Marvin JonesInterview Date: Monday April 30, 2001
Interview Location: Denver, CO
Interviewer: Tom Southwick
Program: Hauser Project
SOUTHWICK: This is part of the oral history program for The Cable Center. It's April 30th of the year 2001, and we are at the AT&T studios and headend in Denver, Colorado. My name is Tom Southwick and with me is Marvin Jones, who's one of the key executives in the cable television business, was present and involved with many of the key decisions that made the cable business what it is today. Marvin, I'd like to start out, if I may, asking you where you were born and a little bit about what it was like growing up for you.
JONES: I was born in Phoenix, Arizona in 1937, and I was an only child. My parents lived there all their lives and I went to school in Glendale, Arizona, up to the first year in high school, and then I left town, or left the state. I did a variety of things; I got involved in the cable television industry in Globe, Arizona, which is the place where Bruce Merrill first started his systems back in, actually I think he started in '55 or somewhere back in there. I went to work in 1959 or '58, I'm unsure which year, but it doesn't matter all that much. I had a great ride.
SOUTHWICK: How did you get the job?
JONES: It was interesting how that came about. I used to race motorcycles years ago, when I was a young man. I worked in a smelter machine shop; I was an apprentice machinist in Inspiration, Arizona, which is in between Globe and Miami, Arizona. I think the town is gone now. It's only reason for being there was because of the open pit mines and the smelters and so forth, and they've all been closed down. I met a young man named Ron Harmon, who was the brother of Homer Harmon, who was managing the system for Bruce Merrill at that time, and also was building systems around the various, in the state, and also in Michigan and Texas, and some other states like that. Ronnie was going to school and after he got out of school he would go to work part time at the cable office, and he was an installer technician. Back in those days, you had to be able to keep the system running, repair amplifiers, install drops, just general all around activity. I met him at an impromptu drag race that was going on, which I proceeded to beat everyone there, and Ronnie and I got to talking and I asked him what he was doing and so forth, and I got to riding around in his truck with him after I got off work from the machine shop at about 3:00 in the afternoon. That was about the time he would go to work, and we would be out until 7:00, 8:00, 9:00 o'clock at night keeping the system running and so forth, and I thought that was such a fascinating job to have, to where you had a vehicle to run around town, you're outside all the time, you set your own hours, you're really active. I asked him about trying to get a job. As it turned out, Homer was going to see St. Marie, Michigan, to build a system for Bruce Merrill up there, actually it was a turnkey job, I believe, and so that created an opening, and I applied for the job. I received it, took a $50 a month cut in pay, worked twice them number of hours a week, and loved it ever since. I've just done everything that I can do in the operational side of the business.
SOUTHWICK: Do you recall what it paid?
JONES: I think I went to work for $350 a month. I'm almost sure that's what the number was. I think I was making $375 or $400 or something like that at the smelter at the time.
SOUTHWICK: Were you aware of cable television before this experience?
JONES: I'd never heard of it. I didn't have any knowledge. I wasn't a television fan or anything else, so it was an all new industry to me. It was fascinating. We had three channels at the time on what was called a strip system, that each amplifier amplified each channel, and you had open wire throughout the town and various places, you had a cable called K-14 that was used to run power up the mountain and bring the signal back down the mountain, which is obviously highly illegal, but it was the way to get the process handled. You used tuners out of television sets to actually tune the channel. We had 3, 5, and 12, I believe were the channels out of Phoenix. You had just plain old antennas sticking up on top of the mountaintop up there and fed it down.
SOUTHWICK: Did you have an engineering background, or electronics, or anything?
JONES: No, I didn't. I'm mechanically inclined; I have an aptitude to things working. I'm not a trained engineer or never was a trained technician, but I was able to repair things. I knew what needed to be done, but I could care less about how the amplifier worked, I just knew that if it didn't work what would happen and so forth.
SOUTHWICK: And were people able to get television in this town without cable?
JONES: No. You could not get anything off the air. There was a translator system that was there that was on the same mountaintop that we were that used UHF frequencies and broadcast - actually it wasn't UHF, it was VHF, but I think they had three or four channels as well, and it was a subscription service, and so forth. That was our competitor. I can remember we used to shake the power lines, try to get the signal to go off up on the mountaintop because our signals fed from the bottom, so we'd get customers to sign up for us. We would build a block of cable at a time and take the installations fees, which were $150 at that time, and build the next block, and that was kind of a bootstrap...
SOUTHWICK: Self-financed, basically.
JONES: Yes, at that time. I was very much involved in the construction of systems and I liked that very much. I went on to help build Yuma, Arizona, and El Centro, California, and Brawley, and all those systems. Later on, we built San Antonio after the company changed and Bob Rosencrans came along, but I was always active in the construction side and the maintaining side, and then at one point I decided management looked better to me than standing out freezing on a pole, so I applied myself, went to night school and learned some things, and became manager of the systems.
SOUTHWICK: What was your relationship with Bruce Merrill? Did you work directly for him?
JONES: Well, I knew him and met him and spent a lot of time with him, but I didn't work directly, direct report to him, except for a brief period of time when I was in Page, Arizona, when we were building that system, when they were building the Glen Canyon Dam, that system reported to him at the time. But mostly I reported to people like Homer Harmon, or Dave Montechard, who was the manager of the systems at Time, and then Homer went later to Yuma, Arizona and El Centro, California to build those systems and I worked for Homer there. I was a construction superintendent on them. After we finished building them, I managed the Yuma, Arizona system, and later on the El Centro system, and I was managing them at the time Bob Rosencrans' group, with Columbia Cable bought them from Bruce Merrill.
SOUTHWICK: Now Bruce Merrill was also a manufacturer of equipment.
JONES: He was. He built the first transistorized amplifier, and the company was called AMECO at the time. He built all of these electronics when I was with him. They built the first, what they call low-band amplifiers, which was a combination of actually 2 through 5, and then they had broadband, which was up to channel 12, at the time, and then went to the transistorized amplifiers, which were first put in, I believe Santa Barbara was the first place they went, and when we built the Yuma system, we spaced it for amplifier spacing for the transistorized amplifiers when they came, but we put tube type in and then changed them out afterwards.
SOUTHWICK: And what was the importance of transistorized amplifiers versus the tubes?
JONES: You had the ability to carry broader bandwidth, and you also had the ability to go further distances between amplifiers. The signal was much cleaner. You didn't have the... We used to have what we called wipe, at that time. It was cross modulation between channels, and a variety of different signal difficulties that the transistorized amplifier cleaned up. Much lower operating costs, you could put the amplifier just about anywhere, power it by DC power down the cable rather than having to have, in those days we used to have to put a meter on every pole where we had an amplifier, a tube type amplifier, a tremendous current drain and you were limited to how far you could go with them. So it in general was... It was the same difference between tube radio and a transistorized radio. It's similar. They do similar things, but much more efficient.
SOUTHWICK: Did the first ones work right?
SOUTHWICK: Why not?
JONES: No, they didn't. Well, it was new technology. The designs themselves, there was what's called a trunk amplifier and then there's a bridger or feeder amplifier, and the circuitry were different in them, and it used different paths, which were devices used to adjust the signal coming into an amplifier to get it at the right range. If you get it too high it will overdrive it and create different problems; if it's too low, it's noisy. When we got those amplifiers, no one told us that the paths you use were different for the two types, one's resistive, one's capacity. If you mix the two you wind up getting ghosting everywhere. We spent three weeks trying to find where all the problems were until finally an engineer came from Phoenix and spent time – they wouldn't believe that... they thought we were doing something wrong to make it work, and we finally discovered what the problem was, but once you got through what I would call the birthing of the technology they worked very well.
SOUTHWICK: And what was Bruce Merrill like in terms of his role in the industry and his style as a manager, I guess?
JONES: Bruce was an interesting person. He was a CPA by training, and I think somewhat accidentally got into the manufacturing side of it. Or maybe accident's not the right word – in order, in those days, to build systems and deliver a product that would work, you almost had to build your own, if you will. There were very few manufacturers of amplification equipment. I'm trying to think of some of the names; it's been so long since I've thought of them, but they're not even around anymore.
SOUTHWICK: There was Spencer Kennedy, and...
