Interview Date: Tuesday January 15, 1991
Interview Location: Unknown
Interviewer: Robert Allen
Collection: Penn State Collection
Note: Audio Only
ALLEN: I am talking with Ken Gunter and we are going to be talking for the next few hours about your career in the cable business. This interview is part of a series of interviews of pioneers and leaders in the cable television industry being conducted as part of the Oral Histories Program of the National Cable Television Center and Museum at The Pennsylvania State University. I want to thank you for the time that you are making available to us.
GUNTER: It is an honor to be invited.
ALLEN: Let's start back with early days and family. Are you a native Texan?
GUNTER: Yes. I was born in San Angelo, Texas, on September 25, 1933.
ALLEN: And what were your parents' names?
GUNTER: My father was Elma C. Gunter who was born in Bridgeport, Alabama, in 1900. My mother was Cleo Bennett born in Dallas in 1905.
ALLEN: And when did they move to San Angelo?
GUNTER: My mother moved to San Angelo with her parents probably when she was a teenager, maybe as early as grade school. I don't really know for sure. My father came from Alabama with his mother, father, and two brothers in 1913. He was the oldest of three brothers, and was 13 when they arrived in San Angelo. My great-grandfather, W.M. Gunter had come out to Texas and looked around and encouraged his son, my grandfather, to come out and bring his family. There was a lot of dissension in Alabama after the Civil War that still had not settled down by the turn of the century. A lot of the old family from the Gunter clan left Alabama around the turn of the century and the first decade or two thereafter because they were all good businessmen and had been successful entrepreneurs, but the reconstruction days left quite a scar on the South and most of them were interested in looking elsewhere. That is really how they happened to come to Texas.
ALLEN: Texas was then a land of opportunity.
GUNTER: It was to some in Northern Alabama in 1900 or 1910 because the after-effects of the war had been severe, socially and on business.
ALLEN: What kind of business did your family get into when they moved into San Angelo?
GUNTER: My grandfather was probably in his early '40s when he arrived there in 1913. He was actually retired. He had made quite a bit of money in Alabama with his brothers and other relatives running paddle wheel boats on the Tennessee River between Decatur and Chattanooga, and they were basically grain brokers. So when he came to San Angelo - he came there to primarily relocate his family and he didn't really enter into any new business activity on his own after he arrived in Texas except to speculate in some land and real estate. Other than that, he really didn't do much.
ALLEN: And your father?
GUNTER: Well, my father completed public schools in San Angelo and went to Texas A & M, got out about 1924 and came back to San Angelo and went to work He became a part owner of a Goodyear tire dealership and he worked in that partnership for probably six years. Around 1931, he opened his own business nearby and it was basically a retail appliance, white goods, and radio store. He ran that store from 1931 until about the mid '70s. After he formed that, he brought in his two younger brothers, probably in the mid to late '30s. That partnership persisted until about the mid '70s when my father was 75 and the next younger brother was probably around 70.
The youngest of the three younger brothers split away in the early '50s and formed a company called Gunter Wholesale. Gunter Wholesale was wholesaler of the same sort of goods, wholesale electronic parts and electrical supplies. That business actually started in the Gunter Company, which was the name of Dad's business shortly after World War II and did well because there were really no sources of wholesale electronic parts and electrical supplies between Dallas and El Paso. But, due to some differing views of the world and business philosophies, the younger brother took that business about 1952 and moved it six or eight blocks away. It is still there today; however, that particular brother, the last of the three, died this past week at age 78. His name was R. C. Gunter. The middle brother was named William M. Gunter. He died about 1983. My father passed away in 1985.
ALLEN: Was he still active in the business at that time?
GUNTER: No. For a time he was, in order to stay busy I think, and because he liked the business. He created a lot of clientele and good friends in the West Texas area. He continued to operate an appliance operation outside of the building where it had been in San Angelo for 45 years. The reason for this is that it only needed to be a smaller operation because he just wanted a place to kind of come to work everyday and meet friends and sell them something they wanted or just talk about politics and business if that's what they wanted to visit about.
The reason my father left that building was that I needed that building. It has around 27,000 square feet in it. It was a rather large retail operation and after we opened the first cable company there in 1958, that business expanded from a local cable TV company which took its cash receipts in over the appliance company retail trade counter. It had no front. It was really a room in a back office of an appliance store. By the time my father was ready to close that retail business, the cable company had practically crowded the appliance operation out of the building because now the local company had grown significantly. By that time our original cable company had merged with friends in Florida and formed International Cablevision, gone public, and around 1969 we merged with Bob Rosencrans and his associates and formed a company called Columbia Cable Systems. We then had not only the local company in that building; we had divisional offices growing up in that building. I was always the head of engineering for International and for Columbia when we merged the two companies. Not only were we competing with the local company for space, we had divisional and corporate offices there. By the time my father left that building in 1975, I would say the cable company had moved from a back room into probably two-thirds of the building.
ALLEN: Was you father active in setting up the original cable company in San Angelo?
GUNTER: Yes, that is an interesting story. My father was the original and only Magnavox, Zenith, RCA television dealer in San Angelo for many years. He had gone to a Magnavox meeting in San Antonio somewhere around 1956 and a lot of the Texas Magnavox dealers were complaining that they were not meeting their targets for television sales. They blamed it primarily on the lack of good diverse television channel choice. It just wasn't available in a lot of small towns in the mid '50s. One of the fellows stood up and remarked that he was from Tyler, Texas, and that a cable television company in those days, which I am sure was then referred to as a community antenna television company, had been built in Tyler by some businessmen. They brought in the Dallas channels to Tyler, which had only one local station, and it had tripled his television retail sales. The conversation went like, "Why don't you people out there who know the electronics business and have television shops and have some technicians, why don't you think about building a cable system in your hometown? Put a big stick outside of the city limits, bring in some over-the-horizon television, pipe it into town and sell that for $5.00 a month like they do in Tyler, Texas. It may not make any money, but it will sure pep up your television sales and probably pay its own way." This was really the way my father began to envision the cable business in the early days. He thought it was a stimulus to retail television set sales.
I was finishing Rice University in the late '50s and I had originally planned to go to medical school because science has always been a first love of mine. By the time I finished Rice in May of 1958 I was pretty burned out on academics. I had also had a little opportunity to spend time with a brother-in-law who was just getting out of medical school in those days. I worked with him with scrub suits on in Parkland Hospital in Dallas. Rice University made it possible for a lot of us that were aiming towards medical school to spend time working the emergency room and other wards of the City County Hospital in Houston and also Hermann Hospital in Houston, to give us some hands-on experience and see if this is really what we loved as much as we thought. I found that I really didn't like dealing directly with blood, gore and sick distressed people as much as I thought I would. I thought for a time I might go to medical school and then come out maybe as a teacher or maybe go into research, but really by the time I was ready to graduate from Rice in 1958, I was not sure what I wanted to do in the way of medicine.
So, on a trip home probably around Easter, Dad had already begun to talk to a local two-way radio operator that he knew there (that was really the only two-way radio shop common carrier in town) - an old friend of his. They didn't know much about what they were doing. But at least they had some beginnings to discuss what it would take to build a four or five hundred foot tower out of San Angelo, run the cables into town, and build some distribution lines up and down the streets and alleys. By the time I got out of Rice and I realized that Dad wanted to do this and was getting serious; I decided that was what I would do. I never wanted to come back to retailing. I don't think I would have liked retailing for some of the same reasons that I don't believe I would have been a good medical practitioner. So when it became obvious I was interested, Dad encouraged me to come home and join him and that is when we began to build the system.
ALLEN: Had you worked in the appliance store before you went to Rice?
GUNTER: Oh, sure. In the early years, in high school, and summers between college sessions, I worked in the appliance store a lot, not doing as much of sales floor work as my father and uncle. I was primarily back in the radio and television repair areas, or back in the refrigeration and washer/dryer areas. I loved to work on anything mechanical or electronic, so the shops were my favorite part of the appliance store. Not the sales floor.
ALLEN: Do you remember when you started? What age you were when you started working here?
GUNTER: Well, when I started working there, in a sense that you might call working with the company and doing something of value for the operation, I would say I was probably a junior in high school. But I probably spent more time in the electronic shops of my father's retail appliance as a ham radio operator from between the ages of 10 and 15. I probably spent more hours in the evenings and weekends there than I did all of the time after that until we formed the cable company. I got my ham license when I was about 12 years old, and for a time I was the youngest ham operator in Texas. That also was part of my background that made me realize early on that cable television would probably be something that would use all of the time and study I had put into electronics through ham radio, and I was right. Cable television really uses just about all of the electronic disciplines, everything from coaxial transmission to microwave and now earth stations and computers. So those early days as a ham operator and all the science that I took while in college, although I did not get a science degree, I took all of the physics, chemistry, and biology that I could take in preparation for med school. All of that really had a big impact on what I became in the cable industry.
ALLEN: Did your parents have their heart set on your going to medical school?
GUNTER: No. There was no pressure whatsoever from my mother and father about going to med school. For some reason as a student I didn't really want to become an engineer. I can't really explain this because I liked electronics and communications equipment very much, but I didn't want to become an electrical engineer for some reason. I just thought that my love of science would be best expressed in medicine. But that is a decision that I have never regretted, never looked back on as a mistake of any kind. I didn't belong in the world of medicine and I think I joined a dynamic and growing industry at just the right time. I couldn't have found a more exciting way to apply my love of science and knowledge of communications equipment.
ALLEN: Did your siblings share that interest in ham operating?
GUNTER: No. I have only one sibling, a sister who was five years older and she cared nothing about science or the retail appliance operation. She was out of college and married by the time we opened the cable operation. She died at age 57, about four years ago. She died of leukemia in San Antonio in 1987.
ALLEN: What kinds of activities other than ham radio were you involved in during high school?
GUNTER: I was in the band in the ninth and tenth grade and then I was shamed out of that by some of my more athletic and macho pals. That was supposed to be sissy. That is one of the things that I look back on as a mistake because I always loved music.
ALLEN: What instrument did you play?
GUNTER: I played clarinet in the band and I also had four or five years of piano prior to the time I went to junior high school and I always liked that. I have even fantasized a few times that if I hadn't gone into the business I did, I would have liked to have gone to a high level of musical education.
ALLEN: Have you maintained any performance skills at all?
GUNTER: Unfortunately cable hasn't left the luxury of much time for that.
ALLEN: So when you got out of band, did your friends get you into the athletic program?
GUNTER: No. I didn't really want to play football. I guess I was large enough in those days to have done it, but at that time I was beginning to get progressively myopic and there were no contact lenses in those days, so I really couldn't play football very well. I played a lot of tennis. I played varsity tennis in high school and enjoyed that very much. I kept that up through the years until maybe the last two or three years. It has been more and more difficult to find the time and the schedule and the people to do it. A lot of the people that I used to play with in San Antonio and San Angelo are busy, are gone, moved away and doing other things. It just became such a scheduling hassle that I haven't pursued it recently.
ALLEN: You were obviously a good student in high school if you were going to consider going on to medical school.
GUNTER: Yeah. That is a funny story in itself. San Angelo schools had a good reputation, but I found them rather easy. I didn't really crack many books in high school. I am sure that I graduated in the top 10 to 15 percent of my class. The entry requirements at Rice at that time, and I imagine now, are still pretty high. I really felt that when I went to Rice I would probably burn up the road there too, but I found out that they shifted into different gears down there and I actually was challenged to just make decent grades, much less the Dean's List. I made the Dean's List a couple of times, I think, but I was practically a straight "A" student in high school, and I struggled to make "Bs" and "Cs" at Rice. That's another reason I think that I was burned out academically after I graduated, because it was a challenge. There were some real curve busters in that school, and to stay afloat, not ahead, just afloat, you really had to really work. I think that had a lot to do with not wanting to go to med school. I was ready to do something else.
ALLEN: How did you choose Rice as an institution?
GUNTER: Oh, there was a high school fraternity and one of the sponsors was a Rice alumnus. It was his habit each year to take three or four of what he considered the more appropriate students out of that boy's fraternity and encourage them to go there. He would always put them in his car and just drive them down there and run them through the campus and let them talk to the registrar. I think that was exactly why I picked it. I didn't even apply anywhere else. By the time he got through brainwashing me about what a wonderful place Rice was, I just didn't really consider anything else. My Dad was an "Aggie" as I have said. He didn't pressure me, but I know that he was disappointed that I didn't go to Texas A & M
ALLEN: At least to visit.
GUNTER: I didn't even consider it. That was not something that we ever really talked about seriously, but I know that it was not his preference.
ALLEN: Did you continue playing tennis?
GUNTER: Yes. I did play. I didn't play varsity tennis at college. I did go out for track. I threw the javelin and that was really for a mercenary reason. I was still athletically active and liked staying in shape then as I do now. But the only reason I went out for the Rice track team was to get on the training table at the dormitory mess hall, because they had a lot better food than the rest. . That was my vehicle to get out of the regular chow line over to the training table, the athlete's chow line.
ALLEN: Had you been in track in high school?
ALLEN: Why not tennis in college?
GUNTER: Well, it just took more application than track and I was already feeling the pressure of staying ahead of the academic curve. I felt like to be really good in tennis it would take three or four hours of practice a day, and track, particularly a field like javelin, required a workout and staying in condition, throwing and maybe weight work, but I did that in an hour or an hour and a half in an afternoon. I made the trips with the Rice track team and that was fun too. I made the training table in the chow hall. That was as cheap a price in time that I could pay to make the team, rather the team trips, and to eat with the jocks in the chow hall.
ALLEN: Get some good food?
GUNTER: Uh huh. . Very good.
ALLEN: How big of an institution was Rice at that time in terms of students?
GUNTER: Rice is still small. At the time I enrolled I believe there were 400 freshmen and the entire student body including graduate students was probably not more than 1,700. Today it might have grown to 2,000 or maybe 2,200 including grad students. But, it has a fine campus in the Ivy League tradition and a faculty, I thought at that time that was second to none.
GUNTER: It was coeducational.
ALLEN: Did you meet your wife at Rice or...
GUNTER: Well, you will have to say which one.
GUNTER: No. I didn't meet anyone that I really had a serious love affair with at Rice. I went with a couple of Houston girls that were not Rice students. I guess I got serious about one or two of those along the way, but nothing ever came of it. But I married my wife after renewing an old acquaintance in San Angelo. She was three or four years behind me in school. I didn't know her that well in public school, but when I came back she had been at TCU for a couple of years and had come back home. I was back and we began to date and decided to get married. Her name was Sandra Freeze and she is the mother of my three children. That marriage lasted around 13 years. After being single again a year and a half, I married Nancy Richey, who is from a rather famous San Angelo family of tennis players. Her father, George Richey, is a wonderful coach. He was the tennis pro at the Houston Country Club for many years and then later at Brook Hollow in Dallas. He retired, I believe, in the mid sixties. I would say 1965 or '66. They came back to San Angelo, which is where he and his two children were born, mainly to work on their professional tennis careers. Cliff and Nancy - I should go back and pick that one up - Nancy was the older sister of Cliff Richey and they were then and I believe still are, the only brother and sister tennis players that have been ranked in the top ten in the United States or in the world. I can't name you another brother and sister team that played contemporarily in the same careers. There may be some that one played, quit and then a sibling later played. So that was a marriage that lasted six and one-half years and involved my traveling with Nancy all over the world to a lot of tennis tournaments. About the time we got married was the first year that the tennis world converted from amateur to professional tennis days. The men were on the way in the late '60s but the women were organized to play professional tennis in about 1970, the year we got married.
ALLEN: Can we touch base then on your three children, as to when they were born and then? Your first marriage took place when?
GUNTER: My first marriage took place November 1955. The first child, my oldest son, was born December of 1956. My daughter, Elizabeth, was born June, 1959, and my youngest son is Kenneth Sloan Gunter Jr. - he goes by the name of Sloan to avoid confusion - was born in 1962. They are spread roughly three years apart.
ALLEN: Are they still in San Angelo?
GUNTER: No. My oldest son Bart graduated from the University of Texas with a BBA and a minor in Engineering, and he went to work for Sammons Cable in Dallas after leaving UT. He worked there several years, took an offer to move to Atlanta to work for Cox Cable and while there he met two friends, one in Marketing and one in Business Management. Those fellows decided to leave Cox about five years ago and form their own local area networking company - that is the business of networking computers. So he has been there for about eight years. Elizabeth, my daughter, is divorced, has three young girls and has recently moved to Taos, New Mexico. She is very artistic. Her mother owns a home up there and they, I believe, are involved in art work. They are probably going to set up their own art dealership up there. Sloan is a graduate of SMU in Business. He is now a stockbroker in San Angelo, but has only recently come back there from Dallas. He grew to like Dallas while he was an undergraduate at SMU. So he is there now and I expect he will be there for a while. He has never married.
ALLEN: Let's go back now to the start of the cable business in San Angelo. Did San Angelo have a television station at all at the time that your father got the idea of putting the system on?
GUNTER: Yes. That is what attracted Dad's attention about the experience of the Tyler Magnavox dealer in the late '50s. We were in a situation very similar to Tyler, Texas. Nothing had happened in San Angelo at that time in the way of cable distribution as it had in Tyler. We had one local VHF station just like Tyler did, and to Dad it seemed a direct comparison between two very similar marketplaces.
ALLEN: That one station was cherry-picking from the three networks, then?
GUNTER: The San Angelo station was cherry-picking in those days. It certainly was, and we had an opportunity to put a tower and office in San Angelo at the four or five hundred foot height range that would pick up Odessa, Midland, Sweetwater, and Abilene, Texas. That was about all that we could get off the air in those days and that is what we began the company with. That was in 1958. It was not until 1964 that we fought our way through the FCC with some business radio microwave licenses and imported three channels from Dallas.
ALLEN: Were you involved in the original engineering of the system?
GUNTER: Yes. I spent most of my time on the technical side of the business because Dad was very much of an autocrat in business. That was not only his first love and best aptitude - it was just his style. His family, his two brothers, and his father were all pretty independent and even secretive in their business management styles. So because he was there, it was fortunate that I was in love with the technical side of the cable at that time because if it hadn't been for that, I think we would have been scrapping about who was in authority in the management area. So he was happy that I was doing the technical work because in those days there really wasn't that much cut and dried engineering information. You had to go out and really do some of this by trial and error.
There were three major vendors in the business. Ameco was big in those days, the Phoenix Company that Bruce Merrill started. Of course Jerrold out of Philadelphia was big, and Entron was a quality producer of CATV hardware in the early '50s to mid '60s. We bought a lot of goods from all three of those companies and we bought cable from various companies, depending upon who was pricing it the best at the time. This was before the aluminum cable days. We were just buying newly manufactured World War II cable sizes such as K-14, RG11, and RG59. Those numbers were World War II MIL numbers. The Tyler, Texas system was built with World War II cable. Some of those systems in the early '50s were built from war surplus sources as opposed to American
manufacturers who were currently making those same coax versions.
So along the way and buying from these three companies primarily - Ameco, Jerrold, and Entron - I met the President of Entron, a fellow named Hank Diambra. A very bright engineer, an ingenious dealmaker and businessman. We were buying pressure taps and some of his tube-type trunk and bridge amplifiers in those days. He had a very nice line of compression fittings for coax which we began to buy because it enabled us to stop soldering the old World War II fittings on poles with soldering irons. Pretty tough in the West Texas wind. During one of his visits out to San Angelo he talked to my father and me around 1960, only a couple or three years after we had gotten into the business, about some friends of his in Florida he wanted us to meet. He thought a way to raise capital in this industry was to go public. My father was very skeptical of all of that talk.
Dad was basically a very bright guy, but he was secretive and somewhat a hip-pocket operator and didn't like delegating authority to too many people. He knew that getting into a larger combine of companies and certainly going public and having FCC reporting requirements would severely impact his personal management style. He was very skeptical about that, but the single VHF that we had in San Angelo at the time and the supplemental stations that we brought in from the area by off-the-air means was a scene that was about to change. There was an NBC affiliate in Abilene that filed for a VHF satellite in San Angelo about the time we were talking to Diambra in 1960 and '61. It looked like, at the time, that it would severely impact our offerings, which were priced at about $5 a month for four channels.
ALLEN: How far away were you pulling signals?
GUNTER: Odessa-Midland, was coming in from about 110 miles, and not so well by the way. That was a pretty long stretch in those days for the kind of preamplifiers and antenna systems that we used. Sweetwater and Abilene were much closer. Because we were north of San Angelo about 15 miles with our original tower site, the Sweetwater-Abilene transmitters were probably no more than 70 miles away. So they came in pretty well. Since Channel 2 - Midland NBC was not so good and susceptible to fading and co-channel, Abilene Channel 9, which had applied for the VHF satellite in San Angelo, was really our big drawing card. So when they applied for that, we realized we had to do something and do it fast to import Dallas, to stay ahead of the off-the-air competition.
ALLEN: Before you go on to that, I assume that you were the one who chose the site for the transmitter or the tower rather.
ALLEN: How did you go about doing that? What were some of the computations or figuring that you had to do to select the site?
GUNTER: Well, in those days, I will have to admit to you, I don't think we even knew how to calculate and predict fringe area reception levels. We do it now with frightening accuracy with computers. We could have done it then with available propagation formulas that were in most of the textbooks of the day. But a lot of this was done by other means. We would actually go out with a crank-up, 50 foot mast and run field- tests on different hills or mountains. We did it just that way. The other constraint, of course, is real estate itself. You kind of have to know the rancher or the farmer, believing that he is going to let you put a big, ugly 500-foot tower up on this land and at a reasonable price. So it was a combination of factors; field-testing, known distance from the transmitter sites, and some knowledge of the owner of the land and belief that he would lease it to us if we liked the result of the field test.
ALLEN: How long did it take you to find a good site?
GUNTER: About three months.
ALLEN: A pretty hefty job then?
GUNTER: Yeah. I think we could have cut that time down, but we were still managing the politics of the franchise application in San Angelo. We knew all the people and the city manager well. It was really rather routine compared to the modem franchise activities that we have all come to know, but we were still putting in all the spare time we had, but we weren't in any big hurry. I think we could have done it in a month or two if we had to and done a thorough job.
ALLEN: Can you tell me something about the process of getting the franchise? Did you have opposition from bidders?
GUNTER: No. There was no opposition. This is the irony and the entertaining part about the cable industry. As late as the ' 50s you could go into a town like San Angelo, which was then a population of 65 thousand, and the mayor, the city council and the city manager might have only recently heard of what cable television had done in a neighboring town from another manager or a mayor.
There was little or nothing about it in the trade publications of city governments in those days, and darn little coverage in newspapers. It made the franchising process really a snap. If you went into the city council chamber as a known quantity, as we were in San Angelo in those days with my family being there many years, it wasn't something that they were afraid to risk. You would walk in and say, "We want a franchise that permits us to use the city streets and alleyways. We are going to rent some telephone power poles and string these lines up and down the alleys and hook up some people and bring in some more TV stations. Really, the reaction was usually enthusiastic. "When are you going to do it and what is a franchise supposed to say?" were the only questions. So we would get together and just flesh out a franchise with the city attorney and it would read almost the way we wanted it to read.
ALLEN: Was there any payment to the city for the franchise?
GUNTER: In those days and probably persisting until now, the typical utility franchise rate in Texas that was paid to cities was around 2 percent, and so for lack of any other number, they just applied the 2 percent franchise tax to most of us. There have been some cable systems that have paid no franchise fee for the first period of the franchise.
ALLEN: The local television station operator didn't get concerned over your bringing other stations in?
GUNTER: Yes. They saw this as fractionalizing their market, and rightly so. They did argue the point, but fortunately for us, the owner-publisher of the local newspaper was a very powerful and influential man named Houston Harte, the founder of Harte-Hanks Communications. San Angelo was his home. He was a friend of my father's and he happened to own either a large share or perhaps control of the broadcasting company that owned Channel 8 in San Angelo. He soon owned a little stock in our company. It was a little bit of a smoke-filled room deal that was struck between him and my father. I think he had a little bit of our stock, which we later bought back, to calm down his local television station manager and cause him to withdraw any complaints at the city commission.
End of Tape 1, Side A
ALLEN: This is Tuesday the 15th day of January, 1991, and this is Side B of Tape 1 interview with Ken Gunter. We just finished talking about the franchising process and the fact that your family had been able, through its connections in San Angelo, to get the franchise. You had mentioned earlier that you had talked to both Ameco and Jerrold in addition to Entron. Did you buy most of the equipment from Entron or were you buying equipment from all three companies?
