all the NFL football on basic. The percentage of penetration within 12 months would go up 20% all over the country. The cable operator would have to carry it or he would be shot
PAGLIN: Yeah, now that's sports. Now addressing the generic question of the penetration by CATV as a whole, where do you see that going in the 1990s?
DANIELS: I just gave you a bang 20% because of the NFL games. Then you add the other four sports that are going to follow....
END OF TAPE
PAGLIN: Give me that figure again, I just changed the tape.
DANIELS: Fifty million homes and they've all got to take the programming. At 20 bucks a year approximately added to their bill is a billion dollars. In addition to that, there'd be another $250 million income in advertising, so that's one billion, 250 million dollars a year. So we pay the NFL 500 million and the balance goes to expansion and cut up among the cable operators and so forth. It's very simple, not that complicated.
PAGLIN: Are you saying that you think the enchantment of the American public, (which is distinctive to the American public) with sports, would actually be the driving force to this expansion and penetration?
DANIELS: Yeah, and that's a start. Because sports, it has been proven, has been the best pay-or-view vehicle we have. There's been some movies that have done pretty well, but the big thing, since Day 1, since the old teleprompter days, was Irving Kahn putting on the fights. That was pay-for-view, but that was in theaters, the people went out to see it.
NFL, the Superbowl, last year, was the most watched program of all time in the history of television. Now it wouldn't take long to get the public used to it. The Congress doesn't concern me, they have considered the World Series and the Superbowl to be untouchable, baloney. Free enterprise and dollars will call that shot and not the Congress, okay? When you get a combination of the club owners in any sports and the cable operators going to Congress, and convince them that this is the only way that we can continue it, the Congress isn't going to give them any problems. The public wants the event, they'd rather have the event and pay for it, rather than not have the event. That's the only choice they've got with prices rising in sports franchises, okay?
PAGLIN: So you don't see that this particular thing, sports which you're concentrating on, would have any deleterious effect on cable's public image that they talked about?
DANIELS: Not at all, it makes them overnight the choice network. The way to get television! The NFLI bill, I know them, they've been very pompous. I can tell you even today that they're going to go any place that they can to replace the revenue they're going to lose from the network. That's cable, and that leads to what's going to happen then to pay-for-view. Sports is going to be the motivating thing about it, not movies, but picture a combination of professional sports not now seen on the networks and some of Ted Turner's MGM films and other blockbusters. They'll end up on cable and it's just a beautiful situation for the cable industry to be in today. We couldn't do it if we weren't up to 48-50 million homes, now we've got the numbers.
PAGLIN: Further expansion not only in the outlying areas but the major cities as well.
DANIELS: Sure, and we scramble the signal of all these events, so even the rancher has to pay to watch the NFL football games.
PAGLIN: All right. Now going on to another subject. What are your views as to the future make-up of the CATV industry. Do you see, for example, entire new segments of industry and commerce are coming into the field. Do you see that there should be any limits on multiple ownership of CATV systems?
DANIELS: I don't see that, I see 25 major owners, NSOs. It could be 15, 20, 25, between 15 and 25, NSOs. That's happening today, there's 100 now and you're seeing mergers and acquisitions, it's starting to happen and I've known this for 10 years. I've predicted that, you can go back and check the record. It's the perfect business for absentee ownership, it's the perfect business for multiple ownership, and the government is never going to let happen to them what happened in the case of the Bell, AT&T.
We've had cases already in our industry when big companies tried to merge in the cable business, the Justice Department has put a quibosh on it. ATC tried to merge with Cox, the Justice Department said "Forget it!" and they backed off. But you'll find the bigger companies picking up the smaller operators, and you're going to see the media concentrated among 15 corporations.
PAGLIN: Do you see, do you think that there is no reason to put any limits on it? Or do you think, as you've kind of indicated, that when the situation gets a little too big, then something ought to be looked at?
DANIELS: It depends on how we as an industry conduct ourselves. If the multiple system operators, as they grow and get bigger, and as they buy the smaller companies, if they conduct themselves properly, if they make the same contribution to the community that the local owner did, there shouldn't be a problem. I don't see anything to get disturbed about until such time as there's a reason to be disturbed.
