Interview Location: Denver, CO
Interviewer: E. Stratford Smith
Collection: Penn State Collection
Note: Audio Only
SMITH: This is Side A of Tape 1 of the oral history interview with Mr. Gene Schneider. We are in Mr. Schneider's offices in Denver, Colorado at the present time. I am E. Stratford Smith. I am going to interview Mr. Schneider as part of the oral history program at the National Cable Television Center and Museum at Penn State University. Gene, state your full name and address.
SCHNEIDER: Okay, Strat. My name is Gene Schneider and I live in a suburb of Denver, Colorado at #6, Sunrise Drive. The mailing address in Englewood, Colorado and the zip is 80110.
SMITH: Gene the way we usually start these interviews is just snoop into your personal background. So, could I start by asking you when you were born?
SCHNEIDER: Too long ago, Strat. September 8, 1926.
SMITH: And where were you born?
SCHNEIDER: In Enid, Oklahoma.
SMITH: Tell us what was the national origin of you and your parents and so on.
SCHNEIDER: Well, my father's father--my grandfather--was an immigrant from Germany. My mother was of Scottish-Irish-English descent. Her parents and grandparents had been in the country for a couple of generations already. But that was the mix.
SMITH: Where did they meet, in this country, or before your grandfather entered the country?
SCHNEIDER: No, they met in this country. My father was quite a bit older than my mother at the time they met and got married. They got married in Garber, Oklahoma. I'm not sure of the date.
SMITH: Do you have any brothers and sisters?
SCHNEIDER: I had one brother up until recently--he just passed away a few weeks ago--named Richard Schneider. There were no sisters. Just the two of us in the family.
SMITH: Tell us a little bit about your boyhood--your early education and your interests as a kid.
SCHNEIDER: I might go back to how I got out of Oklahoma and became a Texan. When I was about three and a half years old or so in the very early '30s--'31, right in there--we moved to south Texas. My father had been in the oil well drilling business as a drilling contractor, along with his brother. The depression and everything hit right in there and they had to sell out of that business. Drilling and everything just came to a stop. But they did salvage enough money to go to south Texas and the Rio Grande Valley and purchased a farm between Brownsville and San Benito, Texas and took up serious farming. They bought land there as time went on and we built a home. As a matter of fact, they built it with their own hands along with some local Mexican labor help. We were really raised on that farm in south Texas. As a matter of fact, we still own it. My mother is still alive. She is ninety-two years old. Every time we've suggested maybe selling it she says, "Well they ain't making no more land are they?" So we've never sold it and we won't until later on, maybe.
Anyhow, we were raised there and went to school in San Benito, Texas. I keep saying "we" because we--Richard and I--did virtually everything throughout our lives together. We went to Texas University. By then it was during the war. He graduated in '42 and I in '43. He had gone to the university immediately upon graduating and then I went for a year before I turned eighteen when I volunteered for the United States Navy and entered an aviation/radar technician program that they had at the time. I spent about two years in the Navy and was discharged in '46. I returned to the university and graduated in engineering there in 1949.
SMITH: What university was that?
SCHNEIDER: That's the University of Texas at Austin, Texas.
SMITH: Gene, at any time in responding to these questions if you will and would like to, please mention anything that is pertinent about Richard's participation with you. Unfortunately, as you have noted, we are not going to be able to interview him. Most people in the industry know that the two of you worked together from day one. So anything you can add for the record, please do.
SMITH: Did Richard also attend the University of Texas?
SCHNEIDER: He actually started a year ahead of me and he graduated in '48 from the university.
SMITH: Did he enter the Navy or another branch of the military?
SCHNEIDER: He entered the Navy at virtually the same time as I did. As a matter of fact, during the war and the training period, he was also an aviation/radar technician. We actually overlapped in some of the places we were stationed in receiving our training.
SMITH: When and where did you meet your wife Phyllis?
SCHNEIDER: That came later, really, after we had gotten into the cable business. We actually commenced the operation in Casper, Wyoming in 1953. Phyllis was a young lady there who had migrated to Casper from Minot, North Dakota. I guess it would have been 1954 or maybe late '53 when we initially met. We got married in, I believe, '55.
SMITH: Since you mentioned that this was after you had gotten into the cable industry, we might as well go on to the point of when and where did you first hear about cable television? I think we called it CATV, in those days.
SCHNEIDER: Community Antenna Television. In fact, that is what we call our company--Community Television Systems of Wyoming. Our first exposure--again it was with my brother--was in Casper, Wyoming in late 1952. A fellow named Bill Daniels had established an insurance business in Casper in the early part of '52 or maybe the latter part of '51. But he had become acquainted with some oil men there, one of whom was an uncle of ours named Earl Lyle. Earl had become, socially and business-wise, acquainted with Bill as well as three other oil men that were very close friends of Earl's. One of them, as a matter of fact, just passed away last week named Jeff Hawks; Harold Barnes was another one of them and he's still living down in Arkansas; and Winston Cox of Billings, Montana. I think you knew Winston.
SMITH: Yes, as a matter of fact, I knew all of them.
SCHNEIDER: Winston passed away some years ago. But Bill had seen the idea of cable, I believe, in the Rocky Mountain News on one of his trips through Denver and also had seen, I think at the time they were called the Gillette fights. There was one television in Denver and it was the Dumont Network, Channel 2. He was very enchanted at the idea of television. Of course, at the time, there was absolutely no television, even from outside the state, that could be seen in the state of Wyoming.
He had taken up the subject of cable with these four oil men. Bill did not have the funding to do it. He said, "Wouldn't it be great if we could get some television here in Casper," which was a pretty isolated community and would have been a great entertainment thing for Casper. Anyhow, one thing led to another and my uncle mentioned that he had a couple of nephews in Houston, Texas who had just sold a business there and why didn't we get them up here and see if they wanted to look around and get involved in it and take it from there. That's exactly what we did in late '52.
SMITH: That was you and Richard?
SCHNEIDER: That was my brother and I again, and we went up. As I recall it, we spent not really full-time, but maybe a period of two to three months going around and visiting some of the cable systems that existed in the country at that time. One I particularly remember is Tyler, Texas. We ended up acquiring that system in the '60s. But we did visit that system, among others, and went back and reported that we thought this thing worked but we needed help because we were very young engineers, at the time, and really did not have the background in RF delivery of signals like television requires and the use of coaxial cable and all of that. So we ended up hiring, as a consultant to the company, an ex-Bell labs engineer named Tom Morrissey, who was living in Denver at the time and doing consulting work. He had actually been instrumental in building the Channel 2 television station in Denver as a consultant.
SMITH: Your wife Phyllis passed away several years ago?
SCHNEIDER: She passed away of cancer in 1975. We had four children. Would you like their names?
SMITH: Yes, I'd like their names and what they're doing.
SCHNEIDER: The oldest is Mark Schneider. The next are three daughters, Marta, Tina, and then Carla. Mark, today, is senior vice president of our private company that I'm now chairman of--United International Holdings. That's where we are sitting, in these offices. He is also president of our International Cable Management company which manages cable systems in Norway, Sweden, Israel, Malta and Hungary. We're getting into Germany, Spain and Portugal. Also, he is now, at this very moment, in the Far East where we are looking at some opportunities there. But he basically handles all of our international operating and developmental projects for the company.