JONES: Yeah, well, that's exactly what I was trying to think of, because I think they had some of that equipment in there. He got into it, I think, out of self-preservation, in order to just make the product work or get something that you could control it, but he was enough of a visionary to see that the demand for the product, the television signals, was great, that this was a business. He was quite good at using OP, which was other people's monies. He always seemed to be just a little bit behind the curve as far as the amount of capital that he had to do what he was trying to do. He was trying to get, like a lot of the older pioneers did, acquire as much area and as many franchises and build as much as you can in order to beat out other people who were trying to do the same thing. As an individual, I liked him. I still do – he's still living, and he's quite a nice guy. He, unfortunately, was let down by, at least he believes it, by his engineering department, by not coming up with a second generation of the transistorized amplifier, which Jerrold captured the market. There are a lot of reasons why that happened, and I'm not one that could really intelligently tell you why, but the fact is it did not come out, and the next generation was far superior to the AMECO equipment, so it wound up being sort of a second class citizen in that case. Also, he ran into some financial difficulties where he needed to sell off the systems that he had. He got into cable manufacturing, which turned out to be maybe a mistake, and Time Cable and some others were better equipped to do it then what he was at the time. So he wound up needing to sell the systems off, which is how I happened to wind up with Columbia Cable and Bob Rosencrans, because they came through and were looking at systems to buy that were in the West. They had Pendleton, Oregon at the time, and Kennewick, Washington – I think Pendleton first, and then they bought Kennewick later, but that was where they started at, and then they bought the Yuma systems and El Centro systems and allowed me to keep managing them, which is what I owe anything I've acquired or accomplished in this industry to that fact.
SOUTHWICK: The equipment business in the late '50s and early '60s, if you didn't build your own, you tended to buy from Jerrold, because they were really the only game in town.
JONES: That's correct. That's correct.
SOUTHWICK: How did they operate, and what was the relationship between Jerrold and the cable operators that they supplied?
JONES: The problem we had with Jerrold was that they tended to be a competitor as well as a supplier because they were building systems as well, and that was also a problem with AMECO, they were the same thing, but they recognized that they needed to get out of that and they changed course. Jerrold would be – if you were going to buy your product from Jerrold and you were going to try to do a turnkey in a system that you had a franchise for the tendency would be to take care of themselves as opposed to you. So, you may find yourself needing a certain number of amplifiers that you couldn't get because they were going somewhere else, and as it turned out they were going to their own systems instead of ours.
SOUTHWICK: Into systems they owned.
JONES: So there was quite a problem there for a number of years, until management, I guess you would say, became enlightened and decided this is really not the thing to do to try to compete with your customers because it became very apparent you need to be in one camp or another. It's awfully difficult to be both the manufacturer and an operator, and so they made the decision to get out of it. But we had, until people like RCA and others developed the equipment, it was pretty tough. That was one of the reasons why in San Antonio we went with the RCA equipment rather than Jerrold, just because they had not exactly been stellar in their performance.
SOUTHWICK: Which systems were you running for Bruce Merrill when Bob Rosencrans came around?
JONES: Yuma, Arizona; El Centro, California; Brawley; Holtville, and Calexico, California. They're all grouped right there right along the border with Yuma of course, obviously, on one side, and the others in the valley on the other side.
SOUTHWICK: In California?
JONES: Right. Which were systems that I had built, physically, I was a construction superintendent for those under Homer Harmon, who was running them at the time. When Bruce decided to sell them, there were several different buyers that came through. I remember Bill Daniels came through because he was brokering some, and as an interesting kind of little aside, he wrecked his airplane there. Well, wrecked is not the right word – he ran off the runway and into the bar ditch because they blew a tire on takeoff and the pilot aborted. The airport in El Centro runs at an angle to the highway; they've since changed it, but at that time you had a very real possibility of something happening and going into the highway. The pilot turned it sideways and skidded into the bar ditch, and he was coming to Yuma to see me.
SOUTHWICK: Anybody hurt?
JONES: No, no, it didn't hurt anybody. It hurt their pride.
SOUTHWICK: Bill wasn't flying himself?
JONES: No, no, it was the pilot.
SOUTHWICK: Was that your first meeting with Bill Daniels?
JONES: Yep, yep.
SOUTHWICK: How did he strike you? How did he impress you?
JONES: He was the most outgoing, straightforward, "Hi, I'm Bill", type individual that you could meet. He was a class act in any way you want to describe him.
SOUTHWICK: And when Bob Rosencrans came in and bought the systems what happened to you?
JONES: That was an interesting experience, and Bob loves to tell the story and I kind of get a kick out of it too. When he came to visit the systems and see what they look like, they flew into Phoenix, and I picked him up in my car, which at the time things were tight and we didn't have a company car, I just had a personal car, without any air conditioning, and it was summer.
JONES: It was in June, June of '65, I think it was, or '67. When was the Six-Day War? '67?
SOUTHWICK: Um-hmm, yeah.
JONES: That's when they came through. And it's of course so hot and everything. He'd never been west before, never seen the desert before, and was really taken by it. We did the tour of the systems and I guess he saw something there, and as it turned out he was right, about what could be done with the systems. I was fortunate in that he evidently felt that I could help that along, and I became the manager of the overall property, all three of them, a regional manager is what we called me then. It worked out well.
SOUTHWICK: What did he do with the systems after he bought them?
JONES: Well, we just improved them. We expanded them and added channels to them, and did the type things that needed to be done that Bruce didn't have the funding to do at the time. We used those systems and the Kennewick, Washington systems to help take the company public, and almost immediately after that struck a deal with the systems that Ken Gunter had at the time over in San Angelo and Vero Beach, Florida. We also did a deal with United Artists, which allowed them to become 25% owner in the company, and that's where the name UA Columbia came from, and it allowed us to grow at a... we did it at a measured rate. Bob and Dave Strassen, who was the chairman of the company, was very mindful of the balance sheet, did not want to be highly leveraged, did not want any of the franchising wars, although they did do some activity in the east. Chuck Dolan and Bob were going head to head on a lot of New Jersey systems and so forth, but you picked the places that you knew you could operate and not be highly leveraged and so forth. They were very conservative in their approach.
SOUTHWICK: What is it about Bob Rosencrans? I mean, here's an Eastern, Ivy League educated guy who's never been West, and comes out and meets a guy who's more or less self-educated...
JONES: That's right.
SOUTHWICK: ...from Arizona, and yet forms a friendship that's lasted many decades.
JONES: I think it's the special nature of Bob, himself. He very much allows people to do what they're cable of doing, and encourages them to do, and lets you do it, if you will. The interesting thing about him – the first budget we ever did we sat down beside a pool with a yellow legal pad and it took about 30 minutes for us to create this budget for this Yuma and El Centro systems – capital budget, obviously – and certain projections on what we thought we could do customer account-wise and growth-wise, and I nicknamed him the "fastest pencil in the East" from that point on because he was uncanny in his ability to make a judgment and be almost entirely right every time about what a system growth ought to be, what it should do, but yet he didn't try to run it. He allowed us to run it, and I learned an awful, awful lot from him on how to manage people and how to set goals and how to step out of the way and let people do their jobs. As to how we happened to hit it off, I don't know, it's just the way... It's my good fortune that we did. I take great pains to tell everybody that, too. I have the highest regard for him.
SOUTHWICK: And Ken Gunter was also part of the sort of trio there.
JONES: Yep, yes he was. He and Ken really hit it off well. There's an interesting dichotomy, if you will, because there is a Republican and a Democrat. They couldn't be more...
SOUTHWICK: And a Texas conservative versus an Eastern liberal.