You know, Hell, you've got three networks now, they've had a monopoly for years and years and years and they've done a damned good job. They only had three competing networks. You've got to remember, we don't really compete against them anymore. When ATC and Cox wanted to merge, that was during the franchise battles. The Justice Department wanted to see a couple of big shooters out there in the cities competing. We no longer compete with each other because we now occupy a monopoly, so to speak, in any one market. You don't have the same problems that you did during the franchise battles.
PAGLIN: In the same vein, what do you think about the cross‑ownership with other elements of the telecommunications industry? Like the broadcasters, networks, newspapers, telephone companies?
DANIELS: I've always thought that made sense. Because if it didn't, because of political muscles today, the TV station owner would own the cable system in every town in the country and that is monopoly communications, that slows down the growth of cable. You know if you own an affiliate in New York City, CBS affiliate, you're not going to be crazy to bring in a lot of channels to compete against yourself. So I think the Commissions very smart move in the cross-ownership deal, and that's allowed the public to benefit. The public has benefited by that.
PAGLIN: In other words, new elements have come in, in the cable industry other than existing broadcasters and so on?
DANIELS: Max, the best example there is is in my home city of Denver, prior to the cable TV system being built here, not one of the systems was on all night, like cable, the station was on all night long. Now you heard me say this in Washington at a speech. There were a few exceptions on a Saturday night that one of them might stay on all night long or maybe two of them (would) Today in your major markets, most of your TV stations operate twenty‑four hours a day. Why cable competition? We have made the local TV station better, and therefore the public has benefited.
PAGLIN: Which is the old competitive way of business from the very start. Do you see this to be solely a reason of the current trend in deregulation or is it something that would have happened anyway because of the nature of the beast?
DANIELS: It would have happened anyway, Max, though it would have taken another twenty-five years for it to happen, deregulation accelerated it. Because the public would have demanded it, and they call the shots. Let us never forget, the public calls the shots.
PAGLIN: Now, how do you see the entry of say strictly the financial speculators who come in to buy up big systems. You referred to it before and have referred to it many times that they are not the public oriented people that the old cable people are or have been, that the old broadcasters have been that have a sense of service to the public. What do you foresee, what's your view on the entry of these strictly financial speculators coming on a leverage buy-out?
DANIELS: Max we've had to have them. The reason we have is, in our industry we compete against investment dollar with the phone companies, and the power companies, and so forth with just so much investment capital. We've had to have them, outsiders, come in, financial people to grow. Now, those that are not public oriented now, and there not many of them, most of them have got the message, are going to be (public oriented) because the public is going to force them to. They'll find out in a hurry that they're not in the business of just shuffling dollars around, they're in the business of serving their almighty person, the customer, the public. Once again the public controls what happens to you and I.
PAGLIN: Do you think that if things get to some degree of concern that, remember they were talking about a limit on the number of stations that could be on, they were talking about the number of the three-year rule in broadcasting. And now, in fact, if you read the trade press, because of these leverage buy-outs, and these turn-overs quickly within a year, they're beginning to talk about reinstating the three-year rule. What do you think about it?
DANIELS: Well, again, the eighth wonder of the world was the free enterprise system, and the ninth wonder of the world is that few people understand it. And if it's abused, by the quick turn-over, the Commission will get the message and will do something about it. If it's abused, they should do something about it, I've got no problem with that. That's why in the case of cable TV, on January 1 of 1987, we're deregulated. If we abuse it, we're going to get our ass kicked. It's that simple. If we conduct ourselves as gentlemen, and we don't overdo it, and we don't mistreat the public, we'll be in great shape. But if we mistreat the public, we'll be right back under control again. Our industry has got to understand that, and I hope they do.
PAGLIN: January 1, 1987, is the flag day for the Cable Act of 1984, the deregulation of the rates.
DANIELS: That's right, the city council no longer has any control over what we do, rates or anything else.
PAGLIN: But what you're saying is, if I understand it, that doesn't give you carte blanche, that doesn't give the cable operator carte blanche. In other words, he'd be a damned fool if he goes out and he gouges on January 2.
DANIELS: You've got it, absolutely. And we've got to be very careful the way we handle that.
PAGLIN: If you want to expand with the public image that everybody wants.
