Interview Date: Saturday August 13, 2005
Interview Location: York, PA
Interviewer: Kristin Van Ormer
Collection: BCAP Collection
VAN ORMER: We're here today with Michael Hain, and Michael is part of Lewistown Nittany Media, a very integral part, and you have been for pretty much your whole life, I believe. Can you tell us about your background with the cable industry?
HAIN: Well, I can. The first story that I can actually remember, I was five years old and I set off 12 ½ sticks of dynamite, but let's back up just a little bit more. I've been told that when I was three I climbed my first tower. My mother wasn't very thrilled with that. My father asked me to come back down, but that's an interesting story on its own. But at the age of 5, we were building the system in Juniata County and to put the poles up over the ridge we had to use dynamite for blasting and at the end of the day we had 12 ½ sticks left over. Now, as you know, dynamite's not something that has a very good shelf life. We weren't going to keep it in the garage; I think dad was correct in making that decision. So the top pole would be called the anchor pole at the top of the ridge, so we put the 12 ½ sticks in there and it was just about dusk, as I remember. This was back during the Mercury Gemini programs – remember the space program? One of the greatest things that the program taught the school age children was how to count backwards from ten. Now, I could have counted backwards from ten, but dad just asked me to count back from five and when I got down to zero I was to touch the wire to the little terminal on the battery post. I remember this pretty vividly because it was just about dusk, the light was what we call "sweet light" right at the end of the day, and I saw this little tiny spark, it was just a little tiny blue spark, and the whole world shook. It was a pretty impressive, memorable experience. The blasting mat they said went 80 feet into the air. The blasting mat is like a potholder made out of steel strand to keep the rocks from getting out of the hole. Well, it went 80 feet into the air. We didn't find it until the next day. But, yes, I got started as a family business. This is what we were talking about earlier – a lot of kids go fishing with their dads on Saturdays and Sundays and they take a fishing pole and they go to the river or the lake. Well, I went fishing with my dad, too, but we took the Jeep to the top of the mountain and I used an antenna mast instead of a pole and we had a Yagge antenna on top and we were looking for distant signals. That was what we did, and that's how I learned how to look for signals.
VAN ORMER: So your father, of course, is Harry "Hank" Hain and was the founder of Lewistown Nittany Media.
HAIN: Yes, Nittany Media, it was then Granville CATV, or Central Electronics, I believe, was the first incorporated name.
VAN ORMER: What was the timeframe?
HAIN: I believe my parents were married in '57 and shortly after that he brought the open wire off the side of the ridge. That's another good story, too, if you'd like to hear that one.
VAN ORMER: Absolutely.
HAIN: Now this is as I remember it – remember I wasn't born yet, okay?
VAN ORMER: Sure. A little disclaimer.
HAIN: I think it was August 16 of 1957... they were married in March and in August dad wanted to do a term in the military service, he felt he owed that to his country, but he didn't want to miss out on the greatest young lady around, so he got married and then went to the Army, but he did it voluntarily. This was August of 1957, he had turned on the first twelve subscribers that afternoon, at I think 2:00 they finished the celebrations of having the channels on, and then stepped on the train for service in the Army that evening at 6:00.
VAN ORMER: A full day for your dad.
HAIN: That system ran, then, until we had an ice storm in January that brought down the open wire, but if you are familiar with the technology that we had back then, the open wire was a transmission line, you had two balanced conductors and it was quite susceptible to falling trees and things like that that you have on the side of a ridge. But the town at that time, the little village of Granville, could get – I'm not exactly sure on the details here – but they could get a very snowy channel 6. Very snowy, barely get it. By today's standards it would be off. You could imagine there was something there. Now that was the quality of signal. By going to the ridge we were able to see into the other areas, the more metropolitan areas and we brought the signals off the ridge down into the little town of Granville and people were just thrilled with the technology.
VAN ORMER: So you were literally born into the cable world.
HAIN: I think so.
VAN ORMER: From fishing with your dad for distant signals, I imagine you worked a lot of your teenage years and your youth within the company?
HAIN: Yes. My first job that I got paid for, we called it destruction. It was a construction crew that went out to put up the cable and I got to come along behind and tear down the old system. We called it destruction because it was a cool name for a 16 year old. But those were the good old days. You couldn't blast with 12 ½ sticks of dynamite nowadays. At the bottom of the ridge there was a gas station and they were just thrilled with what was going on there. They said there were blue sparks all over the wall in the back, and they were excited about it in a positive way. Nowadays, you wouldn't blast to start with, but nowadays we have more attorneys that have more things to do. But, I'm sorry, what was the question?
VAN ORMER: So, were you always interested in becoming a part of the cable industry? Was there ever any question of you looking outside of that, and if you were always interested in cable, what was it that attracted you so much?
HAIN: You know, that's an interesting thought. I'm sure I had a choice and I had lots of options and thoughts there, but as I was growing up there was always work that needed to be done. There was always a subscriber that needed attention or a channel that needed something, and it's just one of those – what do they call it? One darn thing after another. I went to Penn State my first year and I came back my and I built a new town in New Bloomfield and I deferred my going back to school until after I had the town of New Bloomfield cabled.
VAN ORMER: So it was a real family business. Was your mom involved? Was it a mom and pop?
HAIN: Oh, absolutely! She took care of the billing and she answered the calls when that first system started. That's where she started.
VAN ORMER: The classic Pennsylvania cable story, if you will.
HAIN: My parents are remarkable. I'm kind of biased here, but dad has this wonderful vision. He's a visionary. He's very good at seeing what directions to go, sort of has a good eye on the crystal ball. Mom is very good at managing things. She can make things add up, put things together. It's kind of like the engineer and the accountant. Sometimes they don't get along, but they can't really exist without each other. Engineers think – we work on solutions, right? And those doggone accountants mess it up all the time by telling us what we can't do. But on the other hand, if the world were left to engineers there'd be a lot of half-finished projects.