JONES: Oh! The arguments, well, not arguments, debates they used to get into were just fascinating. I used to love to sit and listen to them because they were really going at each other, but they still do have the highest regard for each other. And again, when they made the deal for San Angelo and Ken was going to become involved - I was manager of the whole Western group and I was flying my own plane at that time, because I had responsibility for New Mexico, Arizona, Washington, and Oregon, and back in those days airline service would take you about 11 hours to get up there because it was a whistle stop, they stopped every other hour or so. So I learned to fly and would fly back and forth, so when Bob asked me to go to San Angelo to do due diligence and meet Ken Gunter and to see what I thought about him, because they trusted my judgment at the time, well, I flew out there on my plane. Ken actually didn't even meet me at the airport. You've met him, I know you know him, he's a pretty independent, free-thinker type person, and where I would have went to the airport, he would not. It's just the way he is. So I came to his office and he found out that I'd flown in my own plane, and he was just aghast because he at one time had scared himself pretty badly in an airplane. He got caught up on top of cloud cover and had to descend and really put the fear in him, although he now flies. He flies all over the place now, but at that time he didn't. My first impression of him - and it was borne out - was that this is not a guy that was going to be working for me, it was going to be the other way around. He was just too smart and too - I don't know what other term I would use for it, too independent, probably, that's probably a better term - to become a regional person or... I mean, that wasn't his thing. He very much had a vision engineering side, and business-wise too, he's a pretty smart business person, he comes up with some pretty good ideas, but Bob was the best at that, and Ken was the best at the engineering side and the concepts of what we ought to be doing, and they made a wonderful team. It was really... a lot of good things came from that, but when I came back that was the first thing I told him, I said, "We need the systems. We need Ken with them, but he's not going to work for me. We need some other role for him." And it turned out to be the right one, too.
SOUTHWICK: And what was that role?
JONES: He actually became executive vice-president and he was in charge of all the engineering concepts and thinking, and so forth. When the concept of satellite delivery first came out he was very quick to say this is something we should embrace, and here's why, and was able to explain in terms that people like myself, and Bob, and Dave Strassen could understand it. Besides getting away from the engineering side of it, think about the whole ability you're going to have by doing this, and that was a big reason where Bob stood up to Jerry Levin and said, "Put us down for seven of them." It was an interesting decision making.
SOUTHWICK: Before we get away from the kind of regional manager role, what was the relationship that you had with the cities and when you upgraded systems in Yuma and El Centro, and so forth, were you able to raise rates in order to get your money back, or how did the financing work sort of at the local level?
JONES: We, at that time, and actually throughout the whole life of the company, never used promise rate increases or internal budget rate increases as a method to justify funding to do upgrades and so forth. We went at it differently. Bob... another one of the lessons I learned from him, and this still works today, I think, was to get the best possible product together that you could get that the customer wants to buy. So you need to know what it is, number one, and of course back in those days it was very simple, there wasn't a whole heck of a lot around, so...
SOUTHWICK: It was broadcast television stations that you were bringing in from elsewhere.
JONES: That's right, and the independents from LA, which were brought by microwave back then. But when satellite finally came about, and then you start upgrading the systems because you had additional channels to offer, we went at it with the concept that we would set the capital budgets predicated on increased penetrations, not rate increases. We were always very conservative in raising rates. I remember I've got an article somewhere I happened to run across when I was looking at things here that when the rate regs was taken off the industry and the rates were starting to be prominently, if you will, increased, I made a statement that we just were not going to do that because you're punishing your customer for no good reason. You don't raise rates just to get more money, at least in our business philosophy. You want a fair return, you want the shareholders to have a fair return, you want the customer to pay a fair rate for a good product, and that was our philosophy. So, we did not do more than we could reasonably afford to do. We never highly leveraged ourselves. As I mentioned earlier, we were very concerned about having a decent balance sheet, so we always paced ourselves. It was always a struggle because the way we went at our budgeting process was each of the managers came in with their requests for their next year's capital spending, and they had to justify to everyone of the managers why they needed their money and we had a limited amount of funds to deal with, so you'd better sell a good story. On the other hand, you can't just always let the best or the most desirable get it because you wind up then skewing your business, and the bottom tier can never catch up because they can't get any funds. So, it was an interesting balancing act, which I enjoyed. That was one of the things that I wound up having an affinity for was the budgeting and operating and meeting numbers, and so forth.
SOUTHWICK: And that was on an annual basis that you'd meet with everybody?
SOUTHWICK: About this time, late '60s, the federal government made some decisions in terms of limiting the amount of distant signals you could bring in and other restrictions. How did that impact the business at your level?
JONES: Actually, what happened to us at that level, and I wasn't as plugged in to it then as I became later on when I became president of the company, but we quit spending, is what you did, because unless you could gain additional subscribers we felt like it was not... it was against the company's best interests to just keep building or going out and acquiring other franchises. So, it stopped everybody and we just concentrated on doing the best we could and gaining as many subscribers as you can, and using those funds to obviously build whatever you need to get done.
SOUTHWICK: Talk a little bit, if you will, about the financial philosophy, I guess, of Columbia International, as I guess it became.
JONES: Well, the second generation of the company was Columbia International. Originally it was UA Columbia, and that, to answer your question, and then I'll talk a bit about...
SOUTHWICK: Excuse me, Ken Gunter was the UA...
JONES: No, no.
SOUTHWICK: No? How did that evolve?
JONES: UA came about through a purchase we made shortly after we did the – let's see if I get my dates right – the first deal we did was with Ken and got their company, which was International something or other, was the name of the company, but that's not where the International came from. We did a second deal with a stock transaction after we went public for some systems in Texas and in Tennessee, and they were systems that were owned by United Artists Theaters at the time, and they acquired, or we did sort of a merger where they wound up with 25% ownership of the combined companies, when we added their systems in and ours and so forth, and that became the name of UA Columbia Cable, was what the name of it was, or United Artists Cable later. But that was after we'd already acquired... Ken was part of that transaction at the time, and UA stayed with us up until the original founders of Columbia wanted to cash out. That required... it was quite an interesting vote because the United Artists people didn't want the sale to take place because of a capital gains problem that they had. They didn't want to pay the taxes, and the way they finally got around that whole exercise was to find a white knight, which was Ted Rogers. Rogers and United Artists Theaters took the company private and bought the company and renamed it Rogers UA, and later on they split. It was an interesting... they set a document in place that allowed, in case they didn't like each other, they could get "divorced". I think in some ways it's like a prenuptial agreement, if you're not careful you're predicting what you're going to do.
SOUTHWICK: You're going to end up fulfilling your own predictions.
JONES: That's exactly right, which they did. They clashed repeatedly, but that's kind of the history of how the names go about, and then later on, Bob and Ken started another company called Columbia International, and that's where that name came from.
SOUTHWICK: Right, but the original Columbia in the late '60s and early '70s had an economic philosophy, I guess, that left it in a bit of a different position. I mean, some of these companies, including TCI, United, and others, were on the brink of financial disaster during much of that period, but Columbia was not. Why not?
JONES: Two reasons – well, several reasons, but the two predominant ones was a conservative philosophy about debt, and they were very mindful, although I never heard the word leverage ever used until after the TCI days and so forth when the high debt leverage companies came about you start talking about leverage of 8 or 9 times cash flow, and we'd never thought of things that way. It was strictly an ability to what can you manage, how can you run the business. That was, I guess if there's any one, clear, single philosophy, it was being able to run the business properly, which means you have to have the proper funding in place, you have to have the proper staff in place, all the things that you do rather than taking an opposite philosophy that TCI, for instance, did. It's just a difference of philosophy, not an indictment one way or the other. Their position was to acquire as many as they could get and use the fund, any cash flow generated by what you acquired to leverage it and buy something else. It was strictly...
SOUTHWICK: A growth.
JONES: A growth. Our position was always to try to find the best value for, you know, originally it was private shareholders before we went public, and they were all conservative in their investments and were looking for significant returns. You don't get it by leveraging unless you've got a heated economy or other things happening. So that was kind of the guiding force to it. We deliberately did not get caught up in the franchising wars when those took off; we picked our spots in New Jersey and the East. There were a lot of systems that were contiguous that we wound up acquiring and we were going head to head with Chuck Dolan at the time. We bowed out of systems like Boston and others. We were just aghast at the deal that they struck, you know, and it turns out... you know, I don't say that either one of them was wrong, because if you look with the benefit of hindsight, Chuck's done very well. Everyone kept predicting "he's not going to make it, he's not going to make it", and he's doing pretty fine, I think. On the other hand, we did too, but we didn't want to become the biggest or the greatest or anything, it was just run a business you enjoy and have fun doing it.
SOUTHWICK: What difference did it make to you in terms of being a public company versus a private company?
JONES: My first recollection of the difference was that it gave us something else to do deals with.
SOUTHWICK: The stock?
