Interview Date: Tuesday September 16, 2008
Interview Location: New York, NY
Interviewer: Steve Nelson
Collection: Entrepreneur Club Collection
NELSON: Hello, I'm Steve Nelson and we're here with our Oral and Video History Program for The Cable Center and our guest today is Steve Simmons who's CEO of Patriot Media these days, other milestones along your career which we're going to talk to, but let's just start back at the beginning, when you were a kid. Where'd you grow up?
SIMMONS: I grew up in Roslyn Heights, Long Island, which is in New York State, a middle class, lower-middle class home.
NELSON: Where in Roslyn Heights?
SIMMONS: Percheron Lane, 94 Percheron Lane.
NELSON: We were about three blocks away.
SIMMONS: Where were you?
NELSON: Pebble Lane!
SIMMONS: Small world, real small world.
NELSON: That's really amazing. Okay, middle class, upwardly mobile kind of community.
SIMMONS: Right. My father had started an artist materials business. He made Robert Simmons brushes which were some of the most famous artist brushes in the country. Andrew Wyeth and Normal Rockwell used them. I used to go into the city to watch him do what he did as a small business entrepreneur, and went on business trips with him. My mother, at a time when most women didn't work, was vice-president for marketing and sales for a manufacturing company and I would see her do her thing. So they were a pretty good early inspiration for me to think about business, think about accomplishing things, running things, and so forth.
NELSON: But from an entrepreneurial sense because your father was a small business owner.
SIMMONS: Exactly, and I liked what I saw. It was very inspiring to see somebody go and actually be paid for their effort, paid for their sweat, paid for their work, come up with creative ideas. I'd also say that in our home, since we didn't have a lot of money, you learned the value of a buck. So I would mow lawns, I'd shovel snow I remember, with my brother in the winter, I worked as a waiter, worked as a busboy, had a paper route, did a bunch of things like that to try to make money. So it was that kind of environment.
NELSON: And then high school, any particular leanings? Where did the TV interest come from? When you were a kid growing up, what were you watching on TV?
SIMMONS: Well, I think Howdy Doody was one of my favorite ones as it was for so many other kids, and then you had Paladin, which we'd watch...
NELSON: "Have gun, will travel".
SIMMONS: "Have gun, will travel". The Ed Sullivan Show, we all looked forward to seeing it at night, and I remember Phil Silvers we laughed and laughed at. A big inspiration for me on the political side was John Kennedy in high school, and I can remember his election in 1960, I can remember watching his press conferences.
NELSON: Were you in high school at the time?
SIMMONS: Yes, I remember watching when he made that famous televised address about Cuba and the missile crisis. In fact, I got to shake his hand. He came around and campaigned in Long Island and my friend and I went and saw him and shook his hand, so that gave me the political bug. Of course it was a time of a lot of civil rights ferment, so I felt strongly about that, but with both my parents out we had someone who was an African American home with us who I was very close with and her kids and her family, and I remember making a sign and going down to Washington in 1963 in August for the march on Washington with Martin Luther King – very, very inspiring.
NELSON: Were you still in high school at that time?
SIMMONS: Still in high school, I was 17 and felt strongly about it. We used to drive – my dad used to take us, we'd drive during the summers down to Florida, and I remember we'd pass restaurants that wouldn't admit blacks. It was very upsetting; it was hard to believe it was happening in America. I remember the Little Rock High School integration crisis - it was just very difficult for a kid growing up in the north to see all that happen, so it got you energized to try to help improve things.
NELSON: When you went to college did you have in mind a kind of government, public service, law kind of... I know I'm saying that knowing you became a lawyer, but was that something you were already thinking about when you went to college?
SIMMONS: When Kennedy ran for the Senate in New York I had just graduated high school. I worked for him, Bobby Kennedy.
NELSON: How did that happen?
SIMMONS: Again, just interested in politics and I walked into the office and volunteered, they said yep.
NELSON: Sign you up, right?
SIMMONS: Sign me up. I can remember going with him, in his campaign for New York, and all the unbelievable crowds. It was quite an experience. I remember he came up to Cornell my freshman year and he saw me and came over and said hi.
NELSON: He remembered you.
SIMMONS: Yeah, it was a big deal to me. At Cornell I thought that I would go into politics, government; try to help change the world. I got very heavily involved in student government at Cornell, ran for office, did all these different things. So that's sort of where I thought I was headed. I interned for Hubert Humphrey who was vice-president with Johnson at the time, and when he ran for president...
NELSON: As a summer position?
SIMMONS: A summer internship, exactly, and when he ran for president I worked on the campaign, was hired to help with the "student" movement. What there was – it was tough because of the Vietnam War.
NELSON: And Humphrey wasn't necessarily their hero at the time.
SIMMONS: No, not at all but there are a lot of other things one could use with – and obviously when Bobby Kennedy ran then I was totally conflicted – there were a lot of arguments you could use because if Nixon was elected one could point out Supreme Court Justices that would be appointed that would be different than Humphrey's and a lot of other issues Nixon and Humphrey differed on. The big one, the Vietnam War, even Humphrey was moving away from the Johnson policy, but as you know, Humphrey lost by a whisker and Nixon became president and the rest is history.
NELSON: Where were you – I'm sure you remember – on the night that Bobby Kennedy was shot?
SIMMONS: Oh boy, do I ever! I was working at a Cornell reunion during the summer and I couldn't work for a day or two, I was just totally depressed at that time. It was just a horrible, horrible experience. As you know, it was a wild decade with that one year with Martin Luther King, with Bobby Kennedy...
NELSON: Yeah, in the space of a couple months.
SIMMONS: A couple months. Rioting in the streets and the Vietnam War – it was a very tough time for our country. So in any event, I then went on to law school. I got very interested in film making; I got very interested in television. I took a course when I was in law school, at the end of graduate school, in video production.
NELSON: While you were in law school?