DANIELS: Sure, and you'd be foolish to price your product out of the market, you'd go broke if you do that. It's a fine line and it takes good business judgment.
PAGLIN: Where do you think the guidance is going to come, because that's going to be a very critical day, January 1, 1987.
DANIELS: The guidance is going to come when somebody around the country abuses it, okay; and every customer on the system writes the Federal Communications Commissioner or their Congressman. That should set the message to the rest o£ the industry, "Hey, hold it fellas, we're doing this too fast."
PAGLIN: Do you think the trade association should be trying to hold the reins on some of the operators?
DANIELS: They are, and you are seeing some of the editorials on it in our trade papers, and you'll see it my newsletter, we've already talked about it. You've just got to be sensible in how you handle yourself. You've got to prove that you don't need control. If we don't prove that we don't need control, we're going to have control back.
PAGLIN: What you're saying is your feeling, and it fits in with everything you've said, Bill, is self‑regulation is really the best.
DANIELS: Absolutely, sure.
PAGLIN: And if you behave yourself, as an industry, nobody's going to bother you.
DANIELS: NAB's been pretty successful on that. If I remember their code of ethics, don't they have one in the NAB?
PAGLIN: Well, they have a code of ethics.
DANIELS: And they pretty well live up to that don't they?
PAGLIN: They do, and in fact the funny thing was they had standards on the number and frequency of commercials and it went on for 45 years. Somebody, the Justice Department or whoever the hell it was, complained, and the court threw it out as being anti-trust violation. Could you believe it? This is now some eight years ago or something like that. They said that for trade association to impose limits of that kind, which means the amount of money that a station can earn, is a violation of the anti-trust policy!
DANIELS: It depends on how we'll handle it. We can get by with it on basic today, we're doing it today on basic, on all of our property, on all of our property we're doing where income is substantial. Not near what it's going to be. Now when you get into the pay channels, that's another story. Now, what I can see happening, we in the industry can handle it properly, and I think this will come. The best (thing) I can do is give you an example.
Let's take an HBO movie. At the beginning of the movie, three to four nicely done spots--commercials, an intermission, which believe it or not, a lot of people like to have during a movie, and hit it with four to five commercials and then the end. I don't think the public would mind that one damned bit.
PAGLIN: So, in other words, it would take on the same facade like some of the better broadcasting outfits are doing now, not interrupting the continuity.
DANIELS: Right, in pay now. I think in our basic we can get away with advertising just the way they do in a normal broadcast station. But in fact I don't think we can, I don't think we should. In fact Max, we'd get so much hell if we abused it, the public, that I know for sure the public controls what we do
PAGLIN: Or otherwise it would be suicidal, you'd lose your customers. Now, going on to a new subject. That is to say, your views of the future role of cable and the development of telecommunications, as a telecommunications service, rather than just cable.
What do you view as to the future range of cable services? For example, in the entertainment field, you've already covered that, but in the non-entertainment field. You and I talked in the first session, I remember you saying "Gee Max, I'd love to be here fifty years from now, and see what future course of what this whole telecommunications industry's going to be," and you and I made a pact that we would be here. But more specifically now, do you see cable communications having a role in informational services, in educational services, in civic affairs, things of that kind. What types of non-entertainment service do you see for the technology?
DANIELS: Max, I absolutely do. Now we get into for your Blue Sky. For 25 years I have
believed in Blue Sky. For 15 of those 25 years I have been wrong on when it was going to happen. A lot of it would be there today if we had not been held up by our various enemies over the last 30 years. I see the following happening. A cable subscriber, because of our two-way capability, now therein lies the key, addressability and two-way. The telephone company has one-way communication into the home, and they have only audio. We have two-way capability, audio and video. In addition to the normal things that we talk about, that's banking from the home -- that's going to come, we've fumbled the ball, we haven't done it right, it's been tried, they dropped it. A lot of the telex projects have been tried, they've been dropped, but it's coming.
PAGLIN: Is that the videotext?
DANIELS: Yeah, videotext. A lot of people lost a lot of money. But that's got to happen, it's supply and demand. Picture if you will, that if you have a home computer, it would be connected to a master computer at the cable TV office, where you could in three seconds, find the answer to anything that you wanted answered.
