Interview Date: Saturday February 10, 2001
Interview Location: Sun Valley, ID USA
Interviewer: Liz Burke
Collection: Hauser Collection
BURKE: This is Saturday, February 10. I'm here with Jim Hirshfield. We're in Sun Valley, Idaho. This happens to be the 20th Annual Reunion for the Sawtooth Cable International Group. But we're also here doing oral history, and this oral history interview of Jim Hirshfield has been made possible because of a grant from the Gustav Hauser Foundation. This is part of the Oral History project that is sponsored by the National Cable Television Center and Museum in Denver. With that, I'd like to get a little bit of background from Jim on why you're here and what you're doing in Sun Valley.
HIRSHFIELD: This is our 20th anniversary, I guess you'd say. We have 20th anniversary shirts. I don't have mine on. This is a group that started with four or five of us who, after the Idaho Show one year 20 years ago, came up for a weekend skiing at Sun Valley. It's just grown to where every other year we come to Sun Valley. Every other year we go somewhere else. I think there are about 25 of us here, quite a few of whom are Cable TV Pioneers and all of whom have some connection to the cable TV industry. We think of it as a social thing, but it's amazing how much business does get done just as we walk with each other.
BURKE: And of course later this weekend we're having a panel. Can you give me a little information on that panel?
HIRSHFIELD: The panel is going to be people who have been active in cable TV in the northwestern part of the United States for a long number of years. We're just going to talk about the development of cable, regulatory, political, some of the people, and try to have a good time.
BURKE: You, yourself, are from Seattle, and you've been there for some time. You founded and started your own company in 1973?
HIRSHFIELD: Yes. Actually I will give you the whole nine yards. My father was in the service so I'm from a service family and lived a number of places, went to college in Texas, was in the Navy in California, went back to graduate school. In 1966 upon graduation with an MBA, I got a job with a small cable TV company in Seattle. So that's what took me to Seattle 35 years ago and into the cable TV business 35 years ago. I stayed with that company two years, started my own little company, ran that for four years, and sold it because that's what my major partners wanted. Then in 1973, I started Summit Communications which was the business I had until a couple of years ago –a cable TV company.
BURKE: Let's go back to before you had Summit. What was your interest in cable? How did you get involved and how do you feel about the industry?
HIRSHFIELD: I wanted a job, coming out of business school, as a financial guy in a small company. It just happened that that ended up being a cable TV company. I really didn't know a lot about cable before that time. So that's what got me into the industry. As a financial guy it was sort of easy to see the numbers, and spending a few months with them showed me this was a good business. I had been a ham radio operator in high school and in the Navy had had responsibility for active and passive electronic devices, so the technical part of it was sort of familiar. The financial part I liked. That was really the stimulation for getting into it.
Pause while video is being adjusted.
BURKE: I'd like to get back to those early years in cable. What was the industry like back then? What were some of the issues you had to deal with? You worked a lot with small companies at that time, right?
HIRSHFIELD: Yes. I think one of the things I remembered when you asked that question is – my sister asking me in the early years what she could tell people that I did for a living. I said, "Tell them I'm an entrepreneur." She said, "Well, that sounds like a dirty word." It was amazing the dissonance, I guess, so many of my friends and family had when I entered this young business. Actually, the company I went to work for, Telecable Inc., was one of the large companies in the industry. By '68, 1 ½ - 2 years after I got there, we had about 15,000 customers, and I wish I could remember all the numbers, but that was pretty sizable. That was top 10 or something like that. Companies just weren't that large. Of course, all our customers paid $5.40 a month for cable. That's another thing. And that was expensive. I think many of the other operators were charging $3.95 - $5.00 a month for cable. We were just getting, I guess you'd say, modern management techniques.
A lot of the early operators had financed their systems by just going out and building them, and if you wanted cable down your street, you got your neighbors together and you each paid a $100 - $150 one time fee, and the cable guy used that to run the cable that extra block. We were one of the early companies that would actually front the money to run the cable and then go in and try to sell it to everybody on the block. We would do things like 10-day free trial. We figured once people got on, they would never get off. That basically is what happened. We built markets that had none to two television stations off air. We would do 70% - 80% penetration right out of the box and keep it. Those were markets like Bellingham, Washington, Olympia, Bremerton, Mount Vernon, Sedro-Woolley, and a lot of little towns around Puget Sound in the Seattle area.
BURKE: So after you had that experience, what caused you to stay in the industry and start your own company?
HIRSHFIELD: Well, I sort of liked it. I was telling you I had a sense of how the technical worked. I understood that. And the numbers seemed to work. So when my first company, Telecable, got sold, I basically went out and started my own operation. I got married to my wife, Mary, from Seattle.
We came back from our honeymoon on a Sunday and on Monday we were in front of the King County Council. She was holding my charts and I was telling them why they should give us a franchise to operate in this certain area – the back of a hill – so that the TV signals would go over but the people on the back of the hill didn't get anything. It was about 500 homes in the area. I, then, was working for a fellow named Stan McDonald as his chief financial officer and building this business on the side. My wife had not yet gone back to work. She would go over to Pruzan, which is now part of Antec, and she'd pick up the bolts and the hardware and stuff that we needed for the next few days. She would drive them out to the construction crew that we'd contracted with to build the plant. On weekends I was down there. I was sometimes up poles on hooks. I hadn't been trained for that but there was nobody else to do that. I would hire people I knew in the industry to come in on the weekend and build this. We used the old SKL amplifiers and tapping devices. When you put the cable into these devices, they had a problem. The connection electronically wasn't very good. There were a lot of intermittents. So they developed this set of copper fingers that you curved around, just the size of the entry hole, and you stuck it in there such that it made contact with the shield of the cable and also the housing of the device. That allowed it to make good contact and operate correctly. So one of the things I did when I'd go out on the weekend and look at what the people who were helping me were doing, I'd go and look at the ground under each pole to see if there were any of those "fingers" there. I figured if they were on the ground, that that meant they weren't in the device up there, and we'd have to go up and do it again.