VAN ORMER: So you deferred your education for a year. Did you go back or did you get drawn right in?
HAIN: Yep, I went back into that. But then there's a whole other story. When I was growing up I was in the Civil Air Patrol. When I was 13 I had the honor of being cadet commander. I had 16 year olds doing pushups for me, if you will. Are you familiar with Civil Air Patrol?
VAN ORMER: No.
HAIN: It's sort of a branch of the Air Force. It's a bunch of people who dress up in uniforms and pretend to be military. But the practical function is to do air search and rescue, if a plane goes down, that kind of thing. Secure the area, take care of survivors, get the FAA there to see what caused the crash. But anyway, I was headed for the Air Force Academy and I had knee trouble – Osgood-Schlatter Disease. It's still there but it came from playing football on a real hard August packed ground and going right from that into gymnastics where we went from being real tight to trying to stretch everything at a time when I was growing. Anyway, I was headed for the Air Force Academy right out of high school. I had all the paperwork done, everything set to go, but I had knee surgery on both knees. My casts came off two days before my physical aptitude exam, and I remember that day pretty well. The officer in charge took me aside and said, "If you were my boy, or if I were you, I'd take a year off and let those knees heal and then come back to the Academy in the fall." Well, in the meantime, I met a young lady and that's history.
VAN ORMER: So then you came back to help your Dad run the company, or what was your next step?
HAIN: Well, let's see. We built New Bloomfield and then Thomason Town and then Port Royal. Yeah, there was just always some place to go, there was always building that needed done.
VAN ORMER: So were you involved primarily with the technological aspects of the building? Were you involved with franchising? All of it? What was your area of expertise?
HAIN: In a small company – we did all that. I was at the borough council meetings, I was up the poles drilling the holes, I was out setting the levels on the amplifiers, I did cut-in, I did installs, I wrote our customer accounting system, our corporate accounting and work order processing. In 1984 I put the system in with bar-coded billing, which I still think that's pretty remarkable. And yes, I handled the office end of things too. We had to post the payments for the customer account records and when you do that by hand there's human error when you have human entry, so I decided to put barcode on it and had it set up real slick. The ladies would open the mail, run the wand across the barcode and hit enter. It would beep twice and they'd go to the next one. It was pretty interesting there also because you could update the phone numbers or address or anything at that time instead of setting the paperwork aside to batch process it later. But again, that's a whole other issue. As a company we've been early adopters of certain technologies. We've been on the bleeding edge, if you will. We helped to develop what's now known as DOCSIS. On the other hand, there are times when we have to let technology evolve without us. Converters, for example, we never went with analog pay converters because we couldn't afford to make that mistake once. When you have to invest a large sum of money per customer for the use of converters and then come back in three years and replace them, we couldn't survive that. Back to the economies of scale, back in 1963 we built the system in Juniata. That's when I was five and helped out at the headend, hung around with the guys. At that time, that was right at the point of time when aluminum cable was first introduced. Are you familiar with the history on that?
VAN ORMER: I am, but the more you can elaborate for our audience, the better.
HAIN: Alright. Before that we had a polyethylene jacketed cable. It was a transmission line based with a center conductor of foam, dielectric and then some kind of a foil or copper braid and then the polyethylene jacket. The polyethylene at that time was porous, just by nature. It's structured like glass. When you would put it up it would stretch and the pores would open and you'd get moisture, water vapor would enter in. The basic cause here was that you'd have to rebuild your system every five or seven years. When we put in the Juniata County system, consumers could get off-air the Harrisburg market signals, so they didn't really have to have cable if they had an antenna and $4.33 a month was a substantial amount. A lot of people would rather pay the $15 to put the antenna up. So we realized that we didn't have a return in terms of cash flow there and we knew that we couldn't afford to rebuild it every five years. So Harry worked really hard to get the aluminum cable delivered there. We put that system in and in 1992 when we rebuilt some of that old aluminum was still functioning just perfectly. It hadn't aged, it hadn't cracked, it did exactly what it was supposed to do. That was 412 cable, by the way. A couple other interesting things, the architecture that he used... we now use a trunk and distribution method most everywhere, but at that time most people were using tapped trunk where you would – and I believe our audience understands what tapped trunk would be – he would run the output of the amplifier into a two-way splitter and from that splitter he would use one line for trunk and one line for the taps, for the distribution, which allowed us to go a lot farther than what we could have otherwise. That's pretty amazing. '63, I believe we put the strand up, '64 was when we actually had it turned on. But that was the first all solid state, all aluminum cable system in the world. In the universe, as far as we know. We used solid state amplifiers. They were just brand new at the time and even in the headend where traditionally you would use strips by Luther Holt – he just passed away I believe, two weeks ago. Dad worked with him in designing that. He did the standby oscillators for it. But anyway, we had 13 channels on. 2-13 is 12 channels, but what we did, the next 6 megahertz above Channel 13, at about 216 that would be 222, we put Channel 15, Lancaster-Lebanon. Now they ran the Phillys, and we ran Channel 13 Baltimore right off-air on the frequency on Channel 13. So back then with the old TV sets with the click stop dials if you were a Phillys fan you would fine tune that to the next channel and you would get the Phillys on WLYH. Otherwise you would let 13 on 13 and watch the Baltimore Orioles, and that was kind of neat marketing.
VAN ORMER: It's a whole different world! What were some of the other, going forward, some of the technologies you were implementing that were innovative?
HAIN: Let's see. We did our first fiber project in 1992, which was early. The telcos were asking for a tariff like they do with the 911 system to help build their fiber network. We found that by running fiber we could do things more cost effectively than we could with aluminum. First of all, the fiber per foot was cheaper. We didn't have to have power supplies along the way or amplifiers and we could reach farther. Bottom line is it was cost effective to run fiber. We didn't need anybody to fund us. We ran it because it was the right technology at the right time. That particular fiber link has never failed, which we've been pretty lucky, I guess.