JONES: That's correct. It was a way to do deals without trying to go to banks and creating a package there and that is what created the merger with UA and International and so forth. As far as my experience in operating, at my level, it really didn't make a difference.
SOUTHWICK: No additional reporting required or anything?
JONES: No, not for me. It did at the corporate office, but I was insulated from that because I was just the operating guy.
SOUTHWICK: And when did you first become aware of the possibility of satellites as a means of communication that might be of use in the cable television business?
JONES: Well, Bob Rosencrans and Ken were – I don't know if they're unique – but they were very mindful of telling people what was going on in the company. Our company was so small and Bob would call all of us once a week, or sometimes, daily, depending on what was going on, and would share with us what's going on. So, like, when CNN was thought about, and when Levin was talking to him about satellite delivery, and of course we were looking for ways to add pay services to all of our systems and were running into the problem of the device that ate cards. Who was it that did that? He was out of... it was a guy out of LA that developed it.
SOUTHWICK: Yeah, then John Saeman started working for them and I can't remember.
JONES: I've forgotten now what his name was, but we were all searching - all of his in the industry – searching for some mechanism to grow the business further with something unique, and pay television, or uncut movies, as we called them back then, was very much the way to do it, but bicycling tapes is not going to work. By the time you start extrapolating what this industry could become there's no way you could do it. We tried to do it for awhile and...
SOUTHWICK: And microwave is the other option, which worked in New Jersey. Did that work out West?
JONES: Well, the problem is the FCC took the licenses, changed the frequencies on us, and you had to go with CARS bands, and CARS band is not a long haul capable type technology. AT&T was a long haul carrier at the time, and they were terrible. They had no interest in video, they really saw us as a threat. I mean, it was really not a very comfortable working relationship with the division that had the microwave, so there had to be some other way to do it, and Jerry Levin and his board, in backing him, is really what created this industry to where it is now, and people like Bob and Monty Rifkin did, at ATC, but there's certain discussions about who did what first, but anyway, the fact is the two companies committed to build the earth stations, and we committed for seven of them, and Monty did for one. It created the event that changed the whole industry, made the industry what it is.
SOUTHWICK: And from an operational point of view, in the systems that you were running, what was your thinking in terms of how this would work financially? I mean, if you're going to spend, I think it was $100,000 per earth station in those days...
JONES: That's correct.
SOUTHWICK: How do you make your money back? By selling HBO?
JONES: That's exactly what it was. We had projected it out, and you had a 50% margin, which you were dealing with, you were selling it for seven bucks a month, it was costing you $3.50, you start adding the numbers up, you know, if you get enough penetration it works. And at that time, you weren't – I wasn't anyway – looking past HBO. I mean, obviously, there are possibilities there, but CNN wasn't even thought of at that point, because the next one that came along was TBS. Okay, now it gets us around the problem of the LA microwave channels, because we had run as far as you could go, along the border of New Mexico - actually they got to Farmington – was as far as you could literally take them because of the technology that you used at that time. So, how do you get East with those, and besides, who would want to buy them in the East anyway, if you stop to think about it. The difference of time zones, it got so you had to have some other source of entertainment, otherwise the industry would have remained an antenna service, which is what it was originally, and we were trying to grow it into an entertainment service, which is a whole different animal.
SOUTHWICK: How did Vero Beach get picked as the place to start?
JONES: That's interesting. I think the reason that Vero got picked was it was the easiest site to build an earth station in. It was close to Atlanta, which was where Scientific-Atlanta came from. The only unique problem with the construction of it was we had to, because of the soil, build huge blocks of concrete to protect them against hurricane force winds, but it was still the quickest one to build. We had a fairly decent subscriber base there; the system wasn't that great, frankly. I've got an interesting little tidbit to tell you about the night, but anyway, my recollection is that was the easiest one to do of the seven that we picked out, and to get it done the quickest. It was also the closest to New York, and people could come down to it. I mentioned the quality of the system: the system at that time had about a 35 amp cascade, and for people who may not be familiar with what that means, back in those days, the number of amplifiers you could put in a line, a cascade, they'd build up so much noise that you come to a point to where the picture's not usable. So you were limited by how far you could go. You still have got those limitations today, but today you can use fiber optics and convert to light and go 60 miles, where back then you couldn't go but 1,900 feet, so you have a big difference in the number of amplifiers you have to have. We were 35 amplifiers deep at the Holiday Inn where this service was put on from the headend of where we actually had it, which was in Ft. Pierce, and Bob and I were standing in front of the big screen monitor when the signal came on, and I looked at that and I said, "Oh my God, have we got a problem." And he looked at me and said, "What do you mean? What do you mean?" I said, "When our customers see how good that picture is going through all that cable and all of the quality that we've got now, compare that to the signals we're offering from Miami, we've got a problem." I mean, I'd already seen what was going to happen. You know, the quality was just outstanding, obviously, because it wasn't handled, just through our network, where the quality of the signals coming from Miami, coming through the short arm microwave, coming through... handled umpteen times, degraded it and it was obvious.
SOUTHWICK: In contrast, the signal coming from the Philippines was better?
JONES: Oh, it was just outstanding. Oh, yeah. It's funny how things like that work. That also opened the eyes of the industry as to what kind of quality you should be delivering. If people have nothing to compare it to, then it's good enough. If you can't get direct off-the-air, or you can't get some other comparison, and video wasn't really that popular back then, I mean videotapes. They were fairly pricey and most people didn't have... you didn't have the movie industry around, and all the other things that you didn't have. So, it sharpened our pencil about getting upgraded, getting better engineered systems.
SOUTHWICK: Now, in terms of turning on the signal and seeing that picture, that was just shortly before the event started, right?
JONES: It was, yeah.
SOUTHWICK: So you weren't flat out sure this was going to work until that point?
JONES: Oh, yeah, we went through two satellites. You actually went from Manila to LA, LA to New York, and back down again. So you handled it twice, and no, we all were sitting there, "Is this thing going to work?" And of course everybody said, "Sure, it's going to work." Yeah, well, okay, show me!
SOUTHWICK: Well, you'd had trials before, though, out at the Western Show, and... or the NCTA?
JONES: Oh, yes. As far as the technology we knew it would work, but it had never been done like that.
SOUTHWICK: And was it a race to kind of get the dish in place and things done before the deadline, or how did that work?
JONES: It was. The timing worked out, as it turned out, perfectly fine. Actually there were three satellites up and running and only two of them were licensed it turns out, and I discovered that through the history that we did at the Western Show last year on the participants that created the satellite industry. SA had their dish on, which wasn't licensed. The only two licensed were the ones at Jackson, Mississippi and Vero Beach, Florida. Actually, Vero Beach is wrong – the dish was actually in Ft. Pierce, but the event for all the luminaries was in Vero Beach.
SOUTHWICK: And how many people were there? What was it like? Was it a Holiday Inn?
JONES: It was. We had a big conference room, about 75 people. We had local dignitaries; you had, obviously, the people out of New York. Jerry Levin was there, we actually had Bob was there, Dave Strasler, who was the chairman of our company. I don't remember all the people that were there. I went through and looked at...
SOUTHWICK: Kay Koplovitz, I think.
JONES: Oh, she was there. Well, she put the entertainment function together afterwards. Well, and she also helped, I think, set the whole thing up as far as an event type planning, so yes, she was there.
SOUTHWICK: Irving Kahn?
JONES: I was trying to think of that name. I'm glad you mentioned him. Bob invited him because Irving had, I guess, had a visionary of what the industry ought to be. Yeah, he came.
SOUTHWICK: And were there speeches made?
JONES: I don't recall. That doesn't stick in my mind at all. I was more concerned about it working then anything else.
SOUTHWICK: What was the reaction among people?
JONES: Oohs and aahs. The fight was pretty good, too, so it turned out to be an all around good event. I don't think – certainly I didn't – I don't think a lot of the people there realized what you really were seeing, which was the birth of an industry. That was the seminal event, in my mind, changing it from just an antenna service to what it is today.
SOUTHWICK: And were you running the signal just to the Holiday Inn, or were subscribers actually seeing it in their homes, as well?
JONES: We ran it just to the Holiday Inn, I think. I'd have to go back and look at that. I hadn't thought about it. I'm sure we probably did – I'm not sure. I'd have to look that up and see. The thing that strikes you, that I remember the most about it of course, is getting the thing built, and then the event itself, and then after that it was just business as usual.