GUNTER: Well, that is a two step answer. To begin with, the two-way radio common carrier personality that I mentioned, whom Dad had spoken to earlier about the feasibility of this...
ALLEN: Do you have a name?
GUNTER: His name was Wilbur Anderson. He was really "Mr. Electronics" in San Angelo in the '20s, '30s, and '40s. He kind of grew up around Dad and some of his associates, so he was the first fellow that Dad went to. Wilbur Anderson was a very nice and creative man, and he was also a fellow that grew up in the depression years. He was used to poorboying everything he did to make it pay. His instinct was always to see what he could do to cut corners and even build it himself. He, too, was a ham operator in San Angelo probably from boyhood into his career in business. First of all he loved to save the bucks by cutting out a middleman here and there. He always loved the creativity of building things and making them work. So he convinced my Dad that we shouldn't buy any electronic goods from any of those manufacturers for the first two years.
Now this is what I walked into when I came home from college. I, too, liked to build things, but I had a little more commercial view of this company than that. I realized that if nothing else, it would cause a delay in construction because he could build them just so fast. Nevertheless, my Dad bought the idea that we should be building our own amplifiers and we did. We built our own line of amplifiers in Wilbur Anderson's shop for the first two years. But, it became obvious after a couple of years of operation when we had already strung maybe 50 miles of coax that these amplifiers were ill-conceived and had no automatic gain control. Anderson began to do the best he could to bootstrap those amplifiers with some afterthought circuitry to control the gain due to thermal changes in the cable. We were able to at least make it work well enough to get pictures into the initial 500 to 1,000 homes, but it became apparent real soon that we would not be able to keep on expanding and deepening the cascades without any automatic gain control
Anderson continued to say to my father that he would solve the problem and Dad just said, 'Well I am putting the money into this deal and we are going to have to go out and find some way to really stop this now. We don't want this company to get a bad reputation for poor or marginal quality in its early days." Then he let me go out and see Ameco, Jerrold, and Entron and buy some intermediate stations which had AGC. AGC until very recently was probably not put in every station. I recall in those days AGC was put in every third trunk station. So I was allowed to go out and buy commercially built AGC trunk amplifiers to interweave into our existing trunk just to stabilize our homemade distribution amplifiers. Other disagreements about quality and professionalism led to Anderson's leaving. He had some stock in the company which we bought. He also knew by 1961 that we were headed directly into a public company situation, which he didn't want any part of. So, about the time we went public in '61, Anderson had been with us three years and was on the way out. By the time we went public, he had left.
ALLEN: You put your first subscriber on the air in '58 then?
ALLEN: And how rapidly did the system grow?
GUNTER: As rapidly as we could build homemade amplifiers in Anderson's shop, buy cable, and contract with moonlighting utility employees, power company employees and a few telephone employees to string the cable.
ALLEN: So, sales was not a problem?
GUNTER: No. There was a lot of clamor in town for the four channels that we had to offer. That was not a problem. In those days I think we correctly headed for the affluent side of town first. Cable had a reputation in all of these towns for being so desirable because it was worth $5 a month. I don't think that most cable operators really went to a generalized distribution plan in their franchised areas until maybe the mid '60s or later. We always thought the place to go was "silk-stocking row," and it really was in terms of default sales. Those people just called you up and said, 'Whenever it gets here just hook me up." We didn't even send a salesman out there to knock on the door. Yet we found out in not too many years that the blue collars in the town were just as eager for good television.
ALLEN: Did you have a fairly substantial hook up fee?
GUNTER: In those days we did. In Texas in the mid '50s many cable operators were charging anywhere from $100 to $150 to hook up to cable. That was a lot of money in 1960 dollars. Part of that idea, of course, was to amortize quickly the capital cost of getting the cable distribution plant in that town because the risk factor of cable was unknown. A lot of this was at the behest of the bankers themselves who wanted to get some of that money up front. Later when that seemed to be such a worrisome factor in the financial side of cable, I think Texas cable operators I knew, and to some extent our operation, began to realize that it was best to keep the connection fee high because it was a trading chip. We were prepared to give it up by the early '60s and we later reduced our hook up fee to around $35, but we were charging $50 to $75 in the early years and used that trading chip to trade the rooftop antennas for the hookup fee.
Some people had spent a lot of money for an antenna and they wanted to see something come back. Part of the impasse you would find in talking with some of the more careful buyers was that "Gee, I just put up this 50 foot mast and a rotator to try to get some pictures from Midland and Abilene over the horizon when they come in and maybe a little Dallas on a cloudy day. I just put this up and I am just going to use this for awhile and see how it does. Then maybe when it's worn out or breaks, I will buy a cable hookup." So we would use the high hookup fee to go and say we will take your entire antenna and tear it down for you and we will take it on trade so that it will cost you zero to hook up. So, I believe long after high cable hookup fees were justifiable, they persisted largely as a means of trading out those antennas and getting them down. We just took them to the scrap heap.
ALLEN: Were there quite a few other cable systems in operation by the time you started in Texas?
GUNTER: I'm betting that there were not more than half a dozen towns the size of San Angelo or Tyler with cable systems by '57 or '58. The smaller and more remote the town, the more necessary it was to get some over-the-horizon TV. So the smaller town systems, let's say 2,000 to 10,000 in that range, were proliferating rapidly. In 1958 there were not more than four dozen total cable systems operating in all of Texas.
ALLEN: Was there a Texas association at that time or was it formed after you began building San Angelo?
GUNTER: Yes. I went to the first Texas Cable Television Association meeting, the formative meeting, at the Sheraton Hotel in Dallas, Texas. I believe the year was 1960.
ALLEN: Did you have any trouble with the telephone company or the power company on getting pole rights?
GUNTER: In the early days, the joint-use agreements really came pretty easy to cable operators. I don't think we had any disputes with the power companies. General Telephone was becoming active in San Angelo in those days. They were really not difficult to deal with, nor was the price high. I think it was around $1.50 a pole in those days and stayed there for many years. Power companies have never really been aggressive in dealing with cable companies. The telcos began to realize that we were a fledgling industry that was headed towards a much more general telecommunications role in the world than just distributing some over-the-horizon fringe area TV. In the late '60s, I was approached several times by General Telephone of the Southwest, whose headquarters had coincidentally been located in San Angelo. Their corporate group wanted to get into the cable business. We were approached several times to let them come in. They were old San Angelo people and their big corporate headquarters were there. We were the cable company and it would be great if we had some kind of joint venture. Of course, when they began to put a pencil to it and quote us unit costs of lease-back prices that would take the top of your head off, nothing ever came of it.
ALLEN: Would you want to explain what they were talking about in terms of lease-back?
GUNTER: What they wanted to do was to mainly gain control and keep control of anything that carried pictures or voice down a piece of wire. I think the telephone companies since their inception have felt that if anything that transmitted information was getting into their nest, and it wasn't controlled or operated by them in some way, it was a potential problem. They didn't seem to be too self-assured about getting directly into cable television. They simply felt that if they built the distribution plant for us, maintained it for us, and leased its capacity and let us operate the retail sales, marketing side and billing collection side of the cable business, they would always have possession and ultimate control of that piece of wire for other purposes. I think that that instinct was insightful and I don't disagree with it.
ALLEN: If you had been a telephone man, you would have had the same idea?
GUNTER: If I had a telephone background and I had been sitting where they were, I think I would have begun to have the same fear that this is an embryonic business that is going to eventually pull up alongside and maybe pass us if we are not careful. We ought to find a way to get into it. Obviously, of course, that is correct. We are eventually going to either pull up alongside or pass them and certainly the rivers are going to merge in the '90s or in the first part of the next century. That argument and debate is still going on today as to how those rivers - what that confluence will look like when those rivers do merge. I predict now that some of the fellows in San Angelo that were friends of mine at General Telephone - had well-founded fears that the cable industry would be a major competitor some day. I really don't think that that has been the ambition of most cable operators. I think we wanted to run our own business separately and to tend our own store and not be aggressive. But, I think we will ultimately have to be that aggressive to protect our own turf. We will have to get into telecommunications in a broader sense to keep the telephone company out of our business.
ALLEN: You went on in '58. When did General approach you about this type of a partnership?
GUNTER: Mid to late '60s.
ALLEN: They were prepared to buy out your physical plant.
GUNTER: Oh, yes. They wanted to buy it and then upgrade it to whatever status we gave them for a contract spec and then quote us a lease-back per month price.
ALLEN: Do you know of any cable operators who entered into that kind of an agreement with the phone company?
GUNTER: I know of some. I am not sure that I can name them for you this afternoon, but yes, there were a couple or three that were undercapitalized and entered into such an agreement. I don't personally know anyone, but I read or heard about some that did a deal with the telcos.
ALLEN: Do you have any idea how it came out?
GUNTER: Most of them fell apart. And even the telcos were glad to get out of the business is my recollection.
ALLEN: How long did it take you to build from San Angelo to where you considered it pretty well built up?
GUNTER: I would say that we didn't catch up with the town as it was when we got the franchise grant until l963.
ALLEN: That's about five years.
GUNTER: It was five years just catching up with the town. It probably had 150 miles of plant and we only built about 40 miles a year on the average for the first four or five years. At that time, in the early '60s, we had been building with the jacketed, braided World War II cables that I mentioned earlier. In the early '60s, Phelps-Dodge brought out a CATV grade cable called "FoamFlex" and it was a revelation to all of us because we really didn't need jacketed cables in most of the cable systems except along the Gulf Coast of Texas or Florida where it was needed to retard any kind of salt corrosion damage to the plant. But, we saw the bare aluminum cable that Phelps-Dodge was building and the generation of fittings that had been developed for it, and immediately began to switch over to it. That resulted in a little delay in the mid '60s when that process began.
There was another thing that retarded the growth of plant in San Angelo and a little neighboring town 35 miles away named Ballinger, Texas, where we had a franchise. It was apparent to me in 1963 that we were about to see a major shift in the entire philosophy of line amplifier design. That was from tube to transistor. There was a lot of debate going on in those days at the trade shows. A lot of us that were in those days spending night and day trying to solve the engineering and technical questions of the industry really began to wonder if its time had not come. One of the things about cable television plant, when it is tube type, is the power consumption is rather high. So high in the early days, we didn't even remote power in the cable as we do now. We actually had a power company meter loop - a meter can and a meter set at each of our amplifier locations. Each one was read and we got a stack of power bills that would fill three or four cigar boxes in San Angelo for a long time. So when we began to see that the growth of the transistor in consumer electronics and in the military and space programs was accelerating rapidly, it was apparent it had to spill over into cable at some point. It looked to me like the crossover point was going to be around the mid '60s. I estimated '65 or later because Jerrold was vehemently against transistorization. In fact, they predicted that it could not be done - that the noise, the inherent noise factor of transistor stages, was too great to work at the levels that we normally ran cable amplifiers. They felt that reliability would be intolerable to the poor resistance of solid state devices to transient damage out in the elements. They had a jillion arguments why their tube line would never be obsolete.
Ameco, the Phoenix Company headed by Bruce Merrill, is the company that said, "'We don't give a damn about any of those arguments, we are going to design some solid state cable television line amplifiers." And they did. I believe I had already planned to build Ballinger, Texas, and build it with Entron tube amplifiers. I had the franchise and was stringing cable when this decision point came. In late 1963, Ameco sold its first generation and first bill of materials of all solid state amplifiers, to a system in Great Falls, Montana. The entire industry was watching it and wondering what was going to happen.
Well, of course, it is one thing to build it, turn it on and set the levels and put pictures through the system. No cable engineer would call that a fair test until he has seen the system endure four seasons of temperature swings and of lightning and power company transient damages. Then he would say the equipment is something we might want to put in our system because it has been there at least a year and we have seen it operate. It's stable thermally. It's stable electronically from a standpoint of environmental damage. I did not wait that year.
I went to Ameco in Phoenix and went through the factory and talked to two or three of the engineers out there who had designed this amplifier, and decided that it was worth the risk because I only had 18 miles of plant in Ballinger, Texas, a little Texas city of perhaps 5,000 people. I just decided that it was worth the risk to get our feet wet then. So I bought a complete bill of materials of Ameco solid state amplifiers and put them in Ballinger and it was probably the number two solid state cable system in the industry.
ALLEN: And did you have any start up problems with it, being that new?
GUNTER: Actually it was surprising how little we suffered from that early experience with all solid state amplifiers. I should say in fairness that Great Falls, Montana had problems that we never experienced because they had bought the 12 channel version. In those days, most of the manufacturers were still making all kinds of five channel low band equipment and Ameco made a low band version of that same amplifier that went to Great Falls. I didn't have enough channels to carry. I was just barely starting to engineer the Dallas microwave link. To me it seemed that a five channel system would be the way to start. I made that decision and put in the five channel version of those amplifiers and they were quite stable thermally. We didn't even have that much transient interstage damage problems in Ballinger, Texas. We used those amplifiers probably four years. The only reason that we took them out of Ballinger was because we found we needed more spectrum when we brought Dallas through in 1964, the first year of the Ballinger system turn-on. Those amplifiers were still working the day we took them out four years later and doing a good job. I now believe it was only because they were low band. That seemed to be easier to ensure engineering control in those days.
ALLEN: You also had a little bit of difference between Great Falls and your area in terms of climate.
GUNTER: Absolutely. The temperature swings in Great Falls must have been extremely difficult for an engineer to handle. We have seasonal swings from 100º F down to midwinter temperatures in the teens for a couple of months, but I would imagine that in Great Falls the temperatures were even tougher.
ALLEN: Teens are a spring day in Great Falls.
GUNTER: Oh, sure. There were only two seasons in Montana. I have a ranching friend up there. "There are only two seasons,' he says, 'there is winter and then there is August."
ALLEN: What were the major climate problems that you had, or nature problems
you had? West Texas is famous for wind.
GUNTER: Strangely enough we never had a lot of wind problems in our cable systems. We had more thermal problems. In the old copper braided cables - and those were soldered as I told you - and later compression (applied with compression tools) - those early systems had practically no thermal characteristics of expansion contraction that I could tell. We only began to get into thermal problems with cable and connectors when we went to aluminum. For some reason when we introduced a new cable and generation of fittings we weren't prepared to deal with them. For one thing, we had never put expansion loops in the systems using braided cables. We had to learn to put in expansion loops at least at each amplifier location, and later we learned that we really needed to put expansion-contraction slack at poles along the line. We gradually just cut it down through trial and error really, from each amplifier to every fifth pole, then to every second pole, and finally it just became standard practice to put loops at each pole. The hilarious part about that was we couldn't find any bending tools to form those expansion loops with aluminum cables.
A fellow named Dick Jackson, a contractor from Ohio, actually had some tooled, and we bought those later on. But in the early days I went down and bought wagon wheels. I mean like off of Red Rider kiddie wagons and took the little rubber tires off and we used the "V" shaped or the "U" shaped wheel with no rubber tire on it to form proper loops with aluminum cable. You cannot hand-form aluminum cable because if you do it will usually crinkle inside the radius of the turn. So you have to have something smooth and we tried several configurations. We tried to nail them up to 3/4 inch plywood and bend "U" shaped loops. Then we built some with a wider base. If you drive to San Angelo, Texas today you will see those that were put up in 1974 and '75 with the wagon wheels. I decided that it didn't matter whether they had 4 90º bends as we use today. I thought just a smoothly formed 360 was all you needed.
In fact, they did work, but not very practical. I will tell you why. I got these wagon wheels, and of course we had to have a different size for 3/4 inch cable and another size for the .412 cable because they bent on a minimum radius of the diameter of the cable. We would bend those on this 360 circle which just had a bolt through the hub of the wagon wheel or the wagon wheel was bolted to a piece of strap iron which had a hook that the lineman would hook on the strand just for bracing or support while he bent the cable. Aluminum cable would be cut by the construction crew when they lashed the cable into place and just left crisscrossed at the pole ready for the lineman to bend. We thought this was great for a long time, but in those days we weren't being pressed by the power company too much to observe the National Safety Code clearances between their conductors and ours.
We had a lineman out there one day bending this bare aluminum cable. As he came around and made the 270 point and came back up to finish the top of the loop - the cable was of course pointed vertically at that time - he contacted some of the secondary power on that pole. Fortunately, it did not electrocute him, but fried about two or three pole spans of cable. He had just workman's gloves on, not even rubber gloves. It taught us a big lesson. We hadn't really thought about that being a problem. So, we then began to warn the lineman to just bend the loops at a 45º. Then after that we decided that we really should go to the Jackson Communications die cast tool that he was building. That was quite a period in the history of cable. I have never heard so many arguments at conventions among cable engineers that would gather at various functions about how to properly bend expansion loops on cable.
ALLEN: Who were some of the leading voices in the engineering of cable at that particular time?
GUNTER: Oh, to tell you the truth, at that time I didn't know very many other cable operators that were advancing rapidly and becoming highly professional in cable engineering. Most of the engineering advice and counseling I received in those days and the fellows that I respected most were simply engineers that worked for vendors that we traded with. In those days, of course, the vendor was always happy to make his engineers from the factory or the field offices available to you to come out and see you and argue these points with them
ALLEN: Who were some of the people that come to mind - vendor engineers recognizing that they may jump from company to company?
GUNTER: You know what? This is going to be ridiculous, but I could probably name all three or four, and I will probably go back and check and find out that I am in error.
ALLEN: Do it as best you can now. You are going to get an edit shot at it anyway.
GUNTER: Yeah. I'll have to get an edit shot at it anyway. I'll take a quick crack at it. There was a fellow with Ameco in those days that I loved a lot named Milford Richey, but later he left Ameco and went to Collins Radio. There was another fellow named Rudy Riley who was with Entron that called on us a lot. Hank Diambra, the President of Entron himself was a very bright engineer, a real innovator in the cable industry. He had a chief engineer at Entron in those days names Isadore Lieberman, a darned good design man, although not very strong in field engineering. And Jerrold - I must really work on Jerrold to be accurate.
ALLEN: I gather you didn't buy much from Jerrold at all.
GUNTER: I didn't much in those days. In the later years I did buy a good bit from Jerrold, but at that particular time I was not buying much hardware from Jerrold.
ALLEN: As you were building San Angelo did you go outside the city limits much at all?
GUNTER: No. We came in from the city limits 15 miles north of town and passed houses up and down the lanes that we had chosen for pole routes, but we had our work cut out for us in the city limits in the franchise area. There was no pressure from the franchisor. We didn't even hear from the franchisor for years about anything. But we just went - as I said earlier - to the most affluent sectors first and then began to learn in two or three years that the other sectors were clamoring for it too, but we did very little sales effort. To be accurate about this, I would have to tell you that I don't think the cable operators that I knew, including me, knew enough about cable system economics to play with rarified areas until the late '60s or early '70s. And even now you will see articles in our trade press that still discuss and debate what the minimum homes per mile is that is economical for cable systems.
We are talking about that a lot more and trying to become more innovative as you see while the other systems heat up and compete with us. That was not a big deal in 1958-1965, but it has become one since then. There is pressure from regulators today to wire all areas because they are catching political heat. The problem is that the regulators catch heat when we don't wire certain areas because they are "uneconomical"
ALLEN: So at that point you weren't counting houses?
GUNTER: No. We didn't care. We didn't even think about that. We just knew that we were going to go for the most affluent areas of town first and then trickle downwards from there.
ALLEN: Were you still building San Angelo when you got the second franchise in the small town?
GUNTER: We got the franchise in Ballinger in early '64 and were just getting up to speed in San Angelo in '63 and '64, catching up with construction goals when the franchise was granted and we built Ballinger. Of course, by this time we had already made the deal in 1961 and merged with Florida Cablevision, our sister company, and had gone public under the parent called International Cablevision. I was going over to International in Florida to help with their engineering.
ALLEN: How did that merger come about?
GUNTER: Well, Hank Diambra from Entron was the fellow that came into San Angelo and talked to my Dad and me for a good six months about the merits of raising capital in the public market and getting some visibility where New York banks would recognize what and who we were. At the same time he was doing a turnkey construction job for the Fort Pierce and Vero Beach, Florida group. That was a simultaneous turnkey contract that those businessmen and those franchisees had given to Entron to build.
ALLEN: How far apart were those two cities?
GUNTER: Fort Pierce and Vero Beach at the centers of town are probably 15 to 16 miles apart. They have now met in the middle, of course. Hank was down there building those and I think that he was running into problems as their contractor with prompt payment, which stemmed from their under-capitalization. I think it was in his best interest, and he followed his natural incentive, to promote the marriage of that company, which became our sister company, into the Texas group to form something big enough, something with enough visibility, that could be taken public. At the same time that he was doing that - and the reason for the name, International Cablevision - he had another guy in the Virgin Islands, who was at St. Thomas, interested in joining this consortium and also going public. The idea was of raising money through public stock offerings to improve his baling-wire system - and this was indeed the plan. The only reason that the Virgin Islands system didn't join us in July of '61 in that public offering was because at the last minute the accountants and our SEC lawyer in New York said the guy was so hopelessly overleveraged and his books were so disorderly, that they just didn't want to risk putting it into the offering. It did not read well and the footnotes were getting a little bit dismal, so I think that we jettisoned that one system that gave us the right to call the company International Cablevision.
ALLEN: How did he pick you out of the various cable companies that he must have been working with at the time in addition to the two Florida franchises?
GUNTER: Well, we were one of the first Texas companies that ever bought much hardware from Entron and he also recognized that we had the threat of the then applied for Channel 3 NBC satellite station coming around. It would probably be granted in a year or so and built. We needed to raise some capital to bring in the microwave signals from Dallas to beef up our signal package. My Dad had the money to do this. So in retrospect, I could say subjectively that it was a mistake to have ever gone public. I would rather just own my home San Angelo system today privately. Of course, I wouldn't have met all of the terrific people that I have met and done all of the things that I have done in this business if I would have stayed home, but selfishly speaking, I would still like to own that system. But, Dad would never - he was a conservative businessman - would never have coughed up that much capital to build that microwave system. In fact, we were arguing at the time that Diambra was making his presentations about joining Florida and going public. Dad and I were arguing about should we or should we not put the $300,000 that it was going to take to just buy the towers and five sites and the down payment on the Collins microwave for the Dallas link.
Dad did not like the exposure of that because he still was not that comfortable with the business and wasn't sure of how much impact that NBC channel might have that would put a second network in town. Diambra sensed that. He knew that Dad was flinching at that kind of exposure and cash outlay for the Dallas microwave and he jumped at the chance to tell us that this is the way to keep your stock, go public, and get liquidity with your shares. "We are going to give you guys' shares of the public company for your equity in this Texas group. We are going to give the boys on the East Coast of Florida shares for their equity. We are going to pull all of this and go public and we are going to raise public money and then go to New York banks and borrow the rest, and finish developing Vero Beach-Fort Pierce and start acquiring companies with common stock for currency." That was Hank's game plan. It wasn't too crazy.
ALLEN: So your Dad was really caught in between. He didn't want to go public and he didn't want to invest.
GUNTER: He was really in a dilemma. He did not want the complexity in his life and the intrusion into his private business style that he knew the public company would bring, but also didn't want to take on his own two shoulders the exposure of going forward.
ALLEN: And his brother was still involved at this time?
GUNTER: No. His brother was never involved in the cable company. He was still totally in the appliance business partnership with my father, and my father was still active in that appliance partnership all during these years.
ALLEN: Which side of the issue did you come on in terms of going public or building a microwave link?
GUNTER: I came down heavily on the Diambra side. I liked his arguments that we would grow and become more professional and immediately began to buy equipment that Dad was hedging on such as the microwave and even upgraded trunks and feeders. In those days Dad was feeling his way into the business. I, as a much younger man, thought he was going at a snail's pace and I wanted to speed up, so I was on the side of the public planning company from the beginning.
ALLEN: So this was in the early '60s. You were still in your 20s?
GUNTER: 1960, '61. I was 27 years old.
ALLEN: And the impatience of youth was on your side?
GUNTER: Yes. It was.
ALLEN: Working hard. Did you have models to look at of other cable companies that had gone public?
GUNTER: There were none.
ALLEN: You were the first?