VAN ORMER: Operating a small company, especially now in this environment of so many large MSOs, I imagine you've had to make a lot of decision making in that context of you are a small operator, relatively, and you have to make the right decisions for your business. How have you done that over the years? Is it just a financial equation, is it customer-driven, all of those?
HAIN: Interesting that you should ask that. We're not bogged down in what I would call red tape. When a decision needs to be made, we have the information in front of us. The people that make the decisions are the ones that have to live with them. When the Lewistown girls' high school team won the state championships we carried them live but we also tape delayed the games as they were going through the district playoffs, and that's just something that we do as part of our community and we put those as we say "live on five". Five is our local origination channel. Some other cable systems we made this available to, but they always have to check with somebody else to see what to do. The agility is there for us. The decision makers are right there. I'm not sure if that was your question. How do we make the decisions? Yeah, we do a cost/benefit analysis. That's a big term, but we look at what it's going to cost and whether it's going to be worth it.
VAN ORMER: So generally, as you look back, have there been any times where you feel maybe you missed the boat because you haven't been able to afford to implement the technology or do you feel like your decisions have really been on target?
HAIN: You know, as I look back on the decisions I can't think of one – and let me think a little bit on this... I don't believe so. We're very early adopters in high-speed data, for example. There's another good story, if you like.
VAN ORMER: Please.
HAIN: We have worked with the school districts for a long time. We wired the schools, and in fact when I was watching the Gemini program in the high school, we'd have an assembly... I guess it was the Apollo program, but in that era as a youngster I would sit in the auditorium and watch the launch of the rockets on our own cable system, which is pretty cool. But we've been working with the schools. We air the sporting events, we help the... One particular high school has had a speech class where they do video announcements in the morning and we helped to wire the school for that. Whenever they need tech support I think I'm the first one they call. But anyway, the internet was about to come out. This was '95-'96 and the intermediate unit had put together this wonderful grant that they would be able to provide a point of presence in each of the school districts in the area that they served. Working with Mifflin County, the technology director confided in me that he didn't understand Juniata County, how backwards they were that they wouldn't even take this free thing that the IU was going to give to them. It didn't take a whole lot of thought to figure this out. In Juniata County we have one school district, two high schools about 20 miles apart at opposite ends of the county and there's a terrific political rivalry there. The gentleman, Dr. Stuk, who was in charge there, it would have been a bad decision for him to put that one point of presence in either of the high schools because of the animosity toward the other, or if he'd brought it into the administrative offices it wouldn't have done the students much good – just a little bit of the political background. We'd set up a meeting with Dr. Sole and Dr. Stuk who were running the school district there, and after the initial introductions, "How are you doing?" we started to ask what can we do? Dr. Stuk, again, is a visionary man and he said that, "You know, there's this new medium out there called the internet, and I don't know what all you can do with it but I know that it can be a great thing for learning and for the kids." He started to elaborate on the plan that the IU had, but he indicated that he wanted it to be available to all the students, not just the seniors and not just the teachers, but he wanted it into the kindergartens. One application that he saw with it was predicting the weather. At that point they had dial-up and they could download weather maps overnight because dial-up at that time was, what? 12K? And the kids could look at the weather maps and look out the window and they could predict today's weather, but he said he wanted them to be able to predict tomorrow's weather, but again, he wanted all the students to be able to benefit from it and he asked if there was some way that Nittany Media could help over cable to connect the different schools together so that they could all use this one point of presence. Well, my briefcase was on the floor jumping up and down because in my briefcase I had prepared a little drawing that I showed a map of the county with the different school buildings and the Nittany Media Cable between it and a tie-in there. That was just one of those wonderful moments because everything just came together the way it should. Now, a little bit more on that. Ann had – Ann is my mother – she had $20,000 in a rainy day account and she asked if that would be enough to do this and I thought, oh, sure. This is where our relationship comes in there. She always adds about 20-50% on budget numbers I give her for projects, but at that time the modems were $6,000 a piece. They were made by LAN City but we bought them through DEC – Digital Equipment sourced them for us. In May of '96 we connected the Juniata High School with the East Juniata High School with a ten megabit wide area network and by '97 we had T1 level of internet service in the kindergarten classrooms. We provided the Cat 5 wiring inside of the school buildings, we redid the video wiring, and we did this all as a community service and there was no business model in mind. We went way over our 20,000. We quit counting when we hit 200,000 on it, but Dad has a saying, or something that he taught me, he said, "If you do the right things for the right reasons, good things happen." Simple as that. The kids went to school, they saw what high-speed was about, they learned how to used email, they learned how to use the web for research, and they were able then to go home and show their parents. Their parents went to work and were more productive. Do you see where I'm going with this? The whole region benefited from this, and how did we as a company benefit? You can't calculate it. But when we rolled out the DOCSIS modems, the kids came home to dial-up and said, "Dad, we've got to have a cable modem." The whole region benefited economically. We operate a web hosting development company that's part of our operation, and when we look at the regions – we operate from Altoona, Harrisburg and a whole lot of clients in between – but when we look at the mom and pop, cottage industries that have gone on to the web and our competing globally and they've entered global markets, we see a greater density of these mom and pop web sites coming from our Juniata county area. Mifflin county, which is a much richer area just to the north, just last year we put in a fiber network for them with gigabit Ethernet between the seven buildings that they have there. Before that they were using a combination of ISDN and T1 lines, and the kids had basically no internet. There was nothing usable. If you try to log onto an NT server over an ISDN line, it takes a while for one user. This year we provided them with a ten megabit pipe to the internet and then their gigabit between the buildings and they don't remember what it was like before.