SIMMONS: While I was at Harvard Law School. I wrote a paper on communications law, I spent a summer – I think my first or second summer at law school, actually – going to UCLA Film School.
NELSON: That's not a typical law school student path.
SIMMONS: No. I thought I might go into film production or something to do with that, but as it turned out I didn't. Actually I had an offer, I had an offer to work for a president of a film company when I graduated but decided to instead teach at the University of California when I graduated law school.
NELSON: What were you teaching?
SIMMONS: I was teaching law. I was teaching to undergraduates and graduate students. I wasn't at a law school. I was at the University of California Irvine where I taught constitutional law, I taught media law. My specialty was, if you can call it that, the fairness doctrine, which at the time regulated the broadcast media, so I wrote a number of articles on it and I wrote a book on it. I went on sabbatical to Berkeley where I did the book.
NELSON: And just to remind some people what the fairness doctrine was in its essence.
SIMMONS: The fairness doctrine was based upon the premise that broadcasters were given a scarce resource, a spectrum, for free and in return they owed public interest obligations to the public and one of them was something called the fairness doctrine and it had two components. One is you had to air issues that were of public importance and somewhat controversial, and second, you had to air contrasting sides of those issues. And then there were a bunch of subcategories, something called the personal attack doctrine, which is if you attack somebody on TV what were the rights of that person to come back? So I wrote a bunch of articles on that, and as I say, a book. When Carter became president it was amazing that I then found myself shortly thereafter sort of formulating the administration's position on the fairness doctrine, at least from the executive branch.
NELSON: You were employed at this point? Did you go there from... you said you took the sabbatical with the book, wrote the book...
SIMMONS: Exactly, and then I went directly to the White House.
NELSON: Were you hired because of the book or did you seek a position?
SIMMONS: Somebody I'd worked with in the Humphrey campaign, a guy named Stuart Eizenstat...
NELSON: Who was a well-known Carter advisor.
SIMMONS: He was from Atlanta and was Carter's chief domestic policy aide and he'd told me if we win he'd like me to come to the White House, and they won and I came.
NELSON: How could you turn that down?
NELSON: So now what were your responsibilities there?
SIMMONS: One of the responsibilities was communications policy so I was liaison to the broadcasting industry, and I worked in cable. Another fellow, Rick Neustadt, who's since passed away, was also heavily involved in this, but we worked in cable television, this new thing. We worked with radio broadcasters, we worked with TV broadcasters, and the Carter Administration was essentially in favor of as many voices as possible, deregulation, let the American people have a cornucopia, if you will, of outlets in the media. So that's sort of one area – I also worked on government reform, as best I could. I mean, I was a young whippersnapper to put it mildly, but government reform, and then I worked on some legal things with the justice department, even some small business stuff. So it was quite an extraordinary experience for a young person to go through. I wrote, it had to be 25-50 memos to the president on different issues – pros, cons, what do you do? – and so forth. So that was that period.
NELSON: You say that because of Carter's position – what you just said about wanting as many voices as possible, and of course with cable coming up – didn't that play into the ultimate demise of the fairness doctrine as it was then known because you didn't have three broadcast networks controlling everything and so you didn't have to have two sides of every position every time someone opened their mouth.
SIMMONS: That's a great insight, Steve, and ultimately it did, it did lead to that, and also the way it was administered was not well done, very difficult to sort out what are the issues being discussed, what's the contrasting view – you sort of get yourself tied in knots. I had gone through the case law, but you're right, ultimately it did, but at the time we thought the good of the country was going to be moved forward by that diversity.
NELSON: Just give me some sense of what it was like as the young whippersnapper, as you describe yourself, perhaps a little more sophisticated than that, working in that White House, aside from the policy issues themselves, but you know, the atmosphere there, what was the feeling like?
SIMMONS: Well, it's extraordinary. I mean the first day you walk through the gates of the White House...
NELSON: To show up for work.
SIMMONS: To show up for work, and this is your office, and you know, you're sort of gaga. It's unbelievable. You're sitting there in the old executive office building and the Roosevelt room of the White House, wherever it was you had these meetings, and you're seeing the president of the United States sort of give you feedback on things and interact with you, through my boss, Stu Eisenstat, of course, but it was a pretty amazing experience. It was very hard, very pressured, very long hours, sometimes there was no night and day. You could get there at 9:00 in the morning and work 'til midnight. You didn't have to, but you worked Saturdays. I remember going in on the weekends, Sundays too, you'd see Carter coming from the residence over in jeans and a shirt with a whole bunch of briefing books because he worked very hard. He's a very, very smart guy. And it involved some extraordinary experiences. I remember sitting with my wife Eileen at home and Carter had been at Camp David with Sadat and Begin trying to figure out how to bring peace between Israel and Egypt, and I think we were watching Star Wars at the time on TV, and the phone rang and they said, "They're coming back. Would you like to go to the East Room to see them come back?" and we said, "Sure," we thought they'd announce that they couldn't reach a deal, they'd been there... and we got there and it was an amazing thing. People were crying, tears... I mean, they had reached an agreement. Going up to Sadat and just congratulating him, having that opportunity... I remember when the Shah of Iran came and there was a ceremony on the South Lawn and going out to look at that, and the tear gas being so strong, I don't know how they stood up there. And all the demonstrators and rioters – I went back to my office and looked down on the street and there was one Iranian student with a long plank just smashing the head of another one. It was just incredible times to see all that. For me, it was an extraordinary experience to affect public policy at a very, very young age, working with the Congress on so many of these issues, trying to do it thoughtfully. On the issues you worked on, let's say civil service reform was one piece of legislation, railroad deregulation for example was another, communications issues – you'd be in contact with Congress, you'd be in touch with the media, you'd be in touch with interest groups, you'd of course be in touch with the administration. I worked with Henry Geller a lot, who was assistant secretary at the time. So you'd interview FCC commissioners before they were appointed to see whether you thought they were right for the job. It was an unbelievable opportunity to sort of help your country and work for what you thought was in the best interests of the country based upon the president's positions, the administration's positions. But on some of these issues you'd formulate the positions because he was always involved in the details of what you were working on.