SOUTHWICK: Well, it wasn't though. What did you actually do the next week and the next few weeks after you knew it worked? Did you start marketing it in Vero Beach right away?
JONES: Yes, we did market. We had a decision to make at that time that... and the only way that anyone in the whole system could have seen it would have been if you pulled a channel off and put something on it.
SOUTHWICK: Because you were up to capacity?
JONES: That's correct. And what we went with is what was called a negative trap. So, we sold the HBO service and we went and trapped out everybody in town, and only removed the trap if you sold the service. So our first order of business was to trap everybody, pick the channel – the channel we used is channel 4, and the reason for that is because of the way the spectrum sets up. If you put a trip in, the distance between 4 and 5 audio, it won't interfere with it. So, we used channel 4, and ordered the traps, and that was another story that Ken ought to talk about sometime, is just getting the technology to work and the companies...
SOUTHWICK: The negative traps?
JONES: To make the traps, yeah. Originally they were out of coax cable, and then later on they made them in a little barrel with the trapping mechanism inside of it. Today, if you had today's technology, obviously what you'd have done is to do it the other way around. You would say, "Okay, here it is if you want it. Here's a box and it will let you have it." So it was a different philosophy, but the traps were only about $7.50 to install. So, if you had 3,000 customers, you start figuring the math out, as opposed to using a $100 box, although... I don't know what they cost – it was about 50 bucks probably, back then for a box. So, it made more sense capital wise for us to do it, plus we didn't have the electronic problem that you have, and you don't have to irritate the customer by putting a box in that takes...
SOUTHWICK: In their living room.
JONES: Right, so that was the decision we made, and we stayed with that decision everywhere we had HBO, and only when we added, started adding ShowTime, Cinemax, and other services like that did we go to electronics, because you run into a trap problem, you've got to start cascading...
SOUTHWICK: You have too many of those things out there.
JONES: It just doesn't work out.
SOUTHWICK: And what was the reaction among people when you began to market HBO?
JONES: It was – you had some early adopters, but it was not a slam dunk.
JONES: People, number one, they didn't quite know what they were getting, number one. Number two, we had a very unsophisticated, if you will, and I'm using this for the industry itself, and certainly for our company, marketing. I mean, I'm not a marketer, but yet it fell on me to innovate type of thing. So we had a pretty steep learning curve on how to get to the customer. Television stations would not accept advertising; we had a tough time with radio. So, you wound up using newspapers, that was a predominant vehicle that you used, and the thrust was uncut, untouched movies, uninterrupted. I mean, that was the theme. Well, the quality of some of the movies kind of got us in trouble. We had one – I've forgotten the name of it – but I remember that the reaction it got when it was shown in Jonesboro, Arkansas... James Brown was in it and it was all kinds of different pretty ugly scenes about the Civil War era and slavery and so forth. I mean, we got reactions from the cities and the people all over the place. So, it was a learning curve with franchising authorities and realizing that this was coming in your home, ready or not, if you subscribe to the service that's what it is. It's not like going to a movie. But once people finally understood what it was they were able to buy and the privilege, not privilege, but the ability to watch it uninterrupted in your home and so forth was a pretty good drive, and then later on, we had a shortage of product and we were recycling. Also we were doing what we'd call... we'd stagger the hours so that you could fill the day up, number one, and number two to allow the customer to view it when they want. Then they start saying, "Well, you're just showing the same thing over and over again," so they started churning off, but...
SOUTHWICK: What'd you charge for it when you first...?
SOUTHWICK: And how did that number come about?
JONES: I have no idea. I think it's because they charged us $3.50 and we doubled that and you realize that your operating expense of the overall... if you work the math out what you wind up making is about 20% because you've still got the truck rolls, you've still got the same infrastructure to support it and so forth. But it saved the industry.
SOUTHWICK: And the next one to go up on the satellite was W... I think it was still called TCG in those days.
JONES: I think it was, yeah.
SOUTHWICK: For "watch this channel grow", and then changed to WTBS. When did you first become aware of Ted Turner?
JONES: Well, the first real realization of Ted as an individual and as a visionary and where he was going, was when he was talking to everyone in the industry about launching CNN. The actual independent was nice, and I don't remember now what we paid for it; it wasn't all that much, 5 cents a sub or something like that. You know, it was another product, something else to add to it, but the headline news type – although it wasn't called headline news then, it was just CNN 24-hour news all the time – was intriguing, but my reaction as a field person was "Gee, I don't know. Does someone really want to watch that? I mean, what are you really getting here?" The concept was pretty foreign. I actually met him in person in Dallas in 1980, I think, was the first time I ever spent anytime with him at all and talked to him about it. He is quite a showman.
SOUTHWICK: How did he sell you on it?
JONES: Well, he sold Bob more than he did me. Bob had a better idea and a better grasp about what would sell or what would go in the industry and systems than I did. I just...
SOUTHWICK: Trying to make them work? What about the creation of USA? Were you involved in that?
JONES: No, only as part of the company. That was Bob's – he and Kay.
SOUTHWICK: And now I think it's probably appropriate to talk about what happened to Columbia and particularly what happened to Bob Rosencrans.
JONES: Yeah, it's an interesting story. It changed my life a lot, and of course it did his as well, but as I had mentioned earlier, the original founders and shareholders of the original private company that obviously when it went public they had large amounts of shares to control the company, decided for state reasons and people getting older and various other reasons, plus the prices of systems were rising at the time, that it would be a good opportunity for them to monetize the investment, if you will, and the United Artists people did not want to do that because of the capital gains problems they would have if they were taken out, but they did not have the votes to prevent it from happening. So they went looking for someone to help them acquire the company, and as I mentioned earlier, Ted Rogers, who had a presence in the U.S. at that time, was interested and wanted to become a big player in the United States. They formed a partnership to actually buy the company and take it public, or excuse me, take it private, which they did. I forget what year that was, but it was '85, '84, somewhere back in there, roughly. The management styles and the differences in philosophy – from Ted Rogers, and he's another unique individual that has built a quite large cable, I'd call it almost an empire, in Canada, because the size of it is in Canada, and as well as television and closed circuit and so forth – and the ultra-conservative daily cash run business of a theater group, and then you add in a third component of people like Bob and myself, who are used to running our own systems and shows and knowing what needed to be done and finding ways to do it and so forth – formed quite a clash and Bob was very attuned to having the employees and the management of the company have a vested interest, and was pushing pretty hard for – well, I'm getting ahead of myself. The split between Ted Rogers and Rogers' group, and Sol [???] and the Naify's took place before the event with Bob took place. That philosophy, the difference in operating philosophies between those two companies put us management in the middle.
SOUTHWICK: Between Rogers and UA?
JONES: That's correct. They had a real problem dealing with it, and they pulled the plug and there was a split up agreement, and the way the split up worked was, whoever called for the split created two piles of systems equally and the other party got to pick which one they wanted, including the people, and or course UA is the one that pulled the trigger, so myself and Bob and others created the two distinct groups. And we really thought that what they would do is take the Eastern group because we were predominantly in New Jersey in the East, and then in the West... if you drew a line right down the middle of the country you'd have an East/West orientation.
SOUTHWICK: How big was the company in terms of subscribers in those days, roughly?
JONES: A million and a half, I think, because I think after the split it was about 750,000 something like that. We were about a million and a half subs at the time. So anyway, we created this split the best we could and they confounded us by picking the West, which was where Ken was at, where I was. We were in San Angelo, that was our operating headquarters at the time. We'd built San Antonio – that was under construction and just finished, and we had all the other Western systems. So they wound up, where we thought they'd take New Jersey and so forth, because it was closer to them, it created quite an interesting deal because then you had to resign from the company that picked you because obviously I wasn't about to go work for Ted Rogers, I wanted to work with Bob Rosencrans and Bob's up in the East, so it was some interesting times. But when it all finally sorted itself out, we had a wholly owned subsidiary of United Artists theaters that Bob was reporting to the board, the Naify's, and he used to go to San Francisco all the time, and he and Kenneth were trying to create a structure within the theater group that was somewhat akin to what we were used to running, and they were trying to get stock in the company and things like that. The Naify's were the type of individuals that didn't give anything to anybody. That was not in their makeup, and Bob, and later, Ken, had pushed so hard that finally Bob Naify fired Bob and actually it was handled, I consider, very poorly, and I think everyone else would too, is they called him on the telephone on Father's Day and fired him over the phone, which I find... I still find that offensive. If you don't have enough... anyway, that's for them to decide. So, it was quite a shock for all of us.