VAN ORMER: So you've had just as much impact, if not more, as a small operator than what the MSOs provide in a technology driven way?
HAIN: Well, yes, we live there. Our kids go to school there. It's our community; we support it. The goodwill that being a good corporate citizen buys is priceless. Retransmission consent – do you want to touch on that one once? Way back in the early days?
VAN ORMER: Yes.
HAIN: There may be people that argue this but this is how I remember it. Channel 27, our ABC affiliate, wanted to force us into carrying – because of their ownership with ESPN – some additional programming. We educated our customers that if you have an antenna you don't have to pay for 27, but if you're on cable they want to tax you, they want to charge you for it. So we took a stand; we didn't feel it was right for a couple of reasons. I'll tell the story in a little bit about how cable has helped the broadcasters. But anyway, they had then requested that we remove ABC from our system. We carried two ABC channels at that time – Harrisburg being our ADI, area of dominant influence; we also had the Wilkes-Barre ABC, and they were thrilled that we were carrying them, but we carried them because they did a better job of school closings. That's the channel you would watch if you wanted to know if the schools were closed and they had some different programming, 16 movies and that. Anyway, we had the two ABCs and we had to take them off. This was right at Penn State's football season and there was a game coming up on Saturday and this was the week before. There was a school board meeting and the teachers were going to go out on strike. So we had a very large turnout at the high school to cover this meeting before the strike and it was very emotional. Everybody was there with jugular issues. The Channel 27 news van pulled into the parking lot to cover the thing. They couldn't get out of their van. They got mobbed. The people were really mad that Channel 27 had forced the carriage to terminate there and they went back to Harrisburg and I think we got a call the next day that it would be fine if we wanted to carry 27 on our system. But do you see how goodwill is priceless? An additional note – there was an ordinance passed in the borough of Port Royal. They do a fall foliage festival and they actually passed an ordinance instructing the constable to escort the ABC news team out of the town if they came in to cover the fall foliage festival. But anyway, these are just interesting things.
VAN ORMER: What year was that, do you remember?
HAIN: This would have been back in the first round, I think, in the early '90s.
VAN ORMER: So it was well before the big Time Warner/ABC deal?
HAIN: Yeah, and it wasn't a lot that they were asking. They just wanted us to carry ESPN 2, which no problem, we carry ESPN 2 because it's the right thing to do. It provides programming our consumers would like to have, but we didn't like have the gun at our head.
VAN ORMER: What have been some of the other challenges with programming costs becoming increasingly expensive, particularly from the small operators standpoint?
HAIN: That's another soapbox. Well, this is where I feel Congress can do the most to protect the consumers. The first line in any programmer contract is non-disclosure, so we can't talk about it too much, but when ESPN... We were the 67th cable operator to put on ESPN and that was back in '76, '77, and at that time they were ad supported and they were just thrilled to have more eyeballs to watch those beer commercials. They thought we were wonderful carrying them. A little later they signed an NFL deal where they had to come up with a lot of cash to pay for that and they went to a subscription-based model. But every time they inflate the pockets of the players or wherever that money goes, it has to come out of our pockets, which means it has to come out of our subscribers pockets and they don't understand that when they see our rates go up it's not just that the gas went up and insurance rates are crazy. It's that the programming costs are going out of this world. MTV, right here in Harrisburg – here's a good one. Hank Lockhart had engineered the system, I think it was 330 megahertz at the time, using the microwave. The Harrisburg microwave pops out to the different nodes before fiber. Anyway, he was spectrum limited and because of must-carry he had to add some low powers. I think there was a channel from Philadelphia repeat, or something, and in adding those channels he had to take something off, which they chose MTV because they didn't see the value in MTV. That's another other story. Anyway, when they took MTV off, MTV took out two billboards – right here by the bridge on 83 was one of them – and on the billboard it said, "You can get it in Moscow, but not in Harrisburg. Demand your MTV." So the phones rang and of course MTV went back on the air. I don't know what they ended up doing with... some other channel had to go off. I don't think the tactics are fair. I think the programmers who used to be our friends are now very much – and I know this is being recorded so I have to be careful here – programmers are great. They give us programming, they give us content. As cable operators we're a pipe. That's what we are. We're the delivery system and we need to have that product to deliver, but I think if there was someplace that needed to be regulated... You can't just say that cable rates can't go up and then let the programmer rates go up and then demand more programming. It just doesn't balance.
VAN ORMER: So how are you going to work that out for your own company?
HAIN: Well, the only choices we have are this medium here of voicing our thoughts, working politically to educate those that are in a position to affect a change, and in the meantime we bite the bullet. To us, a penny saved is a penny earned and we have all these other things we need to do. The CLI takes a full-time position. We have the other reports that we have to generate, the proof of performance and all these added burdens. Yes, there are things that need to be done, but they're expensive and at the same time we have to cut costs and prove efficiency. It's the same old global competition thing and it makes us a lot trimmer, a lot leaner. It does, perhaps, stifle some of our ability to innovate. See, innovation is expensive. It's expensive to be on that bleeding edge, to develop the technologies. Again, in '96 we rolled out cable modems which rolled into DOCSIS eventually. We couldn't do that if we didn't have the funds available to do it and today things are a lot tighter that what they were then.
VAN ORMER: Yes, why don't you talk a little bit more about that? With some of these emerging technologies and increasing competition how are you embracing technologies, how are certain technologies working for your company and what ones are you having to forgo?
HAIN: Okay, which technologies are we missing? Well, we don't presently offer a digital package because of the expense of the headend. We understand that as... We have the technology, that's the great thing, and that piece of coax with a gigahertz – that's 150 T3s. Are you following me here? The piece of wire that goes into the back of your TV set is able to carry 150 T3s, T3 being about 40-45 megabits. The phone company gets $10,000, $15,000 a month for T3, for one T3. Bits are bits, I guess that's a statement that doesn't need to be made but once you're delivering data it doesn't matter what the data represents, whether it's a spreadsheet, whether it's a picture of the grandkids, whether it's a voice communication, whether it's video. Anything that you can digitize you can transfer in bits, and with our HFC technology that 150 T3s is per node – per node or per neighborhood or however we scale that. We really are sitting on top of the world in terms of bandwidth.