SMITH: We'll go into United International at some length in the interview but I just have to say now that I had no idea that it was as extensive as you are indicating that it is. I certainly will want to go into it. But back again to your personal background, you have married again since Phyllis' death.
SCHNEIDER: I married a lady named Louise Rouillie. She's a French Canadian from a suburb of Montreal, Canada. We married in 1977. I actually met her at a golf tournament in Casper. At the time I wasn't living in Casper but we had moved our headquarters to Tulsa, Oklahoma by then. We are still married. She is in Palm Springs playing golf and I'm here working with you.
SMITH: I wanted to be sure that we got her included. I didn't want her reading this oral history and wondering why you left her out.
SCHNEIDER: I might add that she has two daughters and a son. The two daughters are now married and both have children. Everybody's doing fine.
SMITH: How about your daughters in the marriage area? Do you have any grandchildren?
SCHNEIDER: One of my daughters--the older one Marta--was married and had two children but is now divorced. My next daughter, Tina, is working in the company and has been working in United International. She worked in Norway for most of the last year and a half and has just recently transferred to Malta and is going to be the assistant to the manager there. Tina, by the way, has been in the industry about eight years and has gone through every phase from being a CSR to doing computers. She's quite expert now at doing computers. The billing, the construction side--she's even gotten involved in that and in all phases of planning for a cable television system. She's going to work with--you may not know this Strat--a gentleman named Gordon Fuqua. Gordon Fuqua we've hired as the manager of Malta.
SMITH: Is that right? Well, this does come as a surprise. We've done Gordon's oral history and now we're going to have to start all over again.
SCHNEIDER: Yes, you're going to have to start him up again. I believe, at the time we're speaking, he is in Malta. I know Tina is there and he was going there within the last week or so. So they are now in Malta getting ready to build that system.
SMITH: That is interesting. Does Mark have any children?
SCHNEIDER: Mark is not married. He has a lot of friends.
SMITH: That's more important. Gene, we can return, I think, to Tom Morrissey.
SCHNEIDER: I might mention the other child if you want to finish that. Carla is the youngest daughter and she is a lawyer. She graduated from DU law school. As a matter of fact, Mark is also a lawyer who graduated from DU. I should have mentioned that Tina got a business degree from DU. DU is the Denver University, for the purposes of this.
SMITH: They all stayed home for their college?
SCHNEIDER: Actually, Carla graduated from her undergraduate work from Colorado College in Colorado Springs but did her graduate law work at DU. Carla has worked for the last several years in Washington. She worked for Jack Cole for a while, whom you happen to know at his law firm there. She also worked for Congressman Schaeffer, Congressman Rhodes of New Mexico, MCI for a year, and she's now back in Denver just in the last few weeks and wants to re-establish herself here and get into law practice here. So she's looking for a job if you know of one.
SMITH: We'll take that one under advisement. Does that fairly cover the family? I seriously did not want to leave anybody out.
SCHNEIDER: I think that pretty well handles that Strat. I didn't really go into any detail on Louise's children but if you want me to I could.
SMITH: Well, let's complete the record on that.
SCHNEIDER: Well, her eldest daughters' name is Michelle. The last name is Price. Louise was married, of course, before I met her and divorced by the time I met her. Michelle lives in Washington with her husband John Siever, who happens to be a lawyer in Jack Cole's firm in Washington. Do you know John? He's been there a number of years and is a very good lawyer, I might add.
SMITH: John Siever?
SCHNEIDER: John Siever.
SMITH: I recognize the name from Jack's letterhead. I see Jack fairly often.
SCHNEIDER: Anyhow, he's a successful lawyer in Washington. Kim Marie is the next daughter and is married and lives in New Orleans. She is married to a very fine young man named Robert Crosby. They live, actually now in kind of suburb of New Orleans, Mandarin, up north of Lake Pontchartrain. They are in the land holding business. They have large land holdings throughout that area and operate in the selling of timber, oil leasing of the land, and things of that nature. They have a successful family business which young Robert now runs. Both of the girls graduated from the University of Wyoming. John, the younger of the group, is now in Denver and has been kind of free-lancing. He did graduate from Western State University in Gunnison, Colorado and he is now back in Denver. He has been mostly in the restaurant business. He did work a year for us in one of our Blockbuster stores in the San Francisco area. But he now wants to re-establish himself in Denver and is here now. I guess that covers it.
SMITH: You mentioned a few minutes ago that your wife was in Palm Springs playing golf while you were here sweating this thing out. Do you have a home in Palm Springs?
SCHNEIDER: We bought a home in Indian Wells. It's just easier to say Palm Springs when you refer to the area. But Indian Wells is probably fifteen miles from Palm Springs, just a solid little string of cities that have developed during the last twenty or thirty years. There is a club there called the Vintage Club which we joined about six and a half, seven years ago. At that time we bought a home there and that's really when we gave up skiing. Any time when we have time in the winter now, we go there and play golf instead of the skiing.
SMITH: Richard was sixty-six. That makes you sixty-five?
SCHNEIDER: Sixty-four. I'll be sixty-five in September.
SMITH: That's a good age to give up skiing. Gene, let's go back to the Casper system because that's where you started your career. You mentioned Tom Morrissey, a name out of the distant past. Did he design the Casper system or did you and your brother and Tom do it or how did that come about?
SCHNEIDER: Well, Tom was a very senior person from an engineering viewpoint and one of the best in the whole country in the design, construction, and development of television stations. He certainly understood the technology that existed and that was used in transmission of television signals via coaxial cable. In all fairness, you could say that although we understood this stuff having a lot of electronics as our background--particularly from the Navy--he certainly took the lead working with, then, Jerrold Electronics in designing and developing the technical side of the system. But we were right in there helping him.
SMITH: Was it a broadband system?
SCHNEIDER: No, at that time--this might sound a little strange today--the system was originally built with the old strip amplifier. At that time, we had one channel--there was only one station in Denver that we could deliver--so one channel was really all we needed. That equipment was originally structured where you could add, I believe, you could go up to three strips, as I remember it, where you could plug them into the same amplifier module. We did add channels a little later as we got some more. But we, at the time, had only one channel.
We built what I believe may be the first microwave system for cable in the country up on a very high mountain outside of Laramie, Wyoming about a hundred miles from Denver. Then we relayed on into Casper. We had to do that at the time through the telephone company. There was no existing FCC licensing procedures or availabilities for--what we, I guess, today would call--private microwave or CARS or private common carriers, which we later became. But at that time you dealt with the telephone company or you didn't do it. As you are fully aware of.
SMITH: What was that first station that you delivered?
SCHNEIDER: That was the one I referred to as old Channel 2--the Dumont Network--here in Denver. That was a station that was built by Gene O'Fallon. That name might be familiar to you. Unfortunately, Gene didn't recognize the importance of the networks as they came along later. He had the premiere frequency of Channel 2 and he sat there through the '50s and allowed NBC and ABC and CBS to move in on Channel 4, 7, and 9 into Denver and never did glom on to one of those networks which ended up hurting him very badly in trying to compete with them because the independents, in those days, had a tough time competing with the networks.