PAGLIN: Information retrieval?
DANIELS: Sure, that is really going to help home computers too. Now don't ask me how that's going to be done because I'm not smart enough to figure how it's going to be done. But it just makes sense.
PAGLIN: Would it key into some of the data banks you're saying that they have now ?
DANIELS: Sure, and think of the software it would save the computer owner when all he's got to do is go to the bank and get it, this quick. You'll see that happen, that's going to happen. That's why I want to come back in 50 years. Because, once again, we've got that audio and video capability into the home, two-way, now that's mind-boggling.
PAGLIN: Do you see that technically this could be tied into a mobile communications service through the headend? In what manner do you think that other types of service could be rendered to the public? Would it be paging. or mobile radio?
DANIELS: Electronics is moving so fast, God only knows what is going to happen. But picture this also Max -- you know the phone company has never made a success of the picture phone. I think you're going to see the day that telephone companies are going to get together with cable operators and somehow you've going to be looking at the person you're talking to. A combination of the Bell System, the Bell Companies and cable TV systems. We have that capability now, they do not, that can happen. I guess the best way to demonstrate this is to tell you what's going on in the paging industry. Did we talk about that7
PAGLIN: Only a little, at the very end. I never would have thought of it that way, did you?
PAGLIN: So, I get the message, I think you're right. We'll see how it develops. Now, finally, oh, I see, we already went over the role of the CATV and the development of the technology and so that's good. As this thing is developing, you're actually anticipating what the cost of this is going to be. The final thing that I thought would be useful for us to talk about, in terms of an outline, is the present and future role of the federal and/or local governments in the regulation of cable, we've touched on it a number of times.
DANIELS: Let me sum up that, Max, 'cause it comes out of that speech I told you about. I'm going to talk about plus things that I think are going to happen in the next ten to twenty years, and minus things.
PAGLIN: This is going to be at the Cable Television Public Affairs Association tomorrow?
DANIELS: The plus side of this paper; obviously, advertising is going to be tremendous. The NFL, I told you about, and other programming. Irving Kahn has said that he thinks someday we're going to have more revenue in our industry from services than TV programming. I don't believe that, but that's what Irving Kahn says. But if we do non-entertainment service, it's going to provide more revenue in our industry than entertainment. If you call sports entertainment, I don't agree with Irving at all.
The other plus side is, the big building period is over and our cash flow is rapidly increasing in the cable TV industry. Our budgets for public relations, for research and development, for programming is increasing every month. And that's going to add a big positive plus in our industry for the future. For so many years we've had to build plants, we haven't had the money, we've paid a lot of interest if you follow me, we've crossed over that now into the high cash flow, in most properties, and we have the money to do a lot of things we didn't before. On the minus side, if we get cocky, and that's the best word I can think of, we're going to be right back regulated again, if we don't handle ourselves properly as an industry.
PAGLIN: And when you say properly, you mean?
DANIELS: If we abuse the public, again the public, if we overcharge them, if we don't give them quality programming, if we abuse the public in any way we're going to be regulated again just as quick as we got deregulated. The other down side is, I'm surprised it hasn't happened sooner, but our industry has not been a public utility in the number of states that I thought we would be by now.
PAGLIN: That is to say, the state would have taken it over as a public utility?
DANIELS: Yes. Max, we're a public utility today in Vermont, in Nevada, in Alaska, and we don't want that, because they control the return on your investment. The worst that could be is if we ever end up a public utility, and I don't see that happening. But if we do, there isn't anything wrong with the utility business, because with being a utility you get a whole lot of protection. It guarantees your monopoly. I would rather operate in the format of free enterprise, than be deregulated. Let us do a lot of things and experiment and make whatever money we can by being businessmen. Now I'm ready for that part.
PAGLIN: Well, you've covered a good part of it already, again, anticipatory. So, for example I was going to ask about the affects of federal deregulation and you've indicated what you think, that there may be some rise in rates, but that you would caution the industries to go slowly and just treat the public the way they should be treated.
DANIELS: Yes, Max, and I even warn myself, we operate a number of cable systems in addition to our banking and we're going to be awful careful in this shop the way we handle our customers in this, because I'm well aware that if we get out of control we '11 be right back where we were.