VAN ORMER: Do you think that's the biggest benefit that the cable industry has going for it, or advantage, over Verizon and direct competitors?
HAIN: You mention Verizon – they're putting forth this fiber to the home initiative because they have to. DSL is an interim technology. It's been pushed as far as it can be. They're hoping to leapfrog with fiber, but fiber... fiber's a great technology but it's still not cost effective. They're investing an awful lot of money in this. They have very smart people making these choices and decisions. They understand that they have to. As cable operators we deploy more fiber as we need it. You understand that. If we need to split a node, we do that. In the meantime, the pipe into somebody's house is 150 times 30... it's a big pipe. So, yes, I think that's a definite advantage. Another advantage we have though, and there are lots of them – the cable industry, we're innovators, we're MacGyver. We make it work. We take what we have and we figure out how to make it work. At Nittany Media our slogan is "Driving technology home for 50 years." Do you like that idea? It's something you can picture. It's visual. We drive technology, we really do. Back in 1960 when we could not buy a low noise preamp, Harry made them. We needed low noise preamps to be able to bring the signals in, to get them without noise, without snow on them. But we've been taking that technology and we've been putting it into our customers' living rooms, which is pretty cool. I mentioned that we did our first TVRO satellite receiver in the '70s. It was the coolest thing to be able to watch Tom and Jerry at 6:00 at night. I think it's time for that story. Back in the early days, we had one snowy channel, two, three, maybe three networks with PBS added in there. But you watched the cartoons after school. Soap operas were on during naptime. If you wanted to know what the weather was going to be you had to stay up until 11:00 to get the weather report with the news. You see how we got our programming but it was all time model plexed. At that time also, no matter how tall the broadcaster would put his tower, or how powerful he'd make his transmitter, there was a segment of the population that he couldn't get a clear picture to. So we offered the local broadcasters a wonderful advantage in that we would pick the signal up where we could get it clearer and deliver it to the homes, so the broadcasters saw us as an ally. We were giving them not just more eyeballs, but clearer eyeballs, enhancing their service. Then as satellite TV came about... Do you know how that came about?
VAN ORMER: Why don't you tell us?
HAIN: Okay. I remember riding to Washington D.C. to meet with some FCC attorneys with Dad and a man by the name of Don Klein, who helped to set up the microwave distribution service. Are you familiar with that, from the Northeast? From the Delaware Watergap, they could pick up Channel 5, 9, and 11 out of New York City which were independents. That gave us some programming other than the ABC, NBC, CBS. The equipment we had then was from Harris and it had the capacity for four channels. We were only using it for three. The drawback of the microwave was that we could only go about 30 hops before the noise go too bad. This was analog and we were using FM video on this, but even so we'd have rain fade and you'd look outside and there was no rain, but there was rain somewhere farther back in the line. But as I recall, we had this extra channel which we decided to – I say "we" as not me, but the more global cable TV industry – we played tapes of movies on that other channel and that become HBO. So HBO was really the first service that I know of – and we have Les Read here tonight at the Cable Heritage Weekend. Les Read was one of the sales people for HBO at the time with it was TelePrompTer that got that going. This is how I remember it, this is my story, so we'll go with that. It's probably not accurate in all its details. But we had HBO then delivered to the northeast through Harrisburg maybe this far into the state, from the Pocono's down this far before it became unusable. But HBO built up enough of a market share there that then all of the sudden it seemed like we could afford to put more money into the distribution of it. Satellites were like out of this world technology. We brought it down to earth. We put HBO on because we could afford the transponder time to carry that, and as that happened we had common carriers and started to get other things. KTVU out of I believe Los Angeles was one that we carried in the early days. That's where I got to watch Tom and Jerry at 6:00 at night because of the three hour time differential. People would come home from work, working the 3:00-11:00 shift and they'd be able to see primetime TV, and it was a wonderful, fantastic thing for us and for our subscribers. They loved it. Well, KTVU asked us, they begged us, they pleaded with us to take them off. It seems like a paradox from today's standpoint, doesn't it? They were paying for their movies based on their coverage area, okay? Their revenues came from Joe's Car Lot. Now Joe was advertising these wonderful deals on cars but we weren't driving out to California to buy them. So Joe didn't see any good reason that he should pay the increased inflated cost for the movies. So that was their idea. I'll contrast that a little bit. There's this little UHF TV station in Atlanta. You know what I'm talking about – WTBS. Well, have you heard of Ronco? As seen on TV? Anyway, they used a different model. Their advertisers then were national. They did mail order. You could buy a clipper for the pet cat, or I don't know what all the Ronco products were. Ronco wasn't the only name, but it was just mail order things that you could buy. So they had a revenue stream to cover their increased costs of their programming. So they became the superstation, which is now known as TBS. KTVU I think is still out there, but I'm not sure if they have a position on satellite right now. Again, perspective is everything but do you see how the things balance there? Well, anyway, we went from this one really snowy channel and time multiplexing what we watched to ESPN where we could see sports all the time, CNN where back in those days it was SNC – Satellite News Channel – "Give us 18 minutes, we'll give you the world." Do you remember that?
VAN ORMER: No.