NELSON: That's the nature of staff work, right?
SIMMONS: Right. So it was really quite an extraordinary opportunity to do it but you had to be a long distance athlete because it was an awful lot of work. You worked very hard and very long.
NELSON: Now you mentioned writing memos to Carter. Did you ever actually get a chance to sit down with him and discuss any of these things?
SIMMONS: Yeah, I was in many meetings with him in the Cabinet Room. On the civil service reform legislation, I remember giving him a memo that had taken me three weeks to put together, talking with experts outside about it, what to do, etc., and you know, he read the memo, absorbed it in half an hour, the whole thing, went into a meeting with some civil servants, and (snap) did just an unbelievably brilliant job of understanding the issues and back and forth. So I was at a number of meetings with him where I would sit as a junior aide, but these were my issues so I'd be the person turned to on the stuff.
NELSON: So I guess he was smarter than a lot of people gave him credit for.
SIMMONS: Well, we all know the things that people say, the negatives of this administration. There were a lot of positives and I don't think he gets credit for. We talked about communications policy, deregulation, he was for deregulation not only in the communications area but railroads, trucking, a whole series of areas.
SIMMONS: Airlines was a big one. Energy policy – I mean, he was the one suggesting originally that we try to develop alternative fuels, reduce our reliance on foreign oil. It never happened but I think he ...
NELSON: He did push that.
SIMMONS: Oh, yeah! He absolutely did push that, and a lot of other things. I think the whole Iranian crisis with the kidnapping of our hostages, which was a foreign policy area I was not involved in, so overwhelmed what he was doing, and that combined with the inflation at the time and high interest rates led to a situation where it was very tough.
NELSON: Of course, ironically here we are again today where energy is a huge issue, Iran is a huge issue, so nothing changes perhaps. What goes around comes around, but in any event, obviously Carter ultimately left the White House. Did you stay through his term?
SIMMONS: Yeah, I stayed. I left, I think, just before the end of it. I got an opportunity to work for a small cable company called Douglas Communications.
NELSON: Now this is quite a change, the White House to some small company.
SIMMONS: Huge change!
NELSON: Well, you did have the small business background, but nonetheless, the perks probably weren't as great.
SIMMONS: No, it was quite a change.
NELSON: Maybe the hours were shorter, though.
SIMMONS: Well, it was nice, too, to make some money. In a government job you don't do it for the money because you don't make much money, so it's nice to be able to work and work hard and be paid for it.
NELSON: Why cable? Obviously you had a great overview of the telecommunications business from where you were. What was it about cable that led you to go there as opposed to go to work for NBC?
SIMMONS: Right. I thought the idea of people paying more for more channels made sense. At the time there were just the three networks – ABC, CBS, NBC, Public Broadcasting, maybe a few independents – and the concept of a CNN, which Ted Turner showed me, by the way, at one of the cable shows, I remember, or HBO, or whatever were the additional channels, it just was a natural to me, and I thought the idea of being able to do that and be an entrepreneur at it made a lot of sense. It seemed to me to be the future, so to speak, and I wanted to be involved in that. I didn't want to go back to the university. I knew the industry, having studied it from the legal standpoint in academia, worked with it from the government standpoint in the White House, and so I decided to take the plunge and see how it would...
NELSON: Get in on the operations side?
SIMMONS: Get in on the operations side. So I thought a small cable operator was the way to go, and I thought also getting equity, being able to work so you could build up equity in something would make sense.
NELSON: What was your job at Douglas?
SIMMONS: I focused on – I think the title was, and it's been a long time now, but I think it was senior VP for business development, which included franchising, acquisitions...
NELSON: And franchising was very active at the time.
SIMMONS: Incredibly! It was like the great land rush.
NELSON Now were you involved in actually franchising negotiations and all that?
SIMMONS: Oh yeah, big time. So we put together a franchising team in the various cities, we put together proposals. At one point we did a deal with United Cable which Gene Schneider headed. Douglas merged with the Tribune Company shortly after I was there, so our franchising efforts became Tribune United. I can remember we were in Tampa, Florida and I got down there – that was a city that was asking for franchise requests – I got there and all the political heavyweights had gone with one of two companies and I figured what can possibly be the strategy here? The city council or the mayor was going to reward a franchise and he had all these conflicting obligations. So I figured, well, maybe the best thing to do is really be the independent. You come in, you don't have political heavyweights so you're not going to offend this group or that group, you just get one or two respected people in town that aren't affiliated and you just try to do the best proposal and win on that. By God, I remember a month or two after I left, maybe a few weeks after I left to start my own company, getting a call – I was walking the streets of New York – and it was the team I had put together in Tampa calling me to say they had won the franchise. It felt good, it felt really good!
NELSON: Because as we know, with a lot of franchises the political connection obviously did...
SIMMONS: Oh, big time! Big time. So it was very exciting. I remember franchising for a bunch of towns in Michigan and we won that, which was good, but you'd have to put together these elaborate franchise proposals, you'd have to hire lawyers that were well-known in town, you'd have to do political schmoozing, and go in there and try to beat the other guy. So it was... You'd win some, you'd lose some.
NELSON: Was there ever one you thought you had in the bag that you lost? If this was the surprise, winning Tampa, was there the other side of the coin?
SIMMONS: Southern California I thought we were going to win some. We had franchised and had done some great proposals in some of the towns in Southern California and we didn't win. Who knows? Probably political connections of others, so there I was pretty surprised that we didn't do better than we did.
NELSON: I guess you can't win 'em all, right?
SIMMONS: Can't win 'em all. Some places, I remember a small town in upstate New York, I've forgotten the name of it, but I remember going there, they were looking for franchises and the guy met me and I got the feeling he was trying to say, hey, if you give me a little thing on the side – not me, personally, but our company – I said, "Are you joking? Do you know my background? I would no more do that..." and I got out of there fast. So there were all sorts of strange things happening. In any event, it was a very interesting period.