I guess the purpose of that story is just to say that even in 1968 when we were doing this, the technology was a long way from where it is now. We had solid state amplifiers that came in 1966, and that was back in my Telecable days. J.C. Sparkman, of TCI fame, was the Jerrold technical rep who spent probably three months living in Olympia trying to make those amplifiers work in our system. The hard shield cable, with the aluminum outer shield, came in about 1965. Before that we used copper corrugated stuff which is sort of funny, before that copper braid. These things didn't work as well. So when I came into the industry, it was a time when the technology was changing, but we still used a lot of old stuff.
BURKE: Obviously at this time there was a lot of new technology coming in. How did you keep up with all the technology changes in this new industry?
HIRSHFIELD: One thing - and I can't take any credit for this - but one thing that happened in Seattle was in about 1967. Jerry Lawfer who was the vice president for engineering for Telecable and a guy named Bob Brown who held the same position for Teleview Systems, (Homer Bergren's company, which eventually became Viacom) built in Everett, Washington, at Bob Brown's location, a cable TV test lab. They had reels of cable so that you could run a signal through lots of cable. They had a temperature controlled vault so they could put things in there and run the temperature up and down. They actually tested a lot of components. We used to get these specification sheets that this amplifier will do this – 1, 2, 3. And when you tested it, more often than not it didn't do 1, 2, 3. It did 0 and 4, or nothing at all maybe. So this was the first effort I'm aware of to actually test the electronics, to see if they worked.
Of course, what happened very quickly was the vendors wanted to be tested, wanted that seal of approval - although it was nothing that fancy – to know that the gear worked. That not only helped the northwest, but Teleview systems all down the coast, quite a bit of it in California. I think that's where we really started to get hold of the technology, what worked and what didn't work. For years, we would go to the cable shows. Let's use amplifiers, to pick on them. Vendors would show us their new amplifier, and if you actually looked at it, it was last year's amplifier with a new label on it. That's the way the marketing went for many years. I think it's sort of like the way the computer industry has been in recent years, that they market it before it's actually developed. We had a lot of that. Sorting that out was really a big part of the industry, because you'd had what I used to call an electro-mechanical monster. You have miles and miles of cable that are connected and send signals, let's call it, through them. They're subject to all kinds of things going wrong with them. If any one of those things goes wrong on a certain leg, then your signal's impaired. So there were lots of pieces, and it was important to get them all done right. It was probably in this area where we started to get on top of that as an industry.
BURKE: How long did it take until you really felt your systems were reliable?
HIRSHFIELD: I think, in my business, I never felt they were reliable. I sold my company, as you know, two years ago. Even up until that time, we used to have monthly meetings where we would get the list of all outages where our system had gone out as opposed to service calls where there was something in the house. We used to have outage reports that we'd correlate. But we would sit down and ask what we could do about this and what we could do about that. Inevitably, stuff that you thought you couldn't do anything about, you could. So we were constantly working that problem. Our approach to customer service was, you don't have a customer service problem if they don't have any need to call. So we worked to make our system go well. I guess it's just a moveable feast. I think people don't know, or at large, understand the complexity the cable TV industry has always had in running these very large systems. There are lots of things that can go wrong. They're very complex.
So if you backed off and said back in the 60's, when did you think the gear could work, I think probably late 60's or early 70's we decided that the amplifiers, once your cooked them in and ran power through them for a couple of weeks and they sat there and nothing had broken, they were pretty stable. I'd say, at that time, the components started to become pretty stable – maybe early 70's.
BURKE: Is that when the big growth started in the cable industry?
HIRSHFIELD: Oh boy - no I don't think so. What do we have – in 1966...
BURKE: Late '60s.
HIRSHFIELD: Well in 1966 we had the freeze – I forget the actual word – where we couldn't bring distance signals into markets. Then in 1972 we had the Second Report and Order where we had a whole set of rules out of the FCC that said what you could and couldn't do. But the markets were not in good shape – the financial markets – in the early 70's. I sold my first company – as an example – for stock at the end of '72 to TelePrompter Corp. We shook hands on the deal a few months earlier. TelePrompter was at 41. We closed right at the end of '72 and TelePrompter was at 36. Eight months later, TelePrompter was a 1.5. So we had that kind of stuff going on in the financial markets. That, of course, meant you simply couldn't get the money to build these things because cable was expensive to build.
The '84 copyright act really settled out the terms under which you could bring more stations in. Then the big thing that drove the industry, I think, was in the late 70's – the satellite – which gave you product. You had markets where you couldn't sell them anything they didn't get until the satellite. We put our first satellite dish in in 1979, I think. It was a 10' satellite dish and it allowed us to bring 3-4 more signals into this town than we could simply receive off air. Of course, that's what stared this trend toward 50 and 100 and 150 channels, 500 channels. Until the satellite came as a method of distribution, we didn't have any way to bring people more than they could get. So probably in the 80's, that's what drove the building of the major cities.
BURKE: The satellite period was very interesting. I understand that was a big event for cable and for some of your small systems.
HIRSHFIELD: I want to tell you about Buhl, Idaho. We decided we'd try this satellite stuff, but try it first in this system. We bought a 5-meter dish so that's about 16' in diameter. It cost $30,000 - $35,000 and we had it shipped to a yard at one end of town and we put it all together. Then we hired a crane, and we had a big advertising campaign. The crane picked the whole dish up pretty high because it had to be high enough for the 16' dish to be well off the street. We drove all the way through the center of town out to our headend site on the other end. We actually had people out watching the dish go through. Our theme was "Buhe, Idaho from candlelight ('cause the town was formed in 1906) to satellite." We put the satellite in and we added 4 –5 signals. That was a big day. That really wasn't too much. We had people in the industry putting in 10-meter dishes, 33' dishes at $100,000 and more just a year or two earlier.