HAIN: No? Okay, I guess I'm... I'm a member of the Loyal Order of the 704 but I don't think I have enough gray hair for that. It's hard when you hit mid-life crisis and realize that you really have that much history. Back to the idea there... we went from time multiplexing things to what we call narrow-casting today. There's a channel for everyone all the time. There's something there – if you want the news, you go to Fox or CNN, you have your choice there. If you want sports you go to that. It's there all the time, 24 hours a day. You don't have to wait for the weather to come on, you just go to the weather channel. We live now in a, we'll call it a 500 channel universe. It's really a couple orders of magnitude above that, but there are really 500 channels that we distribute. A lot of it has gone to this specialized narrow-casting programming, which is great. As cable operators we can give an advertiser exactly the demographics that they're looking for. If they want to sell... name a product. What do they want to sell?
VAN ORMER: Cars.
HAIN: Cars, okay. If they want to do sports cars, they're going to go to the Speed Channel, or motorcycles, to get that audience to put their ad in front of them. So you see what I mean with the narrow-casting. And you asked a little bit about where I think we're going in the future. I think that we're going to go from this 500 channel universe to a one channel universe.
VAN ORMER: Explain.
HAIN: It's going to be your channel. It's going to have on it what you want, when you want it, how you want it. Anybody with a webcam right now can do a video over IP, so no longer is that station license – I mean certainly stations are an important issue now, but the diversity of programming can be realized with a camera much like you have right there and be streamed as we move into new technologies of transport. Video-on-demand is tremendous because the whole library of everything that's ever been produced can be delivered very nicely, succinctly, timely, with even more power than what you can have with a VCR. VCRs you have to rewind. These you can jump non-linearly to different parts of the program. But in a nutshell, yeah, we're moving to a one channel per viewer world and that channel will be programmed with what you want. If you want episode 248 of I Love Lucy where Ricky Ricardo trips over the couch – I guess that was Dick Van Dyke – you'll be able to do that. It'll be your channel, you'll be programming it with what you want.
VAN ORMER: Non-linear networks are the future?
HAIN: Exactly, and as cable operators that's our challenge is to be able to find the content, index it, catalog it, and then provision that bandwidth for the user, and that's where digital fits in. Now where we are, in rural Pennsylvania, we have a very strong basic package. We have something on there for everybody, but back to programmers – MTV requires us to pay them for everybody that's on the system whether they get MTV or not. Grandma, she has to pay for her MTV. She's on Lifeline, she only really wants the networks, she only wants to watch maybe the news and her soap operas, but she has to pay for MTV and if it were available to her she'd blush as she flipped through it, and that's where I think society needs to help make a change there.
VAN ORMER: And so you think these new technologies are going to help with that?
HAIN: Absolutely. We do this thing with economy of scale. We're able to offer ESPN to everybody for less than what we would be able to if we were to charge it to just a few. You remember when Disney was a premium channel? I talked with Disney. We had a small cable system, it had 100 subs or less, and it didn't make economic sense to put the scrambling equipment on there but we did want to provide Disney to everybody. If we had ten people take Disney Channel, it sure wouldn't pay the $5,000 for the capital investment on the equipment, so I asked Disney what kind of rate they could give us if we made it available to everybody. They scratched their heads and said, well, Disney's a pay service and people have to have a choice whether to take it or not. I think it was about 18 months later when we finally were able to put Disney on as a basic channel and we had to charge about ten dollars for Disney then, and we were able to put Disney on and a couple of other channels for a rate increase of somewhere around a dollar. So you see where economy of scale fits in there in two ways. As we talk about a la carte programming, the programming will be more expensive for the few that watch it and I don't think that rates are going to change significantly by doing that. If somebody only wants three channels, those three channels are going to still cost them $30, whereas right now we can provide 50 channels for that. Does that make sense?
VAN ORMER: Oh, yeah! Absolutely. I think that's pretty good coverage of new technologies. Is there anything you want to speak to that we haven't covered yet?
HAIN: Oh, yes! Well, there's the issue of voice. Is it data, is it voice, should it be tarriffed, does it cross lata? We've set up these artificial structures in setting up our telecommunications network for voice. The business model is that the telcos are guaranteed a return on investment. They're limited by the PUC in their rates, but those rates are justified by what they've invested. To bring that down to earth a little bit more, for every dollar they spend they're allowed to have 15, somebody told me 17, cents profit on it. That's why you see the gold-plating. In our operation, when we send a serviceman to, let's say Port Royal, we try to have five jobs in Port Royal for him. Conversely, and you edit this out if it needs to be, the telcos will send two guys out, one to Macalesterville, which is 20 miles away from Port Royal, the other one to Port Royal. That's where their first jobs will be. Their second jobs... they'll wave at each other as they drive by, and I think that's intentional. I've talked to engineers that worked with the telephone companies. This particular engineer worked in Erie, and he was from the Harrisburg area, and when he retired he was very angry because his whole life had been spent on an airplane going to Erie to do the telephone engineering there. Well, there were engineers in Erie that were being sent to Bradford or some other place that could have been doing his job. He could have been home for his kids' baseball games and he wasn't, and he was really angry about that. But it was done in order to maximize the travel expenses. Well, sure, you've got to pay for your engineer to go up there to do the work but there's already somebody there that could do it. Whereas in cable, as I said earlier, a penny saved is a penny earned and the more we can cut our costs, the more personal benefit we have to it. The other artificial structure that's been set up because of things that were necessary at the time, like universal service, are set up so that the more you spend the more you earn. In other words, a dollar wasted is 15 cents profit. But you've heard that before? Okay. Anything else technologically wise? We went over a little bit as to how we... Back to the retransmission a little bit again. Remember, we were good friends with the broadcasters. We were giving them something that they couldn't have bought for any amount of money. We were giving them crystal clear eyeballs. Well, when we started giving people more choices, then their viewership went down. People were watching ESPN, they weren't watching ABC. So then cable was seen as a competitor because of the revenue stream that is used by broadcasters. Where are we today? Well, as we move to an all digital broadcast world, 2006 is the date that's been picked, I think it was very insightful of the commissioner – I believe that was Mike.... No, anyway, the commissioner that picked 2006 – but this was back in the '90s that he decided that to drive technology forward because it was needed. The analog spectrum is a very finite resource. There are only so many channels to go around, so many frequencies, and anywhere that we can move communication to point to point by way of fiber or a wire line system, we need to because ten minutes ago I tried to make a call on my cell phone and it said that the network was busy. By moving to digital we're now getting... even with 8 VSB you get about 4-6 times as much video information there as what you can get on regular analog, we will be freeing up a significant chunk of bandwidth which is very valuable for the mobile market. But even in the mobile market, cell phones, for example, you know how they're set up in cells of orthogonal frequencies and they reuse the frequencies every other cell, for the amount of communication that people are going to want we have these wonderful little devices that would stream video. People are going to be wanting 100 megabits as they walk around town and in order to give that to them we need to have a channel for them provisioned. I see us moving, and I see cable as being a very integral part of this. This is sort of evolutionary to me, I think. As I anticipate what the future needs are going to be, we're going to need more mobile spectrum available to portable devices. So we'll need to be moving as much of that to fixed line as we can, which we already are doing, but I would propose that we go from these cells that now are a couple miles apart to what I would call a microcell, and cable has the infrastructure to provide that. Each of our amplifiers are spaced 1,500-2,000 feet apart. Using a technology as ubiquitous as Y-Fi, we can put a Y-Fi hotspot, if you will, every 2,000 feet at which point this little device – it's just a Dell Axim, but it's a little pocket PC device, has a speaker up here, a microphone here, it has a voiceover IP client on it. Anywhere that you can get 8 to 11, you have a voice over IP connection. I think that's significant. I don't know if I've explained it appropriately here, though.