NELSON: So there were episodes of people looking for a little...
SIMMONS: Very rare, it was very rare. This I never nailed it down, but I felt very uncomfortable. So I didn't want to pursue it to find out what he had in mind, but I think for the most part, and I may be naïve, but I think for the most part there wasn't that going on. I don't know what others have told you in their histories, but I didn't really see much of that. I think, in fact, in all the cases where we pursued the franchises it was one based on politics, certainly, I mean that clearly played a role, you know, key people in the community or the proposal itself, or politicking with the individual council members. One might have said, "Well, I think we need a local studio," or something, and that was important to that council so you put in a local studio, that kind of thing.
NELSON: Well, there were a lot of those in proposals, you give them a local access studio it would carry the city council. That's just responding to some of the needs.
SIMMONS: Right. It was an interesting time.
NELSON: So how long did that go on at Douglas?
SIMMONS: I'd say about a year and a half. At Douglas I had started out I remember actually at a local system where I climbed poles, I walked around learning the business. So I'd learned the business reasonably well. Well, I'd learned something about the business, let's put it that way. I had participated in discussions, the financial side of it, obviously the franchising side, participated in a lot of the programming discussions. These weren't my areas of key responsibility but it was a very small team, you participated... So I'd seen the business from the academic, from sort of the government perspective, and then had been in sort of the operating piece, and I just figured I could do this on my own and I figured let's do it!
NELSON: This is what year?
SIMMONS: Probably 1981, and I had met a private equity venture capital person who had said to me if you ever want to go out on your own please let me know, so I let him know.
NELSON: And he was?
SIMMONS: Stewart Muldow at US Venture Partners in California, and they were just starting their fund and looking for investments.
NELSON: And cable was obviously something they were looking at. Were you focused on that or was it just...?
SIMMONS: No, it was just something I presented and I guess made the case, and then they put me in touch with Allstate Insurance, and the deal was they'd give me some seed money and then if I found good deals they would put in the equity to do the deals. I had a banking relationship I created as well.
NELSON: So you weren't looking to get franchises, you were looking to acquire?
SIMMONS: Exactly, to acquire a system.
NELSON: You'd had it with the franchising approach.
SIMMONS: Well, no. My theory when I started was there were some mom-and-pop small cable systems out there that while the big guys are franchising the Dallases of the world and so forth, you could go in and buy those moms-and-pops, add programming, market them – many of them had never been marketed before – improve their operations, bring in some different talented people perhaps, and dramatically increase the cash flow and make them more valuable. So that's what I did.
NELSON: And this was a time when original cable programming and cable networks were really blooming like mushrooms after a rainstorm.
SIMMONS: Oh, yeah! Many of these small systems didn't have MTV and they didn't have HBO, or whatever it was, so you'd add these... it was a no-brainer to add them.
NELSON: Yeah, yeah. And then from the operations standpoint, I assume that a lot of these systems had been started by guys who were basically more technically oriented, knew how to wire the town but maybe didn't know how to market or program.
SIMMONS: Exactly right, and didn't have the capital, too, maybe.
NELSON: And do you think at that point in time was there kind of a wave of original, hands-on, small entrepreneurs who were maybe even looking to get out? Would you find people... were they receptive to your offers, did you have to really chase people around a lot, or would they say yeah I'm interested, let's talk. I mean, I'm sure there's a mix but was there a sense of maybe some of those very early guys were ready to get out then?
SIMMONS: I think some of the early guys were ready to get out. I mean, they were ready to cash in and somebody walks in and says, in the '80s, here's a few million dollars, that was a lot of money and many of them didn't have debt on the system, it went right into their pocket.
NELSON: Which they'd started from nothing probably.
SIMMONS: Exactly, so my first deal I remember was St. Johnsbury, Vermont and it was a small cable system, about 5,000 subscribers. A great, wonderful family had owned it, the Ellingwoods up there, and their son, Mark, was a wonderful guy, and we bought it and we kept Mark on. He did a great job. We bought some other systems in Vermont and put them together, but it was that kind of a day and there were dozens of entrepreneurs like myself who were doing this, getting into the cable business in different ways. It was a very exciting time, a new industry.
NELSON: And it was also a time of deregulation, which maybe was an outgrowth of something you'd been involved in yourself.
SIMMONS: Well, there was still some regulation on cable that made it difficult – distant signals, the type of signals you could carry and so forth – but in terms of rates, it was also a time of rate regulation at the local level in the early '80s, so you had to strive to ask for a quarter or five cents. I can still remember going up to the Vermont public service board, or whatever it was called, the public service commission and trying to explain to some lady who looked like she was in high school about why we needed to get twenty-five cents on our rates. But in any event...
NELSON: But it was de-regulated enough that the capital suppliers were looking to get into the business because that had been a problem for the industry for quite a while in terms of raising capital.
SIMMONS: Exactly, and that's exactly right. There were a lot of private equity guys and then the banks started coming in to lend money to back us in terms of what we were doing. You'd put together a reasonable business plan and they'd give you the money to do it.
NELSON: Give me an idea of what kind of growth you were able to accomplish.
SIMMONS: We took off pretty fast for a small...
NELSON: It started obviously from nothing.
SIMMONS: ... from nothing, and we did St. Johnsbury, then we bought a cable system in Delaware and Maryland – John Waller's first deal, by the way, who is a cable broker in the industry. And then we bought some systems in upstate New York, and then we bought the Long Beach, California system which was our largest cable system. It was a partnership between two large companies, Times Mirror and Knight Ridder. They'd made a mess of it, it just didn't work. Everybody thought we were paying too high a price at the time, how could we pay that much? It was 15 times cash flow. But what we saw was a great opportunity to really run the system right, get the right management in there, do door-to-door sales, offer new products, rebuild some of the system, and we did all that. It was a tremendous success, so we were very happy about it, and then we went on to buy other systems. So I would say over the '80s we probably got up to 250,000-300,000 customers. I know we had over 50 offices around the country with management teams, regional management teams. So it was very, very exciting, a very exciting period.