By the mid-80s, the actual dish, not the electronics, went from $30 - $35,000 down to just several thousand, $3,000 - $5,000. So you had the ability to put them into lots of cities.
BURKE: Even before the satellite came in as increased distribution, satellite was growing. You were in the position where you'd worked for some companies. You had your own company. What are some of the stores of getting the franchises and getting in to towns and actually building in complicated towns like Seattle?
HIRSHFIELD: We did two things. But back up on my history, I worked for Telecable from '66 –'68. Then I built my own company while I worked for another company as chief financial officer. Literally then, from '68 – '72 I had my own company which we merged into another company, and they sold it to TelePrompTer. I started Summit Communications in the fall of '73 and in the spring of '74 needed a job so I went to work at Seafirst Bank as controller of the bank. So here I had this little company. I'm working about 60 hours a week at the bank, and I'm working about 20 hours a week at my company. I would get up at 5:00 Saturday morning, for instance, and go catch the 7:00 ferry to the town of Friday Harbor on an island north of Seattle where we were building a cable system, build a headend and stuff like that, come back Sunday night and go to work. I did all that stuff.
If fact, let me sort of run this story out. So '74 – '76 I worked for the bank. In '76 we bought two cable systems – one in Oregon down on the coast, and one in Bishop, California. That allowed me to leave the bank and go full-time in the cable business. So now I'm operating out of a desk in my basement. My wife and two neighbor ladies are doing the accounts receivable for my systems. We had, of course, a phone with an answering service. By '78 we had gotten a bit bigger – 6,000-7,000 customers – and I was going to hire a full-time employee. My wife and I had this serious discussion where she told me I could not hire this woman and put her in the basement with me, that I had to go get an office. So we went and got an office. That was '78 or something like that.
By 1980 we were about 9,000 customers. We sold our St. George, Utah system because it was growing so fast we couldn't keep up with it financially. It was just too much for us. Out of that we grew some more. Our Bishop, California system we sold in '86. We sold that one (about 1/3 of the company) because my wife used to say, "If we're doing so well, why don't we have any money?" In cable TV, you didn't make any money running the business. If you generated any cash, you put it back in because you had all these investment needs. Really the only way you could take money out of the business was to just sell it and sort of start over or retrench. So we did that in '86.
To just run this string out, we went from 15,000 to 10,000 customers in '86 and by '98 when we sold the company, we had about 42,000 customers. Much of that was internal growth. We bought a system in Seattle, and we did some franchising, so we had a mix.
BURKE: So you bought and built systems.
HIRSHFIELD: Yes. One of my favorite stories is Port Townsend in '75 when we were franchising that operation. I had to wait for the public discussion. One guy wants to talk to the city council. He says, "You know, you picked my dog up. The dog catcher picked my dog up. I went out and asked why he picked my dog up, and I took pictures of other loose dogs running around which he didn't pick up." He held up and unfolded this series of photographs that were taped together so they went down to the ground. He said, "These are all dogs running loose." The mayor turns to the dog catcher and he says, "Fred, do you have anything to say about this?" Fred says, "Well, it's a lot easier to take a picture of them than it is to catch them." To me that was what I saw probably more than anything else in franchising. It was always the dogs. We would always be sitting there waiting for the dog issues to get done. These were smaller towns across the country. I had the mayor of Friday Harbor explain to me why the big cities had problems. His explanation was that he made $6 a month being mayor and that's why Friday Harbor didn't have any problems because everybody was too busy getting on with life.
I don't know if I told you – I did. I told you the story of – I should let me wife tell this, but – you try to dress appropriately for the town. But one day our lawyer came in in this sort of pinkish-reddish suit. I don't know where he got the thing. I could tell you some fun things that happened in Bishop. We bought the Bishop cable system from one of the big companies. They sold it because they had come in and told the city they were going to increase rates. The city told them they had to go through this process and they said they badly needed a rate increase because they were having financial troubles (which they probably were). "We're going to increase rates a week from Friday." So, of course, the mayor calls up the local judge, and the local judge has a hearing with the city and issues an injunction saying that the cable company can't raise rates. All these people are watching their TV on cable. There was no TV in Bishop if you weren't on cable. So these guys said, "Well, we can't deal with this politically," and they sold the system to us.
I went out to visit the system to see if we wanted to buy it. Bishop, California is some 200 miles from the transmission towers in Los Angeles. It's up in the desert up on Highway 395 sort of central east California. They had an antenna that was 240' sort of in a semi-circle, 60' high, and screened. That all focused the signals back to a focal point where the antenna picked the signals up. So if it was hot weather, the signals weren't as good as maybe if it was cold weather and if you had temperature inversions the signals would sort of miss the focal point and you just wouldn't have them. Of course, there was no satellite so that's all you had. So from here you went six miles into town and then you went six miles in a couple of other directions to serve these communities. These were with these old amplifiers that perhaps weren't as stable as they should have been. So anyway, the manager takes me out to one of the ends of the system. We're 12 miles from the headend. It's a hot summer day. We go into this house, and they turn on the TV for me. There was actually nothing there but the housewife just clicks – there's channel 4, there's channel 5. There's nothing there. There's snow. And I said, "Well, how do you like the cable?" She said, "Well, actually it's wonderful. On these hot summer days, as you can see, it doesn't work as well as it might."