GUNTER: As far as I know. We were told by the investment banking community in New York that they had never heard of any other public cable company or offering. There were companies like Gulf and Western and TelePrompTer and some others that did many other things. Some were even conglomerates that got into the business in the early days, but they were already public, and they just happened to own cable systems. As far as I know, International Cablevision in 1961 was the first public cable offering. So we had no molds or patterns to follow.
ALLEN: How did you finally convince your Dad that that was the route to go?
GUNTER: I don't know if I ever convinced him. I don't know if Hank Diambra ever convinced him. I think he decided it was the path of least resistance and the lesser of two evils. He realized he simply was at the point of no return in the cable investment and he was really not prepared to put up several hundred thousand dollars that it would take to go it alone. He wanted to just take his equity and convert it to the shares in the new company and roll the dice. He was not an uninitiated investor. My Dad was always a heavy stock and bond market participant. He was conservative, but he also loved the risk and the romance of public company investment. That was not new to him at that stage.
ALLEN: How far from completion was Fort Pierce and Vero Beach when you went public?
GUNTER: Well, they were mostly built at this time. They were not totally finished, but the original phases were built in both cities and we had a lot of growth. The East Coast of Florida north of West Palm Beach - that's about halfway between West Palm and Cape Canaveral- that East Coast was growing in jumps in those days and we never really caught up with construction down there. It was always growing.
ALLEN: And who were the officers of the new company?
GUNTER: Hank Diambra was the first President. There were some investors that Hank had met through a common investment banking contact in New York. They were mostly from Ohio. The leader of that group was a fellow named Ralph M LaPorte from Uhrichsville, Ohio. He was a furniture retailer and he put up several hundred thousand dollars of his own money in cash at the advice of this investment banker who knew Diambra. He was advised to buy early insider shares, priced as shares in International Cablevision, before it actually went to the street and went public. I think it is fair to say that LaPorte was another reason my Dad became comfortable with the International deal because he was another relatively small, family-oriented retailer that just had a personality that Dad liked and trusted.
ALLEN: And you were Vice President of Engineering?
End of Tape 1, Side B
ALLEN: As we closed off last night, Ken, we were just talking about the organization of Columbia Cable.
GUNTER: I was first Director of Engineering and later Vice President of Engineering of International prior to the merger with Columbia.
ALLEN: So you were responsible for the engineering activities in San Angelo and also in Florida?
GUNTER: Yes. I spent a lot of time with Ralph LaPorte, who became our President after Diambra.
ALLEN: When did the change take place there?
GUNTER: We should probably talk about that. Hank Diambra, President of Entron, who encouraged the organization of International through his connections with us in Texas and his customers with the turnkey in East Coastal Florida - Vero Beach-Fort Pierce -, became our first President as just a matter of simplicity and ease. The other investor group from Ohio that Mr. LaPorte headed was not fully active in the company at that time.
It turned out that although Diambra was a very bright engineer, a good promoter, and a good corporate planner in many ways, it was sensed from within the International investor group that Diambra had ulterior motives. That probably meant that he would have a conflict of interest, in effect, between his own company, Entron, and the management of the new public cable company that we called International. So he was President for probably only a period of four to six months. Then the board elected Ralph M. LaPorte President and my father Vice-President. At that time, they were consumed with just the financial, marketing and day-to-day operating problems that were related to the company. Neither of them had any real engineering interest or knowledge so the technical and engineering planning fell on my shoulders.
I recall making a lot of trips with them to New York. This is one of the things we skipped over last night that I wanted to be sure to put in. I think it was very interesting. In 1960-62, both just before and just after the public offering - which was, by the way, four to one over-subscribed when sold. It was much easier to sell that issue than we had believed. I'm not sure yet whether it was due to the merits of the issue or the prospects of the company or the fact that we had just run into a pretty good crowd of people in New York. Both the SEC attorney and the investment banker that took the issue did a good job.
I remember very distinctly going to New York City from Texas in the 1960-61 era where Mr. LaPorte, my father and I walked into at least three major New York banks, Chase, Morgan, Chemical - I recall those three. I was astounded that New York bankers really had heard little or nothing about cable television. We weren't talking to fledgling bankers. We were talking to senior loan officers at those banks. They would ask us to explain what our business was all about and what we intended to do. "Well, all we do is put up big towers on the outskirts of population centers, pick up some over-the-horizon signals that can't be picked up with home size antennas, run those cables through the streets and byways of those towns, and hook them up very much like a telephone connection so that they can receive extra pictures. We charge $5 a month typically, in most communities, at this time, for about as many channels - five channels." The reactions were almost uniform, and they had not even heard each other's reaction. It was, "Well, we don't think that business is going to be here very long because, for instance, I live in New Jersey across the Hudson River. I get nine channels over there for nothing. We just don't understand how that business would be much more than a flash in the pan."
So we were turned down, courteously, but emphatically by at least three of the major New York banks during the '60s after repeated visits for explanations of our plans, the marketplaces we had, how we thought they would grow and persevere. I believe the first time I ever heard a banker say anything positive about his willingness to finance a cable venture was probably in the late '60s.
ALLEN: Did one of the New York banks finally become involved in the financing?
GUNTER: Not one of the larger, legitimate banks. We had to go into some much less legitimate sources for money. In fact, I recall that there was a company called National Theater Supply in White Plains, New York that we had some connection with through the investment banking crowd we knew in New York that led us to this fellow. They were primarily in the business of financing theater exhibitors. Mostly small chains or even family owned motion picture exhibition theaters. They didn't finance the production of motion pictures, but the theater business itself - the hardware, the projectors, the screen, and the buildings. They did this on a rather rapacious basis. They would take 40 percent of your equity for the privilege of loaning you money at a high interest rate.
I recall in 1964 and '65, we cut a couple of deals with them and ultimately gave them warrants for 40 percent of our shares in Texas Cablevision - now the old San Angelo-Ballinger Group - just so they would loan us enough money to build the Dallas microwave and about fifty more miles of cable plant. That's how tough it was. We raised only about $1,200,000 net to us in that original, small public offering that the underwriters placed for us.
At the time, however, we had the Tallahassee, Florida franchise. We ran into real severe local financial and political opposition from a broadcaster there named Phipps, who came from a very wealthy family. We ultimately sold to him after building about eighty-five miles of Spencer-Kennedy plant in Tallahassee. But a lot of our money had gone into that and we still had rampant growth on the East coast of Florida to follow with some of these proceeds from the public sale of our stock and what money we could borrow.
ALLEN: So you didn't take any of the money from the public sale to build the Dallas microwave link?
GUNTER: We took some of it. Some of it was earmarked for the Texas microwave and for the extra miles we already needed in San Angelo. But the rest of it went into Florida Cablevision, mostly in Vero Beach-Fort Pierce, and then into our fledgling Tallahassee franchise we had picked up along the way.
ALLEN: If you were having so much opposition from the bankers as far as lending was concerned, how did the investment banking house view the venture as a capital offering? Were they less skeptical of it?
GUNTER: The investment banking company that took us public was called James Anthony and Company at the time. They, of course, had several other investment banking houses lined up to blue-sky the stock with them They all had a very positive view of this. Between Hank Diambra and a fellow named Alfred W. Green, our SEC attorney in New York, I believe they did a hell of a job of explaining the industry and its prospects to these investment bankers. There was never any question of their enthusiasm for the cable venture. That's one reason why, I believe, it was four times over-subscribed.
ALLEN: The difference in the two bankers was one was going to have to put money into it and they were more skeptical than one who was promoting it?
GUNTER: Oh, sure, let's distinguish between that. When I say investment banker, these are not guys who loan you money. These are people who make a living by taking companies public with the public's money. They make a commission off of this. They probably kept 10 percent of the proceeds for just taking us public. Whereas a commercial banker is actually putting his cash on the line based on his faith in your venture.
ALLEN: What kind of people became stockholders? If it was four times over- subscribed, what kinds of people were attracted to the cable industry as a public investment in 1960-61?
GUNTER: I believe I have some early shareholder lists. But I can tell you this from recalling that the list had a few - not very many - institutional investors. They weren't large. I recall the board of International mulling over why any institution would put that kind of money into anything involving something as new as cable. When I say institutional, I'm sure some of these went into street name portfolios for clients. We know that some of those clients later came out of the street name into their own personal name. We even met some of them at the annual shareholders meetings and knew that they had begun into this strange investment on the advice of a portfolio manager at their brokerage house who put them in a street name portfolio and then later, for whatever reason - maybe they moved - they would convert it to their name. They became a personal name on our shareholders lists and came to meetings. Other investors along the way were just people, then as now, who looked for pink sheet, over-the-counter type of opportunities that they thought had some wild, off-the-wall growth opportunity. I think we were perceived as that sort of opportunity in those days.
ALLEN: What percentage of the total stock went public? What percentage was retained?
GUNTER: International was heavily held from inside. Obviously, my family got a pretty big share of stock, a minority holding, but a large minority share for our equity in the Texas properties. The Florida crowd that got the franchises and initially put financing up for the Vero Beach-Fort Pierce systems were given ICC shares in exchange for their equity. The group of investors in Ohio headed by Ralph LaPorte, who was wooed into the investment with cold cash, bought stock directly but at a discounted price prior to public offering. So when you add up all of those factions, International Cablevision was probably 60 percent internally held from day one. In a year or two I would estimate that even grew to maybe as high as 70 percent and the average public float in that company was no more than 30 percent during its existence from 1961 until 1969 when it was merged into Columbia Cable.
ALLEN: Corporate headquarters were in San Angelo?
GUNTER: It was a divided headquarters. My father and Ralph LaPorte were charged by the board with the day-to-day management. Ralph LaPorte, however, was President and he was now also running the Vero Beach-Fort Pierce systems with his wife, Margo. They had a home for many years in Ft. Lauderdale, Florida. They were very accustomed to being in Florida for most of the year. Their son and daughter, I believe, at that time were beginning to run the furniture stores that the family owned back in Ohio. So they lived there and ran the Vero Beach-Fort Pierce systems and doubled as part of the top corporate management. My dad was in San Angelo with me. We were really the other half.
ALLEN: You were moving back and forth between the two?
GUNTER: I was starting to burn up the airlines between Texas and Florida, going back and forth, because we were starting to have technical problems in Vero Beach- Fort Pierce that the local technicians could not handle.
ALLEN: What kind of problems?
GUNTER: The interesting part was Hank Diambra, a bright engineer as I've said before, was always on the forward edge of trying new technology that he thought held promise. His was probably the first system I ever saw built with extruded aluminum cable, of course jacketed in the case of Florida because of salt corrosion problems. He didn't even use the foam filled electric cables which became very popular in our area. He decided because there was a little bit of a gain in the area of cable loss, to use air-filled Phelps Dodge cable called Phelps Dodge Spirafil. I never will forget how it looked when you opened it up. It was just like our modern aluminum cable except you just had a spiral of a polyethylene dielectric and it was necessary to pressurize that cable with several pounds of dry air. That was his second rationale for picking it in Florida. He reasoned that the connectors, in those days, were probably not as reliable as he would like to see. We didn't really have that many good heat- shrink boots in those days. You either taped something with Bishop Bi-seal and then doped it with some kind of gasket goo or you just couldn't waterproof the connector. His reasoning was simply that if he used an air filled cable he would have less loss per foot and would, therefore, result in greater amplifier spacing to assist in the design economy. Also, if and when leaks did develop, there would be positive pressure flowing out of the leak until a technician could get there and investigate why the pressure alarm went off, find the leak, and repair it before salt water intruded and mined the cable. Not crazy at all. But what happened was it took a very careful technician to apply those fittings and waterproofing tapes and sealant compound in the field. It was not being done and we were losing large sections of cable in Florida. Large sections.
ALLEN: Were you still using power and telephone company people who were working on the side to do the installation or by that time, did you have your own crew?
GUNTER: No. I should make it clear that the power and telco moonlighters were confined almost wholly to Texas. We did use a few moonlighters in Florida in the early days for hookups or work overloads after a special would result in an avalanche of orders. We would have to resort to some outside help to get back to equilibrium because in-house guys couldn't keep up. But we never constructed outside plant in the sense that we built feeder and trunk in Florida with moonlight contract labor. We always hired full-fledged contractors there. Primarily, because I wasn't always there to supervise. I knew all of those moonlighters in San Angelo and Ballinger, Texas personally. I went to high school with a bunch of them. The ones in Florida were just not people that we knew or trusted to do that.
ALLEN: What kind of people did you hire then? What kind of experience did they have? Probably not cable installation experience.
GUNTER: Well, as a matter of fact, we did. There were a couple of companies in the Southeast, one in Atlanta, I believe, and one out of Miami that did send power line and telco construction people. As you know, power and telco plant construction is somewhat similar to cable. I think, really, all of us in cable - although in the early days we've put cable on poles with solid messenger that looked more like clothesline than telephone strand - in the early to mid '60s; most of the cable operators began to emulate telco practices in construction.
ALLEN: The big differences were the connections and there were different kinds of connections?
GUNTER: The connections were different. The physical framing of the poles - the three bolt suspension clamps, the quarter inch strand, the stainless steel lashing wire - all of that looks identical to telephone plant when it's first going up on the pole. The only distinction is that you have to be a little bit more careful with observing the tensile strength of a coaxial cable when it's being spun up to strand than you might with telephone cable. Of course, when you begin the splicing process, it's entirely different. Other than that, the clearances, the mounting, leveling and framing of the pole hardware on the strand is identical to telephone construction.
ALLEN: You were hiring a contractor to come in and build. You weren't hiring your own crew who worked under the supervision of management?
GUNTER: No, we did not have our own internal crews. For small add-ons we had our own lashing machines. If we had six blocks of cable to run into a new subdivision we often did that in-house in lots of our systems. But major construction involving several miles or more at a time was, nearly always, farmed out. That was not always so in the early days of our system. It persisted up through the time that we had become a top ten MSO. There is a certain inefficiency in trying to run in-house labor. It was tried by other MSOs and I think most of them gave it up along the way and began to farm out all their major construction because of the start-stop nature of it. Cable construction, for a lot of reasons - somewhat related to budgetary constraints and also climate or weather - tends to bunch. If you start buying your own construction trucks, and they are different from the ones that you maintain cable with, and as you start hiring construction crews, you're going to find people standing around with their hands in their pockets about a third of the time. The logistics of shipping those men and materials and trucks several states away is not efficient for a cable operator as it would be in the case of a regional or national contractor. I think all of us learned along the way that contracting was the most efficient way to build TV cable systems.
ALLEN: So in Vero Beach-Fort Pierce you hired somebody out of Atlanta who came in?
GUNTER: They were out of Miami at the time. Burnham and Sims, I believe. They were actually a fairly large contractor then and probably still are today - that we adapted over to cable construction.
ALLEN: You said you were having a lot of technical problems. Do you want to get back to that?
GUNTER: We moved away from that for a moment. The major technical problem in the Florida group was due to the perennial problem of isolating the plant from the destructive effects of saltwater spray and corrosion. That applied not just to the electronic connectors and cables, but to the sheet metal housings for the amplifiers and the standard telephone grade suspension clamps and the strand. Even the stainless steel lashing wire had half a life in Florida of what it would have had in an application in my part of Texas.
ALLEN: Did that system get built with tube amplifiers or transistors?
GUNTER: That was being built in '59-'60 up through the time we went public and it was all tube type. Of course, Entron supplied those amplifiers. They were, at that time, building what became typical in the '50s and '60s – cross arm mounted sheet metal boxes. Strand mounted housings had not been heard of in those days. You couldn't strand mount something with a solar power transformer in it with the weight that those transformers had, and the size of them. The box would have looked like a suitcase on the pole. So we all mounted them down about halfway between the ground and the strand, if we were allowed to by the utilities that were on the poles. Most of them preferred that we keep them up nearer the strand level. In the early days when we mounted those cross-arm, sheet metal boxes and put all the electronics in there, we tried to mount them down as low as the utility would allow us to because we didn't have that many technicians who wanted to put a set of spurs on and climb a pole. We wanted them to just take a short extension ladder out of their truck or van, lay it up against the cross-arm, open the top of that big sheet metal housing, and do their work right there six or eight feet off of the ground. That was done, in most cases, I would say until the mid to late '60s.
We did not turn the corner to strand mounting our electronics until the advent of transistors. That was about 1964 or '65 when that began to really proliferate. The cross-arm housings began to disappear.
ALLEN: When you built the second system outside of San Angelo in Ballinger, you did transistorize that one. Did you strand mount that one?
GUNTER: Yes, we did. However, they were primitive. There were no die-cast or sand-cast strand metal housings at that time. When I built Ballinger in late 1963, early 1964, and bought the Ameco transistor series that first came out, that transistor amplifier was a chassis strip amplifier-very elongated and with open transistors on top of the chassis and hand wired. We did not have any printed circuit wiring in that amplifier. The only way you could efficiently strand mount it was to use upside down sheet metal cans, which had strand clamps on the back and the housings were open on the bottom facing the ground. You mounted the transistor strip amplifier up inside of that sheet metal housing facing down with its fittings toward the ground and you just looped the cable from the strand down and then up into that housing. It was the first time I recall remote powering a system. Most of the systems we had built were meter powered right at each cross-arm mounted housing.
There was a little bit of a transition period in the remote powering. In San Angelo in the mid '60s we were able to remote power some SKL transistor amps. But only one feeder or two from each of the cross-arm mounted trunk-bridgers. Then in Ballinger, that low current drain in the Ameco design enabled us to remote power as many as two trunk amplifiers in either direction from the power station and all of the associated line extenders.
ALLEN: As you were getting ready to build Ballinger, did you go up to Montana and take a look at the Great Falls system to see how they had done it?
GUNTER: I never did go up there. I had firsthand information from people who had gone there and by this time I had developed a lot of confidence in a couple or three of the fellows that called on me from Ameco and, for some reason, it just didn't seem necessary for me to go up there and see it. I think I mentioned earlier that we bought a different version of that amplifier. I wasn't sure how relevant a visit would be. In fact, the factory engineers in Phoenix openly told me at the time that they thought they would have more trouble with the twelve-channel version of that amplifier up in Montana and that they did not think I would have any cause for alarm in buying the five-channel version in Ballinger. For some reason I was either too confident in Ameco or just plain dumb. I didn't choose to go to Montana and check.
ALLEN: How did you solve the problems in Vero Beach-Fort Pierce with that air pressure system?
GUNTER: Ultimately, we replaced all that half inch spiral filled trunk system. The feeders were double shielded foam RG-11. We didn't have nearly the moisture intrusion problem there because we had conventional, well developed fittings to apply to that RG-11 cable. We ultimately began a constant program of changing out the half inch Spirafil and we also, along the way, improved our technique of applying the fittings and waterproofing them. A lot of the leakage was not the fault of the cable itself, and it was not the fault of Entron for recommending it. It was the fact that, at that time, there were not enough competent field personnel to really maintain something that advanced in its day. So we did both. We replaced it gradually with foam filled cable with a better generation of fittings to apply to them that were more resistant to salt corrosion and to water intrusion and we improved the technique of maintaining the air filled cables along the way as we operated that system.
I remember going to Florida several times and getting off the airplane in Miami and driving one hundred thirty miles north up to Vero Beach. The first thing the chief engineer there would tell me was, "You've got to come out and see this. I just had two of the technicians go out and find one or two spans of the air filled trunk filled with water." I said, "What did you do about it?" He said, "Well, they went out to mid-span at the point of maximum sag and drilled an eighth-inch hole in the cable and let it all drain out." So there were things like that that were tragic and hilarious at the same time.
ALLEN: Were you pioneering seacoast building at that point? Were there many others who were having the salt and corrosion problems?
GUNTER: I don't think I would say that we pioneered coastal region cables. But, I think we were among the first to learn about the peculiarities of building cable plant in a saltwater environment. I don't know of any more, at that time, on the East Coast. I do think there was some cable on the West Coast of Florida. In Texas on our Gulf Coast, there was probably a couple or three that had begun to learn these same lessons that we had learned in Florida.
The manufacturers were picking up information about how to protect the housings better in those days. They tried some zinc chromate dipping processes and, ultimately, settled when those materials finally appeared on the epoxies. Probably the most effective ones were epoxy dipped housings that really had a candy glare covering, or rather any kind of dips or anodized platings.
I recall that Vikoa was the first to come up with an either electroplated or zinc chromate dip that at least halved the corrosion rate in salt environments. My recollection is that it was Kaiser or Thetacom who began to epoxy the outside. Those seemed to work quite well.
We learned a lesson in later days in inland areas in finding that the saltwater corrosion problem was only one form of potential damage to cable if it wasn't properly protected. I believe in the Midwest somewhere, there was a plant that put out some form of sulfur dioxide fumes that was three or four miles away from some of the cable plant but upwind of the prevailing direction of the flow of air. We saw some fairly severe chemical corrosion problems later in the business. This was after the merger with Columbia when we began to operate in sixteen states. So there was, to be fair about it, more than the saltwater corrosion lesson to be learned. There were chemical corrosion problems inland, as well.
ALLEN: But, pretty much, you had to work with the manufacturers and find solutions?
ALLEN: You didn't have a communications network with other cable operators that were building in a saltwater environment except through the manufacturers?
GUNTER: Let me describe that for you. In the '50s and until maybe '63 or '64, around the time of this transition from tube to transistor amplifiers, I would describe the flow of information and experience as interoperator. We used to share a lot, particularly among the Texas operators. There was more than my company home brewing their own amplifiers. We shared a lot of experiences and ideas with them. And yet, in the early '60s and certainly by the mid-'60s, this flow of information and experience began to be between the operator and the manufacturer, much more so than interoperator. It's not that we didn't continue to go to conventions and talk with the operators, but when we were there, manufacturers were coming up to speed rapidly by that time. They were right in the middle of those discussions and trying to take these experiences home to their R&D people, learn by them, and modify their product line to suit us and our needs. I would say after 1964, I spent a lot more time going to the factory and to the labs of the manufacturers in the cable business than I did talking to the people, like myself, in the business.
ALLEN: Who were some of the early operators in Texas as you were putting San Angelo on the air?
GUNTER: Well, John Campbell, who is the originator of what is now TOCOM.
ALLEN: Where was he?
GUNTER: Mineral Wells, Texas. I mentioned Johnny first because he was a true pioneer in manufacturing electronics in his garage and then later became not only a cable operator, but a manufacturer of amplifiers in the Dallas area. He knew a guy by the name of Louis Bone in Gatesville, Texas, down in the Southeast part of the state, I believe. Louis Bone was aping the Johnny Campbell chassis layout and the circuitry and building his own amplifiers. Anderson was a kindred spirit - the Wilbur Anderson I mentioned yesterday - who was kind of running the shop where we were building ours. So he interfaced a lot with Johnny Campbell and Louis Bone and they, I think, exchanged a lot of information that improved the amplifiers they were building up through 1961 or 1962.
This was a time when it was becoming apparent to even the cheapskates like Wilbur Anderson - and Campbell himself was a little bit of a chiseler who loved to save money - that this was the stuff that you didn't build in your ham radio shack or in your garage. This was something that needed to be mass produced. There were economies of scale not only in the cost of building if done properly, but the result was better. I mean you had better quality control of what you had built. You just couldn't expect uniform results and alignments to come off of a bench where one man was building two a day with his own hands. We're only looking at an eight to ten year window - from early '50s to early '60s at the latest, - where the era of the homebrew equipment was in any way dominant. This all evaporated rapidly after 1962 and 1963.
ALLEN: When did Tallahassee come into play? When did you go after that franchise? After International had been formed?
GUNTER: Oh, yes. It was shortly after International was formed. We had an attorney contact in Florida who had, in turn, political contacts in Tallahassee. My recollection was that this attorney - I believe his name was J. Kenneth Ballinger- coincidentally spelled the same way as Ballinger, Texas. He was the one who was originally part of the group who franchised and put the early money up for Vero Beach-Fort Pierce. He and other members of that Vero Beach- Fort Pierce group went to Tallahassee and got the franchise. In those days, we were still in the era where you could almost walk into city council and say, "Hey, we're in the cable TV business and we want to bring cable TV to your town." They would say, "Okay, where do we sign?" It was almost that easy.
At the time, however, we did not know that there was a sleeping giant in town named Phipps, who owned the local broadcasting station. He had not really felt that there would be a cable threat in Tallahassee any time soon. When we began to show signs of activity and construct a plant, we had a lot of trouble with him. Let me define what the trouble was. He first tried to buy us out to get control of the cable system, and then later got another franchise and began to build his own plant. That was the first overbuild in cable I had any experience with.