PAGLIN: Now in terms of future franchising policies, do you see the federal government's role expanding or decreasing?
DANIELS: It will expand if we abuse it.
PAGLIN: That's the key. Would the same be true with state and local governments?
DANIELS: Absolutely. Max, a cable operator that does not provide good service to the consumer and abuses the public should not have his franchise renewed. And I've said that for twenty years, they don't deserve to have their franchise renewed. There was a day when we had a lot of cheap and dirty cable operators who milked the property, they wouldn't aggressively try to buy more services, in the quality of service and so forth for their customers. They didn't deserve to have their franchise renewed.
PAGLIN: In that same vein, in terms of the problems of franchise renewal, particularly in the year we're approaching on the Cable Act deregulation, what are your views, your experience, your practice in terms of cooperating with the local municipality?
DANIELS: We can't do enough for them in the way of cooperation.
PAGLIN: In what areas, give me an example.
DANIELS: Oh my God, volunteering. Jones Intercable, a competitor of mine, but a damned good one, is sponsoring the Junior Olympics in a lot of their communities, it's a PR coup in Montana. Your people being active in civic clubs, anytime the city has a problem, doing the same as the Broadcasters have done for 50 years. Getting the word out to the public, letting them know what's going on in the community, know the city councilmen on a first name basis, be part of the community. If you do that you'll have no problems, providing you provide the customer with good service at a reasonable price.
PAGLIN: Would it be your opinion that cable is another service which not only is being afforded to the public but is part of the entire "Civic Activity" complex, part of the community? Cooperating with the local authorities
DANIELS: Absolutely. Sure, we're doing a lot of that now, we're televising city council meetings. We just started in Denver, five months ago. We volunteer to do that. We shouldn't be told to do that by the city council, we should offer. The sad thing about it is nobody watches it. But it's on television and it's a way for the public to be part of their government. That's a real public service. We're providing access channels, we volunteer that, we shouldn't be made to do that. As our cash flow increases we should do more things for the cities that we operate in.
PAGLIN: So it is, like it used to be when I was with Commissioner Bartley, years ago, a Texas populous, he believed in the importance of a broadcaster being a part of the community. I remember when cable came along, when Fred Ford was president, I knew he was of the same view and I knew you were as were a lot of the old timers. It is just another form of service to the community.
DANIELS: Sure Max, you know the logs that the broadcasters submitted to the FCC. I don't know if they still do that or not, but a percentage of their time was required to be public service. We shouldn't be made to do that, we just do that automatically.
PAGLIN: Well, that completes the outline section for today's discussion. We've gone over an overview, some predictions and overall assessment of what it's going to be like. Are there any other words of wisdom that you think you would be imparting in this whole situation?
DANIELS: I wish in the cable TV business that all cable operators were more sensitive to public relations, being part of the community, and doing things that I'm known for saying, first class, because it really pays off. And I wish that every cable operator in the country was as good as Leonard Reinsch in Cox Broadcasting was in the broadcasting business, and Starr Broadcasting. Now, I know them all, and I can tell you that George Starr, everything George Starr did was first class all the way. First class plus, and the same applied to Leonard Reinsch and Cox Broadcasting. It really paid off, there are schlocky broadcasters in the broadcasting business and there are schlocky operators in the cable business. And unfortunately one schlocky broadcaster can hurt the entire industry, the same in the cable business.
The best example I can give you, and it's a sad story, is what Irving Kahn was found guilty of in the case of Johnstown, Pennsylvania.
And we had to live with that for about a period of five years, where every time that we would go before city council people just assumed that our industry was paying-off city councilmen. Max, that was very rare. Very, very rare. And I happen to admire Irving Kahn today, he's one of my best friends. Was he guilty? Under a court system he was, you know, but I just wish and I hope the day comes when the cable industry really believes in putting back into a community what they take out of it.
We take a lot of money out of the communities in the country today, Max, and we not only put back into better programming and better service, but being part of the community, making this country a better place to live in. There are a lot of things you do in business you don't make a quarter on and we in our industry have not done the things that we're going to be able to do because we're starting to make the money. We ought to be building parks and donating to the city. We ought to be providing swimming pools just voluntarily. "Thank you folks for being so nice to our company" kind of a deal. Scholarships for education. Broadcasters have done a lot of that, not enough in my opinion, but they've done a lot of it. We should be setting up foundations for feeding the poor, for helping the unfortunate, and we're going to get there because that society's the society we live in today.