SMITH: Was that signal available off-the-air in the Casper area or did you have to go microwave from the outset?
SCHNEIDER: That signal wasn't available anywhere in Wyoming where you could see it like at a home. The powers as I recall it at the time of the TV stations weren't what they are today. Even if they were Wyoming is one hundred miles north of Denver. The only way you could get a good signal from that station was to get up on a high mountain, which we did. It was a mountain called The Summit. It's about twelve thousand feet, as I recall it, and it's on the highway between Laramie and Cheyenne, Wyoming. From that point we picked up the signal and turned it over to the telephone company. We had to put in the pickup site and all of that. They just acted as a common carrier and they took the signal and then delivered it to Casper at our offices there and then we took it back and put it on the cable system. In the beginning, that station was only on the air, I think, eight hours a day. That's all we had. Later I'll get into what happened with that signal and how it went. I do remember, I think, originally, the telephone company used Philco equipment which, at the time, hadn't been highly developed for the microwave. Another thing that strikes me is that they had to have $125,000 cash bond or they said, "You can use AT&T stock to put as a bond before they would build a microwave." In those days, $125,000 was a lot of money. It still is.
SMITH: It still is, that's right.
SCHNEIDER: That's where the oil men came in. They were able to--through the banks that they had connections with--put up that kind of cash bond. They also put up the bulk of the money to build the actual system in 1953.
SMITH: Did Bill and you and your brother retain an interest for your services?
SCHNEIDER: We put up what money we had. As I recall it, Richard and I had $7,000 a piece. That was every penny we had. We put that all in. And then we got some stock options. Bill had a similar amount. I think he had $9,000, as I recall it. But it was small amounts relative to the total. But all of us got some options in the company and were treated very fairly and very well. That's how we started our little nest egg.
SMITH: You served as general manager of the company didn't you?
SCHNEIDER: That's right. I can't remember but I think I might have been called president, at the time, and Bill was chairman. Richard was the chief engineer. In those days, when we started out I don't think we had but four or five employees. That grew, of course. I don't know but do you want me to get into the system itself?
SMITH: Absolutely. I will not interrupt unless I need you to spell something for the record. Just keep going.
SCHNEIDER: Anyhow, as I had mentioned earlier, we did the research and due diligence I guess you'd call it in late '52, as I recall we actually incorporated the company in March of '53. Right at that same time Richard and I officially moved to Casper to get established there so that we could start planning and construction of the system with the assistance of Tom Morrissey. We did build part of the system throughout 1953. It went rather slowly. I think we maybe had a fourth--or maybe a third--built by the end of that year. But we did have one long run that we had put in, initially, clear out to the edge of town into one of the better residential areas. We finally got that thing turned on just ahead of Christmas in 1953 and I think we had something like seventy-three or seventy-five customers that went on at the time.
SMITH: What did you charge them?
SCHNEIDER: That's interesting. At that time--people around the country who were in the cable business thought it was pretty high--for eight hours a day for one channel we started out at $7.50 a month and $150 installation fee. Right in there--and it may have been shortly after the first of the year in '54--we had a grand opening at the National Guard Armory. We had people come through there from all over the state. Casper, keep in mind, was only twenty thousand people, in those days, in total population. Maybe twenty-one.
This was the first television picture really ever seen in the state of Wyoming. We had tremendous crowds. We had tremendous acceptance of the system, whereas, as I recall it, by the end of '54 we had over four thousand hookups--which was a high percentage of the homes--all at $150 apiece. I wouldn't want to say it too loud right now, but it paid for everything the first year. To the oil men it was like hitting an oil well.
SMITH: I guess that's a good analogy. But there was high risk in this, as you well know.
SCHNEIDER: I know. Very high. In fact, most people thought we were kind of crazy, I think.
SMITH: How long did you have to wait until additional channels were available in Denver?
SCHNEIDER: I'm going to be a little hazy on this I'm afraid, but I don't remember which one came on next. It seems like it might have been Channel 9. But anyhow, over the next two, three, four year period--'54, '55, '56--right along in there the three networks had started in Denver. Of course, we had an enormous desire to get them in and deliver them to our subscribers, which we did. That really forced us, along in there--and I think you were instrumental in getting some of this done--to get out from under the telephone company's very onerous charges.
As an example--I guess I didn't mention this--we were paying for eight hours a day on that little microwave system into Casper from The Summit outside of Laramie, something like $7,800 a month for that service. Again, that in today's dollars, is a very large amount of money a month for just one channel of microwave, eight hours a day.
SMITH: You had the $7.50 a month charge, too.
SCHNEIDER: That's the reason we had to charge $7.50, otherwise, you couldn't have done it and had any profit from it. But, anyhow, to add channels they just wanted to double, or triple, or quadruple those numbers. It was prohibitive. So--you could probably help out on the timing of this--somewhere right around in there we did, maybe '55 or '56, we broke the logjam on being able to get into what we would call a private common carrier or private microwave. I think we were instrumental, along with Roy Bliss, who was involved up in Worland, in getting some of this done. I think there was a case called Black Hills that got involved in that too. Anyhow, through all of these efforts we got permission to build our own microwave and did so. That made it economically feasible to bring in these additional three signals from the networks out of Denver. Otherwise, you simply couldn't have afforded it.
SMITH: At no time did you take more than one channel from, was it Mountain States or AT&T?
SCHNEIDER: It was Mountain States but AT&T did it. Strat, as I remember, we might have gone ahead and taken one more channel from the telephone company while all of this was pending. I'm not sure of that. It's just kind of hazy to me now.
SMITH: You mentioned earlier that you thought that you might have had the first microwave operation in the country. I have heard you credited as having had it. You weren't the first one granted but I think you were the first one in operation, the first one built.
SCHNEIDER: Was it Reno that was the first one granted?
SMITH: No, the first one granted was Poplar Bluff, Missouri. They never built it.
SCHNEIDER: There was a case over that one called the Belknap case.
SMITH: That happened to be one of my cases.
SCHNEIDER: I know you had a lot to do with the legal side of it.
SMITH: I did. The Belknap situation was one of the first in which carriage and non-duplication came up. The Memphis television stations raised those issues and copyright issues. They were able to satisfy the station and the FCC went ahead and made the grant. As I say, it was never built.
Did you experience any opposition or animosity from the public in Casper because of what was then a relatively high charge for service?
SCHNEIDER: No, as I alluded to the grand opening at the Armory there, the excitement of seeing for virtually all of those people a television picture for the first time was just unbelievable. They didn't really care what it cost. They just wanted it. So there was never any problem that way; although, I think in most other places of the country--like Pennsylvania where cable was developing quite rapidly--they were charging in the $2, $3, maybe $4 dollar range. And they probably had a lot more signals than we had.