ALLEN: When did you get the franchise?
GUNTER: In 1962.
ALLEN: How long before he started to overbuild you?
GUNTER: Not more than about a year.
ALLEN: Did he overbuild in the community or in the exact same area?
GUNTER: I wouldn't say he tracked us just like a shadow where we built plant. He built some other areas but I would say the majority of his construction effort was to overbuild us where we were. He probably knew, with his connections, that we had somewhat limited financial resources and that if he could dilute our sales by duplicating our plant alongside of us that he would weaken us and take us out sooner and with less effort. So I would say that 80 percent of his plant was to parallel ours.
ALLEN: What signals were you pulling in at Tallahassee?
GUNTER: I would have to think about that one. It was all off the air, at the time, I know that.
GUNTER: Jacksonville and there was one Southern Georgia market that we pulled in from across the border and it seems to me that there may have been one or two stations to the west down in the Panhandle of Florida.
ALLEN: Pensacola or Mobile?
GUNTER: Maybe Mobile or Pensacola. I would have to check that. I do recall we built it with Spencer-Kennedy Model 222, twelve-channel tube amplifiers. It was all SKL passives and electronics. At the time, that was the first twelve-channel amplifier I had ever worked with. I had not gone to twelve-channel in Vero Beach-Fort Pierce or in San Angelo or Ballinger.
ALLEN: How many stations were you pulling in?
GUNTER: I think there were about eight, seven or eight. We were certainly beyond the five-channel limit. The first day we opened we had more than just low band.
ALLEN: What did you fill the remaining four or five channels with? Did you use a clock or any of those imaginative and creative programs?
GUNTER: We didn't ever really fill at all. There were two reasons for that. First of all, we didn't have that many off-the-air available to us. There was no microwave plan. As I recall, there was no microwave really economically feasible to bring in much. Atlanta was far too distant to hold up the microwave at that end as was Tampa-St. Petersburg. It is my recollection; we just didn't even envision micro relay of broadcast stations so we simply had what was off-the-air on about a five-hundred foot tower. We did have one of the older, cruder weatherscans, which was nothing more than eight-inch live weather instruments with a black and white camera scanning those on a motor driven turntable. We didn't have any alpha numeric character generators in those days.
In the early '60s there were not that many systems that had twelve-channel capacity and bandwidth that had yet begun to transmit adjacent channel high band. I don't think it was because we had any fear that we could transmit in good condition through our delivery system. Because I spent so many years working on television receivers in my father's store in the '50s, I had a lot of experience with the receiver itself. In those days, we didn't have varactor tuned tuners. We had turret tuners. I can tell you that the selectivity of a 1960 television set was not very good in the high band. Selectivity suffers, of course, as a percentage of frequency increases. When you jump from say, Channel 6 to Channel 7, you've leapfrogged about 90 MHz. The minute you go from Channel 7 to Channel 13, you're working with the same separation between the 6 MHz allocations as you are on the low band. The selectivity of the front end of a TV receiver, in that era, was nothing like as good as it was in the low band. Perhaps we were overcautious. Later, by the mid '60s, certainly a lot of people were running some adjacent high band channels. But I would say in the late '50s and by as late as 1961 and 1962, most of us would use only alternate high-band channels. We'd spend the money for the 50-220 bandwidth in an amplifier and we filled the low band and we'd stick in some FM signals and permeate the 108 range. But then we'd go seven, nine, eleven, thirteen in the high band to be sure that we didn't have subscribers who would have adjacent channel reception problems.
ALLEN: Were there any other significant differences in constructing with the twelve- channel amplifier over the five that you had worked with?
GUNTER: Looking back on those days, I understood the mathematics of cable attenuation very well. But I recall how startled I was at how much more electronics it took me to build the twelve-channel systems because now we were laying out amplifier spacings on 220 MHZ rather than...
End of Tape 2, Side A
GUNTER: We were saying that I was surprised as we began to layout the twelve-channel systems at the smaller spacing between amplifier stations it required when you laid the system out at 220 rather than at 88 MHz which was the upper operating frequency of our old five-channel system. I was about to say at that point, that one reason that it was startling and costly to add the seven to thirteen channel range was that in those days we could only envision the use of four of those channels. So we were spending a lot more money for amplifiers and had to buy bigger and more expensive cable and more carefully design the plant just to buy Channels 7, 9, 11, and 13. That may have been one of the things that retarded the early expansion of cable operators who had cut their teeth on five-channel low band systems. That probably was a retardant that made them think a long time before they spent the money to go to 220.
The other thing was, in those days, we were just seeing the early generation of aluminum cables emerge. The signal losses of the jacketed military style cables we had used until the early '60s were really pretty horrendous when applied at 220 MHz rather than at 88. There was a period of two or three years, maybe from '61 through '65, where people stuttered a little bit before they just plunked down the money before a vendor who had a fancy, new twelve-channel amplifier, tube or transistor. It's the reason in Ballinger that I - even in '64 - only bought five-channel amplifiers. Actually, I bought for two reasons. We didn't envision the day that we wanted the other four channels at the cost of buying twelve-channel equipment. The other reason was that I didn't have the confidence factor yet in solid state amplifiers and I wanted to hedge my bet by buying the low band, safer, more stable design. I would say it was somewhere around '65 or '66 before I and the operators I knew began to really talk enthusiastically about twelve-channel systems.
ALLEN: Were you kind of an onsite manager of the Tallahassee construction? Did you spend a lot of time there?
GUNTER: Yes, I was in and out of there a lot during the design phase but we had picked up a pretty bright boy in Vero Beach-Fort Pierce. His name was Ed Stark. I've lost track of him now, but in those days he was aggressive and alert. He could learn and knew quite a bit of electronics. Ed spent a lot of time driving back and forth from Vero Beach to Tallahassee. It saved me a lot of flying in and out of there. But I was there - during a two year period - every two or three months.
ALLEN: At this time you were still flying commercial? You hadn't started flying your own plane?
GUNTER: Yes, I was flying commercial. It wasn't because I wouldn't have liked to have flown my own airplane, but my dad and Ralph LaPorte were much too conservative to ever let me have a corporate airplane to fly around. I've been flying since I was a senior in high school. In 1951 I got my private license. My dad didn't like private airplanes. It was like moving mountains to even get him to let me take flying lessons in high school.
ALLEN: What attracted you to flying?
GUNTER: Well, again, it's related to my old love of science and mechanics. My bedroom was filled with chemistry sets, microscopes, radio controlled airplanes and ham radio equipment from the time I was eight or nine years old till the time I left for college.
ALLEN: Were you able to keep up your flying pretty continually then?
GUNTER: I flew quite a bit through my college years. Then when I came home and got busy in the cable business, I really didn't have time to fly. It was not until the late '70s that I even permitted the company to buy any kind of corporate airplanes.
The engineering headquarters of UA-Columbia was in San Angelo and we had three of the four divisions of the company headquartered there with management and accounting teams. We were sending engineers and managers from San Angelo, Texas to places as remote and as hard to reach by commercial air as Beatrice, Nebraska; Pittsburg, Kansas; Pulaski, Tennessee; McAlester, Oklahoma; Jonesboro, Arkansas; and Alamogordo, New Mexico. These were places you couldn't even get to by commercial air. Of course, they were too far away to go there by car. It happened that a couple of our division engineers were good pilots. One of them was a very experienced Alaskan bush pilot from years back. So, we bought some Cessna aircraft and based them in San Angelo and let them fly those. Even then it was years before I began to show an interest in flying them. I was very busy building the company with Rosencrans and our management team. We were in sixteen states of operation at that time. It was probably early '80s before I really began to fly again.
ALLEN: That was a digression for which I apologize. I got you off on that tangent there. How long did you stay in Tallahassee before you allowed Phipps to buy you out?
GUNTER: I'll have to get the history books out for that one. But, I believe it was around 1964 or 1965 when we finally sold to Phipps.
ALLEN: You said you had built about seventy or eighty miles?
GUNTER: I would estimate about eighty miles. My recollection is that it was less than a hundred.
ALLEN: At that point, had you started looking for other franchises?
GUNTER: No, as a matter of fact, the Tallahassee experience had pretty well drained the company. We were starting to add subscribers rapidly in Texas and Florida but not rapidly enough to replenish the money we had been spending in Tallahassee and in expanding those. The capital costs of expanding the Texas, Florida and Tallahassee systems simultaneously had been enough that the growing revenues of the company still had not been able to catch up with it. So International began to run into some more cash difficulties in the late 60s because of that. Therefore, we had no horsepower to go out shopping for new deals.
ALLEN: When you dumped Tallahassee in the mid '60s, was the company in a little bit better shape, as far as cash flow was concerned?
GUNTER: Well, it removed that drain which was costing us a good bit of capital investment and also because of the Phipps overbuild, resulting in half the expected per-mile sales. So, yes, that did help. But the board was a good bunch of men that still knew very little about cable television. Even LaPorte and my father were not keeping really abreast of the trends in the industry. I found myself in the mid to late '60s, cajoling and even arguing with them some about things that I thought we should be doing. I believe that it was 1966 or 1967 when I began to argue openly with them and the board about things we were doing, and that we could not run the company the way we were with the rapidly evolving technology that was becoming apparent. We could not run the company without adequate financing to keep the plant properly maintained and up to the state-of-the-art. It was changing more rapidly than they would accept. That is probably what led us into the merger with Columbia.
ALLEN: When you merged with Columbia, which I guess was in the late '60s, were you still operating just the two properties in Florida and the two properties in Texas?
ALLEN: How big was Columbia at that point?
GUNTER: Columbia was formed in the Connecticut area by Bob Rosencrans and David Strassler and some fellow investors. They had gone out in 1962 and decided to get into the cable business because Bob Rosencrans had started with Irving Kahn at TelePrompTer selling closed-circuit prize fights. He had become interested in the opportunity of community antenna television because he sold to some of them as well as the theaters. They had acquired Pasco-Kennewick, Washington and Pendleton, Oregon in one acquisition in the Northwest and shortly thereafter, bought from Bruce Merrill, the owner of Ameco, who was also a cable operator in Arizona and California, El Centro, California and some surrounding towns and Yuma, Arizona. That was their first opening salvo into the business.
ALLEN: That was the early '60s?
GUNTER: 1962. They operated those systems through the years and decided to go public in 1968. We had gone public in 1961 and stumbled along in the business through those years and learned a lot of the things to do and not to do. They had been a little more professional about it. Their approach was a little more enlightened than ours because they had some good partners; very knowledgeable, very businesslike Eastern businessmen that had been in the world of high finance and larger corporate deals unrelated to cable. They didn't make as many mistakes in the financial and management organization of the company as we had
When they decided to go public in '68, it happened that Columbia Cable Systems was using the same Washington counsel that we had always used - a fellow named Jack Cole. The current name of the firm is Cole, Raywid, and Braverman. I was in Washington meeting with Jack Cole in late 1968 or early 1969 - I can't remember which - but it was right around the turn of the year between 1968 and 1969. Jack said, "I have a client named Bob Rosencrans that I think you ought to meet sometime. I just have a feeling you two would get along." I said, "Well, yeah, where is he from?" Jack said, "Well, he lives in Harrison, New York and he has offices in Westport, Connecticut. He's another young and emerging cable operator that has a style somewhat similar to yours. So you just ought to meet Bob. Why don't you just go to National Airport and get on an airplane and go to La Guardia and let me have Bob pick you up?" In those days, of course, I was traveling a good bit to Florida but I was still a Texas home boy and I was dying to get home to Texas after three days in Washington, D.C. So I told Cole that I just didn't want to go to New York City at all. I would go back to Texas and maybe I'd see Bob and him at a convention sometime. Cole just laughed it off and said, "Go home to Texas and I'll set something else up."
I think it was not but a couple of months from that date that we either had a convention in Atlanta or maybe the National was up East that next year. At any rate, in a couple or three months, Cole had set up a meeting with Rosencrans. We met and liked each other almost immediately. The chemistry was quite good between us. I don't think Rosencrans was surprised but it surprised me because I didn't think I would make a rapid business association with an Easterner. I was just simply too Texan and distrustful of Easterners. From that point on, immediately, there was some very serious talk about how we could come together and bring the companies under one umbrella.
ALLEN: By this time they had gone public?
GUNTER: They had just gone public. Like six months before this first meeting took place. My father and LaPorte were getting a little despondent about how they were going to run the board and infuse money into International. They were ready to talk about this sort of thing. Through a couple of investment bankers and some lawyers we began to have conversations about what sort of arrangement we would make, what the exchange ratio between the shares would be. That always takes a lot of bickering between companies when you start to determine relative values. And who would emerge as the successor company and how it would be structured?
ALLEN: Was Rosencrans the President of Columbia?
GUNTER: Yes, he was President of Columbia. David Strassler was Chairman of Columbia. The exchange ratio was a lot more important to the International crowd and to LaPorte and my father. They really didn't have ambitions to stay on in a much larger and public company. They were already weary, I think, of SEC reporting requirements in such a small environment. Both of them were basically family retailers who didn't like the scrutiny of shareholders at public meetings. SEC requirements were just not their bag.
ALLEN: Did your father share your suspicion of the Easterners as well?
GUNTER: Yes, I think he did. My family came from the Deep South to Texas and probably had an innate distrust of Easterners. I think he did. However, because of his age and experience, he was more flexible than even I was at the time and surer of himself that he wasn't going to be run over or cheated in any way by Eastern deal makers. So I think he was quicker to pick up on the opportunity here than I was. I was a little more worried about that loss of control because I saw my father and LaPorte leaving the company if it merged and I saw myself in a business I loved already. I was wanting to go on with cable as a career and an investment, so I wanted to be sure we had the right mix of people. Whereas they just wanted to be sure the exchange ratio was beneficial to them
ALLEN: Everybody has their own motivation.
GUNTER: Absolutely. There was a definite generation gap between LaPorte, ICC and me.
ALLEN: At this point you indicated that Columbia had started with four West Coast systems. What else had they acquired or built in the intervening years?
GUNTER: Not much. They were busy building and managing those properties. They were high growth areas and they were going to be good systems, so they had not gone out and acquired anything else. They probably had somewhere around forty-five thousand subscribers and we were probably at thirty thousand subscribers in those days. The result of the mix was around seventy-five thousand in round numbers. At any rate, an exchange ratio was worked out between the two boards and ratified in early 1969. The deal was consummated by June of 1969. We then became Columbia Cable Systems.
ALLEN: Was this all Rosencrans was doing - running the cable systems in Westport, although all of the properties were on the West Coast?
GUNTER: Yes. David Strassler was a full-time Board Chairman in those days. He had other family investments, but Rosencrans was full-time and the lead dog in those days at Columbia. Strassler was monitoring the financial performance and reporting to the several families of our investors at that time and then of course, their own public group. That was mid '69 and we ran the properties and developed them.
Florida, at this point, was due for a rebuild. So was Texas. We were starting to upgrade Texas in the late '60s to twelve channel. We had a lot to say grace over and capital investment to make. Along the way Columbia had bought somewhat antiquated systems in the Northwest, and Bruce Merrill's systems needed work. Although Bruce was a manufacturer, he was not known for building the most choice cable plant. He was a businessman first and foremost, and he always cut corners where he could.
ALLEN: What was your role in Columbia?
GUNTER: My father stayed on as a consultant for about a year, as did LaPorte in the transition period just before and after the consummation of the merger. Rosencrans encouraged me immediately to become active at the corporate level with him in identifying and locating acquisition opportunities. He picked up quickly that our styles meshed in that he was an MBA with a business management/financial background and that, coupled with my love of the physical side of this business, and my instincts about deals that I picked up along the way from my father and LaPorte would be an efficient combination. I was still clamoring in those days to be left alone to run my Texas and Florida subsidiaries. We still ran ICC as a subsidiary of Columbia and I was President of that subsidiary and I wanted to do the management and engineering of Florida and Texas and be left alone. Rosencrans wouldn't hear of it. He said, "You've got to start bringing in some people now to form a division of the company and bring in some engineering and management talent that will let you travel with me. Let's go out and find some deals." Ultimately, he coaxed me into that.
ALLEN: You did not oversee, directly, then the rebuild of the Florida system and San Angelo?
GUNTER: No, I did. I still had that to do. But he did not want me to limit myself to that. No, I did oversee the rebuilds of the Texas and Florida plants after the merger of ICC into Columbia.
ALLEN: And also the Columbia properties?
GUNTER: And I began to take engineering responsibility for the Columbia properties. I became a Vice President of the company at that time with no particular designation. But later, I asked for it to be more engineering related than it had been. That was only a temporary wish that they granted.
In late 1972 through other investment banking friends, we stumbled across an opportunity to merge Columbia with what was known as UA Cable Systems. It was a separate public company but closely held by the UA Theater people of San Francisco. They had put together an interesting complex of systems in my area. UA Theaters had always had a large office in Dallas which stemmed from the acquisition of a Texas theater group known as Rob and Rowley, or by that time probably just known as Rowley United Theaters. The Rowley's were headquartered in Dallas. They had properties in Oklahoma, Nebraska, Kansas, Tennessee, Arkansas, and New Mexico.
ALLEN: When you say properties, are you talking about cable properties?
GUNTER: Well, yes. Theater properties, first. I'm coming to that point. Theater properties scattered in those states. Their local management and their Dallas corporate people decided in the late '50s, early '60s, that this cable television monster might be something that could consume the theater business. It had already begun to impact drive-ins. Broadcast television and cable were probably the combination - the one-two punch - that did in the drive-in theater business. They thought this might even enlarge to the point that it might threaten the movie theater business itself and movie houses. So they had reasoned that they were in place in these cities with their theaters and they had been there a long time in most cases. They knew they had a presence. They knew the city fathers. It was one of those things that was still easy in the early '60s to walk in and say, "Hey, we own the Texas Theater down here and we think we know a lot about this sort of thing, the entertainment business, and we want a cable franchise. We're going to have a theater but we're also going to have a cable system in town." In most of the cases they got franchises just for asking with no competition as we had in earlier instances.
So they, in effect, had built up a cable company in their theater towns and gone public with it and had maybe sixty - sixty-five thousand subscribers in those days, and yet they realized after a few years of operation that they really had made a mistake in assuming that the theater and cable businesses were very much alike. They weren't alike at all. The engineering and technology questions that arose through cable management was more than any of their management had been prepared to tackle. They were used to buying film projectors, movie screens, and stereo sound systems, but not RF distribution systems and microwave. So they were beginning to sniff around and look for a deal
So through investment banking circles that we were both familiar with, we were brought together at a meeting in Chicago in 1972 that David Strassler and Rosencrans and I attended with the two Naify brothers from United Artists and Salah Hassanein, their Executive Vice President. From those meetings, we quickly began to talk about numbers again, about relative values and exchange ratios. Indeed, through the fall of '72, enough work was done that we had a deal struck by December 72 and the merger was actually complete January 1, 1973. We had decided that because of the UA name - even though they were only given 27 percent of our shares to pull them into our company and five board seats - we wanted the UA name in front of Columbia. So we made it UA-Columbia because it had an entertainment mystique and value that we felt should be retained. At that point, they had five board seats and no one who joined our management - Rosencrans, David Strassler, and I continued with the company from that point forward
ALLEN: In that period between 1969 and 1972, had Columbia put any more systems on?
GUNTER: I think we had not. We had added some small satellite systems in towns around major systems we had.
ALLEN: Such as?
GUNTER: In the case of San Angelo there was a city known as Winters that we had added which was fifteen miles from Ballinger. Probably a city of four thousand people maybe. I think in Southern California - in El Centro when we bought that - it had two or three towns that Bruce Merrill had already begun to wire but we added one more area.
ALLEN: So growth was still very modest?
GUNTER: We were growing but the growth was modest. We did not go out and begin to grow by digesting a town or a system at a time after the merger of Columbia and ICC. We got on the map by making first the deal between us, ICC, and Columbia - which was the beginning of a very good relationship between two companies struggling to grow. We really couldn't have had a happier marriage between people. From June of '69 until December of '72, very little was done except to develop what we had put together. There wasn't that much of an interval when you get to really thinking about it. There wasn't that much time to get on an acquisition wave. We had a lot of fine tuning between the styles of the two parties and the properties and integrating practices and ideas so that we really hadn't had much time. Therefore, the next big quantum leap was the UA merger into Columbia.
ALLEN: How many properties did UA have, at that point?
GUNTER: UA is where we picked up the Nebraska, Kansas, Tennessee, Arkansas, Oklahoma, New Mexico and other Texas properties. We had added one significant acquisition by buying Jonesboro, Arkansas, and Gainesville, Texas from Carter Publications in Fort Worth. That's the Amon Carter group that owned WBAP AM/FM, and TV, and the Fort Worth Star-Telegram. They decided, like a lot of newspaper and broadcast people, that they wanted into cable and then that they didn't want into cable. I saw the Dallas Morning News and the Belo Corporation in Dallas go through this same curve of schizophrenia. "Do we belong in cable or don't we belong in cable. We're broadcasters, we're newspaper publishers, should we be cable operators also?" In the early days, I even did some consulting as a hired gun for the A.H. Belo Corporation and the Dallas Morning News to assist them in a decision. That's another story all by itself. But we did make a deal to acquire those two from Carter, and they probably didn't have more than eight or ten thousand subscribers between the two systems. But that was between the time we did the deal with Rosencrans and Columbia, and the UA acquisition. That's the only thing of any consequence we did.
But after we had done the UA merger by January of '73, we were really on the map and starting to roll.
ALLEN: Were you one of the larger MSOs by that point in time?
GUNTER: Well, I'm going to have to get the charts out on that one. At that time, we were probably, easily, in the top twenty. But I don't think we were top ten by then. After the UA deal, the real growth of the company in the early '70s came from Rosencrans emphasizing growth in the Northeast.
With the UA deal we also picked up Brookhaven, Long Island. That's out in Suffolk County. That was really a very fortuitous acquisition because Rosencrans had already begun to pick up some properties in Northern New Jersey. But we had picked up three or four townships in Northern New Jersey just before the UA deal. When we added Brookhaven, Long Island along with the UA acquisition we had some presence in the Northeast that excited Rosencrans. He put together a real franchising and management team to really take advantage of that opportunity. I would say we grew from the early '70s to the late '70s. He built Brookhaven, Long Island, the original UA system; got franchises in Westchester County, New York; expanded the Northern New Jersey group from four or five townships to forty or fifty townships; and got into a real slugging contest there with Charlie Dolan and John Tatta. We were competing head-to-head with them on nearly every one of these Jersey townships in Bergen and Passaic County.
ALLEN: Competing for the franchises?
GUNTER: You bet. Head-to-head with Dolan. Dolan and John Tatta were tough competitors. However, we probably were batting about a seven or eight hundred average. We did very well.
ALLEN: What did you have going for you that they didn't that allowed you to get that much more than your fair share?
GUNTER: I can't say we were any better competitors in the franchising area than they were except that we had a little bit of a head start. We were in the Northern Jersey area where we were beginning to rapidly build a reputation for quality systems. We were the ones who brought Madison Square Garden live into Northern New Jersey across the Hudson in the early '70s because we began to learn as we acquired those New Jersey systems that off-the-air wasn't going to cut it. People were used to getting some pretty good signals from Manhattan and from Philadelphia directions, and even as far away as Hartford sometimes. Except for the shadow areas caused by the hills of Northern New Jersey we were having a little trouble selling basic cable.
Bob is a long-time sports fan who loves anything that has to do with sports promotion. That probably is the very reason that when he left Columbia with his MBA he got involved with Irving Kahn selling closed-circuit prize fights. The idea of taking about 110 events a year live out of the Garden over to Jersey and putting them on was something he was dying to do and we needed to do. So he went to work on that.
I went to work on the engineering problem of getting it across the river. There was no way then to really do it in the time frame we had selected except to run a Bell microwave video circuit. We got a two-hop Bell relay built from Manhattan over to our headend in Northern New Jersey and used it over there for probably a year. This was somewhere around 1971 or '72. Then we got the idea, as we began to pick up more and more of the Jersey franchises, that we wanted to spin-off some of the costs and share with other operators up and down the Hudson. So we put together a private CARS microwave network to take it from the Bell terminal after two hops, and put it on our own microwave and dump it out up and down the Hudson to other cable operators, including our own headends, and distribute from there. That was the beginning of USA Network.