SOUTHWICK: So Bob Rosencrans left the company, where did that leave you?
JONES: Actually what happened after they terminated Bob was Sal Ahasnan, who was Exec VP for United Artists asked if I would take the job, and my first instinct was to say no, and I talked to Bob about it. I was torn, I really was. I had no desire, had never pictured myself as ever being president of the company and did not want to be. I was perfectly happy with what I was doing. The more I thought about it, the more I thought "Well, what happens to everybody else?" I've got a whole regional and divisional structure underneath me, and if I'm gone, well, then who do they bring in? And so, I made the decision with a great deal of angst to take the job, and I remember Bob and I talking at his house – we had a sort of a final get together before everybody left talk – and he encourage me to take it, although he said, "If I had anything for you," because Columbia International didn't exist at that point, it would have been a different story. And so I took the job and it has been an interesting learning experience. I was not prepared for it, hadn't focused on being that. Dealing with Sal Ahasnan was an interesting experience of its own, and he is very much a hands on type individual. That was part of the problem with Bob is Bob wanted to remain and operate as he's always operated and Sal was saying, "Look, you're working for us. It's our company." So you run into that over and over again. I have in a variety of different mergers. The buyer says, "Look, I own it." So you have to make a decision.
SOUTHWICK: Was part of the problem, also, that they weren't really cable people?
JONES: That's correct. We had a great deal of difficulty. The first board meeting that I went to to make budget presentations to them was bizarre to say the least compared to what it should have been. I'm sitting there in a chair, not unlike what I'm in now, balancing papers on my lap, trying to explain to them why you have to buy converters, and what they do. They had no concept of how a system even technically worked, and they'd never had any occasion to before. I mean, they just... Bob would give them the numbers that he'd forecasted and so forth, and Ken would say a few things, and they'd go off and that'd be that, and the numbers always came through and so on, but when they owned it fully, they wanted to treat it like you do a movie theater. In the movie theater business they know every coke that you've sold, every bag of popcorn, and they know it daily, and they expected the cable system to work that way. Well, this business does not work that way, and you have to make long-term investments, long-term decisions that you may not see the results of for months, maybe years, who knows? It's not like a movie that either dies or falls in the first weekend, so it was quite an experience.
SOUTHWICK: And what year was this?
JONES: It was 1985, I believe. Yeah, that's about right – '84, late '84. They wanted to move the headquarters. I was in San Angelo, Texas, had been there since 1974, so I moved to Montvale, New Jersey so I could be closer to the management of United Artists, and interestingly enough, Sal Ahasnan, who I reported directly to, was not kept apprised of what the Naify's were doing, because they wound up selling their interest in the cable system to Malone and that was – remember the Moscow trip, the first time?
SOUTHWICK: Um-hmm, the Goodwill Games.
JONES: Yes, that's exactly when it happened.
SOUTHWICK: Right. Um-hmm.
JONES: And when they came back the announcement was made, "Guess what? We did the deal." And Sol was taken aback, and I was taken aback, and it turned out that it was a good move. That's when Stewart Blair got involved and some others because the original concept from Malone's and J.C. Sparkman's position was to absorb the systems into TCI operationally and sell off the theaters. Well, Stewart Blair and Brendan Kluston saw an opportunity here, because here you've got a company and you've got a cash flow business and two different businesses to run there, you've got to do something with them. Why not let them remain independent and run them as an entity on its own, and they were able to persuade Malone to do that. Stewart was named the CEO of it, and Brendan...
SOUTHWICK: To allow the whole company, including the cable systems and the theaters, to remain essentially independent as a subsidiary of TCI.
JONES: Correct, operate separately. Right. So, Stewart became the CEO, which he enjoyed thoroughly. The first meeting that I had with him was interesting. We met in a lawyer's office in New York City; Sol had met with him first about the theaters, and Sol was a quite large man. He's an Egyptian that came over and educated himself and started as a theater usher and worked his way up – he's quite a self-made man. And Stewart Blair is a unique individual, and is English, actually Scottish, and long blonde hair, stringy – just totally two opposite people. And then I walk in to the meeting room and the first thing Stewart says to me, "One of us is going to have to change their hairstyle." And I thought to myself – I didn't say it out loud, I should have, I didn't know him well enough then – well, it isn't going to be me. I didn't, either. It was an interesting association, and it enabled me to keep running the systems and I was the chief operating officer until Malone finally decided that Stewart was maybe getting a little too ambitious and he decided to pull the option he had to buy the rest of the shares from the Naifys and they did absorb them then.
SOUTHWICK: And how did it change the operations of the systems under the Stewart Blair kind of quasi-independent stage?
JONES: From my perspective, two things happened. The way that you went at the capital budgeting and operational budget changed quite a bit because the TCI method was somewhat different then ours. There were limits put on our capital spending for what I considered no good reason. I mean, the reason was that they wanted to use the funds somewhere else rather than the business needs for it.
SOUTHWICK: So they were squeezing you a little bit in order to put some resources in...?
JONES: That's correct – to buy corporate airplanes, and things that we had done very well without. So, the positive side was that they used our operating group as a – Malone did this – as a balance staff, or a... what is the term I'm looking for... a benchmark for TCI systems, and I asked how come you can't run the operating margins that UA's running at? So that created some tension.
SOUTHWICK: What were the margins?
JONES: We were running around 50%, and that was kind of the benchmark that you used. As you get into bigger and bigger systems it's not possible, but back then in a classic systems, 50% was the number, and they were running...
SOUTHWICK: And this is about the time that rates were deregulated as well. Did that make a big difference for you?
JONES: Yes, later on, and right about that time...
SOUTHWICK: '86, I think.
JONES: '86 I guess it was.
SOUTHWICK: Yeah, because it was two years after the '84 Act passed, I think.
JONES: At that point, there was probably more pressure to raise rates than there might have been under the complete stand alone system because funds were being used for a variety of things. The theater business wasn't doing all that well, either. Malone saw, from the first day he ever saw that, that that was not a business he wanted to be in. Stewart fell in love with it.
SOUTHWICK: And eventually ended up with it, too?
JONES: Yes, right.
SOUTHWICK: Merrill Lynch, I think.
JONES: To not necessarily a good result, but anyway he did.
SOUTHWICK: And so when it merged into TCI, where did you end up in the hierarchy?
JONES: When they merged, totally took it over in '91, they eliminated my position and all of the corporate staff. There were about 125 of us here that were let go, and I started a consulting company called Marvin Jones Associates, Inc. – really original – and my first client, which turned out to be one of the best ones I had, was John Malone, who called me up. I was sitting around wondering what I was going to do, because I was just out of a job. I'd never been out of a job in my life, and didn't quite know what to do. I mean, how do you go about plugging back in again? Probably feeling sorry for myself, too, truth be known, and he called and wanted to know if I was interested in working with Liberty Media and Peter Barton, because that spin-off, when it took place, had all the partnerships that TCI had in various operating entities that they owned various percentages in but had separate management, and Bresnan was one of them, Leo Hindery's company was another, the Knight Ridder group, the old Storer systems, and all of those.
SOUTHWICK: And TCI owned anywhere from 1% to 90% of all these different...?
JONES: Actually, I think the lowest... you had to have 15% in order to get the discounts from the pay services, and so I think it was from 15% to around 50% and the Gerry Lenfest group, there were some pretty big properties there, and they had around 3 million subs. So, I became their paid consultant and officed out of their building. I had other clients but not anything of the magnitude of them. I did some work internationally for TCI International, for Comcast, but mostly I'd babysit the partnerships that they had, and while Peter and Dobb and those were out building the programming side and other entities there, I was looking after the systems, so that worked pretty well.
SOUTHWICK: But you weren't actually operating them, right? I mean, the individual, whether it was Lenfest or Bresnan...