There was another interesting thing in that grand opening when we got cranked up there in late '53 early '54. You've got to keep in mind that since there was no television picture available anywhere in Wyoming let alone in Casper--which is in central Wyoming--there were no dealers that handled television. Therefore, we had to go around to the appliance dealers and practically plead with them to get television sets in so they would have something to sell to our customers. We couldn't sell our hookups very well without television sets. That was quite a job, I remember, in itself because they were reluctant to buy a lot of sets for inventory and have them available when they didn't know if people would hook-up and pay that $150 and $7.50 a month. So there were periods there where there was definitely a scarcity of TVs themselves.
SMITH: When you had your grand opening demonstration at the National Guard Armory, what was the quality of the picture when you turned it on for the first time?
SCHNEIDER: Of course, by today's standards you would not rate it as high quality. The noise level and so on. Then, considering what you had to relate it to--which was nothing--it looked very, very good. You know the thing we finally got these dealers to do when we had that grand opening, they did get enough sets in there to make probably eight or ten of them to put a display and booths around the Armory where people could see television sets and actually make purchases. It was really astounding. The sets that were there were sold out just overnight that they had on hand. We were signing up people to subscribe to the service like crazy.
SMITH: That's a great story which we'll continue after I turn the tape over.
End of Tape 1, Side A
SMITH: This is Side B of Tape 1 of the oral history interview with Gene Schneider. Gene, on the other side we were talking about the fact that the public bought out all the television sets that were available at the Armory the night you turned it on. Were there any fears in yours and Richards' and Bills' minds--and the other stockholders as well--when the time came to throw the switch and prove that you could do it?
SCHNEIDER: Well, Strat, you know microwave technology in those days was not anything like it is today either. We always, for years and years, had a very definite fear, particularly at the very beginning. That night was a huge event for us as I say. We had it two nights, as I recall it, and there were over twelve thousand people that came to it. What if the thing went off? What a disaster! That kind of feeling existed for years. And it did go off some. We had real outages for hours at a time. Keep in mind the weather in Wyoming in the middle of winter is not always easy. You know, very high winds. As a matter of fact I can recall times when the wind was moving the dishes and the picture was flopping in and out and stuff like that. Dishes would break loose, loosen up, things of that nature. It was a major task on the part of the telephone company to keep that thing operational. When you had a big event like a Rose Bowl game or things of that nature--World Series or whatever would have been on--you always just were on pins and needles hoping, "My gosh, I hope this thing doesn't go off."
SMITH: Gene, how large did that system grow before you and your associates who built it and operated it initially went on to other things?
SCHNEIDER: Strat, believe it or not, we still own that system. Through all the years through United Cable Television Corporation--and we merged that with United Artists Communications to form United Artists Entertainment, which I'm chairman of today. We still own the Casper system. So I have never parted with it.
SMITH: I didn't realize that. Did Daniels and the other stockholders maintain an interest throughout that entire history?
SCHNEIDER: No, they did not. As I recall the dates there, I believe it was January of 1960. The oil men were oil men. You know, they put their money into things and if they didn't get it out very quickly they thought it was a bad deal. It didn't always make money. Sometimes they didn't get it out at all, but they kind of got itchy; although, they stayed with this thing seven, eight years, or whatever it was. They decided that they'd like to sell their interest.
Bill Daniels, in the meantime--I believe it was '55--had moved on to Denver to establish another insurance office. He kept the one in Casper and had a friend of his named Walt Forbes running that, who happened to live across the street from me. Bill had begun to develop other interests in cable in bringing in investors, in becoming a brokerage arm of cable, in forming a management company and was kind of going off in his own direction. We skipped part of what happened here. We did build two or three other systems before then. During that period right in there we brought in some additional investors and were able to raise some more money ourselves and we did buy out Daniels as well as the four oil men right in that early part of 1960.
SMITH: Then you and Richard continued your interest in Casper right up through and including today.
SCHNEIDER: To this very day, our company still owns Casper. The only thing that I might mention that is kind of interesting and unique that I just thought of is that when we had that one channel of microwave and the other network stations started coming on in Denver, we could only deliver one channel but we could pick up first two, and then three, and then four. There were three networks that eventually came on during the middle part of the '50s. But we could only deliver, for part of that time, two channels and then we finally got the three and later on we got five or six channels of microwave when we brought in PBS and other stations. Anyhow, we went to a balloting situation because we had to select the program. We rigged up a ballot, and as I recall, we sent that thing out every month or every two months, and let the subscribers vote on what programs they would like for us to select. Of course when the voting was all done we picked up what we liked. But it was very complicated and that was a big, controversial situation because you have three or four stations available that you're trying to select what you're going to watch down to maybe one or two. You can imagine the controversy. It was a real one. It went on for several years that way.
SMITH: I can imagine. You mentioned that original group built some other systems. Where were they? Tell us some of the interesting aspects of that work.
SCHNEIDER: As I recall it, our next project was in Farmington, New Mexico. There had been a theater man down there that sort of started a system. This would, again, have been in the '56, '57 area. I think he had three hundred subscribers. The picture was just gawd awful. He was just doing a terrible job. He didn't have any technical help and he really didn't know how to go about it and didn't really want to spend the money to get the help to do it. We acquired that system, I think, for $60,000. Not very much. We built it up, really, completely because he had very little of it built. But we went ahead and completed this system and it became a very, very successful project.
Also during that period, we got into Rawlins, Wyoming, which is a community about one hundred twenty miles south, southwest of Casper in the southern part of the state. We built that system and fed it in the later part of the '50s. Although we split off of the same microwave system, we by then, owned ourselves and we split off to bring the signals into Rawlins. That was a very successful system.
SMITH: How large did the Rawlins system get?
SCHNEIDER: Well, Rawlins was a much smaller community than Casper but I think it was around two thousand subscribers that it got up to during the '60s.
I guess you asked the question a while ago, "Where did Casper get up to?" Casper was a rapidly growing town all through this period. It was kind of a boon town. We peaked out at around nineteen thousand subscribers there. The population of Casper five years ago peaked out around fifty-five, sixty thousand. Since then that population has dropped significantly, materially. There are probably five, six thousand empty homes in Casper today because of the energy crisis or the oil boon and all of that. It relied a great deal on oil well supply houses and regional offices of other companies. Most of them moved out of there through the '70s and into the '80s. So, today, that system has around sixteen, sixteen and a half thousand subscribers. Still, percentage wise, it has held its' own. There are just not as many people there anymore.
SMITH: Is Rawlins still in the United fold?
SCHNEIDER: No, we sold it. Again, I could stand corrected here, but it was in the first two or three systems that TelePrompTer bought--Irving Kahn--in early '60. He bought a small system in New Mexico simultaneously. Farmington and Rawlins we sold to him and that's what started TelePrompTer into the cable business.
SMITH: You didn't mention the theater owner's name a few minutes ago. It wasn't Irish Schaehan was it?
SCHNEIDER: No. Irish came in as an investor into our company at the time we were buying out the original four oil men as well as Bill. Right in that period is when he got involved.
SMITH: I remember him and I wanted to be sure to get him into the history.