PAGLIN: And should that message not be spread to the whole industry?
DANIELS: Absolutely. Absolutely.
PAGLIN: And the trade association would probably be the vehicle to do it? People like yourself.
DANIELS: Well, I preach it to more than one, sure.
PAGLIN: That's what I mean.
DANIELS: You'll see more of that happening in the industry.
PAGLIN: I would guess. I final thing, the, oh, by the way, the word is philanthropy. It's interesting the way you put it because it harkens back to the old days of the Carnegies, the Mellons, the Rockefellers, the Harrimans who when they took so much out of the community decided the time had come to put it back.
DANIELS: Sure, look at what the Ford foundations, the Rockefeller foundations, and the Mellon foundations, all of these fine, fine foundations have contributed to our society. We should do the same.
PAGLIN: And the industry in your view, in other words Bill, has matured or soon will mature to the point where they now individually or as an industry should be doing the same for the community?
DANIELS: Every year that goes by we should do more, absolutely.
PAGLIN: One final update, and I thank you, this has been invaluable, I've enjoyed it immensely, and I'm sure for historical purposes this is going to be invaluable, the recent thing that I referred to before we went onto the tape of your conclusion of an association with the Soloman Brothers. What are the general parameters of that and what will be the future of that operation?
DANIELS: Max, that gets back to the competition we have for the investment dollars with the phone company, and the power companies and other businesses. Our industry now has got to go to Wall Street, where the really big dollars are to do all of the expansion we need to do. All of the acquisition that needs to be done in the industry to solidify it and we in this little company could do everything but we didn't have access to the big public dollars. Now we have access in our industry to unlimited funds through our relationship with Soloman Brothers.
PAGLIN: What actually will be the nature of the relationship?
DANIELS: Eurodollar financing, high yield bonds, the new kinds of financing that are starting to come on the horizon in all types of businesses today, and the tremendous amount of dollars there are out there for investment purposes, for the right kind of deals, if that's the proper word. The money available today for investment purposes is unbelievable and we in our industry want our fair share of that money.
PAGLIN: Will they have any relationship in terms of the policy making in your company and Daniels and Associates? Will there be a joint board?
DANIELS: Not really, we are lucky in this firm. We have, Max, I just distributed checks to investors in a cable property that we bought about eight years ago to all of the investors and they made a lot of money on their investment. And I made the statement in there that this continues our 100\% record of cable investing over the last 27 years. Now that's unusual in any business. Now I've made a lot of bad deals but they haven't been in the cable business!
PAGLIN: You mean like sports teams, boxing and fighters and stuff?
DANIELS: And other silly things. The cable business we got a perfect track record and I'm proud of that.
PAGLIN: Well that sounds like it's got a real future.
DANIELS: I think so, yes.
PAGLIN: So, I want to thank you again, Bill, for your cooperation. As you know, we're going to transcribe this and then send the transcription back to you for corrections or additions, and if you set the time to review the edited version of the first interview, see if there's anything you want to add to that, feel free.
DANIELS: I corrected that once didn't I?
PAGLIN: Yeah, but that was just in terms of Solomans and how to spell this guy and that guy, but looking at it in substance if you feel there are things that you want to add to it please feel free because that will be the permanent document. These transcripts will become part of the Golden Jubilees oral history project. And, as you know, we're also working will Penn State's National Cable Television Museum and going to be exchanging so our transcripts will be a part of their library and vice versa and actually we will be conducting oral histories for the subjects with them. So, we're hoping that this will really form something novel and unique.
DANIELS: You know what's fascinatig5 about this, the fascinating thing about it is that the people who are most likely to read it will be gone by the time it would be interesting to them more than anybody else.
PAGLIN: Who would that be?
DANIELS: You and I. Wouldn't you like to come back 50 years from now and read all the stuff you're putting in the museum and see what has happened compared to what people thought was going to happen?
PAGLIN: Yea, that's right, but of course it also has a use for the future generations.