What struck me out of that was that you could run our business, like any business, I guess, two ways. You could actually fix things so they worked or you could tell people that this was normal. Since the people in Bishop had no choice, they thought this was normal. Well, we did buy it, and we fixed it. It actually worked pretty well. We had, through the years, a number of rate increases. In those days, the cities had to approve all the rate increases. The city of Bishop actually sent out a questionnaire asking everybody in town whether our rates should be allowed to go up. I think something like 39% of the people said yes. I appeared before the city council and said, "This is really incredible. Can you imagine 39% of the people saying it's fair for my prices to go up?" But that's the kind of environment we dealt with.
We had a fellow who owned a radio station there. This is all in the late '70's, and he wanted to run like Home Box Office but his own thing – pay TV programming. So he bought video tape players and movies, and he was going to put them into our system. But we didn't any deal. We weren't adverse to him doing this, but we wanted to make some money on it too.
So one day, I came down there. I used to go down there every 2 – 3 weeks. His pictures were on our cable system. We went over to our little building. He had actually drilled a hole into this sort of equipment building and run a cable from his studios over, put it in there, tapped into our lines, and was running his business. So we disconnected him and he sued us. A day later, we're in court. He was trying to enjoin us from doing that. Turns out that the judge is his godfather. We're in court. The judge is his godfather. But to his credit, the judge did the right thing and said, "You can't do this." These are some of the things. This same guys actually did the same kind of thing up by this big antenna site I described where he cut into our cable there and ran it over to a microwave site he had and microwaved our signals 10 miles down the valley to a little cable system he was building. The same kind of thing. It was sort of a cowboy area.
BURKE: Refer to the wild west.
HIRSHFIELD: Both as to the cities and also the people you had to deal with.
BURKE: You go away for two weeks and you come back and people are hooked up to your system.
HIRSHFIELD: We solved the problem by buying him out, of course.
BURKE: Very interesting. While we're on the topic of the wild west, why don't you mention again your stories about Anacortes, because it was pretty wide open in those days.
HIRSHFIELD: Well, this was a system we built at Telecable. The antenna site was on Mt. Erie which is now a park. You couldn't put anything else up there. But in those days it was just the top of a bit of a mountain on an island north of Seattle, Fidalgo Island. Then behind Mt. Erie is the town of Anacortes with about 5,000 homes maybe. So the way you ran the cable from the antenna site on top of the mountain down to the cable system was to put the cable reel on top of the mountain and lower it down the hill, paying out the cable. But as it turned out, the lowering mechanism broke, and the cable reel went top to bottom, crashing its way. But the cable was all right.
BURKE: The cable didn't break.
HIRSHFIELD: So we used the cable. I was telling you, some time later in that town, driving around, there was a house with an antenna, and the antenna wasn't pointing at Seattle where the TV towers were. It was pointing where nothing was. I wondered what was going on here. My wife would tell me I was nuts always looking at antennas. We had the technician climb the pole and look. Apparently this guy, because who else would do it, had drilled a little hole through the shielding of the cable so that all the signals were not only going through the cable but they were radiating out right at his antenna. So he clearly was picking us up on his antenna. He's got great cable TV. He's not paying for it. He's placed us in violation of FCC regulations because you're not supposed to radiate outside the cable, for good reason. That was another one of those kind of things.
BURKE: So in addition to dealing with franchises and sort of the wild west mentality, you also mentioned you were dealing with FCC rules. What was that like in the early days?
HIRSHFIELD: I think in the early days - and there's almost an internet tie here – if you had information, you had an advantage. The FCC, in 1966, said you couldn't import distant signals into markets. I think that arose out of San Diego, Lee Druckman, in bringing in distant signals from Los Angeles, when San Diego only had two networks at the time. He did very, very well. The local networks in San Diego, of course, didn't like the competition. That all ended up in the '66 freeze. The FCC was studying it.
Then in '72, they came out with the Second Report in Order which was a fairly thick, small-print book. If you read that, knew it, had some sense of how those rules might be applied, that gave you an advantage going forth in the business. That's really a theme that we ought to mention as a theme. So much of the regulatory stuff that came down over the years, where local and federal government tried to shape cable, really just became barriers to entry. So if you were there and you understood this stuff, you only could run your business as well as you might be able to under these rules – that was the negative.
The positive was that it was very hard for somebody else to come in. That takes you back to franchising. The typical thing that started to happen at about that time – and I'll give you counterpoint story in a minute – was that cities started creating franchises, monopolies, and selling them to the highest bidder.
So the story I'll come back to – Seattle, in 1966, adopted it's first franchise scheme. The scheme was this: you could get a franchise for the whole city if you were qualified. Qualified meant by character, financially, and by your understanding of the business. But that was about it. It wasn't because you promised to plant trees or something silly. Everybody got a franchise. I think there were 12 or 15 outstanding shortly thereafter. You then could get permits to build cable on city streets. But you couldn't get more than 50 miles of streets worth of permits, and there were 1,600 miles of streets in the city. And you couldn't keep the permits for more than six months. You had to be done. What happened was, I think five or six companies came in and started the second phase of build-out. Seattle actually had had cable since '52 which is yet more story. But they started the build-out and of course, after awhile, as happens, you run out of money, you have to make this investment you've made pay off before you can then invest the next bit of money. A lot of Seattle got built in that way.
In '72, Seattle adopted a new franchising scheme where they created districts. They did this because they had different companies already built in different places. You then got a monopoly right to build the district, but you were required to build it out. So that was '72. As late as the early '90's, many of those districts were not built out. So the regulatory scheme was that we give this guy a monopoly, we require him to do things like provide local programming (that was one of the big ones), and he'll build the whole area. But the regulatory mechanism wasn't sufficient to get the area built. They didn't know what was built or not. But it was sufficient to give them a monopoly to people who had these areas. What happened was that construction in Seattle slowed down significantly. The town really didn't get built out until the late '90's. It's always been my belief that had they just stuck with the first system, they'd have been built out 20 years sooner. They removed the incentive. And a lot of cities did that.