SCHNEIDER: Yeah, Irish ran and owned a radio station in Casper during the '50s. We cooperated very well with him and he wanted to get into cable. He got involved as an investor in Farmington and I think Rawlins prior to the time we bought these other people out. Really a great deal of the money we got to buy them out, as I recall it, was coming from the sale of those systems. I should interject here that the stockholders in Rawlins and Farmington did not involve all of the original group. They were very happy with just Casper. So Bill, Richard, and I brought in some other people. By then, we had a little more money ourselves to develop Farmington and Rawlins. So there were different groups of stockholders in these three systems; although, Richard and Bill and myself were the common thread to all of it. We ran them all.
SMITH: Were there any other systems that that original group put together?
SCHNEIDER: Well, we went ahead and developed systems. United Cable Television Corporation, which was a name that we finally adopted in 1974, ended up with 1,200,000 subscribers so we developed a lot of systems through all those years. In the early days, the next system might have been Moab, Utah; or Perryton, Texas, which is in the Panhandle close to Amarillo, Texas. Gosh, there has to be others in those very early days of the '60s.
We got involved in Grand Junction, Colorado right in there. That was another long story in itself. That was one of the earliest referendums on cable that probably happened. I think there were seven elections before we finally won the thing by joining up with TCI. They were our competitors as well as Roy Bliss and three or four others. I guess the strongest three were TCI, Roy Bliss, and ourselves and we just kept knocking each other off. Nobody could get a majority. Rex Howe, who was a broadcaster, was ferociously fighting the thing. He was trying to defeat the referendum, which was really, I guess, in the form of an amendment to the city charter. The city took the position that they didn't have the right to issue this franchise without a referendum, which is probably wrong, but that's what they did at the urging of Rex Howe. He had the single television station there in Grand Junction. Those were the days when he was fighting the cable by putting up a black screen and saying, "This is what your screen will look like if cable is allowed in."
SMITH: That was in his theater?
SCHNEIDER: No. That was in the television station.
SMITH: Oh, in the television station.
SCHNEIDER: Yes. We're in Grand Junction, Colorado now. You remember all of that was happening.
SMITH: Well, I remember a good deal of it but that doesn't put it on the record. Gene, how about the franchise for Casper? How did you obtain that?
SCHNEIDER: Believe it or not, the original franchise for Casper was one paragraph on one sheet of paper and it said, to the effect, "We hereby grant you the right to use the streets and alleyways for the purpose of building a cable system." That's all it said. There was no franchise fee, no anything.
SMITH: There was no battle or argument before the city council?
SCHNEIDER: Nothing. It took five minutes I think.
SMITH: Well that may be the shortest one on record and I've seen some pretty short ones.
SCHNEIDER: There is another interesting thing on delivering those signals into Casper. When we started having a selection of more than one station up at The Summit on that twelve thousand foot mountain out of Laramie, we had to put somebody in there to do the switching because we didn't have any technology then to do it. I remember Richard developed a thing using a Rube Goldberg switcher. It had little cams that were on a timer. We developed this thing as we were going along there through those years where it would run manually because there were no electronic switches available then. It had to be manually--like punching a button or throwing a light switch. By turning these little cams at the right time, this would manually punch the right button to switch to another channel to bring into Casper on the one channel of microwave. But for years, we had to have a person up there all the time in order to do that switching at all.
SMITH: Twelve thousand feet in the middle of the winter?
SCHNEIDER: There were some hairy times there. We used students out of the University of Wyoming which was at Laramie. There were more than one occasion where those guys got stranded up there. They just simply couldn't get out.
SMITH: Tell us about the facilities you had up there for them to protect themselves. Was there a hut and a cook stove?
SCHNEIDER: We equipped the thing. It was a cement block building and not very large--maybe 12' by 15', something like that--where you had the microwave equipment, the reception equipment, the short tower outside of the building where we had our receiving antennas. We put a cot in there and stored some food and things like that in case they got trapped. There was no particular danger to them unless they tried to go outside and get out of there. Then it would have been very dangerous in blizzard conditions. You go to twelve thousand feet, you know, one hundred mile an hour winds can come up pretty quick.
SMITH: I could be persuaded to stay inside too. Did you ever have any occasions when you had to perform any rescue operations to get them out?
SCHNEIDER: Well, we did--a little later on when we could afford it--buy a snow cat, I guess you'd call it in those days where it could go through almost anything. We had it on a trailer where we could transport to the other sites also, which were on high peaks. We used that cat to get in and out of these remote places. I don't recall that we ever had an instance where that couldn't get in there if we had to get in.
SMITH: You never had to resort to helicopters to get any stranded students out?
SCHNEIDER: Strat, did they have helicopters then? I'm not sure they did.
SMITH: Gene, I'm not satisfied with the level that my voice is recording so let's pause here for a few minutes to see if I can do something about it.
SMITH: When we interrupted, Gene, we were talking about any special problems you might have experienced in Casper in the early days, I'm thinking particularly of technical problems and the lengths you might have had to go to to resolve them in light of the state of the technology of the day. Since Casper was one of the earliest systems, I'd like for you to fill in anything that you can recollect on it.
SCHNEIDER: Well, I think there are probably at least two areas that pop into my mind as people today probably don't realize, but in those days solid state technology was nonexistent. We used the old vacuum tubes--so did television sets, by the way. They didn't work near like they work today either, but anyhow, these things weren't designed for or expected to be used for the outdoor type of things where you have these huge temperature swings and things like that and maintain a system with tubes in it. As I recall, strips had seven or eight tubes alone just in the strip itself and it was a real job by today's standards. Most people today would just throw up their hands and say, "I quit." But, we got it done. Of course, you didn't do as good a job--even close--as what you can do today in delivering quality pictures. But, like I said earlier, in those days, when you had a picture compared to nothing, that makes it look pretty good even if it isn't the best. But we did a reasonable job.
One of the other things I remember that caused us problems--not only us but a great deal of the industry--as I recall at the time, Times-Wire Cable, Larry George's company, did a lot of their marketing through Jerrold. I don't know what percentage of the business Jerrold had then, but it was a big chunk of it. So they furnished a lot of the cable in the industry. They were developing new cables as they went along. I believe this hit in the later part of the '50s that they came out with a cable called strip braid and everybody thought it was just great. It had lower loss characteristics and you could space the amplifiers wider apart and a lot of other good things could be said about it. But after being up in the air a year or so, this cable-- probably due to corrosive effect on the braid--started having suck-outs and losses increased tremendously. Frankly, it simply wouldn't work. But one way--I don't know how this was discovered--but somebody learned that if you would take something like a baseball bat and drive along with a bucket truck down the alley and start beating on that cable every few feet, it would just come back in nice shape. So, actually, it became sort of standard equipment on all of our service vehicles that we carry baseball bats. Anyhow, that cable all had to be replaced. As I recall it, Times did have some kind of replacement program that didn't make it too painful, but that cable was quite a problem for several years.
SMITH: You used the term suck-out a moment ago. What did you mean by suck-out?