Getting back to the question of how did we bat so good an average against Dolan in Northern Jersey. Around this time in the early '70s we had the opportunity to bring in a woman named Kay Koplovitz and her husband Bill. Kay had just gotten out of the University of Wisconsin with a degree in communications. Bill was an attorney by education. We brought Kay in to manage that little network and we brought Bill in to help with the franchising effort. We couldn't have picked two finer people to help in both of those isolated departments. Kay rapidly began to help us build the Madison Square Garden networking idea, ultimately, taking it on to what became USA after we sold to Paramount. Bill Koplovitz became the backbone of our franchising activities in the Northern Jersey and Westchester County area.
We had hired a young man named Steve Sinn as our division manager of the East. A very bright fellow that worked in close harmony with Rosencrans and Bill Koplovitz to orchestrate and strategize all of the Eastern franchise activity. Those three people were the reason that we had that high batting average. I had very little to do with the Eastern franchising activities. I appeared a few times to testify on technical matters and I was responsible from San Angelo for the engineering planning, but those three people were the ones who swept the table clean up there. That's where our growth came from in the early to late '70s, the Northeast. Our other systems were good systems in the other states in the West, South, and Southwest.
ALLEN: But you weren't adding any?
GUNTER: They were normal growth systems. They weren't rampant growth in the class that the Long Island/Westchester County/New Jersey properties were.
ALLEN: The UA properties that you acquired, were they technically in pretty good shape?
GUNTER: Not bad. It happens that UA was run, at that time, by three ex-Jerrold people. Their chief engineer was a fellow named Jack Stone who had once called on me, in the early days, from Ameco. Ameco used to call on its customers with a Salesmobile - a converted bus that had all of its hardware and goods wired down on plywood display cabinets and they would actually get out in front of your place and say, "Come on out and walk through the bus and let me show you the new amplifiers, connectors, line splitters, match sets, and all that stuff." Jack Stone was one of those guys who then later went to Jerrold and came out of Jerrold with Pat and David Rutherford who were hired by United Artists Cable Systems several years before our merger to run that company. Therefore, they did not have any experienced theater people running UA. They had gone out and found some management and technical side people who knew what they were doing. Therefore, the answer to that question is that the UA properties weren't in such bad shape.
ALLEN: They were twelve channel?
GUNTER: They were mostly up to twelve-channel capacity. They had not been stingy with them in terms of capital dollars to be spent for developing the plant. These three people that ran UA at the time of our acquisition had done a pretty darn good job of managing and developing those properties.
ALLEN: Anywhere along up to this time, did you get involved in any marketing activities starting with San Angelo?
GUNTER: I guess I've worn more hats in our companies than anyone other person. Rosencrans has never tried to second-guess me about engineering questions. I'm sure I've second-guessed him many times about management and financial decisions. I've even kibitzed with our marketing people. I remember one that I had a lot of fun with.
In the early '70s I stopped by Vero Beach, Florida. We were brainstorming
about some new kick-off for a couple of channels we were adding down
there- I think West Palm Beach or Miami. At the time, up the beach not
too far was a lot of space activity and "countdowns" at Cape Kennedy. It was just one of those things - my brain jumps around and I love to get involved in a room full of people in arguing points like that - and I said, "You know, what we ought to do here is use--- " Part of this came from my retailing background in my family and hearing my uncle's retail promotional schemes. One of the things you do with customers is don't give them a lot of time to decide. Make it costly to delay. In those days we were used to space countdowns up the beach at the launch pad "So, why don't we use a reverse "countdown." Let's start off- we've got a $35 connection rate here - let's just start back at $1 on the day that we splash the announcement in the papers and on the radio stations. Let's say if you hook up today, it's a dollar. Every day you delay, it goes up a dollar until it goes back up to $35 in about a month." It was a very successful promotion. They've always laughed about that reverse countdown that I cooked up that day. But things like that I guess I've participated in but I've never considered myself a cable marketing genius.
End of Tape 2, Side B
ALLEN: So at this point, the discussion for the earth station in Florida must have begun. You had completed the merger with UA in 1973. How does that earth station fit in?
GUNTER: January, 1973 was the merger date of the UA acquisition. We were very busy building up the Northeastern group, which I just described. I think this leads us, now, to talk about the transmission difficulties all of us were beginning to experience in going for closed-circuit or pay-per-view type of events. I've said that we had beefed up our dial to improve sales in Jersey by microwaving live those 110 or so events out at the Garden over into Jersey.
ALLEN: Were you actually doing the production work with the Garden?
GUNTER: No, it was farmed out. We just took a video feed. The Garden handled that. We didn't get into any production. They gave us a video spigot from the contract video production people.
ALLEN: You weren't the only company that was receiving the video feed from the Garden, then?
GUNTER: I do believe that Rosencrans was the guy that cooked up the deal, but later they were working out some way to feed other systems so that, eventually, we took it over to Long Island and, I think, Manhattan Cable finally got some way to carry it there. There was a problem with that because of gate. There was some fear all along that widespread cable coverage might impact the gate. I think that I'm probably not as qualified to say that much about that as Bob because he handled most of those negotiations directly with the Garden. Bob was talking to a fellow named Joe Cohen at the Garden. Those were the two fellows who cooked up that first deal.
Simultaneous to solving the Garden feeds into Jersey, we were also heating up a crude but growing pay television business. HBO was formed by Dolan originally to furnish some pay television for the Manhattan cable systems. A guy named Geoff Nathanson from Los Angeles was the promoter we met along the way. I think he's Marc Nathanson's uncle or cousin. He was really revving up a pay television service in those days called Channel 100. I think he had visions of being what HBO is today. He was a very likeable and affable fellow, who was a good deal maker. We latched onto him and put Channel 100 in New Jersey thinking that too - since you had to buy basic to get to pay - we thought that having a pay service in New Jersey would also help basic penetration, which was lagging still even with the Garden. It was lagging behind what we had hoped and projected. So we put it in there.
In those days, the security to lock out those who didn't wish to buy was crude at best. Nathanson had gotten Oak Communications to build a converter box that just had a little jumper plug in it. You put the plug in it and it would convert the channel to a usable signal for the subscriber. You pull the hidden jumper out and it wouldn't decode. But if someone just knew a little bit about the technology and knew that all you did was plug in that jumper, they had a box that would tune the service. That's all we had at the time and we used it. That was the security end of the difficulty with pay television in 1972.
The other problem was transmission. Where do you get the signal from? There wasn't any satellite, obviously. There wasn't even any way to get it real time or microwaved. It was too expensive to use AT&T long lines to be firing twenty-four hour television service around. So we bicycled three quarter inch video cassettes just like movie houses bicycle movie reels. Expensive, cumbersome, and a lot of times the flight didn't make it. We used to hire college kids just to feed these three quarter inch cassettes to playback machines at each system
Shortly after we started the New Jersey system, I wanted to get some hands-on experience with the same problem at the San Angelo headquarters where we still owned and operated my old system. We put in the Channel 100 down there. One of the first things I saw was the inconvenience and expense of three quarter inch movie dubs being mailed out to all of the affiliates of Channel 100. Bicycled around with a list of... by the way, I should comment on that. When you finished with it in three nights, you put it on the airplane to the next system. It was just round-robined around the horn that way and then it was returned, finally, at the end of the trail to Channel l00 for maybe erasure and reuse.
That was a worrisome aspect of the pay business to me in the early '70s, but as a technologist the thing that I began to zoom in on earliest was security. I knew that if we didn't perfect something better than what we were using in Jersey and San Angelo, then the better the product got and the clearer the picture became, the more susceptible it would be to theft.
ALLEN: How well did it sell in San Angelo?
GUNTER: Oh, in Jersey and in San Angelo in the early '70s I would say we were hitting 20, 25, 30 percent levels.
ALLEN: Of your basic subscribers?
GUNTER: Yes. It was a year or so until it became better known as to what it was. And a lot of this is word of mouth. You can tell people just so much about why they should pay for a commercial-free movie channel in the advertising media. You can just say so much about that. They get the picture and the zealous few will try it. But then it begins to be word of mouth. It takes a while. I think in the early days, we may not have had more than 10 or 15 percent for a year or so. But I think we hit 20 rather rapidly.
At this time my San Angelo group and I were talking about what we would do to secure these pictures. We talked to all the major manufacturers including Scientific-Atlanta, Oak, and Jerrold, I'm probably leaving one out. I don't think Hamlin was that prominent in those days. There were at least three, maybe four, major set-top device manufacturers that we were talking to and none of them had any answers for this. There was no real scrambling, but there was some beginning. As a matter of fact, Jerrold did lead the way in some of the early scrambling, but it was very crude. As a tinkerer, I went down to our labs and defeated it with one forty-five cent Radio Shack part.
ALLEN: That didn't give you a lot of confidence!
GUNTER: Didn't give me a lot of confidence. They had built a device that had a so-called four-channel capacity. It was a standard converter. If you needed conversion of your basic cable down to your television set, it had that, but it also had up to four pre-selectable pay channels in case you were to run more than one pay service some day. You could run up to four simultaneously if and when that happened. That sounded pretty racy and that was one of their big marketing pushes. But the security wasn't worth a hoot.
There was a nice fellow that came down from Jerrold then that was promoting this particular generation of security. His name was John Sie. He is now Senior Vice President of TCI in Denver. He was once the Marketing Vice President of Showtime, the movie channel. He is a very bright guy, a doctorate level Chinese fellow that really knows how to meet people and sell. I liked John from the beginning. He was almost sure that he had a device that he would begin to sell to us as we opened more and more of the pay outlets. He knew of our discontent with the Oak box in New Jersey and some in Texas. So he came down all primed to get a purchase order and it was at a time when I had just finished that experiment on the bench and defeated it with some scrap box parts. I showed him the results of that and told him that we could not buy that box. That we were very likely not going to buy anyone's so-called scrambling, and that I didn't trust any of it. I thought it might be as much as five years before we would see real encrypting that could be trusted, and that UA-Columbia was now heading towards negative traps for security. Well, Jerrold didn't make negative traps in those days. I'm not sure who did. I had to go out and scrounge out someone to make them. I was convinced that the negative trap filter was the only way that we would properly secure the pay product until good electronic encrypting came along. That was just a closed issue with us in those days.
John Sie was very disappointed and said he would keep me apprised of all the latest developments and that they had more things on the drawing board. I said, "That's just great. You come back and see me any time. But in the meantime, I've got New Jersey and San Angelo and other systems where we want to put three quarter inch playback machines. I've got to secure those signal channel pay services and for now it's going to be done with low band negative traps."
Well, I shot my mouth off about the low band negative traps but nobody was building them. I think it was an obvious answer in those days to securing single-channel pay. So I had to go scrounge up some guys that would build them. Viking or later Vikoa - they changed their name - had people who were agile enough to attempt to build them, but we had had some other corporate disputes with Vikoa and I didn't want to fool with them. At the time, they had gone through growing pains which had resulted in the exodus of some key people. Two of these people that I knew formed a little company called Pro-Comm in Poughkeepsie. They didn't know what they were going to build except they thought they would get into the subscriber passive sort of business. Just build subscriber two, three, and four port line splitters, match sets - whatever they could scrounge up to build in their small shop in Poughkeepsie. I ran into them in the East on a trip to Westport, Connecticut one time, had supper with both of them and talked with them about my trap idea. They said, "That's exactly what we're set up to build, subscriber passive devices. Tell us what it is you want and we'll build it."
The sales manager and partner of that company was a fellow named Tom Stockton. The partners' name was Eli. He was the EE and technical thinker that had left Vikoa with Tom months earlier. Tom is a bright fellow that picked up the idea very quickly and even suggested other circuitry for the trap when some of my crew in San Angelo and I suggested other ideas. They had a prototype ready in a couple of months. We went up and looked at it and it was nothing more than a small vector board prototype of an LC trap circuit. They wanted to see if we just approved of it. Physically, it had to be miniaturized. It had to be eventually put into a small, metal container and even potted with epoxy to weatherproof it and to give it some temperature stability because it had toroidal coils on it. We worked with that for a month or two and even ran it through some environmental chamber testing to see how stable or unstable it might be or what temperature compensation might be required. Finally, we decided we had one that was acceptable. I believe in late 1972, early 1973. We ordered enough for New Jersey to start putting them in, for Texas, and then we were ready to crank up Florida at Vero Beach-Fort Pierce. We ordered one type down there with a special epoxy coating on it to protect it from the salt spray because it was nothing more than a nickel plated sheet metal can about the size of a small match box.
Those traps worked as well as we expected, but we knew that there could be some security problems due to aging of components. We hadn't seen enough seasons to know how rapid the aging curve might be. We estimated those traps might hold their notch depth and frequency stability with time and temperature for at least eight seasons. We found that most of them developed external and connector physical problems due to just humidity and corrosion of the fittings, as much as they developed internal component problems. By the time we had done this and deployed them in Jersey, Texas and Florida and had already started to order a few more to go out west to Yuma and Pasco-Kennewick, we had interested several of the manufacturers in building them
Ultimately, within a two or three year period following the 1972 introduction of the Pro-Comm trap, there were at least four manufacturers building a lump constant trap such as we built. A company known as Vitech emerged and they built a transmission line or a coaxial trap. We bought some of those and liked those as well. They were just a coiled up piece of cable, which was cut to a trap configuration rather than using capacitors and inductors.
The prediction I made about the five years of development needed to give birth to good encryption security was not far off We began to see some forms of electronic encryption that would at least offer medium to high level security by late '70s. This leads into another big decision we made involving security.
Around late 1977, I was visiting San Antonio, Texas. That was just a favorite place I used to go to from San Angelo a lot. I was in a hotel down there one time in the fall of '77. They had three networks and a PBS station there but it really struck me as peculiar that a town the size of San Antonio had no cable system. We had been so busy looking into other places that I hadn't thought much about inquiring. But the next morning I got up and went down to city hall and said, "What's happening? What's the history of cable here? It seems to me that GE Cablevision had a franchise here one time." One of the assistant city managers came out to talk about it and said, "Yes, you're right. I was here then. GE did have that." About the time of the HemisFair here in San Antonio, there was a lot of activity and city council, without much discussion or competition, handed it to GE. GE fiddled with it for a year or two and decided to lay it back on the table about 1971.
This was concurrent with all of the upheaval that went on in Washington with FCC and NCTA about major markets. This was before the time we had made the deal to be allowed to import as many as three independents into a large market. That came in the rule making of 1972.
GE had pitched the franchise back on the table at city hall in San Antonio and said, "Count us out," a couple of years before that. For some reason, that whole issue of a franchise for San Antonio, Texas had laid dormant for all those years until late '77 when I just happened to walk in there and became curious about why there was no activity. There was nothing in our trade press. Nothing in the San Antonio papers about cable there.
I happened to like this assistant city manager, a fellow named Cipriano Guerra, a retired Air Force officer who left one of the San Antonio air bases there at the end of his career and decided to get into city government. I said I wanted to pursue a franchise in San Antonio and I would need legal counsel immediately to help us. I wanted to know whom GE had used because I didn't want to educate another law firm along cable franchising questions. It seemed like that would be like inventing the wheel all over again. So he turned me over to someone who remembered that history and gave me the name of Arthur Troilo. We made a deal with Arthur Troilo and later Cipriano Guerra would leave city government and join the franchising team, and we did, ultimately, get that franchise. That's another story, of course, that we may want to get into later.
But that leads me to a discussion of finishing my observations about cable security and how long it took to get something that was meaningful to really build multi-channel pay-per-view security systems. This is 1977 when we began the franchise fight for San Antonio. It was fall of '78 before we completed that process. After competing with Storer Broadcasting, we won San Antonio and approximately sixteen contiguous but separately incorporated cities around San Antonio. We let a contract to RCA Cable Systems for the turnkey construction of 2500 miles of thirty- five channel cable plant for San Antonio as required by the franchise agreement that we had negotiated.
As late as 1978 there was still no significant or new generation of security that I was encouraged to buy. I hit the ground running with two channels of pay television in the new San Antonio System in 1978 and with two trapped pay services, HBO and Showtime. It worked quite well As a matter of fact, large pay penetrators always worked well with my trap system. Indeed, to my knowledge they still trap HBO and Showtime in San Antonio to this day. Obviously, the larger the pay penetration of a channel, the fewer negative traps you need. You only negate them where someone doesn't buy them. So if you have a pay channel like we had in the early days of San Antonio where we had HBO and Showtime penetrations up as high as 170 percent of basic combined. HBO was usually the leader at say 95 percent and then maybe Showtime would be 65 or 70 percent. Those, of course, tapered down with the introduction of other pay channels. They have been further fragmented in their audience as well as by the impact of video cassette rentals. So I imagine the entire San Antonio pay penetration today of five maxis, not two, is not more than 90, maybe 95 percent, of basic. But when we had two maxis penetrating at 170 percent levels of basic, it was an obvious decision to make.
By this time we had manufacturers building some pretty worthwhile trap devices for $5 apiece. So we didn't have a set top decision to make then. It was fortunate that we didn't have one to make because there really wasn't that much that I trusted. In 1978, 1979, and 1980 we deployed only traps and converters.
We did have one additional security problem there that we trusted to Hamlin because they had a fairly good encryption system. Bob Rosencrans realized along with the franchise negotiations that we had to agree to carry the San Antonio Spurs and the Associated Basketball games on a special sports channel which was to be sold over and above basic. We used Hamlin electronic encryption for that because we didn't figure that it "was something that was going to be stolen to a high degree and we didn't worry too much about it.
But the first time we made a major security decision involving a technology that I thought had some promise of high security was in 1983. This is after the Rogers Cable Systems merger when Ted Rogers was pressuring us to add more maxis to San Antonio and all of our systems he had just bought half of. We made the Zenith Z-Tech decision in San Antonio. It turned out to be not such a bad one. I tell that story in that way to illustrate the decade that it took from the time that I refused to buy Jerrold crude encryption and switched our company to the trap decision in 1972. It was ten or eleven years of growth. I had estimated five years in an explosive industry before it had developed a good electronic encoding. That's the truth.
ALLEN: I started talking about one aspect of the problems related to pay and you have dealt with the issues of security, but what about the three quarter inch cassettes and the bicycling which you said was risky at best? How did you approach solving that?
GUNTER: In the early days of pay television, beginning in the early '70s, there were two parallel problems. One we've discussed pretty thoroughly and that was the security against theft of the signals we were transmitting. The other one was the source of the movie product itself. The three quarter inch cassette was not only cumbersome and expensive to ship around to be shown and run on the machinery, but we had to pay someone to attend to those machines and run them.
I've got to tell you that the early dubs were very poor. The houses that were taking the movie product and putting them on the magnetic media were not doing very good jobs. They were either grainy or just low resolution pictures that were being produced by those houses in that day.
Somewhere around late 1974, HBO had been acquired by Time-Life. We were already trying to find a way to emulate the Madison Square Garden feed over to New Jersey and go real-time to HBO's Manhattan playback studio where at the time, believe it or not, they were using two-inch quadraplex broadcast playback equipment. But the dubs were very good. They were using those to feed the New York system and we wanted to bring them across the river. That's where the relationship with HBO began. That's where we realized that our relationship with Geoff Nathanson's Channel 100 was going to be of limited duration because of the logistics of signal transmission. We could not continue to grow and countenance the expense, inconvenience and unreliability of the physical transmission of cassettes around our systems as we expanded.
Somewhere in late '74, along with the discussions of microwaving to just our New Jersey group, we had to face the fact that we had Florida, Texas, Yuma, Arizona, El Centro, California, Pasco-Kennewick, Washington, and others where we wanted to bring in pay television services and start the marketing process.
There had been early work for military and government purposes involving satellite transmission and there had been some discussion in cable circles about the potential for video signal relay through the satellites. The first time it was being discussed, it was Marty Malarkey. The other guy who delivered a paper at our national convention was "Hub" Schlafly. Both around 1972. The first time I saw anything that looked like a serious effort to alert the cable industry to the idea that satellite transmission might be in our future was a trailer-mounted dish at the Anaheim Show in 1973. I believe it was a Scientific-Atlanta dish mounted on a trailer and they had some temporary satellite link set up just to show video transmission through the space medium No one really took it seriously, even at that convention. There was some excitement about it, but no one really knew what the economics would be, or how well it might fold into the world of cable.
The first time I ever really heard any serious discussion was when the HBO movie distribution question arose between our company and HBO. It was originated probably between Gerry Levin, then of HBO, now of Time-Warner, and Bob Rosencrans. They were stewing about how this dubbing and tape bicycling question would be solved. Someone at HBO was beginning to say, "Why don't we at least look at the idea of satellite transmission? We've priced out AT&T long lines. That's prohibitive. Let's at least look into it." Someone, probably at the HBO level, went over to see people at Western Union at the time because they were in possession of some satellite transmission facilities. RCA had formed a subsidiary called Americom. There were also discussions with them. Ultimately, a deal was struck with them for a transponder in 1974.
But when the feasibility of this began to sound more interesting and it looked like the economics and engineering would be digestible by us for cable applications, a phone call came to me in Texas from Bob Rosencrans, who said, "You know about these discussions we've been having with HBO. We're kind of stymied on pay growth in the company because we don't know whether to go ahead and buy another truckload of three quarter inch playback machines for all of these systems we're trying to open up with HBO or Channel l00 pay services. We've got a decision to make and I can't and won't make it alone. The financial side of it looks like it will play. But before we stick our neck out, is this technology going to work? Are you willing to bet your bottom dollar on it?" I said, "You bet I am. I've seen enough of it to know that it's got to be a good bet and it's a gamble I won't even think about. Let's take it." So he hung up the phone and called Levin back at HBO and said, "Count us in. We'll work the receive end, you work the transmit end, let's get to the FCC and the lawyers and apply." That was probably after the first of the year in January or February of 1975.
The national convention was in New Orleans in 1975. In February and March, I was up East several times to talk to the HBO people and to go over the final commitment we had made with HBO with our board and with Bob Rosencrans and Dave Strassler. It was probably no more than a month before the New Orleans show that Jerry Levin, Bob and I made a decision to announce at the New Orleans show what we had decided to do. We did indeed do that. It was kind of a bomb. Some people were startled by it. I don't think it was a total secret, but it hadn't been discussed around the industry much before that announcement. There were people that were excited about it. I would say the majority were excited about it. There were some naysayers at the time that said it would never work or it wouldn't be economical, but overall I think the impression was optimistic.
The timetable that we announced at that show was that UA-Columbia would apply for seven earth station sites around its company for openers. HBO would acquire the space segment, that is, lease the transponder. HBO would be fully responsible for the acquisition of the Hollywood product and the transfer to the playback medium. The uplink would be somewhere in New Jersey - probably at RCA's uplink. The first launch was expected to be in Vero Beach-Fort Pierce, Florida in late September of that year. I believe we knew then and announced at that time that the target event was the Ali-Fraser fight to be fought in the Philippines, Manila, September 30, 1975. The so-called "Thrilla from Manila." That was our target date and both HBO and our company would begin immediately to secure the consent from FCC. That we did.
HBO began all their work with RCA and Americom We went to work with our Washington counsel, Cole, Raywid, and Braverman. It was my job to get the application filed. We knew already from having talked with Chairman Richard Wiley at the FCC and a couple of the commissioners that there would be sympathy for the idea at the Commission. After the announcement they said, "Come on in and let's talk about it." We did so and found out that there was considerable precedent for, and even FCC forms for military and commercial applications but none for CATV. There was no form to fill out. The first time in my long history with FCC they didn't push a form at me that was an application for a construction permit. It became my job along with a fellow named Robert James at the law firm of Cole, Raywid, and Braverman to handwrite the application. The Commission just said, "You tell us what your legal, technical, and financial qualifications for that station are in your own words." That's what we did.
ALLEN: How long did that take you?
GUNTER: Well, it took James and me from April when the announcement was made at the New Orleans show until about late June to put all of that in shape. That included frequency coordination which we knew would be required as an engineering exhibit. We had it filed and in the Commission's hands, I believe, sometime by mid to late June. But the Commission was aware of this and alerted to it and even saw early drafts of what we were writing. The Chairman, James Quello and others who were Commissioners were very supportive of that idea and were instructing the staff to accelerate the process because they knew what our self-imposed deadline had been in September and they would like to see us meet it. But it was a photo finish to the last because squeezing something like that through the bureaucracy with something as unconventional as a home-brewed earth station application was a pretty good trick in those days.