BURKE: You actually built in Seattle, so how did you deal with sort of this patch-work regulation?
HIRSHFIELD: Of course my first company, Telecable, Inc., got one of those 1966 franchises, and we built maybe 50 miles of cable in an area called Ballard. We had local origination there which didn't do much for us. We thought it would, but it didn't. And I have to tell you another thing we thought we had. We had Telecable 5 Star Theater. The boss, the head of Telecable, and his number two guy, (I was chief financial officer at that time), met a fellow named Lee Cook from, I think, Houston, Texas. Lee had the right to sell movies for you to run on cable along with his associate, Felix somebody – I forget his name. So we thought this was great. I said that I was sort of busy with my financial stuff. I didn't need to be involved in this. The marketing guys went to town and they put on Telecable 5 Star Theater. We were showing, pretty much, movies that had just come out of the movie theaters.
That went on for, I don't think, more than maybe 10 days. On that day in our office, I think I was the only officer in our office, several guys came in to Adie Miller, the receptionist, and they had suits on and they had FBI badges. They said, "We're here to pick up your movies." Of course we were pleased to do whatever they asked us to do. It turned out that his fellow Cook didn't have authorization even though he had apparently presented something to us. I think he owned movie theaters or somehow was taping these in movie theaters. I'm not sure how he got them or what the deal was. I think he went to jail over this. I remember the name Felix because I remember he got to go into the Army instead of going to jail, which in 1967 was probably a brave choice to make.
Another guy that built a system at that time was Phil Hamlin. That's a name the industry knows. I think Phil, by the early 70's had 15 million cable converters out. His was the cable TV converter that worked. He had them manufactured overseas in Japan and brought them in through Seattle and distributed them to the country. He had built this system in Seattle in order to test his converters, but decided he wanted to be in the converter business.
That was my first company that I owned a piece of. I came in and bought his company. So we were on Capital Hill in Seattle. Again, I think there was only about 20 – 22 miles of cable. The city was going through this refranchising deal. I managed to get myself appointed on the cable committee, the theory being that they should have somebody from the industry sitting there while they're going around making all these rules up. They had university professors and people like that on this committee. That resulted in this 1972 thing right about the time we'd sold our company, and I've talked about that sale. Then in about 1980, the city franchised a minority area. They franchised it to a fellow who was a very nice guy. The company was Vanhu. I remember that. V-A-N-H-U, meaning "of the people" or "for the people", a Swahili word. He was a local guy. But he never got this area built. So here's one of these districts that the city has created, these monopoly districts, sold to the highest bidder. They wanted this to be minority owned. They accomplished that, but it never got built.
So finally, early 80's – several years after he had it – they voided his franchise with much angst. I was not involved in that. They awarded the franchise to guy named Bill Johnson out of Ohio, who was also a minority. Bill built the system. He built it about '83 or '84. By '85 or '86, Bill also had financial difficulties. The banks wanted him to start paying them back, and he didn't have the money. This was again pretty typical of cable. You've got all your money invested and sometimes it didn't come back as quickly as you wanted. But you sure could invest a lot.
It ended up, we bought Bill's system. In going through the city of Seattle for the franchise transfers, we had this minority overlay where people wanted this to be a minority franchise, but there was nobody of that qualification who was going to step up and actually put the money in it that needed to be put in there. That took nine months to get that thing transferred. It was sort of difficult trying to do the right thing and say the right thing, and yet all these various interest groups work their way through and have their say. So we ended up finally owning that system.
I'm going to go back a little. In 1982, we had built a system in downtown Seattle, again an area that wasn't constructed, because a couple of companies were building major apartment and condo developments there. There was no cable, and they wanted cable. I knew one of them. He called me up. So we went to the city, and we asked for permission to do this. They said, "Well, no, we have to go out to bid for that franchise district. Until we go out to bid for the franchise district, you can't build cable in there." So these apartment guys came in and said, "Well, we want cable." And the city said, "Well, I'm sorry. This is the way it works."
So we went out and started to run the cable within the block. So we were within the buildings. We had a dish on a building and antennas. We actually had the dish on the roof of the lowest buildings so all the high buildings blocked the interfering microwaves because the telephone company was nearby. Their microwave operated on the same frequencies as the satellite did. So we had to have the dish on the top of a building but also in a hole, if you will, with high buildings around. So we got that all figured out. Well then they started to build the next block. Now we had this street crossing. They said, "We're opening the street. You can run your cable across." So we put a piece of conduit in, and the city inspector came and took it out. He said, "You don't have a franchise." So we went to the city and said, "How do we get a franchise or a permit?" We did this same thing again. Well, it ended up about nine months later, we're sitting there with our lawyers, and we said, "Here's what our lawsuit looks like. We don't having any interest in having a lawsuit. Just let us cross this street."
At that point, the city then passed an ordinance that had lots of qualifications, but it was such that it let us cross that street. It probably didn't let anybody else do anything. So then it got sort of silly. They kept building these apartments through other blocks. We would do things like go out in the middle of the night and run our cable on the underside of the elevated expressway. We'd do it Saturday night because we knew there were no regulators out. There might be somebody out on a Tuesday morning, but not on a Sunday morning.
One Sunday morning, I think about 7:00 AM or 8:00 AM, one of our guys was doing that, and he saw this police car come charging down toward him. He said, "Oh, gosh, we're busted." But then he realized it was a black-and-white. That's sort of a California police car. It wasn't Seattle. Then it had California plates. As the story unfolded, they were actually filming a movie there. So this was the chase scene, early morning before there was anybody out on the street. This was about 1985 probably. So Mike keeps running his cable, and pretty soon there are Seattle police out controlling the crowds. They naturally assume he's part of the film crew, and he had a very productive day that day because they helped him to get into all the areas.