SCHNEIDER: See, the cable is broadband in characteristic. It will pass over a wide spectrum of television signals but you might have at one hundred gigahertz it might just have a dropout where instead of passing the signal that might be at that point, the attenuation would go way up and if you had a channel on that frequency, it would just virtually knock it out. That's what we call a suck-out. The same thing can happen in wide band amplifiers if they are not properly maintained. Even today, you can have a roll-off on one end or suck-outs and things like that but, today that's a minimal problem, really. What that cable was doing, probably more than suck-out, was the whole attenuation and loss of signal was going way up due to this corrosive effect, although probably in an uneven manner. Maybe worse at one end of the spectrum than another. It was definitely there and it was a real problem.
SMITH: That was a problem that was experienced, generally, around the country wasn't it?
SCHNEIDER: Yes, that wasn't exclusive to Casper. That cable was sold all over the country and it was an industry-wide problem. Many, many people had it.
SMITH: Gene, the time came when you and associates of yours joined with other pioneers in the industry--Ben Conroy, Jack Crosby, and some of those--to form a new company. Could you detail how that came about and tell us about some of the systems that were involved and who the personalities were that were associated with it?
SCHNEIDER: Well, I think we were a very close-knit industry with people like Jack Crosby of Del Rio, Texas, at the time; Tubby Flynn of Tyler, Texas; and Ben Conroy of Uvalde, Texas. All of us were very expansion-minded. We were thinking of ways of how to get a lot more funds available to expand more rapidly, acquire systems, build systems, get franchises and all of that. Obviously, one way that occurred to us was to get a company together and eventually take it public to raise money through an IPO (initial public offering). After talking to Crosby, Conroy, and Flynn for several years, we finally managed to put a company together and we named it GenCoe, which stood for General Communications Entertainment. Anyhow, as I recall it, I'm not sure we actually got it formed in '64 but it was right along in there somewhere, maybe a little bit later than that. Our company, by that time, was called Wentronics. We had changed the name to that, which stood for Western Entertainment with Electronics, believe it or not. We had about twenty-five thousand subs at the time, which was substantial in the early '60s. Other companies were a little larger but it was one of the larger ones. I forget the numbers that Crosby and Conroy had but we put the four companies together and named it GenCoe with the idea of as soon as it was practical we were going to go public.
Actually, about the time we were really getting serious and at the point where we thought we could do this it was '68 or maybe the later part of '67, Crosby had an old school roommate that was working for a company in Tulsa, Oklahoma--really a small, independent oil company--that was called at that time Livingston Oil. They later changed the name to LVO Corporation. But Livingston Oil, I believe at the time, had something like a six million dollar annual cash flow and they were expansion-minded into something besides oil. Six million dollars, believe me, in those days sounded like all the money the world ever had to us. We thought we could really do wonders with that in cable. So this fellow's name was George Owen, who was a lawyer representing Livingston Oil and later LVO in Tulsa. He got to talking to Jack and telling him about Livingston and one thing led to another. Over about a year's time, it probably actually happened in early '68, we decided to merge GenCoe with Livingston Oil, which made the GenCoe people the largest stockholder in Livingston Oil. As I recall, we were right at thirty-seven or forty percent of the company as a result of that merger. That, like I say, occurred in early '68.
There was a surprise. Jack was the chairman of the board and I was on the board and so was Richard, my brother, and Ben. I don't think Tubby was. Fred Liebermann, who was a partner of Jack's, was involved there. I don't think Fred took a board seat either, as I recall it. But, anyhow, there was one, little flaw in that plan. Jack handled these negotiations, primarily through George Owen. There was just an understanding that he thought everybody had that this cash flow of Livingston was going to be devoted to expansion in the cable industry. Really, in effect, we were going public via the back door because Livingston was a public company. The first board meeting we didn't bother to take control of the board or anything, although there was no major stockholder in Livingston, at that time. The original founder of Livingston had essentially sold out so I think they had around twenty thousand stockholders and I don't think a single one of them owned over one or two percent. So, we definitely controlled the company. These old oil guys that were on that board acted like--and I'll never forget that first meeting--well no we're going to continue expansion in the oil business and yeah we'll put some money in cable but we're not going to devote the bulk of this money to cable. So here we were. It hit the fan right then and there. We discussed the idea of a proxy fight and all of that and to change the board which we could have easily won because it was a New York Stock Exchange company.
Fred Liebermann and Jack Crosby were the kind of people by nature that just didn't want to get into fights of that type. I was different. I was ready to do it and it would have been a hands-down, slam-dunk. We could have won it. And we would have had to remove them all and, in effect, we would have had our six million dollars.
SMITH: And some oil wells, too.
SCHNEIDER: Jack and Fred backed off. As I recall it, after another meeting or so they just resigned from the board and said, "The heck with it." There we were. Then the Livingston people asked me to move to Tulsa and run the cable company and, of course, remain on the board. It was kind of interesting because I then became the largest individual stockholder in Livingston Oil.
SMITH: Did Jack and Fred take their companies out?
SCHNEIDER: We settled the whole issue by giving them back, as I recall, Uvalde and Del Rio. I can't remember what we did with Tubby. I think it stayed in. It did. But we gave those systems back and settled the whole issue and traded the stock that they had in Livingston for it. That ended that. Well that's when I moved to Tulsa in August of '68. There were two reasons why I moved to Tulsa that had developed. One was the Tulsa franchise was beginning to heat up and we thought that if we moved the headquarters out of Casper for GenCoe it could enhance our chances of getting that franchise. Also they kind of wanted it there because the control of the board was there and they all lived there so they thought it would be better. I didn't argue that much about it. Although I would rather have stayed in Casper. But anyhow, that's what we did. There's a long story that follows after this in what happened with regard to Tulsa franchise and Livingston. I don't know if you want to get into all of that now.
SMITH: I'm interested in the story, Gene, and I definitely want to go into it. We have just run out of tape and it is lunch time. If you can be available later on we can resume at that time.
End of Tape 1, Side B
SMITH: This is Tape 2, Side A of the oral history interview with Gene Schneider at his offices in Denver, Colorado. Gene, at the end of the previous tape you were remarking about a long story about LVO. Would you like to go ahead with it?
SCHNEIDER: Yes, Strat. I mentioned, I think, on the other tape that we did move our GenCoe headquarters to Tulsa subject to that merger for the purposes that I stated. That happened in August of 1968. Just as a side note there, we did leave the engineering function with my brother in Casper and it remained there throughout all this period even when we moved back to Denver in 1977, which worked out very well. In this computer age we were able to handle the purchasing and all that very well and the engineering functions. We did get involved, as I recall it, it was about '69 the Tulsa franchise started heating up. I think that dragged on through '71 or '72 before we finally got it. We had a very ferocious, competitive situation there with actually two of the three network stations. One of them was owned by the Kerrs and the other one owned by the McGees filed on the franchise against us--along with some other applicants which very quickly seemed to fall by the wayside--to get that franchise. It basically boiled down to those two television stations and LVO or GenCoe, which was a subsidiary of LVO at that time. Right in there somewhere, by the way, we did change the Livingston Oil Company name to LVO Corporation. It may have been '69 or '70.