VAN ORMER: I think you did a pretty good job. I wanted to address decision making practices in the context of a small company and I think we covered that really well – how you've faced and embraced new technologies.
HAIN: There are those that were on the bleeding edge because there's a good reason to be, like fiber for example. We have more experience than almost anybody in fiber, and likewise with DOCSIS because of what we did. By rolling DOCSIS out, or cable modem service out to the school district, it allowed us to perfect our techniques on managing a two-way plant, and it let us deploy it over a nice time period. We had enough history there, we had enough time for things to go wrong that we could adapt our practices so that we would prevent that. We're very particular in our engineering, like which way the bug goes and how you put the tape on and those kinds of things because we've been out there in February fixing things and we've identified what practices work best for us.
VAN ORMER: What else do you want to go into in terms of technology as a boon or a detriment to you? I think you've covered the ground really well, I just don't know if there's anything else you want to add?
HAIN: When you were talking about competition in terms of that and technology – doggone it, in Pennsylvania we've invented just about everything that's happened with the exception of fiber, and it's arguable that fiber came from Area 51. But in terms of making the technology work, what we were doing with Cable Labs is significant. When cable modems were first dreamt up, they stood about 3 foot tall and weighed about 120 pounds. Our first ones were, as I said, $6,000. They were a box about like that by that. Nowadays they're discardable. Our cost is somewhere in the $30 range for them and they weigh ounces and they're like a 3x5 card. So that came about primarily because of the Cable Labs initiative to come up with a standard, the DOCSIS standard. So we pushed forward in packet cable and those types of things. I think it's great. It's interesting to see that Scientific Atlanta has given quotes to Verizon for the equivalent of digital headends. We are developing the technology that makes sense. It's practical and it's going to be used. In terms of satellite, I told you a few minutes ago how video got onto satellites. If it weren't for cable there would be no Direct TV. There would be no programming, nor would there be the delivery system. We made it happen. Now, in terms of competition, we're two-way. Satellite is not two-way and it would be very expensive to become two-way. They tried to compete with us on data. I think it's wonderful somebody in Gnome, Alaska has cable modems, but somebody in the middle of – let's pick Wyoming because Wyoming has a lot of wide-open space – is able to access the internet over satellite.
VAN ORMER: Do you think that somewhere down the line they're going to look into interactivity more like they've done in the past that hasn't really panned out?
HAIN: Well, they have a very slow return path with their telephone return and they can do store and forward, they can get market demographics, they can see what you've been watching and tie that in with their billing. In terms of getting VCR functionality, they have to build the cache into the box meaning the movie has to live on the box for them to be able to access it addressably. Interactivity – you're not going to see video over IP over satellite. You are over cable.
VAN ORMER: Right. I'm talking about how the cable industry is going to maybe utilize that in the future. Do you have a vision for maybe how that will be...?
HAIN: Well, what we do is bandwidth. We do bandwidth. We're moving from analog to digital but we still do bandwidth. Bits are bits; they can represent anything. We have the biggest pipe and we have very good ways to use it. Video over IP I see as a tremendous boon. The technologies that we're developing as we deploy the voice over IP services, the digital voice services, will be scaled very easily into video over the same methodology. You remember George Jetson and Jane his wife? I remember an episode where she was called early in the morning and she didn't have time to get fixed up yet and she had this mask up where it had this pretty smiling face and I think we need to figure out how to do things like that, too, because it's interesting how fiction really does become reality. Maybe not as quickly as we like, but I think we're going to Mars pretty soon, aren't we?
VAN ORMER: So what do you think the landscape is going to look like five, ten years from now in terms of who's going to be in the game in terms of competitors? You kind of talked a little bit about linear to non-linear programming, but what else do you think is down the pike for cable?