JONES: No, it was strictly a board seat type... we had veto power over the budgets. We could not tell them what they should be, but if we didn't like the direction they were going, mainly in capital spending or something like that, we had the ability to have a negative vote, which we never used.
SOUTHWICK: But all of these had been owned partly by TCI prior, so it wasn't as if you were coming in completely new?
JONES: No, I was new to them, but it wasn't a change for them at all. The person that they used to deal with was Larry Carlton, I believe, and so I just substituted for them.
SOUTHWICK: And what was Malone like to work for, or with?
JONES: I found him very stimulating. I miss that a lot. I mean, he's the type of individual that in a group executive meeting, you would never know where it was going to go. Obviously you had a topic that you were meeting about, but his mind is such that he can make connections that you don't even think about, and I found it very stimulating. It was interesting – you had to be around him for a while to understand some of the ways he did things. He would float an idea, and being who he is and where he is, depending on who you were, you'd either take that as an order or you would take it as, oh, it's just another idea and ignore it, or somewhere in between. And really all three of those were correct because he would test different things. "Why don't you take MTV off?" And you'd think, well, I'll tell you why I'm not taking it off: because I'd get my head handed to me. I mean, that would be my response. Other people would take it off and get their head handed to them, and then go through the exercise to put it back on. He would do things like that, and that was a simple example. Much more complex examples exist.
SOUTHWICK: Was he looking for you to argue back?
JONES: Yes. He was testing a thought. Why are we paying MTV – and personally I don't like it, I mean that's his mind working – this exorbitant fee when we could be using that money to do something else. So, tell me why we shouldn't do this? And then, if you're not careful, you would...
SOUTHWICK: You'd salute and go jump off the bridge.
JONES: Yeah, you'd go jump off the bridge, yeah.
JONES: But I thoroughly enjoyed him. When I was serving on the NCTA board, I was able as an independent stay on it, it was interesting to see the reaction of other operators and himself and how he handled himself and so forth. Very bright.
SOUTHWICK: What was his position in the industry, and kind of relationship to some of these other moguls, particularly Time, Inc.?
JONES: Well, there were some tensions.
SOUTHWICK: Did they resent him?
JONES: There were some tensions between them because he's not afraid to speak his mind. He's not political at all, in the sense that some people are pretty good at taking the long way around to say something, he takes the shortcut. That doesn't always fit well with people, and he'd call a fool a fool, from his viewpoint, so there was some interesting times. But everyone respected him and respected his intellect. I've never heard anyone say he didn't have the brainpower. They didn't agree with the way he ran the company in the sense that their philosophy – take, say, an Amos Hostetter versus John Malone – totally different approaches. As I mentioned earlier, TCI was on a land grant grab type philosophy to get as big as you possibly can because he knew someday, somewhere, someone was going to buy all this, and he wanted to have the market cornered, if you will. Where Amos and Bob Rosencrans and others, were going at it from a this is a business I want to grow, this is how I want it to look, and this is how I want it to be run, and if I can't run it that way if I get bigger, than I won't get bigger. So it's a total different way of approaching it. I'm not going to say which one is right or wrong; I don't think there is a right or wrong. I mean, they both turned out one way or another.
SOUTHWICK: Now they're both shareholders in AT&T.
JONES: Interesting, huh?
SOUTHWICK: Sitting on the boards of all these different companies, which ones struck you as perhaps, I don't know if best run is really the right way to ask it, but which ones were kind of doing interesting things, and which ones struck you as, gee whiz, I never thought of that? You had Lenfest and Bresnan and what all others?
JONES: I guess the differences between the companies were most marked in the Knight Ridder companies versus Gerry Lenfest or Bill Bresnan.
SOUTHWICK: Meaning somebody who sort of was a creature of the industry, Lenfest and Bresnan, versus a company that's really in the newspaper business?
JONES: That's correct, and the way they viewed and the questions they would ask and the way you go at it, and then you had someone like Leo Hindery, who had his properties there, who was not an operator, but a dealmaker extraordinaire, and he was trying to build something, not too dissimilar to what Malone had done, and not without good reason because he sort of went to school on Malone, and Bob Lewis was a cohort of theirs that they were building all of these various partnerships. Leo, to his good credit, was very sensitive to the relationships with communities and with customers and so forth, where Malone and TCI could take the position that it's our business and if we get along, fine, if we don't, well, that's fine too. It's a different approach. The Knight Ridder people were always – and I'd probably have done the same – comparing what the cable systems were doing and its cash flow and its growth against what the newspapers were doing in advertising, and so I found that very interesting, enough so that I wouldn't want to be in the newspaper business. That's not my cup of tea, and some of the management agreed with me, too, that was interesting. They all in their own way were quite good properties. They allowed their management in the field to run the business without a great deal of interference and so forth, which I find the best way to do it.
SOUTHWICK: What was the purpose of Liberty? What was its real ultimate goal?
JONES: You know, without being John Malone I can't answer that truthfully. I can tell you what I think it was, and probably to the benefit of where it went. He always felt like no one was really valuing TCI the way it should based on all the investments that it had in programming and in cable systems and others, and there was no way to get that out of it, except by creating an entity that could be examined and looked at. The structure that he put together to make that happen is unbelievable. I think they make case studies out of just studying how he did that. Very, very few people understood it, but they all understood what it did for the stock when it was issued, and I think you'll see, maybe not as great a bang, but you'll see it happen again. I mean, I still believe that Liberty is the right vehicle and the right group, that they're there for what they're trying to do. But it was strictly a way to get value out and get it recognized and trade it.
SOUTHWICK: It also transformed him from an employee of the company essentially, albeit well-paid, to a significant owner of the company.
JONES: That's correct. If that was the original plan, it's worked very well. I don't know what the original plan was.
SOUTHWICK: Liberty, then, was folded back into TCI.
JONES: It was.
SOUTHWICK: And what was your role at that point?
JONES: When Liberty came back in, I actually kind of came back in with it and still remained as a consultant to TCI, still Liberty. I stayed on those boards of all of those partnerships up until they were sold, and some of them I got off when I went to work full-time as an employee of TCI in '96. Obviously I was no longer on their boards then, although they still looked to me to look after them, but I was still a consultant to them.
SOUTHWICK: TCI hit some pretty difficult times there, in the mid '90s, partly, I think, because, well, they had the Bell Atlantic deal, which fell through, they had rate regulation, which took effect, they took a lot of heat for bad customer service and so forth. What happened to the company in the mid '90s?
JONES: Part of the problem that occurred at about that time was they knew that they needed to build a network capable of broadband technology. Telephony, in their minds, was going to be a threat from the telephone companies, and it also was a source of revenue for the cable companies. They felt at that time that if we didn't get into it then the telephone companies were going to gobble us up. So, they've tried to put together a structure, a network, and a management that would allow them to build this network, but remove from it, because of their lack of in-depth management that they felt could do the new generation of business, the people that were managing the systems in the field they didn't feel comfortable could offer telephony or any of those services that come along, the decision was made to create a network that removed the network, the cable system, from the management into one large, almost like a telephone call center concept, so that you could say that the same standards are met everywhere, the phones answered the same way everywhere. That's what created the call centers that were built, and the decision to try to make a billing system to handle all this, called Summit Track, which absorbed tremendous amounts of development funds and so forth.
SOUTHWICK: So instead of having a kind of dispersed authority and a lot of different guys it was all central.
JONES: It was all central, completely centralized. So the local manager really had no say so over what channel carriages they had, what hours that they had, what rates they charged. They were really, I don't know what a good description would be, they're just caretakers. They weren't business operators, which is a totally different way of looking at it. This industry has always been built on small entrepreneurial businesses. Each system, each city was a business on its own. To take that concept and scatter it across the United States the way it was, and try to make one system out of it was a tremendous undertaking, and financially it almost killed it. Between the sums that were spent and being spent and not really necessarily being...
JONES: Yeah, and efficiently done. Rebuilds were started without maybe the necessary oversights, and there was a lot of overspending on capital, no one knew what was done, there were systems being built by contractors, in Chicago, for instance, they're supposed to be building a 500 megahertz system and you go find out it wasn't. There was no oversight.
SOUTHWICK: Did a lot of the long time TCI managers leave during that period?