But, anyhow, that battle was finally won by ourselves and we did start construction on that system in I believe it was '73. That was a rather aggressive thing to do at the time because that was, of course, pre-satellite days. Really, we were competing with three networks, an independent, and PBS in Tulsa, I believe, at the time. So the competition was quite heavy from a cable versus off-air perspective. We did build approximately a third--six hundred miles of this system. Interestingly enough, basically with Magnavox's money.
SMITH: How did you manage that?
SCHNEIDER: Everybody was anxious to sell equipment in those days and the manufacturers were doing some very high-level financing. Most of the money that was put up by them was on a non-recourse basis to build the system, which probably is the only way we would have done it at that time. As it turned out, we built that six hundred miles and really had a very tough marketing time on this system.
Fortunately, about the time we completed the six hundred miles is when the satellite services started hitting. We did put in immediately one of those ten meter dishes. In those days, that's what we were using. They were over thirty feet in diameter. I think it was the second one in the United States. I believe Bob Rosencrans put the first one in down in Florida. About that same time, I think, one went up in Jackson, Mississippi. We put the one in Tulsa and then we put the first one up in California in the San Francisco Bay area also about that same time. As I recall, it was the fall of '75. At that time, I think all that was on that satellite, if my memory is correct, was HBO; although, as we all know in subsequent years, rapidly, other competitive services to HBO as well as other kinds of services started to come on there. TBS, of course--Turner's station--went on there and things like that. It did turn the system around rather quickly from a marketing viewpoint. We then arranged for additional financing and went ahead and built the rest of the system out over the next three or four years. Today, as a result of the merger, it's still owned by United Artists Entertainment. I think it's right around one hundred seventy thousand subscribers today. So that's the story of Tulsa.
I need to back up and say how we got out of Tulsa, I guess. LVO never did do a lot in the oil business, even though they were using a considerable amount of their funds--even subsequent to '68--to try and further develop things in the oil business. They did devote quite a bit of their money to the cable side of the business which, of course, they owned at that point in the form of GenCoe. We did feel that--and the board felt--that they didn't want to furnish all the money that cable needed so it was in 1971 we had the initial public offering on GenCoe. By that time we had changed the name to LVO Cable. That was handled by Bear Stearns and was a very successful offering that went out quickly and we raised several million dollars for cable expansion that way. There was another offering a couple of years later--I forget the exact dates--to raise additional funding for expanding the cable, which we were doing quite rapidly. We had obtained some significant franchises and most of the cable systems that we have even today that we developed through those years, we actually built as opposed to buying. We kind of approached things that way. Most of TCI's growth came through purchases as opposed to ours coming from actual construction.
In 1974--I think it would have been April or May of '74--LVO Corporation decided to merge with Utah International, a very large Salt Lake company that was in oil and manufacturing and many other businesses. They were a multi-billion dollar company. Utah International, probably much to their regret later, had decided that they did not want to get into the cable business. As a result of that decision, the LVO Cable was spun-off to the LVO Corporation stockholders in the form of a dividend. Every stockholder in LVO Corporation, for every hundred shares they owned there, got sixteen and two thirds shares in cable stock. That made the LVO Cable an independent, publicly-held company.
During and prior to that as this was happening, I then organized a new board for LVO Cable to United Cable Television Corporation and that's actually what it went out as in the spin-off, United Cable Television Corporation. I selected some people that I had been acquainted with, some in the cable business, some not--primarily in the Wyoming area--to participate in the on-going operation of United Cable Television Corporation. Some of them were ranchers that I had done some business with in Casper. Al Carollo, to this day, is still on the board, as well as one of the ranchers. Anyhow, we started a buying program in the open market of the stock. At that time, they all owned small amounts of LVO Corporation which in turn gave them LVO Cable or United Cable stock. I had fairly substantial amounts being a fairly substantial stockholder in LVO Corporation and I got the resulting stock in the spin-off. But we started this buying program and at one point we had gotten up as a group to around maybe forty percent of the entire outstanding stock was held by the board. In subsequent years, through expansion and underwriting and things, it got deleted down. But we had a very substantial piece of it at the time. This group worked very close together and really is the group that developed United Cable, by the late 80's, into the seventh largest cable system in the country with over 1,200,000 subscribers.
SMITH: You referred to Kerr as being a competitor for the franchise in Tulsa. Was that the Senator Kerr?
SCHNEIDER: Not the Senator himself, but the family. If I'm correct, he may have passed away by then.
SMITH: If this is in the early '70s, probably so. He was in the Senate in '69. That was when the famous S.2653 was in contention.
SCHNEIDER: Anyhow, he did not, as I recall it, get actively involved there; although, behind the scenes he very well might have been if he was still around at that point. I'm hazy on that. But it was the Kerr interest.
SMITH: McGee. They were a big, powerful oil company were they not?
SCHNEIDER: Right. They had these independent holdings in these television stations.
SMITH: What did you have to promise the city of Tulsa in your franchise in order to get it?
SCHNEIDER: Too much.
SMITH: That doesn't distinguish you from very many people I know.
SCHNEIDER: Actually, fortunately, in those days I don't think the franchise thing had heated up as badly and so many promises that people felt they were forced into making hadn't really come about quite that early. Although it wasn't much longer after that it got out of hand. We actually got a pretty good franchise in Tulsa. It was livable. To my memory we never felt compelled to go in and change anything in that franchise. It was acceptable and workable.
SMITH: How many channels did you start with?
SCHNEIDER: Well, let's see, at that point in time we must have had the thirty-five channel equipment. We used whatever the latest was. We always did. I think it was probably the thirty-five channel equipment because later we converted Tulsa to fifty-four. So that's what it must have been.
SMITH: Did you fill them all up?
SCHNEIDER: Not in the very beginning. It was interesting how all of this worked. Remember, this was pre-satellite. You know, we didn't come close to filling them all up. We thought thirty-five channels was an unlimited, boundless number of channels and you would never fill them all up. Of course, in a matter of a few years going on into the early '80s and a little later, it turned out that thirty-five really wasn't enough. But at that time, it seemed like an awful lot.
SMITH: You put in one of the first thirty meter dishes. You were paying a lot of money for those dishes in those days.
SCHNEIDER: As I recall it, those dishes were installed for approximately $125,000 for just the reception side of it. It was a little different than what it is today.
SMITH: I should say so. What other franchises, Gene, did you add to your group at that time?
SCHNEIDER: We had obtained several other franchises. Probably a little bit, as I remember it, behind obtaining the Tulsa one. But we were working on Albuquerque, New Mexico; Chattanooga, Tennessee; Columbia, South Carolina; Charleston, South Carolina. Those were four of the main ones that we had at the time. That's kind of another story there. As most people will probably recall, during the middle part of the '70s there was a tremendous money crunch. In fact, I don't think General Motors could have done very well borrowing. There just simply was no money. As a result of that a lot of these franchises had deadlines for starting construction and completion dates and all that kind of thing. Bonding requirements and whatever. We felt that we had two choices. Either face some very tough battles--and most likely lose some of them--because we weren't able to jump into the construction because this was pre-satellite. Even right when the satellite first came along, we just simply didn't have the money to build all of those. And there was no borrowing to amount to anything. So we ended up actually disposing of, I guess, all of those four franchises I just named. We disposed of them and sold them to others who had the wherewithal. I know the Tribune Company bought Albuquerque, as an example. Of course, they had money. A wealthy, independent family in Rome, Georgia bought Chattanooga, the Smithgalls. They had a lot of television stations and things like that so they purchased the interest in Chattanooga. We did keep, in some of those instances, an earn-out position. It took years before we totally went out of them. So we got a lot of money out of them in the end as they were built out over a period of years. Anyhow, we did give those up. Probably, looking back, we might have been smarter to have fought the battle with the cities and tried to have kept them as opposed to going ahead and transferring them to somebody else. Anyhow, that's what we did. That's hindsight.