HAIN: As I think about that, a lot of that depends on the political landscape. It depends on whether we keep competition fair or whether we subsidize. The initiative in Philadelphia caught a lot of heat. It has a lot of flaws in it. I see it as a dream and there are certainly some benefits there, but one of the biggest things was that they're using our tax dollars that we're paying, they're taking that out of my pocket to pay my competitors to compete with me. Do you see what I mean? And that's certainly not fair. But back to the political landscape. If we know that we have a stable future, if we know that the rules are not going to change halfway through the game, we'll be able to invest the resources and the assets to come up with some great things. One of them, as I said, maybe foremost would be the voice/video marriage. In terms of future applications, you can watch any video of anything that you want right now. That will become easier. Programmers are going to still be there. ESPN is going to be there. But watch out for Mark Cuban. I think that he's going to deliver the Super Bowl over IP one of these days, and the neat thing there is you will be able to pick your seat - in other words, the camera angle that you want to watch the game from, okay? And even more significantly, maybe, you'll be able to choose an announcer that will favor your team. Have you ever listened to a game called by the opposing, somebody that was definitely on the other side of things? That's a little irritating. Beyond that, the statistics, if you want to know who the quarterback's dating, it's right there. Anything that you want to know, you'll be able to dig down in to. How will this be funded? Well, lots of different ways, but one thing we'll be able to do is put the Domino's special on and with one click of the remote, the doorbell will ring and there will be the Domino's pizza right in time for kickoff. That's pretty neat. Back in, I guess it was maybe '96, I was at the National Association of Broadcasters, and they did a breakout session on new media and trying to brainstorm where things were going, and as I looked around Las Vegas at that time, I predicted, and I talked to Mark about this, I predicted that we needed three things to happen and the Super Bowl would be available over IP, or whatever the next protocol is – we need bandwidth, but it's back to the same thing, if you build it will they come? Well, if they want it and are going to pay for it, you'll build it, right? There was a lot of dark fiber hanging around Las Vegas. I knew that that was going to happen. The second thing that we needed was a point-to-multipoint protocol. At that point, all connections with computers were pretty much point-to-point. You go to a web server, your address talks to an address on the server and you exchange the data back and forth as a one-to-one point-to-point connection. Broadcast topology like the local broadcasters use, you have one transmitter and it transmits out to millions of antennas. Well, we needed that kind of a thing for IP and we have it, it's called IP multicast. The streams are split by the routers. As a programmer you have one source you deliver to your router, it delivers it to the routers that it connects to based on whether they want that stream in their direction of not and it just keeps fanning out. So we have that. The other thing we needed was a secure method to pay for it because somebody's got to foot the bill. Have you purchased anything online in the last 30 days?
VAN ORMER: Yeah.
HAIN: Okay, and you trust it?
VAN ORMER: Yeah.
HAIN: So we're there. What are we waiting for? Come on, Mark! We need a stellar event to launch it and I think the Super Bowl is that, although I don't think it's practical to dice it up that way. The Super Bowl has sort of a public ownership, even though NBC may buy the rights to it this year. I think that if it were available exclusively over IP there'd be a lot of unhappy non-IPers, but I think it would be an add-on that would be profitable, would be marketable, and I think its time is just about here.
VAN ORMER: Interesting. Well, I'd like to move into your cultural perspectives on Pennsylvania and the cable telecommunications industry. What would you say is the legacy, maybe, or the greatest contribution that the Pennsylvania cable community has made to the overall industry?
HAIN: You know, I think that what we've done in Pennsylvania is that we've taken technology and married it to an application. I think that's simply it. We've taken the application, whatever it was at the time, and we've found a way to make it happen by using the appropriate technologies. What did Pennsylvania do? Well, that microwave network with its limitations, the capacity to have HBO on the limitations that it could only reach so far brought us into the realm of satellite delivered video. That is significant. The fact that we have mountains here and people just can't put up an antenna even though they're 50 miles from the transmitter. They have to have a clear path, hence we needed to have cable. The topography was very important in that evolution. The mindset of the citizens, the people that live here – we don't live in a world where we're limited by the here and now. We can imagine a future. We know what we want and we'll be able to find a way to get it, and that's what we did with this. There's another story. It's not mine, but I just heard this recently. One of our people coming into the Cable Pioneers this year, Joe Sampelli, told me this story about how his dad had a cabin on the side of a mountain and it was near where a road would cross over the mountain and there was a big fight that was coming up – Jack Dempsey or something, I don't know exactly – but people from, and we use the phrase miles around, but literally from counties around came to see that fight at this one TV set that was on the side of a mountain that would be able to pick up this signal from, I think it was from Pittsburgh. They had to call the fire trucks and the fire police to watch the traffic because they had the road pretty much closed there because of all the people parking to go over to see this show, this event. I think Pennsylvania has a lot of heritage. Do you know what California's most proud of? San Francisco? The bridge. Do you know where that bridge came from? From Pennsylvania. It was the steel workers here that built that bridge. Isn't that interesting? A couple of years ago I saw Governor Tom Ridge – good man. I was in Florida. It was actually at an SCTE emerging technologies conference, but he was pitching to Floridians the benefits of businesses in Pennsylvania. But one of the neat things, when they were having the rolling blackouts in California because of the unwillingness of the people to put power plants up – you know, the NIMBY thing we're seeing with cell towers, not in my backyard – he tied it in with this Motel 6 commercial, "We'll keep the lights on for you". Anyway, that's Pennsylvania, I think. We've done a lot for the industry. I think we invented it, we grew it up, and the whole world is benefiting from it. The things that we discovered in 1963-64 when we put in that all solid-state, all aluminum cable system, the first one in the universe, are now things that are common practice throughout the world. The material properties of aluminum, that it doesn't let moisture permeate it, and just all those lessons learned – expansion loops and all. It's interesting that it started right here.
VAN ORMER: Well, I think that's a good note to go out on. Very good. Is there anything else that you wanted to add?
HAIN: Oh, probably a million but...
VAN ORMER: Oh, I know, we could talk all afternoon, I get the feeling.
HAIN: But I think there's a tee time coming up here I'm a half hour late for.
VAN ORMER: It was a great discussion. We really appreciate your time and your insights.
HAIN: Thank you very much. I enjoyed it as well.
VAN ORMER: Great, thanks.