NELSON: Geographically it seems like Vermont, California – you're pushing the envelope.
SIMMONS: We went wherever the opportunity was and we felt we could manage... We had some small systems where you had operating margins above 50%, you know, 53%, so at the time we didn't think that size mattered that much.
NELSON: Were they mostly smaller?
SIMMONS: Smaller. Well, yeah, they were mostly 5,000 subs to 60,000sub systems. We had some clusters that were really small. So that's how we developed, and again, the concept still remained the same, to go in there and increase the products being offered, improve the customer service, do what we had to do technically and increase the cash flow.
NELSON: Talk about the customer service aspect, what you were doing at the time because I imagine with a lot of these smaller systems that had sort of grown up with their first generation owners, customer service, other than the personal because in these small towns people might know the guy that owned the system, but I would imagine in terms of a real professional kind of customer service it probably was next to non-existent.
SIMMONS: Yeah, and we tried to improve customer service wherever we owned systems. I think the best example is this Long Beach system that we bought, which was our largest, and when we got there the call center people answering the phone, they were not cross-trained so there was one area if you called up for an installation, another if you called up for billing, another if you called up to order a product, and it was very frustrating for the customer because they kept being switched from one person to another, phones took a long time to be answered. So we cross-trained everybody and got the average call waiting down dramatically. Secondly, in terms of the products offered, we offered them a whole bunch of video channels that weren't being offered, so I think they appreciated that. Thirdly, in terms of the technical service, they had a lot of technical problems so we significantly improved the signal quality. I mean, after all, if you buy some food from a supermarket you want it to taste the way you expect it to taste, same with a video product. You want it to look and want the sound to be what you expect it to be. So we did that. We made sure, with a fellow named Pat Murphy who was a great technical person, made sure our technical staff got out to do service calls in a reasonable amount of time, 24 hours or less was our goal, and then our service techs were held to high standards. I did and still believe in door-to-door marketing, so we had our sales force go out and market door-to-door. So I think the philosophy always was that the customer's right, you've got to be a customer-oriented company, and that's what we did. In Long Beach the cash flow grew probably six times from when we bought it to when we sold because of that philosophy.
NELSON: So that took care of the 15 times.
NELSON: And then some.
NELSON: But at the time, and not to cast any aspersions on anyone, it was known that the cable industry at that time wasn't really famous for its customer service, and probably as a public policy person you know that there was a lot of noise about that on the Hill that actually contributed to the re-regulation in '92. What was it that made you focus on customer service at that time?
SIMMONS: I thought that was the way to success. First of all, I was in this obviously to make money but also because I believed in delivering these services to the customer. I really wanted to make the customer happy and pleased with what we did. The flip side is that's the way to make your company successful. Now we didn't always do it perfectly. We had situations where all of us cable operators would have done some things differently, but from the start and certainly through Simmons and then through Patriot Media and now in Puerto Rico and Choice, customer service has been an important part of what we do.
NELSON: And obviously you can see the correlation between keep the customer happy and it keeps the bottom line happy.
NELSON: I suppose a lot of people at the time were just looking to buy systems, build them up a bit, flip them, and they weren't so much concerned about the customer as making a quick killing. You seem to have been in it for yes, to make money, but maybe with a long term view.
SIMMONS: I think that's right. I think that you've got to invest money, and some companies – I won't name them – but some folks have not invested enough money, I think, in the operational side or the capital side to improve their plant, and my philosophy was to try to do that. Some situations where I didn't do it I regret it. In general I've tried to do that and stay ahead of the curve and in that way sort of really make your customer happy with what you're giving them.
NELSON: And talk about the plant, aside from the customer, what was the plant like at that time and what did you do when you came in and took over these systems? I imagine that technologically they weren't very advanced.
SIMMONS: Every system we bought we had to upgrade and/or rebuild the plant and add channels. They frequently were 300 megahertz or 330 megahertz. There were problems with them frequently with leakage and so forth. Whether it was Delaware or whether it was California, we'd go in and invest money because to the extent that you wanted to add channels you needed to have the channel capacity to do it. Now it's different but we were always in this cycle from 300 to 330, 330 to 400, 400 to 440, 440 on up and up and up. So now we've got compression technology that makes that less necessary, but the game was to deliver a good product to the customer in those early days, a good video product, either the amount of the product or the quality of the product. You had to invest in the plant, and that included channel capacity but it also included making sure that... some of these old plants, they'd have old cable that was figure eight cable that would totally leak and some of it was waterslogged. You'd go and you'd see some of the cable attached to trees and that kind of stuff. So you really had to spend some time and effort to get your engineering people and your technical people to do a better job with the plant to make it work the way you wanted it to work.
NELSON: But I suppose you built that into your business plan, you knew you were going to do that. It wasn't like, oh my gosh, what did we get ourselves into?
SIMMONS: No, no, during the due diligence process you'd send your engineering teams around and take a careful look about what was necessary in terms of capital investment and you'd put that into your plan.
NELSON: And did you have a goal where you looked at a system that was a 300-330, was there a place you wanted to take it right away or were you going to leapfrog up?
SIMMONS: Each system was different. In retrospect we probably all should have leapfrogged up but each system was different at the time. I wish there were some systems that we had built to higher capacity than we did, but it varied. We had so many systems all over that you dealt with each one differently. I think in general the more successful the more you'd try to upgrade your plant, and at that time we really didn't have 860. We didn't even really have 750. So if you could get your plant up to, at that time, 440 that was pretty good.
NELSON: And was this without fiber, the 440?
SIMMONS: Yeah, there was no fiber in the days I'm speaking of. That came later. And of course, later as we got into the '90s and after, the plant had to do a lot more than just video. We'll get to that.