DANIELS: Oh I know, sure.
PAGLIN: The industry, the government, the scholars, and that's what the name of the game is. But you and I made a date before that we were going to get together fifty years from now and I got it down on my calendar I don't know about you.
DANIELS: That would be nice.
PAGLIN: So finally, if there is any further documentation that you think would be useful to go along with the transcripts, you know, corporate annual reports, or writings of yours or speeches of yours, anything we'd find that would be very useful so if you think of that, let us know and we'll be back in touch and if you think there's anything else we need in terms of further sessions again, just let us know and we would be very happy to cooperate. But again, I want to thank you for your time, and as usual it has been a pleasure, and a unique pleasure to be with you.
DANIELS: Thank you Max.
PAGLIN: Thanks again. Is there anything else that we want to talk about?
PAGLIN: Now again, it just occurs to me I did not ask, when I said is there anything else in terms of the first session we had and the second session that I may have overlooked that you may want to comment on and the whole picture. Do you remember I told you how we're going about the three pilot programs, that is to say, Marty Malarkey, one of the initial operators in the East, yourself as one the initial operator entrepreneurs and one of the initial regulators being Henry Geller. Those are the three pilot sessions we're. doing.
DANIELS: Let me comment on, I think I said earlier in the interview, I think I named all of the enemies that our industry had when we started out. Didn't I do that for you Max?
PAGLIN: In the first session you did, yes.
DANIELS: I should add to those list of companies and industries some specific names. One of the top would be Henry Geller, another one would be Ed Craney from Butte, Montana.
PAGLIN: We talked about him, yes.
DANIELS: Bill Grove from Cheyenne, Wyoming. Who's the guy from Springfield, Illinois?
PAGLIN: Putnam, Bill Putnam?
DANIELS: No. Springfield, Massachusetts ‑ Bill Putnam, you're right and there's one more from Springfield, Illinois. He owns a TV station in San Diego. I hope to think of him later on and I'll give it to you and you can write it and add it to this, but those four individuals did a real disservice to the American public by either in the case of the private broadcaster, trying to feather their own nest, or in the case of Henry Geller, over-regulating and doing everything he could to stop our industry. If he had not done this, and I'm talking about Henry Geller, plus the other four or five very active, bitter enemies of our industry, we'd of been ten years further along in this industry than we are today. Now how does that go to the bottom line?
We're going to have an in-depth study that'll be finished in a couple months, Max, and I'll supply you with a copy of it, of what our industry has meant to the national economy. The number of jobs it's provided, the number of dollars it's put in circulation, new investment dollars, and the many millions of hours of additional entertainment to the American public that we've provided, and to all of the ancillary industries and it's going to be with a lot of pride that those of us in the cable industry look at it.
But guys like Henry Geller did a real disservice to the American public, and I've told him this to his face, and I will keep telling him because there is a case of a guy that he's marched to a different drummer than everyone else. He was the only one that was in step, he thought, and I still see him., Henry Geller, coming up on, making statements, that to me, are directly opposite of the free enterprise system. Henry Geller should live in a communist country and not in a democracy. I like him personally. I am just as friendly with Henry Geller as I am with you Max, but I've never disagreed with a man as violently as Henry Geller unless it be Adolph Hitler. Is that pretty strong?
PAGLIN: Yes. Now, what would you perceive to be his personal efforts at regulation to protect the broadcasters, is that what you're talking about?
DANIELS: No, regulation for the sake of regulation. Henry Geller was a regulator for the sake of regulation. And not for the sake of the broadcaster, just for the sake of regulation. Telling everybody how they should run their business, telling what's right without letting the American public decide what's right. It never occurred to Henry Geller "Let the market place decide, let the American public decide." It was, "I'll decide it for you, American public." That's bullshit.
PAGLIN: In those days.
PAGLIN: Now, the interesting thing you're aware I'm sure Bill, that today Henry Geller is the most, "First Amendment" guy you'd want to meet in cable, in broadcasting. He now thinks there should be no regulation.
DANIELS: He may be the greatest "Fourth Amendment" guy in the world but he's a world's worst free enterpriser.
PAGLIN: First Amendment.
DANIELS: First Amendment, yeah, but he's world's worst free enterprise guy I've ever known.