We would do things like – we would go down to the area where the homeless people would hide under the freeway. We would hire them to dig the underground, because there was dirt in that area, to run our cable another block. Our theory was that the inspectors don't like to come down there because maybe they think it's unsafe or maybe it's just different than what they're used to. We had to do this kind of stuff for six or seven years before we finally got authorized to operate this cable system legitimately. The way that came about was this. Twice the city went out to bid on this central district franchise, but it was a monopoly sold to the highest bidder. They asked for things that nobody would bid for. They either got no bids or they got bids that just weren't responsive and they would reject them.
Finally, TCI came in and said they wanted to build this area. At that time we had applied, I think, for another seven miles of permits under this screwy rule. The city said, "Oh good. Now we have two people who want it. We can have a bidding process." To his credit, I think it was the city attorney, who said, "Haven't we been trying for 10 –15 years to get this area built? Why don't we just let these guys build it. We don't have to have a bidding process." To their credit, that's what happened. Those are just some of the stories of the silliness that goes on.
Seattle, just last week, issued a third cable franchise. The hullabaloo was that these people are going to invest $500 million. They're going to upgrade all the city's facilities, of course, and give the city some other goodies, and we'll now have competition. You have two guys in there. Now you have a third. I think there are 2 –3 more trying to get in. This is sort of Jim Hirshfield's rant against cities in general. They're always creating franchises and trying to sell them rather than finding ways to invite in competition.
[Editor's note: At 11/01, the 3rd company had disappeared from the scene.]
BURKE: I think the cable industry was built in spite of all these things that happened to the people who decided to be in the industry.
HIRSHFIELD: I think in the early years we had less of this. For instance, Seattle, up until 1966, because we just weren't on anybody's horizon. But as soon as the municipalities found out that they could tax us, they did that. When we sold our company in Seattle, we had about 20,000 customers in Seattle. We paid the city of Seattle significantly more than we made out of that system. We were paying them about 13% of the gross which amounted to almost $1 million a year in taxes just for the right to be there. That's another story that people don't really appreciate – the tax load that this industry is carrying.
BURKE: Seems like some of these challenges are what led you to get involved in state organizations and national organizations. Is that a fair assumption?
HIRSHFIELD: Yes, you know, how do you affect these? I think, to me, it was a double-edged sword. You try to affect the environment you're in and you also try to understand it. I think more and more as we kept going as a small operator and the number of large operators got put together and became larger, I thought it was important to know these people so that they just wouldn't do something, unthinkingly, that caused me a lot of problems. So not only the governmental agencies, but the big operators as well, were an issue. I was one of the founders of the Washington Cable Association in '72.
We had a Pacific Northwest Cable Association but we weren't dealing in state issues. We started about that time to have things happen at the state. An example would be the state licensing board saying that cable installers have to have an electrician's license in order to run cable wires in a house. That's a significant apprentice program. It's a union program. Those jobs carry much higher wage. But arguably, there was no need to do that because cable is very, very low power – a different beast entirely. So fighting things like that, we got active.
Later I remember appearing before a state regulatory committee about all these issues. I had a little presentation and I had a cartoon. In the cartoon, the guys are sitting around a conference table and they say, "Gee, I know we're supposed to protect small businesses, but if we protect them, then they'll become large businesses and then what are we going to do." To me, that was sort of the dilemma. The regulatory people would talk about protecting small business, but they would continually do things that caused you problems.
In 1981, I joined the NCTA Board. That was the 3-year run up to the Copyright Act of '84 which was a pretty positive act for cable in that it clarified what our responsibilities were in terms of paying for product we used. There was never any problem with paying for product we used. There was always an argument of how much. But the big issue was to get the issue settled, and we did that. I then took six years off. Then from '90 – '96, I was again on the Board of NCTA. I spent one year on the Executive Committee. That was in '84. In that period, I also chaired the Telecommunications Committee, what's going on in Congress and the FCC in terms of setting policy that may impede our industry's ability to sell telecommunications products as opposed to, let's say, entertainment products. I also chaired the State and Local Government Committee – what's going on in states that's being repeated around the country such that they become national issues.
There was a lot of that as, let's say the telephone industry, our potential competitors, became aware that we were going to be able to sell telephony products and then digital products which could be telephony and other things. They started, in a lot of states, working to have laws passed and regulatory rules issued that would impede our ability to do that.
Other things included pole rentals. We had the FCC adopt formulas for what could be charged for poles. That still, in the industry, is the third largest expense. We used to pay, per year when I first came in the business, any where from $1 - $2.50 per pole for the right to attach to that pole. It wasn't a right to use the right of way. We paid the city for that. And we couldn't put up our own poles, even if it was cheaper because the city wouldn't let us. So whoever owned those poles, which were the power companies and the telephone companies, really had a monopoly right. They had the pole line and everybody had to use that pole line. They started to figure this out, and I think one of the early abusers were the public utility districts in the state of Washington in the late '70's and early '80's, I think it was. They started raising the rates to like $12 per pole per year. There are 40 poles per mile, 35 maybe. So you're dealing $400 - $500 per mile per year just for the right to have that attachment.
I always felt the city of Los Angeles, Los Angeles Water and Power, fixed all of their safety violations on their poles from the make ready charges they would charge cable. Before you could actually pay that annual cost to be attached, you had to pay to get the pole in a position where you could safely attach. So you not only moved things that accommodated you, but you usually cleaned up the last 10 – 20 years worth of problems that nobody had cleaned up. I heard numbers on the order of $20,000 a mile of make-ready in the city of Los Angeles. We were a customer of LA Power & Water in Bishop and in some of those communities as well. In the early '90's, late '80's, we were being offered pole rental rates of $25 per pole per year, inspection fees on top of that, and of course make-ready. Conduit was $1 per foot per year.