NELSON: But in terms of Simmons Communications that got sold off before you got to that period of history. So what year was that?
SIMMONS: In '94. We started selling off our properties probably in like '90, 1990.
SIMMONS: Yeah, to different buyers. By '94...
NELSON: Was that because people started to cluster and you had properties that fit other people's properties?
SIMMONS: Right, and these were part of venture capital cycles. They wanted out. So I had gotten lucky enough to have money. I did the first LBO in '86, 1986 – small by today's standards but it changed my life in terms of living. I'd never had any money. And so by 1994 I'd made enough money to sort of do what everybody says they want to do, go off and do personal things. I had five kids – 2, 4, 6, 8, and 10 – who I wanted to spend time with. I wanted to write some children's books.
NELSON: I was going to get to that.
SIMMONS: I also was, quite frankly, disappointed in re-regulation that happened in 1992. I had worked very hard against it. I had seen a number of senators, I think I saw over 15 different senators to talk about it, I'd seen a number of House members, in the end unsuccessfully. Although I did get... I worked with the White House, the first President Bush was there, I remember talking with him about it at a function, handed him a letter about it, and he did veto the bill.
NELSON: Yeah, that was his first veto, too.
SIMMONS: But it was overturned. We were trying to work legislatively. It was very disappointing to see and I thought it was wrong. I thought it set back not only the industry but I thought it hurt the consumer because it prevented a lot of investment, capital investment, in fiber and other things that would have come sooner had we not had that regulation.
NELSON: So at that point, did you see yourself as okay, I've done it, I'm out of the cable business (after Simmons was sold), if we're now re-regulated? In your head was it, okay, that was that?
SIMMONS: In my head that was that and I didn't think that I was going to go back in.
NELSON: So, you became a successful children's author.
SIMMONS: I did. I had been telling my kids stories and they liked them. These were just things that happened, spontaneous combustion, if you will. I remember telling them, we were up on a hill by my house and I was enacting a witch story...
NELSON: Where were you living?
SIMMONS: This was in Greenwich, Connecticut. This was a witch story about witches we enacted when the kids were all very young. They liked the story, I wrote it down and told it to their friends, told it in their class, they all liked it. So I figured I'd try to get it published, and it was a picture book. I got an illustrator and I did a few other stories like that. I was rejected by about 14 different publishers.
NELSON: Classic first author experience.
SIMMONS: Totally, I couldn't get an agent, couldn't get a publisher, very difficult to do. But the 15th liked it, and the 15th took it, a small publisher in the Boston area and it became number one for a short period of time. Just unbelievable! And then the others didn't do that well, but did ok.
NELSON: There are so many, I'm sure, stories about the mother or the dad tells the kids a story and the spouse says, "Oh, dear, that's such a great story that you really ought to try to get it published," which of course never happens. So was this more of a surprise to you? You persisted. You could have said, "All right, I sent it off to a couple of publishers, let's not get carried away with this," but you were persistent.
SIMMONS: I persisted, I did persist, and it's very difficult. I thought, like you just described, I thought you write it down and send it off. By the time Alice and Greta, the first one, was published, I rewrote it, had rewritten it 22 times. It's got to be exactly 32 pages, the words can't repeat what the pictures are doing, they have to flow with the pictures like a film does. You've got to throw in a few words that kids don't understand to increase their vocabulary. It was a very humbling experience. It's not as easy as one thinks. But I got a great kick out of it and it was very satisfying. I'd walk down my street in Greenwich and all the kids had read it. I did book signings at all these different book stores, I went on the Today Show and all this stuff. It was great fun. You realize... this series of books had a good message for kids. It was sort of the Golden Rule, do unto others as you would have them do unto you. So I tried to make it a positive message and it's a good feeling to think that tens of thousands, hundreds of thousands, really, of kids have read your books and its brought them some joy, parents snuggling up with their kids to read them and so forth. So it was great fun. It was great fun.
NELSON: I can imagine. That just seems like such a different place to be, from the White House to the cable business and now kids' books, which obviously was personally very satisfying. You were financially, I assume, from making a few mental calculations here, pretty well-settled at this point. So what the heck did you get back in the business for?
SIMMONS: By the way, I'd also used that time to do things like sculpture and guitar lessons – all the things people say they're going to do – and most importantly spending time with my kids. I was the only dad at all these field trips and I was very lucky to be able to do that, all their games.
NELSON: You were in your what? 40s at this point?
SIMMONS: Yeah, 46, 47-ish, somewhere in there. So it was a great opportunity to...
NELSON: When most men, and these days many women, are in the heart of their career and working like crazy.
SIMMONS: I was very lucky to be able to do that. Well, I first thought I'd try to do a programming channel because I was very interested in that, called BKTV.
NELSON: And this is early '90s?
SIMMONS: Now we're like '99, 2000.
NELSON: Okay, I need to keep sort of an idea.
SIMMONS: Sure, sure. It sounded like a great idea but I'd determined at the end that starting at that point an independent channel was just too much of a long shot.
NELSON: Was there a specific programming concept?
SIMMONS: The idea was to take books and focus on books and do programming based on books. There were a lot of films and TV already based on books you could buy, bring in authors, bring in stars that enacted the stories and produce the stories, and then try to sort of be a cross of public television and maybe Lifetime, that together, and it seemed to me it would be...appealing, and then you could tie in lot of things with schools and kids and all the rest. But I funded it myself and I didn't spend all that much money, but I came to the realization after seeing everybody, and of course I knew all the cable guys that would carry it, that it was just very, very difficult if you weren't already in the business of programming in terms of having your own other networks you could leverage... It was a great experience, I'm glad I did it, but I said I'm not going to do this, I'm not going to go forward. So I stopped it before we did any launch or anything like that.
NELSON: You must have had a business plan of some sort.
SIMMONS: Oh yeah, had a business plan.
NELSON: So what did your business plan, in maybe an amended version of it based on talking to people, what did that say that you'd have to spend to make this channel viable?