JONES: A lot of them did leave. The good ones, or independent thinkers, did because they couldn't survive in that environment, and the ones that were left would keep their head down to keep from getting it shot off, so it got to be really an uncomfortable scenario. When I came back to work for them – or came to work for them – the first time I worked directly for TCI was in '96, they had just stopped everything. They put a freeze on it.
SOUTHWICK: And this is when Leo Hindery came in?
JONES: Yeah, I came in '96, in October. John asked me to manage and be president of what they called Group B. We had A, B, C. The Group B was the medium sized systems – as opposed to Denver, Hartford, I would have the San Angelos and Tulsas and those kinds of systems because he felt, properly so, that the margins were just off the wall. We were only getting about 30% margins in the classic systems, and he asked if I would run those for him, which I did, and at one point the original thinking was to spin those off and make a stand alone entity of them, make a separate company of them. And then put the Group A, which were the ones that they were spending all the money on, the Hartfords and others, in the large markets, then you had the ones that were doing interactive, Group C and so forth. He quickly found he couldn't do that because of tax reasons and because of ownership, the way the company had been built, there was no way to spin them out, so he reached the decision that he just needed a change in management, and he asked Leo to come and run it. Leo came in February of '97, I believe it was, and Leo asked me when he was being interviewed for that job if I would take on all the systems, and I said yes.
SOUTHWICK: What'd you do?
JONES: Do in...?
SOUTHWICK: In terms of what changes did you make when you came in?
JONES: Well, I changed it back to a structure that they had had in their past that I'd always used in Columbia and United Artists, which was strong regional divisional management, and with clear authority and budgetary ability. Once we all agreed on what the budget was, they ran them, and as long as the numbers are there and the benchmarks are checked, I'm out of your hair. You miss them you got a phone call, miss them twice you got a visit, I mean, that kind of concept. We had to change some managers because they weren't able to handle that. Others just blossomed, and so we created five divisions and were well on our way, at the time they made the decision to sell to AT&T, to putting that company right back where it should have been some time ago. We had about another year left to get everything accomplished we wanted to accomplish, but got enough done to where AT&T thought it would fit their long-term needs and so forth. Then when AT&T made their decision, and Malone and Leo to sell the company and Armstrong to buy it, it brought me to the end of what I think my cable career as an operating person will be.
SOUTHWICK: You never know.
JONES: Well, that's pretty true, but I'm just not cut out for the operating environment that a telephone company operates in. So now I'm retired.
SOUTHWICK: Let me ask you about a couple of things we didn't get into. One is C-SPAN. That was really the creation of Ken Gunter and Bob Rosencrans. How did that come about?
JONES: And Brian Lamb. Brian Lamb was pitching all the NCTA board on this concept, and he found a kindred soul with both Rosencrans and Gunter. As a matter of fact, Ken was an agitator about Bob to make the investment, and Bob wrote a check, I think it was $25,000, I believe was the number.
JONES: And of course that was kind of the seed money that got the whole thing up and running.
SOUTHWICK: What was it about Ken and Bob that made them fertile ground for when Brian Lamb, this trade reporter, walked in with a harebrained idea?
JONES: They're very much fully-rounded individuals as far as government goes, society goes, and so forth. They have sides to them that you don't necessarily see in a lot of the business world, and they really believed in what the concept was. That number one, this is a great idea; number two, it's something that ought to happen; and number three, to a lesser degree, people will watch it. It's unique. I mean, where else can you get this? You've got to get cable service to do it. That was always something we looked for throughout my career, is what makes this different from some other source and how can you make your potential customers enjoy it and want to keep it because you can't get it anywhere else. The concept of being able to see, with all the warts, Congress going through the laborious exercise of creating laws that effect our society is in some ways like watching paint dry, and in some other ways like watching sausage being made, but it certainly is not boring. It's very stimulating to understand we can do this. I mean, no one can sit and watch it all the time, but it's just the fact it's there. Where else in the world can you see this? So I've been a supporter, obviously, from day one. When Bob left, well I became, I was on the board of C-SPAN up until I left the company. Well, actually, I was on the executive committee until Leo came and he took my place, but I've always been a major supporter. Brian is just another one of these individuals that are unique to this industry, and in a lot of ways to the world, and he's had a passion and a vision for this that, unless you've been around him, and I know you have, you can't understand how someone like him could even be around. He's the most non-biased, as far as letting anyone else know about it. He's biased, we all are, but he's able to pick the middle road and get, no matter who it is, on those programs, and with them feeling that he's not going to have a slant to it one way or another. Anything that comes across is what you come across, not something he did. So, it's a unique service, it really is. Brian Lamb is another one of these unique individuals in the industry that you can line them up – people like Bill Daniels and Bill Bresnan and Amos Hostetter and John Malone – they all have some persona, some image that comes to mind, and of course Brian's is a single-minded dedication to that channel and its unbiased objectivity, and he is just frantic about anything ever interfering with that. He becomes a whole different individual; he can be very passionate about being perceived something interfering with that channel. It really is his child, I guess.
SOUTHWICK: You got into this business because you liked riding around in a car outside rather than being in working in a smelter. At some point, I guess, you must have realized that you were in more than just the shoe business, that what you were doing was kind of transforming society. Do you think about that now, and do you think about what it is this industry has accomplished?
JONES: I do, but it's only been lately, I think, once you sort of... I guess when it really became more apparent to me and I started really giving some thought to it, I served as – we didn't mention, but as you know – for a period of time as the interim CEO of The Cable Center, and part of that activity, which of course this taping is part of it as well, is reviewing and preserving all of the events and things that took place that created the industry that we now look at. I mean, it's still ongoing and evolving as we sit here, and so you start thinking about, well, here we are. How did we get where we are and what were the things that went on? When we put together the panel for the Western Show a year ago, with Levin, Rosencrans, Rifkin, and Brian as a moderator, and talking about what led up to the decisions that the decision makers were making to create this satellite technology and what it meant to this industry, and ultimately to the world, you've got to kind of take a thought and say, you know, gee, we really did do something. You didn't just make money for your shareholders, you created a business that allowed something like CNN to come into being, and as a direct result the Berlin Wall came down. It would still be there! So if you don't think about that then you're probably not thinking too deeply. But it is interesting what's happened, and it's nice to be a part of it. My part was on a smaller stage, I would say, than some of the other players like Malone and others, but I represent, I think, the people that made it work. Somebody has to take the visionary's ideas and actually apply them to the real world, and that's what I was fairly good at and I enjoyed doing.
SOUTHWICK: Talk a little bit about The Cable Center, if you will, what its purpose is, how it's evolved a bit over the last year or so since you've been involved.
JONES: The original history of a cable museum started several years back and was originally in Pennsylvania, and it was a way to preserve materials and documents and things that were in danger of being lost. There was a sense later on that it needed to be enlarged and a great deal of that occurred when the decision was made to come from Pennsylvania to Denver, and they decided to build an actual museum and also form an affiliation with Denver University, which really, that relationship and partnership, if you will, is what is going to allow The Center to become a real entity, not just a museum, which that's not its purpose. You need to know where you came from, you need to know what G Line meant for the industry and how it got to broadband and how it got to fiber optics, but where is it going and what does it mean to society and how can you use that as a teaching mechanism and so forth, which is what we created with the Magness Institute. So it ultimately will wind up being a place that scholars can use, news gatherers can use as a history source. The university partnership allows you to set up teaching and schooling to teach the next generation of people that are maybe in the broadband and entertainment business, if nothing else, teach them what not to do, help them understand what customer service really means, and why it's important, and all those things. So it's been exciting for me. I served, I don't know, I guess almost 18 months as a sort of pro bono president. I was executive on loan from AT&T until my term there expired. I found it very enlightening, very stimulating. I'd never been involved with a non-profit organization before, certainly not with a university. But of course, Dan Ritchie I've known from way back, Group W days, so as an individual I knew him, but I didn't know the mechanics of how a university works and they're a world of their own as well as non-profit organizations. So it's another piece of my education, if you will. I'm looking forward to the opening. It's going to be quite spectacular.
SOUTHWICK: Terrific. Anything else I left out?
JONES: Oh, we could probably talk about all kinds of minor stuff, but I think we've covered most of the high spots.
SOUTHWICK: Terrific. Well, thank you very much.
JONES: Thank you.