So the regulation of this, since it was a monopoly right, was pretty important. Of all the natural monopolies that affected our industry, that was probably the biggest one. Cities created artificial monopolies, but the pole line was a real one. I could see why you don't want a pole line on each side of the street, you want just one. So maybe that made more sense.
BURKE: I'm sure it kept you very busy. You were building a company, you're dealing with the franchises. The Seattle story is very interesting. You got involved in the state level, and of course, the National Cable Television Association has grown to be a very big organization that deals with the national issues. What other states were you involved in?
HIRSHFIELD: Our company operated in a number of states – Washington, of course, Oregon, Idaho, Utah. We had, in our company, two other people who were president of the Washington Association. We had two who were president of the Oregon Cable Association, and we had one who was president of the Idaho Cable Association. Our corporate engineer not only was president of the Oregon Association, Gene Fry, but he also was pretty active in the Society of Cable Television Engineers in the northwest. So we gave a lot of support to these organizations. As I said, it's because it gave us information and maybe we could help affect what was going on.
I think there were two kinds of companies in our industry. There were a lot of companies that did that. There were a few companies that were free-riders, that didn't get involved. But I thought it was necessary and that we had to do that.
BURKE: There was a lot of camaraderie in the early days. It seems like it extended to all these groups. Was it that way as cable continued to grow? How did that affect the cable industry?
HIRSHFIELD: Well, if you sort of come to the last ten or so years, as the companies got bigger, as long as it was the same company, they usually would be the same people and would tend to operate the same way. If somebody new came into the industry, often they would issue edicts that nobody can go to the cable meeting – to save money. So it wouldn't be different. It would be that they simply weren't there.
We had one of the large cable operators, their head guy in the state of Washington, appear at a Washington state meeting and talk about the importance of political action. That afternoon when we went over to the capitol to talk to all our elected officials, there was absolutely nobody from his company, largest in the state, with us. So I'd say it was just their absence that we saw.
BURKE: Are there any very meaningful relationships that have kept you in cable and have been very significant to you?
HIRSHFIELD: I don't know that they've kept me in cable, but I was thinking of some names. The fun story of my first boss, Richard Evanson, Telecable, who hired me in '66, sold the company in '68. A couple of years later he bought an island in the Fiji group, divorced, moved there, and semi-retired - he was a young man. He still lives there and it's now called Turtle Island. It's a very up-scale resort. Every now and then I see him on TV advertising it or talking about it. He sort of likes to be .... I call him the local bwana, although that's probably not a term for the south Pacific. He's been there ever since. He was very acute. He built Telecable from '63 – '68, from nothing to 15,000 customers.
I mentioned Jerry Laufer, Bob Brown and the technical lab. I think that was pretty significant. There was a fellow named Jim Straley who was head of the investment department at Home Life Insurance Company who used to make loans with equity paper, (but that was fair) where banks wouldn't make them. In fact, in my Capital Hill system in Seattle, '68 – '72, we didn't' have any bank debt. We had Home Life Insurance debt. He did that deal. He died young – probably within ten years of that. But he was a significant player in the industry. Probably, from that point until Drexel started doing the high-yield debt for our industry and others in the mid-'80's, he was a major financial player.
I always liked Ted Turner. Ted did a lot for the industry. He did a lot for himself, but it was always very positive. Some of these other vendors ... I had one satellite vendor describe to me that these guys are as incompetent as alternate vendor A and arrogant as alternate vendor B. So now you had all three of them being sort of unpleasant to deal with. TBS, CNN, those guys, were never unpleasant to deal with. They sometimes caused us financial problems, but never over a time-frame that was too short to deal with.
There were a lot of other people in that end of the business who were much, much less pleasant to deal with. I actually had ESPN come in on a Thursday with a contract that was all agreed to, ready to sign, and say, "Well, we've decided no to do this. You have to sign our standard contract or take the signals off Saturday." That was not an unusual way of negotiating. So you see enough of that and it was nice to have the other.
I was looking back through my calendars trying to just remind myself, and in June, 1977, about a year after I left Seafirst Bank where I was controller, a friend of mine – a lending officer, said, "What are you doing this morning." I said, "I have some time. What's up?" He said, "I'm talking to these cable guys. I have absolutely no idea what it's about. Why don't you come sit in on the meeting." It was John Malone and Donne Fisher. I got to sit there, the ex-banker, and sort of talk to Ralph, my friend. These guys were out, of course, looking for money. Things were tight. They were doing what they had to do. It struck me that 20 years later, everybody says, "Oh, TCI and the owners of TCI, John Malone, they had it made. They're too wealthy." But it didn't happen because it happened. It happened because they worked very hard. Even in the late '70's it was touch and go as to how that was all going to come about.
I think, though, the best answer I'd give you – and I wish I could just run off 20 names – is all the small operators I know. There are guys like Mike Fairheart who built Morton; Bob Smiley who built over in the Olympic peninsula; Ed Varhaug built some little systems in our necks of the woods. It was people that would go out and just, from their own resources, build towns of 500 – 800 homes, maybe get 200 – 400 customers. If they were lucky, they'd grow that. But they brought cable TV to all the smaller markets, and in some cases small parts of the bigger markets. Those are really the heroes in this story. But none of them, in themselves, is enough of a name for anybody to care, I suppose. But as a group, I think that's what the cable TV industry is – is all those men who did that.
BURKE: So local heroes as well as people that impacted this industry at every level.
BURKE: One of the questions I've wanted to ask you is would you have any advice for people who are considering careers in cable from your past experience? Looking ahead, what would you tell people about the cable industry?