SIMMONS: You know, it's been awhile but I think it was like you'd have to spend over 50 million dollars to make it a viable network.
NELSON: As an independent?
SIMMONS: As an independent, right, exactly, and then I considered other options, putting it as a piece of programming on another network. But I then got intrigued with – to answer your question – some of these new services coming online with my old cable industry. There was talk about internet access, talk about all these digital channels that were coming on the line, talk even about digital phone, this thing called the digital video recorder that could record programming.
NELSON: A lot of change since you left.
SIMMONS: A lot of change, and I said, hey, that sounds interesting! So I decided to do that. I looked around, I joined with some of the private equity firms who I knew, and looked around at different opportunities and this property in central New Jersey, owned by RCN, came on the market, and RCN's strategy was to overbuild in the cities, and this was sort of a plain Jane cable system, spectacular demographics that they had totally ignored. It was not well.
NELSON: Is it sort of off the beaten path in terms of the heart of their strategy. You said they were focused on cities.
SIMMONS: Exactly. From their standpoint, they wanted to do New York and Boston and Chicago with all these upgraded services. They didn't want to put a lot of time and energy and money into an old cable system.
NELSON: And this was in the Princeton area?
SIMMONS: Yeah, 31 towns from Princeton in the south all the way up towards New York City in the north.
NELSON: There are some pretty good demographics in there.
SIMMONS: Some of the best demos in the country. There were nine bidders and I just felt so strongly in this that I outbid the other guys with my private equity partner, Spectrum Equity Investments.
NELSON: Well, there you go again with a high multiple.
SIMMONS: Right, exactly, like Long Beach people thought how could I pay so much for this thing? It's a quarter of a billion, it was almost 250 million.
NELSON: And how many subscribers did it have at the time?
SIMMONS: Like about 78,000 video, 15,000 or so, data. No phone. No DVRs.
NELSON: So that was all upside there, but from a conventional cost per subscriber basis pretty pricey.
SIMMONS: Yeah, 3,200 a sub, maybe. Something like that, 3,100 a sub, and we just did the blocking and tackling from the ground up. I think in cable, any business, but in cable you start with people and I recruited a terrific management team with Jim Holanda, who had been at Charter and Comcast, other companies; Pat Murphy from my Long Beach days, a great technical engineer; a guy named John Godovan, who had been with several companies, a terrific guy; a guy named Rob Roeder who I'd actually talked with about these new developments because we'd done some due diligence about all the new products; John Flanagan from my old company, Simmons Communications, the CFO. So those and others, just put that team together because there was virtually no management at that level at this system, and then looked at the products they were offering and how they were offering them, and we added over 150 video channels over the course of our time owning this system. We also rejiggered it. When people went to their guide or went through their dial, if you wanted news you had CNN on this channel and CNBC all the way up there and Fox... it would drive you nuts. So I said, let's put all these by genres so if you're interested in children's programming you can channel surf up and down those.
NELSON: Same area.
SIMMONS: Right, exactly. We repackaged them.
NELSON: These systems were all interconnected?
SIMMONS: It was one headend, one system, but they needed a tremendous amount of work. In terms of products, video channels, we added DVRs, we added video on-demand, and then of course we added high-speed internet services and digital telephone service, voice service. So we gave people the products they wanted, we changed the place where the business was being done. They were spread out in half a dozen locations. As in Long Beach, I think it's best if you can get everybody under one roof, so we did that so you can better manage, the different departments can work with each other better. We focused on marketing and sales. I believe strongly in door-to-door sales which we've done a lot. We hired a big sales force to do that, changed how we packaged the products, and then as we've been discussing, customer service was critical. So we hired a complete new call center, they had been outsourcing their calls to places in Arizona and Pennsylvania. We hired local people, trained them, cross-trained them so they could answer different questions and answered in very fast amount of time, certainly in under 30 seconds, usually between 15 and 20, and they had the answers to people. With our technical people we retrained them all and when we got there I think it could take five days to get out for a service call, that became under 24 hours. Installations could take 2-3 weeks, we got there in a few days to install a new product. The entire quality of service was upgraded and we rebuilt over 2,000 miles of plant. It was a top to bottom change. The franchises had been banding together to kick out RCN, seven of them. I had met with the mayor before buying it and he was very skeptical, and by the time we were done with this they gave us a ribbon cutting ceremony and were very thankful and complimentary. I felt very, very good about what we did there for the people in central New Jersey and as an economic investment it was great. We sold it for over $6,000 a subscriber, one of the highest prices paid... I think it was the highest price paid, maybe for a system of that size ever. I don't know, I'd have to compare, but certainly among the highest ever paid. So we were happy.
NELSON: I imagine you were. When you went and came back into the business... you talked about the change in the product mix, the technology.
NELSON: The other thing that had changed was now you had a lot of competition, and RCN, of course, was trying to be another competitor. They didn't work in that market, but the satellite guys were really being successful by this point in time, so again you had that emphasis on customer service, but you must have been, I assume, doubly aware of that only because you had probably a bunch of dissatisfied customers, you had some dissatisfied mayors and city councils, so you really had to perform.
SIMMONS: It was a dramatic difference. When I left there wasn't what you call the death star, the satellite didn't have much impact. When we got back into New Jersey you had DirecTV, you had Dish, and they were fierce competitors and growing, good programming, good product, and towards the end of our stay there the phone companies were getting into it, which is another thing you had to worry about. I think that's important for the cable industry today. There is brand loyalty to an extent, but if you don't give customers the products they want, if you don't give them the service they want, and if you don't give them those things at a price that is reasonably competitive you're in trouble because other providers are doing that and will continue to do that. So it's a very different world, then it was, you're quite right. And on the horizon is video streaming, if we're speaking about the video piece of it, coming through the internet. On the one hand that helps cable operators because we have an internet business, but on the other hand, if people are getting a lot of their video programming through the internet they may start thinking about why do I need a cable, they also have to pay a cable connection, so then you have the whole wireless phenomenon where people are increasingly using it – in other countries much more than ours but it's growing in ours – people increasingly use wireless connection for video and clearly for data. So cable operators, I think, have to continue to keep up with what's happening around them, what the products are, and we've got... after we sold Patriot I kept the management team together and we've been looking for other properties with Spectrum as our partners and we bought a cable system serving about a third of Puerto Rico and we're doing the same blocking and tackling there. This was another system that was a disaster and we're doing all of the kinds of things I talked about that we had done in Long Beach, that we'd done in New Jersey, we're doing again here. So it's an ever-changing industry, you're quite right.