ALLEN: How did you choose the Florida location as your test site?
GUNTER: It suspect there were other reasons. I think we wanted to do an East Coast opening. I think HBO liked that. For some reason they didn't seem to think there was anything romantic about opening in Yuma, Arizona or San Angelo, Texas. I'm sure that had to be one of the reasons. But it was also the next place that we wanted to open pay television and we were holding the PO for the three-quarter inch playback machines. It was the next launch. We said, "Let's just put it there. Let's don't buy the three-quarter inch machines. If we're going to put it anywhere, let's start it there. If it works there as expected, then we'll replace San Angelo next because Jersey, by that time, had a microwave feed across the Hudson River for HBO. If it works in San Angelo and in Florida, we'll just cut loose the rest of the orders with the supplier, who was Scientific-Atlanta, and let's get them put all around the country in our bigger systems and replace anything that we've been planning there in the form of cassette playback"
ALLEN: Was Scientific-Atlanta your sole source? Nobody else built those?
GUNTER: I don't know if they were the sole source, but they were the logical source. We had background with Scientific-Atlanta in the cable hardware business. We were pretty close to them already and we knew them, liked them, and trusted them. I knew Sid Topol and Jay Levergood very well personally. It was my job to go in there and hammer out a deal for the first ten-meter dish order, which was for seven stations. The first one had to be ready and delivered for the contractor to install and have talking by mid-September for real-time testing. They were the sole source at the time. We cut the deal for the seven stations and got the commitment to have that Florida station on the ground in time to make our announcement come true in late September. Later, we ran into a few glitches with the equipment along the way. Shortly after the first station was seen as a success, Scientific Atlanta was avalanched with orders. It clogged up the delivery channel to the point that I ended up buying an Andrew earth station for our San Angelo system because I was getting a little disgusted with a couple of mechanical problems we had with the dishes and with some of the missed delivery dates. To answer the question, they were, in the beginning, the sole source. Even before the order for seven earth stations was delivered I was already buying Andrew out of Chicago. We then switched between the two depending upon when and where it was.
End Tape 3, Side A
ALLEN: Ken, did you have any particular problems in doing the installation of the earth dish in Florida in so much as nobody had ever done it before?
GUNTER: Well, they had put in other dishes like ours for other industries, perhaps even military. There was experience in that and, of course, the wind loading of a dish that size was no secret to calculate. I would say that the only thing we did down there was advise the contractor, Jackson Communications, to round off high on the concrete base. That, as you know, was a ten meter diameter dish. It was required by the FCC, at the time we filed our application for the construction permit, that a dish aperture be no smaller than nine meters. It just happened that S-A built one that was one meter larger than that and that was, of course, due to the Commission's concern then about orbital spacing of satellites. They later relaxed that to smaller apertures - four and a half or five meters. We were mostly concerned about the large size of that dish. Being in a hurricane zone, we did go to great lengths to be sure that the superstructure and concrete basing were even bigger than calculated. That's the only thing that I would say was unusual or extraordinary about the Florida installation. We probably were not that cautious inland when I look back to Texas, Arizona, California and Washington State. We didn't have any such anxiety about it, but I think I was most nervous about hurricane damage.
ALLEN: Did the fact that the Florida pay was by satellite assist in the sales of it?
GUNTER: What do you mean, just the idea that it was being delivered through a satellite?
ALLEN: And you were getting better signals when subscribing?
GUNTER: Well, I was going to correct it to that. You've added it. That is what really sold. There was an immediate leap in picture quality. The satellite quality was excellent from the first time the people saw it. There were many dignitaries from FCC and government, HBO, our company, and a lot of trade press. AP was even at the opening that night. All remarked at how they were startled by the crispness and clarity of the picture. I think the subscribers immediately after it was turned on in late September began to respond to the improvement in quality. I'm quite certain that without satellites the pay television industry as we know it would not have developed to its present state. I'm not saying that it wouldn't have gotten there, but it would have taken much longer, years and years longer to bring it to the present penetration levels we have now if we had not used real-time satellite transmission from high quality studios such as HBO's in that day and time. If we were still relying on playback in the field, I'm certain that the quality would be higher, but it still wouldn't be as good and it would still be much more clumsy, a lot more expensive, and we wouldn't have as many simultaneous channels.
ALLEN: Who else went up on the satellite besides HBO, once it had been proven?
GUNTER: After that HBO opening, I think that the next thing that was done that had any consequences at all was Ted Turner putting WTBS, his superstation on. That was really where Turner showed more ingenuity than anyone. He was a guy that really conceived what a superstation could be. Of course, it got a UHF station that wasn't paying him that much return on his investment out of, probably, a pretty deep hole. I think Ted and his father before him had never had that much profitability in running the UHF independent. That's really what put him on the map. And, of course, it is what spawned CNN later. Or at least the transmission medium enabled Ted to spawn the idea. I'm certain that Ted is the kind of guy who could sit around and leap from one possibility, and then catalyze the next idea from just his experience of going nationwide with WTBS. I can almost see him saying that the next logical thing would be a twenty-four hour news service. But I believe that it's in that order. I believe that WTBS going superstation was really the next thing. Then CNN followed quickly thereafter. But at about the same time we were starting to see simultaneous plans emerge from people like Showtime and others.
ALLEN: Did you take WTBS as soon as Turner put it up?
GUNTER: Oh, sure. I think that was a quick, easy sell.
ALLEN: That was not a pay channel, right?
GUNTER: No, that was a broadcast station simply relayed by satellite to the national footprint.
ALLEN: What was the next major event in the development of UA-Columbia?
GUNTER: I think San Antonio was our grand finale. We were still very busy developing that large system in San Antonio. You know, San Antonio was the largest we had done. However, in terms of subscribers, New Jersey, Westchester County, and Brookhaven, Long Island has pulled up alongside. They were as high as 175,000 subscribers in our Northeastern group at that time and we didn't reach 200,000 subscribers in San Antonio for several years. But San Antonio was different because it was really kind of a windfall. It was something that hadn't been done in the big markets until then.
You think back on the large cable markets. They were mostly chopped up. Houston was cut up into six different franchises. Dallas-Fort Worth was cut up in little pieces. Even the little incorporated cities on the outskirts of Dallas-Fort Worth were being fanned out to different entities. Chicago, as you know, is highly segmented. Even New York City was two franchises. The boroughs were later in different hands. If you look around the large markets in the United States, very few of them were swept off the table in one fell swoop by a single franchisee. As a matter of fact, I used that in the franchising arguments with the city and the cities surrounding San Antonio. "Don't go out and splinter off into small groups. Houston made that mistake. Dallas made that mistake. The same mistake was made in El Paso and Chicago. Don't do it here. Let's build you an integrated communications system" For some reason, they bought that.
ALLEN: Did you have much competition for the franchise?
GUNTER: We had almost an instructed verdict in San Antonio in the early days. The team I assembled there was well-known and well-entrenched politically and knew the right people. We went to the city government and actually said, "We're a top ten MSO. Our engineering headquarters and our major operating center is in San Angelo two hundred miles away. GE came in here from Schenectady and didn't do anything. Check us out. We've got the credentials and we've got the financing in place. Why go through the expense and delay and agony of comparative hearing?" In all honesty, we believe that was the best for the company and we were prepared to put our best foot forward and get that franchise. We wanted it. The city government, with the help of our local representatives, believed that was the best. That was in late '77 and early '78, when I made the first presentation to the city council and even added to it the statement that to put our money where our mouth is, we want to open up with a good rate structure here and we want to guarantee that rate for five years. That was just a demonstration of our intentions and our good will.
I think things like that, in those days, were taken seriously by a city government. There was not nearly as much cynicism in the late '70s. All of the franchising excesses, the misrepresentations, lies and suspicions of the city governments that they weren't getting the best deal didn't start until the last phase of franchising in the early '80s. That's when all of that really happened. It was tragic, in a way.
ALLEN: So, in fact, you didn't have any competition?
GUNTER: We did, ultimately, have competition. In the spring of 1978 ironically, in New Orleans where we had announced the HBO UA-Columbia satellite venture three years earlier at the New Orleans show, Storer Broadcasting made an announcement that they had just earmarked $100,000,000 for cable television expansion into larger markets because the rules had been limbered up and made the larger markets feasible. It also so happens that a fellow by the name of Bill Michaels, who was Chairman of Storer, lived in San Antonio at one time. He understood from friends and former acquaintances in San Antonio that there was a major franchising effort underway there. They didn't take a week after that announcement in New Orleans before they showed up in San Antonio and eventually asked for a hearing in front of city council. They said, "Look, this is silly. You have one company in here and nobody else is even second guessing them. Now, UA-Columbia is a fine company and we agree to that. But we're a fine company. We know something about cable. We think we ought to be heard. We think it's really not in the public interest here not to let us at least come in and show you what we would propose and what we would charge." Of course, following our proposal it was easy to snipe and second guess at what we had already said and the rate structure we had already proposed and guaranteed for five years. So Storer did, indeed, do that. I don't blame them for trying. They came damn close to upending us. The city council of San Antonio and the surrounding towns require three readings to finally approve and adopt a franchise ordinance. The city government, politically speaking, was really hard pressed to tell Storer that they didn't want to hear their pitch. So they allowed them to come in. We had already been voted on for two consecutive rounds and approved and then Storer came in and they were voted on for two rounds and approved. I think they came for political reasons. The council then had to make that third reading and that was the deciding reading. So in early September after several appearances by both our company and theirs, the council agreed to have its third reading and we won eight to three. Once we got the city council of San Antonio to approve us, it was really rather easy to sweep the table on the others.
ALLEN: The others were just sitting back waiting to see what happened?
GUNTER: The others were sitting back waiting except for seven cities out near Randolph Air Force Base. Seven of those small, incorporated cities I had managed to franchise. The rest were waiting to see what happened in downtown San Antonio. We had attended to all of those, made full presentations and they were in various stages of approval, but I do believe they all held off until San Antonio acted.
ALLEN: Did you run into any different kinds of problems because it was a city the size of San Antonio than some of the other systems that you had built?
GUNTER: Oh, yes. Let's go back to my statement earlier where I said that the other major markets had been highly segmented, mostly for political reasons. To appease various factions in town that had political clout the city governments would often, Houston is a prime example of that, where they have several applicants that had political prowess, they didn't want to give it to one. They didn't want to face the others and say, "No." So they just chopped the pie up into four, five or six pieces and gave it to the strongest of the applicants. Well, that was more than a political decision. That's an engineering decision. You take something as broad and flat and laid out as Houston, Texas and try to wire that with the technology available to us in the mid to late '70s or even early '80s, you had a real challenge on your hands.
We had the same challenge on a somewhat reduced basis and scale in San Antonio. They didn't segment that. We not only got the seventeen cities surrounding and downtown San Antonio, we got Bexar County. That presented an engineering challenge to my San Angelo group. There was, as you know then only early discussion of application of fiber optics in our industry. Irving Kahn was running around talking about the future of fiber but there weren't that many engineers that I knew buying that. It just really wasn't ready. It was a little early.
So we then had to decide how we would take something involving so many square miles of territory such as San Antonio and feed it with common signals because we had made the representations about the integrated telecommunications systems to all of these cities. To live up to that we had to gather these signals with an earth station location outside of San Antonio or at the edge of San Antonio. One of our cities was named Universal City, very close to Randolph Air Force Base. It happened that the frequency coordination for the downlink frequencies for the earth station narrowed out kind of in that area so we chose that as our downlink location. We had to microwave those down to a downtown bank building in San Antonio and from there we had to spoke out in eight cardinal headings to have sub-headends for the distribution. There was no way with the technology of 1978 that we could have had a thirty-five channel system with trunk links emanating from downtown and feeding distribution in ten-mile radiuses.
So we decided to build as far as the cascade depths would safely take us. Around twenty trunk stations, by the way, out from the downtown bank building where we chose the headend location. Then on the top of that bank building, I elected to use local distribution microwave, Hughes AML, to send out our entire package of signals, off-the-air combined with satellite reception plus the locally inserted alpha-numeric access channels and our local studio. We sent those out by seven spokes of this AML multi-channel microwave to sub-headends around the main loop surrounding the town. From that point we directed our trunk design back towards town to meet the tips of the trunks coming outward at about the same cascade depth and then left in the opposite direction going out from the center of town with twenty more amplifiers.
In that particular time, that covered almost everything that we could see that could be covered in the next five to eight years. If technology had not changed somewhat and if we had retained ownership, we would have had the problem of establishing new headends and earth stations out in the county. It just happened that fiber optics, in that next decade, turned the corner and became a realistic technology for this sort of leapfrogging. We could have used that for the arterial growth routes. That was something that we had not done and even the present owner has not done. If he has to do it at least now he has fiber optics, which we didn't have to work with.
ALLEN: How long did it take you to build San Antonio?
GUNTER: We built San Antonio at an amazing clip. We were completing eighty and ninety miles of plant a month. It was a twenty-five hundred mile plus project and we had represented to the city governments that we would be through within thirty-six months. We made the target.
ALLEN: I imagine there was some competition from some of the smaller towns saying, "Me next. Me first. Me first."
GUNTER: Yes, there really was. However, most of them understood. It had been presented to the city governments that in the policy of the system, the architecture required certain sequential building to get from one place to the next in time; therefore, there was a lot of clamoring for it. However, that's a good problem to have. One of the greatest things in the world in being a cable operator is having to put out the fires of enthusiasm of prospective business. People stop you in coffee shops and even stop you in the street when you're standing by one of your trucks and say, "When are you going to be here? Just write my name down and hook it up when you get behind my house, will you?" I like to go to those kinds of meetings, even at city halls, and take that kind of heat. Of course, we will respond to it. But of all of the problems that are discussed, the best one is, "When can you get to my house?"
ALLEN: Eighty to ninety miles a month is quite a different rate from when you built San Angelo.
GUNTER: Oh, Lord. We could have built San Angelo in two months at that rate. Very few companies have obtained that kind of construction and it was not thrown together. It was a good quality plant.
ALLEN: Did it sell pretty well?
GUNTER: Yes. We hit the 50 percent mark on basic penetration rather easily, almost by default. It went on up to the mid-'60s rather rapidly. As I said earlier, the pay penetration there was just two channels, HBO and Showtime, peaked at 170 percent. I would say that San Antonio was a tailor-made market. Probably a market that was more receptive to cable in view of five local stations than any other market I've ever seen. One of those five stations was an ethnic station. It was a Mexican language station. The other three were networks and PBS. But I don't really count it as a full five station market for that reason, since one was ethnic, but, nevertheless, half of San Antonio, roughly, is Mexican surname.
ALLEN: Any idea why San Antonio was so cable ready?
GUNTER: I don't know. I don't think I can really answer that with certainty. I possibly may have to eat my words when I said earlier how we all felt in the early days of cable that making a beeline for the affluent sections of town was the thing to do. We learned, not too many years after I began in this business, the more of a middle or lower-middle to blue-collar class of people you have in a town, the better cable will do. Actually, cable is not something for the rich man. It's just something he wants when he wants it. But it really is the greatest bargain in the household of a person with a limited income. San Antonio tends to have a higher percentage of that because of the higher Mexican population. It's a nice town. It also has its own blue-noses. But still, probably, it jumped out at the cable opportunity of entertainment as a good buy because they had that higher percentage of the lower income people. As I said earlier, we guaranteed lower rates there for five years as a gesture of thanks and trust to the city government that would have considered giving us a franchise without a comparative hearing. They would have done so had Storer not forced them into it politically. They still gave us the franchise. So we had low rates there. HBO and Showtime were $7 apiece under that plan. Basic cable was $8.50 for thirty-five channels, guaranteed.
ALLEN: Was that the first thirty-five channel system that you had built?
GUNTER: No, we had others approaching that bandwidth. I don't think that was the first. See, the New Jersey stuff was being built to that spec even before we began San Antonio. About this time, we were also applying in the so-called Area 9 of Connecticut for a region around Stamford, Westport and Greenwich, Southern Connecticut along both sides of 1-95. Along that area. We did pretty well in that competition. I think we came pretty close to winning it. But I think ultimately Charles Dolan won that one with Cablevision Systems.
One of the reasons I think we came out second best in that contest is because I was conservative in engineering. I did not want to promise that we would build a full 400 MHz system. 400 MHz bandwidth had just become available. It really hadn't been field tested. We could extrapolate from the old and predict a lot of its behavior, but I wasn't prepared to stake my reputation on it, working as they expected it to when they granted the franchise. I tended to hedge my bet on that. I think that the PUCA sensed that we were tentative about 400 MHz. They wanted it. It had been sold to them as the wave of the future. So they granted it to whomever they thought was the best applicant who would promise it.
The same thing was happening in San Antonio and New Jersey. We were reaching out to the 300 and 330 MHz level with existing hardware and doing it with great confidence. But we did not build 400 even in 1978, 1979 or 1980 in San Antonio or New Jersey. But we did have other things approaching the thirty-five channel capacity.
ALLEN: Was your concern well founded?
GUNTER: I believe it was. I believe, in retrospect, I was justified in being conservative. I'm happy I was. We had some lessons to learn with the four hundred. As a matter of fact, look at the economics of buying it. We were spending, in the late '70s through '82, money for 300 MHz amplifiers that really were giving us all the channel capacity that we needed and had channels to place on those systems. Those amplifiers had a useful life of fifteen plus years. Most cable equipment that I've had experience with had that kind of a useful life, except some amplifiers I built in my shop. But, if I had waited until mid-'80s to buy 400 MHz when it was safe and fully tested and developed, you would have been buying a technology that, even then, was on the way to functional obsolescence way before its time. We passed from 330 MHz bandwidths in our cable hardware, through 400 on the way to 500 and 550 MHz like it was standing still. Therefore, the MHz crowd never ever realized the intended useful life of that hardware before they were already outclassed by the 550 crowd which we have today.
I had an emotional reason in New Jersey, San Antonio and in the franchise competition for Connecticut Area 9 for hedging my bet on the four hundred. I truly believed that we were sticking our neck out where it didn't belong. Those were the early days of the franchising lies and promises we all told to see who could out-lie who and get the franchise. I just didn't want to be a party to that. We really didn't need that kind of channel capacity. I would have much rather put in the tried and proven three hundred thirty capacity of its day, spend less money doing it, and waited for the 5 or 550 MHz days, which we found ourselves in less than a decade later. And then put in the 5 or 550, and, maybe even at this point, waited until we had fiber.
In other words, I'm saying, my company to begin with, and this industry at large, would have fared just as well if it hadn't told all the lies and promised all the channel capacities and proceeded along at a more orderly pace on both programming and distribution channel capacity and let these things happen in a more natural course. It was all accelerated and forced down our throats by the kick-sprint finish of the last few franchises that were available in the '80s. That did things to programming and technology in this business that I think were injurious and that were not sensible and orderly.
ALLEN: You served as a director-at-large on the NCTA Board. When was this?
GUNTER: I shied away from NCTA Board for many years in my early days. I thought that the NCTA Board was, and indeed it's true, that the NCTA tended to be kind of a club in the early days. It was a bunch of the earlier fellows, some of whom started before me, and some who may have started after. But they tended to be cliquish to me and I was still not only busy working with Rosencrans doing what we were doing, but I had my head down and my elbows up and I didn't have a lot of time to play political games. I didn't cultivate that crowd. Most of them were very productive and good leaders in this industry. I don't mean to say that they didn't do a good job for the industry. I just mean to say that I didn't relate to their habits and patterns of the time. So it was not until late '77 that I felt that we were big enough and paid enough dues that we needed representation on the NCTA Board. I ran and was elected and I think I served six or seven consecutive years from 1977 to 1983.
The first year I was on the Board there was more than just the "good old boy" faction on the Board that I didn't identify with in the earlier years. There was little or no engineering representation on the board of directors. It was entirely management, financial, political personalities. I was probably the first recognized technical person that was on the Board. As such, they were rather quick to single me out and ask me to chair the Engineering Committee, which I did. I served a really unprecedented three consecutive years. At that time each board Chairman appointed his own Committee Chairmen for his one year term. So the next three asked me to do it. I was happy to do it and I learned a lot. I think it was in an important time in the industry when that happened. It was fun.
ALLEN: What were some of the kinds of issues that you wrestled with on the Engineering Committee?
GUNTER: The issues, in those days, of course, were bandwidth, reliability, and the plant protection. Jim Stilwell, I recall, was one of the [most] vociferous spokesmen at that time, about grounding and about national safety code issues. Our industry was suddenly getting big enough and visible enough that it needed to look more professional. The cable industry grew up in a lot of TV and two-way radio shops like mine. We strung a lot of clothesline and baling wire up and down the streets and alleyways of hundreds of American towns before we began to really come out of the amateurish mold and start to look like we were going to do things that would deserve the respect of engineering and financial professionals. I believe it was around the late '70s when those issues were beginning to be brought into focus. The NCTA wanted to see those things identified, sorted out, and dealt with. There was a conscious drive within the NCTA from the staff and the Board to make this industry look more like a utility, like a baby Bell, is a fair way to describe it. I think my Committee, for three years and thereafter, did then and has continued to put the professional pants on the technology side of this business.
ALLEN: Who else was serving on the Committee with you at that time?
GUNTER: Frank Bias, Jim Stilwell. There were probably only about fifteen of us at that time. It's very large now, by the way. Someone, maybe Robert Schmidt, the then President of NCTA, or maybe Daniel Aaron, the Chairman the first year I was on the Board, decided that all the NCTA Committees were out of hand with too many back-slappers and good old boys instead of working groups. The Committees had grown too large and ponderous. So he invoked a rule that said, "No NCTA Committee could have more than 12 members plus its' Chairman." But they were the heavyweights in the business, names you'll hear over and over today.
NCTA was also a little bit of a turning point in that that's where, as Chairman of the Engineering Committee; I spent a lot of time down the street at the FCC.
When I was in town I was talking to the Chairman and the staff there about cable matters. I met a fellow who was Chairman Richard Wiley's engineering advisor. He was the EE at the FCC who came in and sat down with Wiley and explained all the new technologies to him so that when it was discussed at the Commission level, Wiley was fully conversant with it. And indeed, this person would even go to some of those meetings and explain it to the full Commission at times.
This was a guy named Robert Luff. At the time I was chairing the Engineering Committee, almost the first of the three years I did that. We had a turnover of engineering staff in NCTA that resulted in some weaknesses that we wanted to bridge. The Board encouraged me to go out and find a new VP of engineering for NCTA. Luff and I had become friends and had immediate good chemistry for each other back during my visits to the Commission. I encouraged Bob Luff to come over and become a Vice President of engineering of NCTA. We had a very good relationship there. As happens quite often in trade associations after a few years there, they tend to migrate out of the trade association into the industry. That's what happened with Luff. After about three years, I brought him early in 1980 to San Angelo to become our VP engineering at UA-Columbia. Luff has gone on to do great things since then. He has been a very strong and able spokesman and, I believe, President several times of SCTE. He, too, has been Chairman of the Engineering Committee. He has won the outstanding engineers award given annually by NCTA. I won that one year in 1980. That was a great honor. Luff is now, I would say, one of the top leaders of the engineering community in our business. He worked as the VP of science and technology for Jones Intercable, and is now at Scientific-Atlanta.
So through that Chairmanship I made associations like that that I believe changed the course of my company and my personal life.
ALLEN: Was the role of the Committee to make recommendations to the board about technical standards?
ALLEN: What were some of the recommendations that were made during the three years that you were the Chairman?
GUNTER: We were charged with helping the industry develop standards. I mean things as everyday as symbology for construction maps. They were in a state of disarray in the '60s and up through the mid-'70s. We brought our standard symbology so that all CATV maps that you pick up anywhere in the country read the same. The amplifier symbol and the power supply symbol are the same. They were just whatever somebody thought up before that. We also drafted, wrote and published cable system maintenance practices, safety practices, headend and earth station practices for the membership of NCTA. Rather than recommending a lot of things to the Board directly, the Board usually asked the Committee itself to enunciate for it something of perhaps a political nature, but having a technological basis or background. We would develop those arguments with the NCTA board and staff and get it ratified by the Board to carry it to the Hill or the FCC.
ALLEN: Have you got a couple of examples?