PAGLIN: As a matter of fact in certain circles, lawyers in particular, say Henry had changed 180 degrees from the way he used to be in the old days. He never would have said there should be no regulation of cable, that cable is a First Amendment operation, free speech and that's the way it should be. That's what he's saying today.
DANIELS: If Henry Geller would give a speech publicly and admit some of the mistakes he's made in the past, and I don't think he ever would, I'll pay his round trip plane ticket wherever he wants to talk with his wife and his children and his grandchildren to hear him get up and admit how wrong he's been in defying the free enterprise system in our country.
PAGLIN: Maybe I can find some of those answers. That's interesting because the impression we have now in the Washington community is that Henry is now First Amendment, free enterprise. He goes after certain things, he's now with Duke University.
DANIELS: Well, hell yes, he is because all the decisions have gone against him, for Christ sake, you know we won the Must Carry Dea1. Henry, sure now, because the court decisions have all been against him. We won them all. Our industry today is in better shape than I ever thought possibly we could be in this year. I thought we'd be here where we are in about 1990. But the sad thing about it is we should have been here ten years sooner. Do you ever see Henry?
PAGLIN: He's a neighbor of mine, I see him every day, virtually. He's on our Board at Golden Jubilee as a public member and he lives in my building and I see him virtually every day. And he's very active. He's heading up this Washington Institute for Public Policy Research. It's the Duke University foundation type thing and it's a public interest kind of thing.
DANIELS: Tell Henry that I'm building a new lovely home in Denver and it's got a lovely guest house with its own swimming pool and if he ever comes to Denver I would love to have him as a guest in my home. I've always liked him personally but I'd give anything to see him "eat crow" some day.
PAGLIN: Well, maybe you can get him to make a speech to the Denver Cable Association.
DANIELS: Love to, have the man call it "I'm Gonna Eat Some Crow."
PAGLIN: I'll tell him, I'll tell him he's got an open invitation.
DANIELS: And it's not because of my competitive nature and proving that he was wrong, it's because of the disservice I think he's done to the American system of economy and the American public.
PAGLIN: Well, you know one of the things that again, digressing, I know 'cause I was there at the time. Henry, you know was my deputy when I was General Counsel, and when I left he became General Counsel and served one of the longest terms. It is said that the anti-cigarette commercial, that is the banning of cigarette commercials, was between Henry Geller and Rosel Hyde.
DANIELS: That sounds like Henry Geller. Rosel because he's a Mormon, that's part of that. Incidentally, I'd put in the same class with Henry, but he wasn't as vocal, Ken Cox.
PAGLIN: You mentioned that in the first interview. Well now, Ken is with MCI, and he's mostly common carrier now.
DANIELS: But see Ken Cox was protecting the broadcasters. I'll never accuse Henry of that, Henry Geller. I don't want to accuse Henry of protecting any particular facet of the communications industry. I just consider him not a free enterpriser and an over-regulator.
PAGLIN: Well, that's probably so in those days.
DANIELS: I don't even know if he's a Democrat or a Republican. I'm going to guess he's a Democrat.
PAGLIN: I'd guess so. I don't know that he has any political slant at all.
DANIELS: I will say this about him; he's bright as hell. Brilliant guy, he just never got the message.
PAGLIN: But you know, he never has a prepared text, he's that good that he just has notes and he goes on. He was on our Conference. Now he's written articles. You know what I ought to do if you'd like? See if I can't gather some of them together and send some of them just to see if you would recognize how he has changed.
DANIELS: You mean looks or his mental attitude?
PAGLIN: No, his writings, his mental attitude, his positions.
DANIELS: Well, 'cause he was beaten.
PAGLIN: Well, yeah, but even so I find it surprising to hear him talk about the First Amendment in the light of what it used to be.
DANIELS: I wonder, where does Henry live in Washington?
PAGLIN: In our building, Van Ness and Connecticut.
DANIELS: Do you have cable in the building?
PAGLIN: We have HBO as an option.
DANIELS: But from the dish?
PAGLIN: Well I don't think they have a dish yet. I haven't really seen.
DANIELS: If you've got HBO you've probably got a dish on top.
END OF TAPE (SIDE B)