NELSON: But it seems like some of those lessons you learned from way back in the beginning still hold true in terms of the blocking and tackling, the customer service, upgrading the system. It's a much more complicated business but in a way some of the fundamentals haven't changed.
SIMMONS: No, I think that's right. I think it all begins with the people you hire and you've got to hire the best people you can find. If they're smarter than you don't be afraid of them. There are some people who don't like to have people that are smarter than them around them and they have to be the top dog at the table. My approach is completely different. Maybe it's a professorial background there but I love to have discussion, love to hear different opinions, love to have people disagree with me. I mean, in the end I'll make the decision because I'm the boss but I can frequently be... if the right decision is not the one I originally began with that's fine. So I think getting the right people was the right thing in the '80s, the right thing in the '90s, the right thing at this time.
NELSON: And will always be.
SIMMONS: I think will always be. It starts with that. I think having good customer service is always something that's going to be critically relevant, giving your customers the products they want and the service they want, having a balance sheet that's not too leveraged is also very important, especially in these times as we go through financial stress today. I think you're well-advised to have a balance sheet that... not that it's not leveraged but gives you cushions on what they call covenants in a bank agreement that you have to obey. So it's been an evolving process but I think some of these lessons are still very relevant today as they were before.
NELSON: And what would you say, just in terms of wrapping up, is the contribution you've made to the cable business if you could summarize it?
SIMMONS: I think first, over the years, I don't know how many homes in total but over half a million homes my companies have been involved with, close to maybe 2 million people in total, if you figure it that way, and one of the reasons I went into this business is not... everybody wears shoes and I think that's important, or makes widgets, that's important, but I love the idea of expanding people's minds and their horizons and bringing them entertainment programming so they can cry, they can laugh, they can get away from their daily cares watching their favorite shows or movies, news and public affairs so they can learn about what's happening in their town, their state, their country, the world, being able to have their children see programming that informs them and makes them happy. That, to me, has been a tremendous opportunity, and then today and in more recent times, being able to connect those homes with the world through the internet so they can access websites or access other people, and through voice, has been a tremendous accomplishment for me to be able to do that. It's why I've been in the industry and it's why I feel very good about what my companies have done over the years for all those people. So I think that's my most lasting contribution. Developing people along the way, not as much as some of these big companies, obviously, but we've had some great individuals who have, I think, gone on in the industry to do well and also management teams have made some money that has changed their own lives which has been very satisfying to me to see that. And then, finally, of course with some of the industry activities, the Entrepreneur's Club which I started with Gus Hauser and Marc Nathanson back in 1988, 20 years ago. I think if you ask the members of that club what organization in the cable world they're most happy about being a member of it would be that because we've really helped each other be better cable operators, helped the industry in terms of Washington and regulation along the way. So I'd say those things are probably what I would regard as my, if you want to call it a legacy in the business. Unlike my father I don't have a lot of Andrew Wyeth or Norman Rockwell paintings on the walls of museums and God knows how many hundreds of thousands of other artists have used his products, but maybe we've been able to offer a larger canvas in terms of media and communications for people's lives.
NELSON: Well, it sounds like since you're back in again for another round that you haven't put your brushes down and we can expect to see more from you.
SIMMONS: Well, I hope so. We're working hard here. We're looking at... even today I've got more properties we're looking at. I joined recently the board of Virgin Media which is the largest cable and internet company in England and northern Ireland, and I joined in large part because I found it fascinating. They're doing quad play there, so they've got not only video and internet, they've got landline telephone and mobile telephone, which we as cable operators here have to figure out how to do that. It's been very interesting to be involved in that company and look at what they're doing. I've already offered some advice I think that's saved them some money and they took it, which is even more remarkable. So that's exciting as well.
NELSON: And do you think that that fourth part of the quadruple play, the wireless, is in fact a key piece of the cable industry going forward?
SIMMONS: I do. I think we've got to develop that because I think that's part of the future and we haven't quite figured it out yet. There are a bunch of larger companies who are working on a wireless platform, but Ted Rogers up in Canada, Rogers Communications, one of the most profitable parts of his business is the wireless piece of it, mainly voice, but I think we have to figure out a way to integrate a wireless product that delivers not only voice and data but also a video product appropriate for a smaller screen because that's the wave of the future. We've done a good job as an industry keeping up. We haven't been up 'til now like the company selling buggy whips when the automobile came in. We've adapted. Satellite came in and we've moved forward; the internet came in and we've moved forward as a key deliverer of internet services, of digital video services and of phone services. But it's a rapidly changing environment and once you've moved from analog to video what you've done in some respects becomes a commodity and it becomes who can deliver that the best, and what unique characteristics you can bring to that versus the next guy. So I think we have to be ahead of the curve and you've got to be constantly ahead of the curve in the products you're delivering as well as all of these other things we've talked about, customer service and so forth.
NELSON: Well, we'll have to have you back some time to find out where you are on the curve because you've stayed ahead of it for a long time and we really appreciate your coming in.
SIMMONS: Well, it's been my pleasure. Thank you for chatting with me. It's been a great career, it's a great industry, and I hope that people going forward who succeed the entrepreneurs of the past will carry the tradition forward on the new frontiers that they find. So, thanks Steve.
NELSON: Thanks. I'm Steve Nelson. Thanks for watching. For The Cable Center's Oral and Video History Program.