GUNTER: Well some of those things involved the pole attachment formulas. We also got involved in the small aperture earth station arguments, which finally led to reducing those big aperture dishes that first went in in 1975 down to the four and a half meter limit where they now are. They evolved in several forms, but I think during the late '70s, early '80s, the best set of technical standards which the Board adopted and eventually recommended to the FCC to be incorporated into rules for the industry, came from the Committee. A lot of that was fed to the FCC through the pipeline of the NCTA and by the Engineering Committee and its members talking to the FCC. I believe the Engineering Committee along with the Board had certain influence on some of the lawmakers on the Hill where there was an engineering topic at stake.
It may be somewhat arrogant of me, but I like to think that in the late '70s and early '80s, with my help and that of Bob Luff as VP of engineering of NCTA, the staff and the Board really began to take the engineering camp in this industry seriously. Engineers tend to be ignored in all industries, not just cable, but in the early years of all industries, certainly in power and telco. I'm aware of that because I read some of that history. Engineers tend to be treated as vassals. You just trot them out when you need them and then send them back to the back room to play with their soldering irons and drafting tools when you don't want them around bothering the managers. You certainly don't bring them into the board room very often. That's been changed. Engineers have come into their own in this business, and I believe that Bob Luff and NCTA, SCTE and I, to some extent, had a lot to do with bringing the respectability and acceptance of engineers right up alongside managers in this business. It all happened in the late '70s early '80s. I think that because the Engineering Committee and Bob Luff and I were able to do a lot about building that awareness at the board level and at the highest level of the staff at NCTA, the business is far more than financial and market driven. It is a high-tech business that has to be operated as such and the personalities that make those technical decisions and policies have to be a part of top management.
End of Tape 3, Side B
ALLEN: Now let's return, Ken, to the development of UA-Columbia. At the time you were building San Antonio at such a rate, were you also building anywhere else, or was San Antonio pretty much the focus?
GUNTER: Concurrently with San Antonio, the Northeastern group was still advancing rapidly. They were almost the same size for a long time. They were the two high growth areas of the company. We had normal expansion in most of our other markets. Everything besides San Antonio and New Jersey was really below the top one hundred market size. Their growths were maybe in the 2 percent a year range.
ALLEN: It was about this time, then, when you moved back into another merger?
GUNTER: Yes. As you recall, the major milestones in the company were the merger of International and Columbia in 1969 and the stock merger of UA and Columbia Cable Systems in January of 1973. Then with the internal growth of the company we had become a success story financially and there were Board members, principally from the Northeast, but especially our Chairman David Strassler, who had begun to believe that by 1980 the industry could be peaking. This was due to several factors that were afoot in the industry and the world at the time. It was as much a view of the world as it was the industry. But these people were experienced and sophisticated financial managers and investment oriented people who began to think that this thing could be reaching a plateau. It had something to do with just coming out of the Nixon years and 22 percent prime rate experiences and other frights that we had had. In any event, there was momentum building on the UA-Columbia board to look for a buyer and to cash in chips for those of the public who might want to sell. It wasn't said that we would sell all or nothing. It was just said that there were significant numbers of the anxious insiders, and remember that the insiders were still the predominant shareholders. Even as late as 1980 the public float in UA-Columbia was probably not more than 30 percent. So Strassler, with the consent of the board, retained an investment banker to at least assist in the search for potential buyers of all or part of the company. They rather quickly located a high degree of interest in Knight-Ridder Broadcasting and Dow Jones Publishing.
ALLEN: These are two separate entities?
GUNTER: They were at the time. Dow Jones and Knight-Ridder, however, had friendly top brass who liked each other's styles. Dow Jones, as the publisher of The Wall Street Journal and Barron's, doesn't need much introduction here. Knight-Ridder really doesn't, either. They are a newspaper and broadcasting chain. They both, in visits with each other, had decided that they had similar reasons for needing to be in the cable business. This is, again, a somewhat later resurgence of that question that I saw as early as 1965 and '70 of newspapermen and broadcasters wondering if they shouldn't be getting into cable. Much as United Artists had wondered, as theater operators, if they shouldn't be in cable to cover their flanks. Not just as an opportunity for growth but as a possible offset of intrusion into their classical businesses by cable.
So Knight-Ridder and Dow Jones had heard about this opportunity and had talked about some others but just never had gotten serious. They wanted to go fifty-fifty and form a third company that would be invested only in cable properties. They really became inflamed about the UA-Columbia opportunity very rapidly and came in with an offer of $75 a share for shares that had been selling, in the last few months in our company on open market, at probably $30, $32 a share. Our board's ears got extremely pointed, of course. They had not really expected that anyone would come in and place that kind of value on the company, although it was not a big surprise that the offered price was that much larger than our trading price. This was, indeed, part of the pessimism of the Board and its Chairman, Strassler. Public cable companies, then and traditionally up to date, have traded at rather severe discounts off their private market value. We didn't like that either. We didn't understand fully that we would have cash flows and other indices of value that when applied to the private market system sale formula would make us have a per share value, including debt, of maybe $60 a share. And the market is buying us and trading us every day on Wall Street at $35, for whatever reasons. Maybe because we didn't look like the right kind of company to be on a broker's desk. They liked ten to one PE ratios to recommend to their clients and didn't understand the cash flow nature and capital intensity of our business. So for whatever reason, for many years we had seen that kind of public company discounting of our shares. We expected to be bid for at a much higher than Wall Street market price, but we weren't prepared for $75 a share. So the Board was moving rather quickly to negotiate on this offer and close it. It became clear that, at that price, we would even have fiduciary problems as board members if we didn't approve it because the public would have every right to criticize us and ask, "Why?" There were insiders who wanted to take their chips off the table at that kind of full liquidation value.
The bug in the rug was United Artists. The five United Artists directors representing 27 percent of our common stock said, "We don't like to pay capital gains tax. We love entertainment and the cable television business. We don't want to sell. You people sell. We want to stay in." We said, "Well, then, we'll talk to Knight-Ridder and Dow Jones. If they'll leave you in for your shares, swell. We'll just cash the rest of us out and you stay." We went to Knight-Ridder and Dow Jones knowing before we went that it probably wouldn't work but we asked the question. They said, "No, we don't have anything particularly against UA, but, this is our deal. We've agreed to a fifty-fifty consortium and we don't want others in the deal." When we announced it to UA they promptly filed a lawsuit to block the sale. Knight-Ridder and Dow Jones didn't know exactly what to do but said, "Well, we'll wait this out. We'll see if this storm blows itself out and you people deal with them any way you have to because we, of course, intend to fight that. We felt that they should not be allowed, as 27 percent, to block a lucrative sale of the company's shares at that price and we intend to fight."
At the same time there were still negotiations for peace and we were talking to the UA people about, "If they won't let you do this and join their consortium, what do you have in mind? We can't spend the next six months to a year in lawsuits with internal factions of the board because we may even get sued by a group of external public shareholders." They said, "Well, we just may get our own investment banker to go hunt for another buyer. We may buy up to a higher level and meet someone else mid-way and we'll just take all of you out. We'll stay." They did, indeed, do that. They then retained an investment banker who did a lot of shopping for them. They finally located a guy named Ted Rogers from Toronto, who was the largest Canadian cable operator at the time, I believe still would be the largest Canadian cable operator, and Rogers, through several weeks of discussion with UA and the investment banker, decided that he would come in for an even-Steven deal on voting control if UA would buy from 27 to 49 percent. He insisted he had to buy 51 percent, even though they would balance voting controls. He had to do that so he could borrow the money from the Toronto Dominion to do the deal. Only by owning 51 percent could he consolidate all of the American company's numbers into his Canadian numbers and justify the line of credit. UA agreed to that.
ALLEN: Was this at $75 a share?
GUNTER: Well yes, they wanted to do it at $75 a share. But the minute this deal was hatched, we realized we had a bidding war. Knight-Ridder Dow Jones raised their offer to, I believe, $80. The UA-Rogers consortium raised theirs to $85. It quickly ratcheted up to the $80, $85 level and then Knight-Ridder Dow Jones said, "Hey, this looks like this could go on forever, count us out." Because Rogers-UA, then, had tendered a $90 offer for stock that was selling for $32 on the marketplace. We knew what we had to do. The Board knew what it had to do. Of course, the insiders who were clamoring for us to liquidate or make possible a liquidation for those who wanted to sell were thrilled, Strassler included.
Now, in the meantime, UA had approached Rosencrans and me and said, "Look, we've done what we wanted to do in the sense that we struck what we believe is a good business deal, but we don't know anything about the cable business. We know Ted Rogers is a well-known Canadian cable man but we want you to stick around and help us run the company." So we signed a five-year contract, Rosencrans and I, to stay on. This was all taking place in 1980 and into mid-1981. It started about the fall of '80, really, and came to a head and culminated in the Rogers-UA deal in the summer of '81. It was consummated and the checks were written to the public shareholders in November of '81.
Immediately thereafter, meetings were held between UA and the Rogers boards. We formed our new board of directors and, at least lip service was paid in those days, to leaving the American management in place. But I think that it was apparent to Bob Rosencrans and me that the Canadians would soon become heavy-handed. They were very bright businessmen. Ted Rogers is a lawyer by education who, I believe, never practiced law but thinks as a lawyer. He is a very bright man intellectually and a consummate dealmaker. But he could not, and time proved, would not keep his fingers out of day-to-day management of the company and leave in place the American management that had brought the company to where it was.
Arguments erupted almost immediately between Rosencrans and me, and Rogers and the Canadian top management. In the early days, this did not really include the United Artists owners and directors at the board level. They were a little amazed that there was friction so early and tried to encourage both sides to calm down but it just didn't work. There was just too much interference with the Canadian style in matters. We knew that things were not going to work if we did not use the tried and true methods that we had used to build the company.
ALLEN: What were some of the issues?
GUNTER: One of the things that came up was that I'm sure Rogers would have been aggressive in multiplying services too rapidly. He was an aggressive marketer. However, he had borrowed a lot of money. In fact, he was sloshing to his eyebrows in leverage when he got through doing the UA-Columbia deal. He had his own debt to assimilate related to his Canadian properties and acquisitions along with this one. But after the Rogers-UA deal was done he was leveraged to the hilt. I think he really had pressure to generate cash flow and generate it quickly. Rosencrans and I believed that he was driving us in our bigger properties into a multi-tiering of pay and decisions on hardware which I didn't like. I had told you earlier that I was not happy with set-top security hardware until about this time, early '80s. We did not really want to get away from our negative traps in a lot of our big markets. They were secure, they were manageable, and they were easily audited. We trusted them. We just weren't ready to spend millions of dollars replacing that technology with electronic set-top security just because it could be addressed and would manage several more channels than the two or three pays we had been running. Rogers wanted to get immediately into as many maxis, as many offerings, and as many mixes and combinations to use in marketing schemes as he could. He needed to really build up basic and pay penetration rapidly and start milking that cash flow to service his debt.
There were other disputes. Some of them stylistic, some of them even personal, about the way he browbeat, and, in my view, abused our top people. We had over the years assembled some wonderful cable managers and engineers. We had adopted a decentralized management style that trusted and even drew from the system level of the company up through the divisions for policy making. It was run like one big, happy family with a lot of people in shirt sleeves who loved what they did and were very company-oriented, loyal employees. The Rogers Company, on the other hand, was somewhat of a snake pit in terms of people. There was a lot of jockeying for position in the ranks of their management. I think they were somewhat distrustful of the ease with which our people spoke and exchanged ideas. They were, I think the word I use is correct, simply heavy-handed with good people who did not need heavy hands. And to us it was restrictive and constrictive. It didn't let our people fly and operate at the levels that they were capable of operating the company. It had a suffocating effect on us, I think. Maybe that's a better word than restrictive even. Rosencrans and I debated that issue with Ted Rogers many times and tried to get him to relent, ease off. Indeed, let us report to him and let us handle our own troops. It just didn't work.
ALLEN: He was in Toronto, Rosencrans was in Connecticut...
GUNTER: ...and I'm in San Angelo. I had moved to San Antonio by that time. It was such a big project, such a big chip, that I sold my home in San Angelo and moved there. I didn't close the offices. We kept our divisional and corporate people in San Angelo with that system. But we all commuted back and forth a lot. I had a company apartment in San Antonio and finally bought a home there. This was all about the time that the mushroom cloud was building around the Rogers-UA and Rosencrans-GUNTER: arguments.
It wasn't more than about a year that the arguments began between Rogers, Rosencrans and me that UA itself began to argue with the Canadian board members and with Rogers about business issues, policy issues, and financial strategy. They were soon at each other's throats. In the merger agreement, there was a divorce clause which called for either Rogers or UA to be allowed, as the dissenting party, to call for a bust up. Then that would force the dissident party who had called for the bust to divide the company's assets into two balanced lists and let the non-dissident pick the half he wanted. Like two kids and one apple, you let one kid cut the apple, but the other one gets to pick his half. That keeps everyone real honest. That's exactly what Rosencrans and I had to do. UA called for the divorce. Bob Rosencrans and I had to divide the company into two balanced lists, not only financially and from the standpoint of value, but to some extent respecting geography. We were scattered from Washington to Florida and Brookhaven, Long Island to El Centro, California on the Mexican border. It's a pretty big challenge. Because we had the management contracts and because we knew that UA had already spoken to us and said, "When this bust occurs, please stay with us because now we don't have anyone that knows cable anymore. But we've got immense value and will you and Gunter stay?" We said, "Yeah, we'll stay. We love the company. We want to stay here." That encouraged them to proceed with the bust-up.
Bob and I took the list and decided that it had to be broken along the large market systems. We put in New Jersey, Westchester, and Brookhaven at the top of one list. We put then San Antonio at the top of the other list and began to gerrymander the company between the two, balancing subscribers and values and geography the best we could. But there was a prejudice that crept into that. It was an interesting one.
Rosencrans was always very proud of San Antonio and loved it, but it was basically my brainchild and something that I developed from San Angelo two hundred miles away. But rightfully so, New Jersey and Westchester County, New York was his brainchild and baby. He developed it from Westport, Connecticut. It was clear that I wanted to keep the San Antonio list. Rosencrans would have certainly taken the San Antonio list but he would have preferred to have kept the New Jersey list. So in filling out and flushing out those two lists beneath those two properties, which we both had conflicting geographical and emotional reactions to, we ended up kind of along the Mason-Dixon Line. We rationalized that division, not because of Bob's Eastern connections with New Jersey or my Texas connections with San Antonio, but because the best value and our brightest, shining star was really San Antonio. Even Bob was gravitating towards the idea of putting the systems we really wanted with the San Antonio list and putting New Jersey at the other side and the Northwest and Aspen, and anything else that we could put in there that worked with the North, although we did leave the East Coast alone. We put the Midwest, the Tennessee group, Ft. Smith Arkansas and others, mostly the ones we thought would appeal to a man from Toronto who already owned Syracuse and half of Minneapolis and half of Portland, Oregon.
Obviously, a man from Canada who owns those northern properties is going to want our New Jersey group. Well, he had a month or two to make his mind up. He sent all the troops out and did his due diligence and immediately did a doubling back and picked the San Antonio list. Shocked us all. So there went my old San Angelo system, San Antonio, Laredo, Alamogordo, New Mexico, Yuma, Arizona, EI Centro, California, some of Bob's oldest systems and some of my oldest systems. As LBJ used to say, "Well, there goes the neighborhood!" So UA then inherited the Jersey group: Westchester, Brookhaven, some of their old systems, Aspen, Colorado, my old Vero Beach- Fort Pierce system, which we had to use to balance the country over on the East Side, even though it was on the southern side of the country. Bob and I were once more running those. The date of the consummation of the Rogers-UA deal was November of 1981. This divorce was called for and done by mid-late '83.
ALLEN: Didn't last long.
GUNTER: Didn't last long. We then, as we said, joined the UA group with a management contract. We loved the business and we loved some of our old properties we had brought along and developed but we also talked, in those days, that we didn't have the same feeling for the company. We were just "hired guns" now. They paid us well, they let us alone because they respected our cable knowledge, but we were just hired guns. Our equity was gone. It changes your whole view. Your whole entrepreneurial view is modified by that. I didn't believe it until it happened but it's changed forever when you are no longer a shareholder. We did a good job and we loved what we did, but there is something missing. But still we were out fishing for deals and UA was encouraging us to look for deals. They even had us out looking for land mobile radio deals and thinking that we might get into something involving land mobile like cellular. In fact, we located a deal like that but we just never did it because it was too wormy and complicated.
In the meantime, Rosencrans and I were looking for other things. Something comes up with a guy named Bob Wright, who used to be at Cox Cable and is now at General Electric Corporate. He heads up the cable operations for GE Cab1evision, the old franchise holder in San Antonio whom I thought I would never meet again.
ALLEN: What goes around comes around.
GUNTER: That's right. That it does. They wanted to do a deal and focus on some other things. I think at the time Bob Wright was headed for bigger and better things at GE Corporate and was moving along. He may have been their guiding light in cable, as they saw it. For several reasons they wanted to either sell out or sell most of their systems and keep some stock. That they did. We engineered a deal with them. We were both big companies. I mean, it was really a chance to do a classy deal. We did, indeed, negotiate and put that deal to bed about the time Bob Wright moved on to GE Credit Corp. Another guy from the executive suite took over his authority in the cable area.
Then one of the most unexpected things in my career happened. Bob Rosencrans was at a resort somewhere in the Northeast and got a phone call from Marshall Naify, the Chairman of the board of United Artists and he fired Bob. This was just shortly after we had announced and put to bed the GE deal. There was no relationship. UA loved the GE deal. It was one of the things that enabled them to sell later to the Danie1s-TCI-United crowd and their current combo at the value level that they were able to command. No one really knows why that happened. Why they called Rosencrans, one of the nicest men in the industry, certainly one of the classiest and genteel fellows you'll ever meet. Why that phone call was made no one knows. I suspect it was made because the cable arm of the theater company was suddenly outgrowing its master.
Even the investment bankers would write research papers about UA in those days and note that the cable arm was suddenly approaching or exceeding the theater, the traditional theater side of the company, in revenues and in profits and in cash flow. I think there was to some extent, an unspoken battle of egos, and perhaps even a fear at some point that Rosencrans and I would be the tail wagging the dog and do some other kind of deal which would force their hand at something they didn't want to do. Maybe even leading up to our making a deal which would cause them to find themselves in a sell position like the UA Columbia/Knight-Ridder-Dow Jones event wherein they almost were forced to sell their 27 percent of the company into a deal they didn't want to acknowledge. I think there was some of that. This is industry history that we're talking about and you're free to use it or not, but I'm saying to what extent we edit this, I don't know. It was an exciting, tumultuous period in everyone's career and a sad time because there was a mass exodus of the people who stayed with the Rogers half. Our people and the style of the Rogers people, once they were in full command of that half of the company, didn't fit. That exodus didn't last a year. Ninety percent of our good people were flushed out and gone like a covey of quail in all directions.
ALLEN: When did Rosencrans get the telephone call?
GUNTER: April of '84.
ALLEN: So there was still another year, year and a half, in your five year management agreement?
GUNTER: Yes. September, 1985 is when that contract expired. They paid Rosencrans off, but they wouldn't pay me and run me off. I resigned from their board I was so incensed by what they had done to Bob Rosencrans. I think, at the time, they had not consummated the GE merger. It was a done deal in terms of letters of intent and the numbers were put to bed but it wasn't done. I truly believe, and they took a great chance in firing Bob Rosencrans two or three months before that consummation. That they thought they could get away and squeak through the deal and indulge their emotional need to fire Bob and still not blow the GE deal out of the tub by keeping me around. I think that if they had gone for both Bob and me at the same time, that GE would have walked away because they would have said, for one thing, "What could be going on in this wonderful company we're buying?" They were staying in bed with the deal. They didn't get paid off. They kept some stock in the company which UA had to payoff over a period with a formula of puts that GE had. They could put the stock to UA after a period of time and force them to buy them down. But for a period of time they had to rely on the UA management team to run UA and their old GE cable system group properly or there would be a diminution of value. That's my theory at least. I think if they had just swept out our top management in one drastic action it would have been the end of the GE deal. They didn't want to kill that deal but they also wanted Rosencrans gone.
So I stayed around. They wouldn't pay me off or let me go. Well, I could have gone; I could have just voided the contract and gone. But they wouldn't have finished paying me what they owed me. So I stayed until September of 1985. Even then I resigned from the Board and told them of my displeasure with the treatment of Bob Rosencrans, and therefore, I was a lame duck that did little or nothing except stay in my company-paid office with my company-paid secretary and cash my pay checks. I had time to think of other things and I already knew I would be joining up with Bob Rosencrans in another venture later. Indeed, in early '85 Bob and I and our old financial VP from Chase Manhattan, a young fellow named Scott Ledbetter, formed our present partnership called Columbia International. I don't know how much detail you want on that. Do you want anything else?
ALLEN: Yes, sure. Keep going.
GUNTER: Columbia International is a limited partnership that was formed as a result of the series of blow-ups between Rogers and UA and our ultimate expulsions from those companies, or our decision to leave, and to stay in the business we knew and loved and thought we could do well in. The name is silly. The name came from merging back the old names of the Rosencrans and Gunter corporations, Columbia and International There is nothing international about our partnership. It operates in five or six states and has no ambition to go off-shore. However, the word Columbia never came from a Hollywood connection of any kind. The word Columbia came from Bob Rosencrans' original acquisitions on both sides of the Columbia River between Washington and Oregon, between Pend1eton, Oregon and Pasco-Kennewick, Washington. That's why it was named that and it was as good a reason as any to keep it.
So Columbia International started out and we, fortunately, had built through the years a lot of good connections and I think a high degree of respect with the New York lenders, insurance and bank lenders. We were pretty well known names in cable by this time. Fortunately we were able to go in and structure debt and equity deals to formulate a limited partnership in which we were general partners. We went out and began to look for acquisitions and we found several just in the nick of time before the cable market momentarily peaked.
We bought some systems, not at fire sale prices, but at good values. We bought Vancouver, Washington. One of our old division managers, Homer Harmon from the old company, had acquired some smaller systems in the South Tahoe area of Nevada, which he had bought personally. He traded those in for a limited partnership stake in the new partnership and is now one of our junior partners on the GP side of the deal. The first deal we actually did was Ann Arbor, Ypsilanti, and Brighton, Michigan, which was a group that we bought from TCI and Daniels. Then came Vancouver, and about the same time, the Nevada group. Then we bought three different acquisitions, a group of systems south of Washington. D.C. and Prince William County, Virginia starting around Quantico Marine Base and arcing around north towards Manassas. Probably, as we acquired those from '85 through '87 or '88, we had some beginning subscriber counts down around 130,000. Those have now grown to 200,000 basics in the five years we've owned them.
Columbia International has really kept some of the principals of the old company together. Bob Rosencrans and I, Scott Ledbetter, Ron Harmon, Homer Harmon's brother, who was the manager of Vero Beach-Fort Pierce for many years and later became the general manager of San Antonio. He and his brother have been division managers of UA-Columbia and then Rogers-UA properties for many years. A fellow named Cal Broussard who came to us from TelePrompTer years ago, managed our Aspen, Colorado system for many years, then moved to our Ft. Smith, Arkansas system, and then came to the assistant manager's position in San Antonio. Now he is the group manager of about half of our present partnership subscribers in Vancouver, Washington and Portland, Oregon. We don't own any of the Portland franchise. That is primarily TCI and Rogers. Of course Rogers sold most of that recently. We have fifteen systems that were built originally by Storer Broadcasting on the west edge of Portland that are centered in Beaverton, Oregon. Those systems and the ones centered around Vancouver just across the Columbia River, represent about half of our 200,000 subscribers. I find it ironic that the Columbia River has always figured into this company. There was no way of knowing when we formed this partnership and called it Columbia International that we would then own systems straddling the Columbia River in Washington and Oregon. That's spooky.
ALLEN: When did you move from San Antonio back to San Angelo?
GUNTER: I moved in September of '87. I was commuting some and starting to fly again with my own airplane in '84 and '85. Ironically, I bought my first airplane from Ted Rogers. We put the airplanes based in San Angelo into the southern list that he picked and he didn't want the airplanes. So I bought one of them back from him personally just to get back and forth to San Angelo. My father passed away at age eighty-four in March of 1985. I had to get back and become active in the management of his estate with my sister, who was then still alive. Then in '87, due to the '86 roll-off and the profitability of oil operations in Texas, the fellow I had sold my home to near San Angelo went broke in the oil business and moved to Kansas and left me with it because I owner financed it. So, happily – it's a home I like - I took it back and still live there and I like it very much. Since September of '87 I've lived there.