HIRSHFIELD: I don't know how good I am at advice, but it reminds me of a story. My brother-in-law had a career in the steel industry. Maybe ten years ago or so, my wife and I went and joined my sister and brother-in-law in Colorado to ski for a couple of days. We joined them with a group of their friends who were out for a week. In the evening at dinner, as we were chatting, all these people talked about were the problems and issues they had and how difficult last year had been, and how difficult next year was going to be. The reason I tell this story is, when I'm with cable TV people, it's 180 degrees opposite. It's always, "Boy, what's the next thing that's coming" and "Look what we overcame last year". I even get more animated telling the story. It's just so positive. To me that still is the industry, that people in it are "up", they want to do things, they want to go forward. They're risk takers. That enlivens the atmosphere. That gives you opportunity.
Beyond that, I think it's probably like most jobs – if you perform, you get ahead. Maybe in the cable industry, things are still tight enough that it's harder to ignore the performers. There are some old-line industries where maybe you want to move the performer out because he threatens your job. But in cable TV, things are still pretty tight financially. If you can produce, you're a hero and you get ahead.
BURKE: I also want to ask you about the phrase 'level playing field'. What does that mean to you?
HIRSHFIELD: That's the mantra that the industry used through the '80s and '90s, saying politically, "Just give us a level playing field. Let us compete on an even basis." Other industries have picked that up now as well. The first I heard that was when I used it. That was at a Senate field hearing in Seattle in the late '70's. I tried to find the date, and I couldn't pin it down in my records.
Senator Packwood from Oregon and Gorton from Washington were out in Seattle conducting hearings on what became the '84 Cable Act. I was on a panel with the city of Issaquah and several other municipalities. I think I was the only cable operator. My plea became "Cities, just let us get out there and compete. Make the playing field level." I remember actually on that panel, in front of the two Senators, I applied for franchise in Issaquah. They had problems with their local operator, and they were telling the Senators how terrible it was. I said, "Give me a franchise. I'll come and build it. They'll shape up with competition." It turned out that's not what the city of Issaquah wanted.
What we always wanted was an industry with a level playing field. What I always wanted was the right to compete. Where there were certainly benefits from having these monopolies the cities sold you, I always thought I could have done better if I were simply allowed to compete. That's what we did in Seattle my last 10 years there. We competed head-to-head with TCI, now AT&T, and that was a nice business. That was just fine.
BURKE: Looking back, what are some of the things that you are most proud of in the cable industry or that you feel are some of the most important contributions that you helped with?
HIRSHFIELD: People used to ask me, back when, "You're a business man. What do you do for society?" I said that I employ 80 people. That would be the end of my discussion. I always thought that was pretty good, and running a local business, running a business in Seattle, we created jobs there – well they're not there now since we had to sell the company.
I also tell a little story that sort of illustrates how I think about this. I was a history major in college so that's where this comes from. In the Thirty Years War, which was located in Germany from 1618 – 1648, most of Europe was involved, as you know. I think Spain and Sweden and several other countries had like 10% of their population under arms. If you took that to the U.S. today, it would be like having 27 million people in the military. Some 20% of the population of Germany was destroyed. Large areas of Germany were populated simply by wolves. This was basically a religious war between Protestant and Catholic, people who wanted to control what... Of course, Germany then wasn't Germany. It was lots of smaller municipalities or duchies or call them what you will.
It took them five years to make peace on that war - the Treaty of Westphalia. There were something like 100 nations negotiating the peace. Up till that time, they had used an emissary system, I guess you'd call it, where the king or the ruler would send an emissary to negotiate the treaty. Then the emissary would get the new stuff, and he'd go back. Of course transportation being what it was, this took months. They'd go back and forth. They didn't get that treaty signed and that dispute settled until they changed to what I call the ambassador system.
The difference between an emissary and an ambassador was that an ambassador actually could make decisions. He had the king's general desires at hand, and he could commit for the king without traveling back and forth. That's how they got that war settled. In German history, up to World War I and II, that was probably the worst war that had ever happened.
The ambassador system, in my mind, kept working until about 1990 when the CNN system took over. That system is Sudam Hussein calls in the CNN reporter, and he lays out his negotiating position. Other countries do the same thing. So no longer do you have the need for an ambassador. You have an instant communication, all parties see what your point of view is. I call it the CNN system of negotiating. Maybe there's another way to term it.
But I think one of the things I'm most proud of is that I've done a part, a small part but not an immaterial part, in creating the distribution network that allowed the CNNs and the FOXs and 200 other channels to become worldwide entities and, among other things, facilitate this kind of worldwide communication. There are lots of other derivatives you could draw from that point, but nations negotiate differently now, and we had something to do with that. Long story.
BURKE: You've had a long and productive career in cable. You're still very active in education. I can notice from this event with the Sawtooth, this is an example of the many lasting friendships that are created in the cable industry.
Are there other things about the cable industry that I haven't asked you that you just think are important to share?
HIRSHFIELD: Thanks. I think one point that I don't think we've put on tape yet is why was cable successful. What was it about cable that allowed it to be what it is? To me, it's always been a, what I call, a monopoly of the frequency spectrum. In nature, there's one frequency spectrum at any location. You can only use that once in a location. If you try to reuse it, it doesn't work because you have two things that are interfering with each other. What cable did was overcome that monopoly by allowing you to create a frequency spectrum each time you put a wire or, in the last decade, a fiber. So now every time we want to reuse that frequency, we simply put up another fiber or another cable.
That is the essence of what cable has done. That not only has worked for the last 50 years, but that's going to work going forward, whether we call it cable or what we will. That's the engine that drives this economic machine, and that's still very much in existence I think.
BURKE: It's been very exciting and interesting to interview you. I'm very proud to be part of this project, and we look forward to having you at the rest of the oral histories that will be part of what's available at The Cable Center in Denver.
HIRSHFIELD: Thanks. I appreciate, very much, the opportunity to be part of it.
BURKE: Thank you again for your time and you input.