ALLEN: What is your major role now in Columbia International?
GUNTER: I have the same title I had with most of the years with UA-Columbia and Rogers-UA, Executive Vice President in charge of a little bit of everything. I still head the engineering department. We have a director of engineering there much like Bob Luff, who was my VP engineering in the old days. They're the day-to-day guys but they report to me and clear engineering policy and directions through me. I guess that might be my greatest strength in some ways because of my family background from retail experience in the early days and the exposure to my father and uncles in Texas. I grew up with a pretty good business acumen that was tempered by that exposure to the family businessmen that I knew on both sides of my family. My mother's kinfolk have some entrepreneurial people that I'm sure influenced me. But having grown up with that background and the engineering and technology background I think maybe what I've done best of all is to translate engineering and technology goals into the language of management. I've been able to take engineering policy and principal into the board room and argue and debate it and even go to bat for it when necessary in terms that financial and management and marketing people understood and accepted. I still do that.
ALLEN: Does Rogers still own San Angelo?
GUNTER: No, no. My old San Angelo system has been sold three times since we owned it last. Four times, really. San Angelo was bought, of course, or acquired by International when my father and I traded our equity in for International stock. International was later acquired with stock which we exchanged when Columbia and Bob Rosencrans came around. Columbia gave UA stock. That wasn't involved in San Angelo. But, then came the Rogers-UA deal where Rogers-UA, an entirely new parent, acquired it. Then came the divorce between Rogers and UA where Rogers acquired it. Then Rogers traded San Angelo for properties belonging to Scott Communications who had, in the interim around '83 during all this upheaval in the company, come in to Bexar County around San Antonio and begun to build scab systems.
End of Tape 4, Side A
GUNTER: You recall that we talked about the aggressive construction schedule that we had promised the city governments there a three year schedule which required an eighty-ninety mile a month build rate. We also had the Bexar County territory surrounding the San Antonio and sixteen other cities. But we had not promised them nor could we in good conscience go to the more rarified areas around these cities and build cable when there was such clamor for the service in the dense areas.
So an opportunist named Scott out of Da1las, Texas came to Bexar County and began to cherry-pick. Build what I just referred to as scab systems, which to us is just an interloper, and build in these territories. We knew they were there. We thought, "Well we'll either buy them out later or we'll overbuild them or we'll do something. But we've got to finish our commitment in San Antonio." So not much was said. Then suddenly we began to finish those commitments and leap out into the county. Then Scott sent one of his lieutenants down to see me. We had lunch and he asked what our intentions were. I said, "Well, my intentions are the same intentions that you've been reading in the newspapers ever since you've been down here. They've been the same for about five years now. We're going to build everything in these cities we have franchises in and we're going to build all of Bexar County." He said, "'Well what about these systems we're building." I said, "Well, name a price or whatever, but we're going to come out into the county as promised. We already have said we would and we now have the franchise to do it. It's also part of my first early commitment that we would build an integrated telecommunications system for the cities and the county and that's what we intend to do." He said, "Well, we've got this investment out here." I said, "Well, you knew we were coming and had franchises when you came in so I presume you expected we would be here some day."
When he first said we had so much power in the bigger cities and why do we want to come out there and interfere with their little, small pickings in the county, I said, "Well you've heard the reasons why and we're coming." He wanted to make a deal. In short, we never made a deal. I just said, "Look, if you'll build to my specifications-because you're building cable facilities out there that are far beneath my physical and electronic specifications- all I can tell you is when I get there we'll pay you a fair market value for them if you want to sell. Otherwise, we'll overbuild you." Well, that never happened
But they filed an anti-trust lawsuit for several million dollars against the company. Of course, Rogers fell heir to that. I think there was little or no merit to the anti-trust suit because they came in there much after the fact. We couldn't have been accused of predatory pricing because we were still, at that time, within the five year voluntary freeze of rates that I had promised the council five years before. Anyway, they filed a suit for whatever nuisance value it had and this is how the deal was made with San Angelo. They wanted San Angelo and Alamogordo. Rogers wanted to clean up the anti-trust action and get them out of the Bexar County territory and integrate it into his San Antonio system he had just inherited. So they made a swap. Scott Cable ended up with San Angelo and Alamogordo, and I think something else that Rogers had. Later, Steve Simmons was forming a private MSO which is now headquartered in Stamford. He was out shopping around and finally made a deal with Scott Cable to take Scott clear out of the cable business and so Simmons owns Scott and San Angelo. It's a long, serpentine story, but that's the way it happened.
ALLEN: You're also involved as a member of the board of directors with TCA Cable?
GUNTER: Yes. I think I joined the TCA board in 1984. That's about three years after they went public in '81. Bob Rogers, the Chairman and principal shareholder of TCA, is an old friend of mine. I probably met Bob around late '59 or early '60, and it's an interesting circle that you repeat over and over in this industry. You recall I said I was buying principally from Jerrold, Entron, and Ameco in the late '50s when my dad finally let me begin to buy a few things besides the homemade amplifiers. It also so happened that Bob Rogers was just starting in the East Texas cable area, acquiring a few little, wide spots in the road. Bob is a very conservative man financially. He always buys everything as cheap as he can and he thought that the cheapest way to buy Entron amplifiers, pressure taps and line splitters was to become an Entron dealer or distributor. So he did, indeed, do that. He went to Hank Diambra and said, "I want to be one of your dealers. Of course, I want to buy for my systems, but also go out and stir you up some business around the state." This is really the first place that I began to hear of Entron. Bob Rogers was knocking on my door wanting to know if I wanted to buy some Entron goods through him. That's how we met about 1959 or '60. We've been friends ever since. Bob, in those days, was just beginning to become a big factor in acquiring some East Texas properties. In the early to mid-'50s, he was a drive-in theater operator who just bought and operated some little outdoor movie screens. He also began to quake in his boots a little bit about this new idea called cable television that might get into the outdoor screen theater business. And, indeed, it did. So to hedge his bet, he was able to pick up a few little cable systems and learn something about the business. He ultimately sold out of his outdoor theater business and concentrated solely on cable. As you probably know, or could find out easily, Bob Rogers has done quite well in cable and now has a public company as respected as any in its size class. I've been on that board since 1984 and enjoyed that association very much, not only because Rogers and I are old friends and I respect his record in the industry very much, but because that company runs a lot like the old UA-Columbia ran. It's got the same kind of homey people and careful managers, but informal, shirt-sleeve decision makers that characterized my old company.
ALLEN: And Television Enterprises, Inc.?
GUNTER: Television Enterprises, Inc. is another kind of crazy deal. In 1965 there was a dentist who practiced in Brady, Texas for a while. Brady is about seventy-five miles from my home in San Angelo. He left a general practice in dentistry to specialize in orthodontics and came to San Angelo where there was more of a market for that kind of a specialty service. He was, just by accident, a limited partner in the original system in Brady, Texas in 1954, one of the earlier systems in the state. This system was operated by a fellow named John Threadgill, who is now dead, but whose son, Jack Threadgill, is still an active Texas cable operator.
Along the way Threadgill and his seven limited partners, who were local area businessmen around Brady, - ranchers, farmers, lawyers, dentists, as in my partners' case - became disenchanted with the way the company was being run. They thought that Threadgill was spending money that belonged to the company on personal things like aircraft or cars. Arguments ensued and the partnership broke up. One of those partners, the orthodontist I have mentioned, a fellow named James Francks, knew my father and me and knew that we had been in the cable business a long time and that we were in San Angelo. He kept slightly more than a majority of the company for himself, but offered about 30 percent more of it to a couple of other Brady personalities, one an MD, and one a fellow that used to run a butane gas business there. But he felt that their local presence was needed which is why he offered them the other 30 percent. He had about sixteen percent left and he came to see my dad and me and said, "Do you all want to buy this? It's not a very big deal. It's only about thirteen hundred subscribers. But you can buy the whole thing for a reasonable price and we'd like to have you in because we know you're cable experts. That's all I've got left, so do you want it or don't you?" Dad said, "Yeah, we'l1 take it." That was in 1965.
Eleven years after that company was formed and the system was built is when the bust-up occurred. Francks happened to get an option to buy it from the rest of the partnership and exercised that option and split it up as I just described. Along the way I was able to add other little franchises that cluster around Brady. We've got now nine total headends and systems averaging about a thousand or twelve hundred subscribers. Brady is the biggest system we own in that little company. It's twenty-three hundred subscribers. The little MSO is still run by Dr. Francks and me and his son James Francks, and totals now about nine thousand subscribers.
ALLEN: That brings us pretty well up to date as far as where you are. Now what I'd like to do to wrap this up is to ask you to take a look at the future using the knowledge you've built up over the years. Where you think some of the trends are going to take the cable industry? One of those things is the role that Congress is playing. They came very close to passing some new regulation legislation in the last session. Do you think that they are going to add some additional regulations and, if so, what impact do you see the proposed regulations having on the industry?
GUNTER: Well, as we speak, Senators Gore, Danforth and Hollings are already introducing a new de-regulation bill for 1991. There is no question that there is going to be some momentum in the first Congress to revisit last year's bill, which failed to pass. I do believe that the hotheads that are leading that charge are not going to succeed in bringing about punitive re-regulation. I believe that the moderates are going to win the day with the view that competition is really the answer for cable television's public relations problem The FCC is already hard at work on developing new definitions of effective competition and must-carry. The copyright issue will be revisited before this is all done. When the rules are changed, I think copyright will have to be modified in accordance with those rule changes. Compulsory copyright is bound to be modified with anything that is going to upend our present FCC rules. But I believe that Congress will finally recognize, and even the White House will agree. I think that the FCC is probably the best place to foster and launch competition. I do not think it is going to come about in the form of re-regulation or repeal of the Cable Act of' '84 or something that tumultuous. I just don't think that's going to happen. I think that maybe the time has come for this industry to face the reality of competition. It has been almost, not quite, an unregulated monopoly.
I think since the '84 Act has been handed to us there have been abuses. Among the old-timers that started this business with me, we grew up the hard way in the business, and I must say I've met very few cable pioneers that were real money-grabbers in the sense that they would ever gouge on rates. Rate gouging has started since the Cable Act was passed. The Cable Act, as you know, was passed right in mid-stream with the final kicks that went on to land those last few franchises on the beach and when the excesses of the industry were peaking. Congress may have made a mistake in handing us that much liberty. I think it has been, to some degree, abused. But, primarily, by the new entries into this business. When cable became a fair-haired boy in financial circles during the late '70s, maybe as far back as the satellite era in 1975 and '76, I think that it became immediately apparent that cable was going to be a real success story and a money machine. Wall Street, the insurance company lenders, and the commercial banks began to agree and recognize that it was a real skyrocket.
In the late '70s, or by 1980, I began to notice dozens of new faces, the MBA type manager and investor who came in from the sidelines in this business, and began to acquire properties. There is nothing that says they can't or shouldn't. This is a free country. But that is the very crowd that began to take the most advantage of the de-regulation of the Act of '84. The crank on rates has gotten us into this terrible cross wind. I do think we have been abusive. Not everyone, but enough to attract the attention of regulators at all levels, local, state, and federal, and that attention has brought the house of cards down around our ears. We really had it made if we had been less greedy and less aggressive about how we went on to develop this industry and the concomitant rate increases, which would have come. You can't continue to add channels and services in an escalating consumer price index environment and never raise the rate. No one ever said that. But we've gone far beyond that point and enraged people such as Albert Gore and made them enemies of our industry. We're paying the price now. But I don't think it's going to be paid in terms of a brand new, iron-clad bill from Congress. It's going to be paid in whatever the federal government can do to foster competition.
ALLEN: Do you think the FCC will remain a major player in cable rather than the industry being treated like a public utility under the PUC?
GUNTER: Absolutely. I have my reasons for believing that. The Commission is the logical vehicle to bring all of this new defacto re-regulation about in the form of competition because the competition is high-tech. The competition is direct broadcast to the home. The competition could even be, if Judge Green and the Commission relent, telco competition, which the Commission already regulates. The Congress, to some extent, every now and then passes a bill that modifies the Communications Act or something. But, essentially, wireless cable, DBS, telcos, all of these competitors that could be launched against the cable industry are already understood and in-house as far as the FCC is concerned. Why shouldn't they then be the ones to stir all of these technologies together as best as they can see the industry in the next decade?
ALLEN: What do you see as the role of the telephone company in this business?
GUNTER: We talked earlier in this interview about the telcos having a mentality that really pervades their companies back into the '20s where "anything that comes down a pair of copper wires belongs to us." I think that same mentality certainly pervades the post-divestiture Bell operating companies. They come by it honestly. They inherit it from the Ma Bell days. I don't resent that nor do I fear it. It's an honest enough business instinct. However, it's monopolistic and I don't think they're going to be permitted to remain a telecommunications monopoly any more than we are. The days of the defacto telephone communications monopoly, really, are gone for all practical purposes. I think the telephone company will be permitted ultimately, to render some video services, first dial tone, or perhaps lease channels. I think that there will be First Amendment and other political issues involving their being direct program sources. So I suspect that you'll see the emergence of video services through the telephone medium, first of all in maybe some dial tone selections of pay- per-view events.
I really believe that you're going to see movement in this country towards an electronic white and yellow pages, very much like the French have developed. I've seen that work. It's quite impressive. Not every instrument is equipped with this little five inch or seven inch CRT screen in France, certainly no more than every phone in America is touch-tone yet. But they're well on the way to converting to a system that has a tremendous information capacity other than looking up a phone number for a friend, or even going to the yellow pages and shopping for completely current vendor information. As you know, that's one of the things about the yellow pages that none of us like, it's only printed once a year. If you start your business or stop your business in mid-year, you've got a problem with the yellow pages. This one is updated daily.
ALLEN: Is that done on twisted pair or does that require fiber?
GUNTER: It's slow scan. It's data rate. It does not require fiber. Rapid scan, or full motion video as you'd expect over broadcast or cable system, is going to require a lot more bandwidth than you can cram down a pair of copper wires, even with compression techniques. So the phone company has two problems before they're really going to get in here and slug it out with the cable industry. They are going to have to solve the politics involving the consent decree with Judge Green and the FCC management on the cross-subsidy issues and things that all of us fear could happen if they're allowed into video. But they've got a massive plant problem. They are, for other reasons, moving into the direction of broadband and away from copper pairs. But to move at a rate fast enough to put them into the broadband video business at the same time they're just starting to build fiber pipelines for voice and data is really a project that, if done in time to compete with us this decade, would take more money than God's got. I don't see it happening. As well-heeled as the Bell operating companies are, I don't see it happening at the rate they are propagandizing that it will happen.
I think a lot of their plans to wire this and wire that and we're going fiber into the home, or at least to the curb, all this stuff is a lot of their usual, very adept, lobbying effort to get some of the constraints and manacles off of their industry by Congress and FCC, and even by the PUCs. I don't think we're going to see that much of the telephone company into our nest this decade. But I do think they're on the way, and conversely, I think we're on the way to a head-on collision with them. I think you're going to see the cable industry demanding a level playing field if the telcos are turned loose to get into cable as we know it, and perhaps even more primitive video as we just discussed. It's only logical that our industry is going to be clamoring for a right to get into data and voice.
ALLEN: Is this going to require any major new technologies?
GUNTER: Yes. First of all, our architecture in the cable industry is not any better suited to telephone data two-way duplex transmission than the telcos architecture, which is suited for that, is suited to the bandwidth requirement of video. We're incompatible for related but separate reasons. We have the bandwidth but the wrong architecture to get into voice and data and they've got the architecture to get into voice and data but they don't have the bandwidth to get into video. It's an interesting dilemma. But as we both move towards fiber, the bandwidth question tends to equalize itself between the industries. As we both move towards fiber, the bi-directional problem of topology in our system of architecture tends to become less onerous for us. That's one distribution technology. Then we have terminal technology to consider. We would have to modify our thinking as radically in the home terminal as the telephone company will have to modify their home terminal thinking to get into video services. They don't know any more about video home terminals, which we've learned about the hard way as you know, than we know about voice and data home terminals. It's encouraging to see the experiments that have just been announced this past year with some of our MSOs willing to go in and test some of the new personal communication devices, which are really the mini-cellular telephones that work in the ultra small cells.
We have an almost natural network to couple into a PC network and to get into the personal communications business in a big way on the neighborhood level. On the system-wide level we still have to interface somewhere with bi-directional plant with the public telephone utility itself to make those telephones worth holding in your hand and using. That problem has yet to be solved, but I think it's on the way because interconnect is a problem that was solved long ago with the Carterphone decision. So, on the matter of do we have the right to interconnect with the public telephone system. We do. It's how and on what tariff basis will we be allowed to do it. So I see those two rivers merging in the household.
ALLEN: What impact is the enhanced television signal going to have on this, assuming that this controversy is settled?
GUNTER: Well, I can give you an answer to that one both as an old television set retailer and as a cable man. You're not going to see the people in this country make the radical transition to HDTV from the present generation of color TV that they made from black and white to color. That was a little different and the chasm wasn't as wide. You're going to see HDTV of the Japanese type into the marketplace at $3,000 and up for a decent receiver. I don't see that happening in a large enough quantity to encourage the broadcaster or the cable operator to distribute those signals in rapidly evolving numbers that would cause this thing to reach a critical mass and then grow suddenly. It's just too esoteric for that right now. You're going to see a stepping stone in the form of advanced NTSC, which is compatible with current NTSC. Another of the stumbling blocks which true HDTV does violate, and that is compatibility with existing receivers. That's the other thing that will hold it back drastically, besides the additional cost of the receiver and the transmission capability of the broadcaster and cable man. So you're going to see in the next year or two, I think, some very encouraging experiments and enhanced NTSC American Standard which will be quickly adopted by broadcasters and cable companies by the middle of this decade. That will carry us as a stepping stone into true HDTV by the end of the century and into the next century. That's my estimate of the timetable now. I don't see how that could happen much faster than that.
ALLEN: Do you see that being analog or digital signals?
GUNTER: You're asking if I see improved television in analog or digital. Let's start first with the enhanced NTSC which must remain analog to be compatible with the millions and millions of analog receivers out there. So, that's for openers. The HDTV is almost certain to be digitized so it lends itself to compression techniques that are going to be required to control the bandwidth appetite of that medium. If you sent out true HDTV analog signals in a normal uncompressed analog format, it would take at least three times the bandwidth of an American TV channel-18 megahertz, roughly. There's hope to get that down to eight or ten, maybe even lower, with advanced compression techniques. But only if they're digitized.
ALLEN: The last item, then, is on the programming side. The satellite made it possible to put a lot more programming into the home. Do you see any other things on the horizon that are going to have a significant impact on programming?
GUNTER: Well, programming certainly put us where we are in this business, I don't deny that. But I'm a little cynical about the gluttony that has gone on in our programming industry. I don't blame people for taking opportunities and shoe-horning in new ideas where they can, but I'm afraid we've already over reached in programming. We're narrow casting now. We've already seen in the last year or two several cable networks emerge and go broke. Some of them weren't bad ideas. They were not that ill-conceived. They just simply came into a market place that wasn't ready and into a viewer's home where confusion already reigns.
I still talk to a lot of viewers. I still believe in keeping my ear to the ground and listening to the grass roots. The consumer of cable services is already confused with thirty-five, forty, fifty channels and we're going to confuse him even more with another thirty channels and yet we're heading towards 600, 700, 800 megahertz distribution systems. I don't deny that we've got to continue to develop our bandwidth capacity but to me it's not for more satellite and broadcast channels. It's for all these other services that we can probably think up that are value-added on top of traditional cable as we know it. Fifty channels of television is almost mind-boggling if you get to thinking about it. You talk to the average person at a coffee shop and ask them what channels they watch; they'll all tell you around six to seven channels. Now, they'll be a slightly differing six or seven channels. And the first string, as I call it, of cable channels off the satellite networks encompasses no more than fifteen channels. It depends on whom you talk to. Some will say sixteen or eighteen. Some will say twelve or thirteen. I say about fifteen is what I call the first string channel of satellite. The rest are tapered drastically or rapidly from that point downward in viewership and value to us. But they're there. Once they're put on, they're hard to take off. So, in programming, I would say that we may have maxed out for a while. There is certainly more to come, but it's going to be much slower than the last ten years of growth.
I guess I'm reminded of a thesis that belongs to Alvin Toffler who wrote, Future Shock, years ago. I read a chapter in Future Shock that is burned into my memory about over choice and how he remarked that the typical American automobile in 1975 or '76 - whenever he wrote Future Shock - had thirty-.five hundred possible combinations of optional features that you could order if combined in all permutations. He said that he felt like this is part of the future shock of our civilization, and especially in this country. It really had a numbing effect on the buyer. The ultimate consumer of our businesses and services is being numbed-out by over-choice, and I think that the cable TV industry is headed in that same direction. We need to diversify our broadband telecommunications services, not just keep piling more of same on top of the same.
ALLEN: What are some of the diversification things that you see coming down the line?
GUNTER: I don't think that there's much question but that we're going to be into the Nintendo type business and the interactive business, both video and data, in the next few years. I was one of the early detractors of some of the silly blue-sky ideas like reading water, gas and electric meters by cable and burglar and fire alarms and things like that. I never really believed that that was something that we should do. Not that we couldn't do it, but because I knew enough about telephony to know that the telephone company can always take those kinds of narrowband, short-term bursts of information and kill us on efficiency and price. But when it grows in sophistication and becomes a picture or interchange of broadband data, for the moment at least, we have the inside track.
Now we've already said that the rivers are merging and the time will come that I will not be able to tell you that the phone company is outclassed by cable in broad or even medium band services such as interactive data or home terminals, videotex, and interactive games. I don't know. I don't know at what point those curves will cross, but I predict that it will be mid to late '90s that we'll begin to see the early warning signs of telco being able to compete where we once thought they couldn't compete with us in special services. They will probably also be shocked to learn that we can now compete over here on their turf where they once thought we were totally incapable.
Other than that, I don't know what is going to be flowing up and down glass fibers and coaxial cables. I think the imagination is the only limitation on what we can transmit to and from a home. We do live, after all, in the information age. If it's information and if it's got to be perceived by the senses, if it can be seen by eyes or heard by ears or keyed in on a keyboard by the fingers, I guess we can transmit it both to and from a home and charge money for doing so.
ALLEN: So it's been an interesting period of time to have been in the cable business since you started after graduating from Rice University and from what you're saying is that there is no diminution in that interest.
GUNTER: Oh, no. I love this industry. It's been good to me. Of all of the things I'd like to go back and change, that I would prefer now to have done differently, I never look back on my decision to enter the cable industry. I'm only amazed by the good fortune that led me to that decision. You've heard the old saying, "You don't have to be smart, but you'd better be lucky." Well, you need to be a little bit of both, but I'll tell you this, there's is no way I or 90 percent of the cable pioneers I know can say they intentionally, by design, entered the cable television industry knowing where it was headed. I didn't anymore know where it was headed than the man in the moon in 1958. We thought we were going to sell more television sets, and I just began to love the technology and the excitement of it. There's never been a dull moment in this industry, but I can never go back and say that I did this with full awareness of where I was headed. Also, it's the only major decision I've ever made that I've never regretted, and would encourage anyone to get into.
ALLEN: So you think it is a business that you would encourage young people to look at as a potential, long-term career?
GUNTER: Sure. I'm just like any old goat in any business. I'm sure that I've seen the best years in this industry, and I truly believe I have, at least the most exciting and the most dynamic years. But this business or any information and telecommunications related technology today is going to be exciting the rest of my life and probably well into the next century. We are living in an age of information flow and the people here in the middle of that flow and the purveyors of the ideas and developers of the companies and systems that transfer all that information and charge for its exchange are going to be on the cutting edge of our society for the foreseeable future.
ALLEN: Well, on behalf of everybody associated with the National Cable Television Center and Museum, thank you. It's been a most interesting couple of sessions and we'll look forward to continue working with you.
GUNTER: I'll be interested in seeing all this gibberish on hard copy so I can start scratching on it with my marks-a-lot.
ALLEN: You'll have the chance.
End of Tape 4, Side B