The other thing I might mention, simultaneously with getting this western-related board of the people from Wyoming in the fall of '74 during that spin-off of United Cable, we made the decision--although we didn't do it immediately--that we would probably move the company headquarters to Denver. And we actually did do that in August of 1977. At that point, we had no more ties with LVO, or any other reason, other than the fact that we owned that large system in Tulsa. But we really wanted to get to Denver. You go to Tulsa if you're going to Tulsa and that's the only place you're going. You go to Denver where you're going to a lot of places. We wanted to get into the mainstream transportation wise. Of course, the cable publications were here and a lot of the cable companies. We felt more comfortable being here and it worked out very well when we came here.
SMITH: You may recall that I spoke to you just briefly in Tulsa once when Frank Thompson's daughter was in some ice skating tournament or whatever in Tulsa. I had told Frank that when his youngster got to the point where she was really competing seriously, I'd come out and root for her. I did and you came by that evening. I think you had your son, Mark, and you were driving a brown Toronado.
SCHNEIDER: That's what I had. That's right.
SMITH: We only spoke for a minute or two. But I do remember.
SCHNEIDER: I think that was the Amateur Nationals.
SMITH: I think the youngster came in fifth and was broken-hearted.
The move to Denver, did that mark any particular change in the policies and activities of the company?
SCHNEIDER: Oh, we were, through those periods, taking an aggressive posture on expansion. I don't think it really changed anything. As a group, the principal owner of the company had set sights on building as large and effective, productive cable company as we possibly could. Moving to Denver just maybe helped that in that we were a little closer to things. But we continued with the same policy that had been established in Tulsa which was really a different kind of policy than we had under LVO because there was always the money restraints there and the conservative attitude towards cable. They were not really sure whether they liked this thing called cable and that sort of thing. But we felt much better and everybody was very enthusiastic about the company being spun-out and becoming independent with new control.
SMITH: Who were some of the members of your board in addition to Al Carollo? He was on the board, wasn't he?
SCHNEIDER: Al Carollo was, and is, on the board to this very day. It's now the board of United Artists Entertainment. We had Kurt Rochelle, who was a very large rancher in Wyoming; probably today the largest rancher in Wyoming. He's still on the board. Another one was a rancher named Van Irvine, who I guess, at that time, was the largest sheep rancher in the world. Subsequently, they ran into some hard times and lost most of those ranches. I forget when he went off the board. I guess it was in the early '80s, late '70s, right in there somewhere. We kept one holdover from the LVO board, the dean emeritus of the college of engineering of Oklahoma State at Stillwater, Oklahoma, Dr. Pete Lowman. He was a very effective LVO board member and he was a very effective board member with us. He retired from the board about a year, year and a half ago. At that time, it would have been the United Artists board. Of course, my brother was on the board.
Who am I leaving out? It was a small board but there is somebody missing that is no longer on it. That, basically was it. Oh, I know how it is, the fellow we just got interrupted about, Joe Giannini. He came on the board and was successful in real estate in Casper and coal mining and that kind of thing. He was from Rock Springs, Wyoming where Al Corolla was. Al Corolla brought him into the deal. Joe has been a CPA with Arthur Anderson and really has become independently wealthy and was and is a very good board member to this day. But I believe that is the entire board through all those years.
SMITH: What additional systems did United acquire following the move to Denver?
SCHNEIDER: You know I really need to get out an old report to review that. There were about fifty of them before it was over, most of which we didn't build. But there are places like Boise, Idaho; San Francisco Bay area; Los Angeles area; we acquired and rebuilt and expanded the Hartford, Connecticut area. I'm just naming some of the big ones. Baltimore we built. Very, very successful system. And so was Hartford after we took it over. The eastern shore of Maryland. Of course, I shouldn't leave out Denver itself.
By the way, that was another motivation for moving to Denver. This franchise was heating up and we wanted to get in on that. We had a ferocious battle with our good friend, Bill Daniels, over Denver itself. But we ended up getting virtually all of the suburbs, which was really the best part. We have about 170,000 subscribers now in the Denver suburbs. We did not get Denver itself. Daniels, in combination with ATC, got Denver.
SMITH: You didn't have any geographical limitations on where you would acquire or build systems judging from what you said. Any place in the country?
SCHNEIDER: No, we didn't. As long as you could get an airplane to it, it was fine.
SMITH: How did that Denver franchise work out, Gene, in terms of the division of the area? You said you got most of the suburbs. What other groups were awarded franchises in Denver?
SCHNEIDER: That reminds me of exactly how we did do that. Today in the Denver area you probably have ATC, of course, with Daniels in Denver itself. Daniels is the minority end of that. TCI has subsequently gotten involved in Denver in that they took out the Scripps Howard position. They were a partner in there too in the beginning. Then Jones has a substantial operation in Jefferson County here. He may be into Arapahoe County a little bit. By far the biggest operation is our own--in the beginning and still today.
The Denver system had a tough time. I suppose you'd relate that to them making some terrible mistakes on construction. Technically, they had major problems. And then the demographics of Denver are not near like the suburbs as far as being good cable potential. Anyhow, we ended up with the cream of the crop in the whole area. It's interesting how that came about. As a matter of fact a company called CableCom General, Bob Clark, I believe in conjunction with Daniels, early on without much competitive factor, had gotten franchises in most of these suburbs. I think Daniels was primarily responsible for getting that done and he had optioned those properties to CableCom General for $25,000.
SMITH: Bill must have been hard up.
SCHNEIDER: I think Bill needed some money occasionally. Anyhow, this option was expiring and they didn't want to pick it up, believe it or not. So we got wind of it and they assigned the option to us and we put up the $25,000 and that's the way we got all those franchises without even going to a franchise hearing or anything else.
SMITH: You were not involved in that?
SCHNEIDER: Not in the suburban area. We were heavily involved in Denver itself. In fact we spent over $3,500,000 trying to get Denver, which is an interesting number. But in the suburb we got those by picking up that option. They had put $25,000 down and I think they had to put up another $25,000 and they wanted Bill to give them back their $25,000 and they would give him back the option and he wouldn't do it. We heard of this and they assigned it to us and we put up the other $25,000 and got it.
SMITH: And how many subscribers did you say that has grown to now?
SCHNEIDER: One hundred seventy thousand. Bill and I had a little strained time right in there over that but business is business.
SMITH: Gene, correct me if I'm wrong on this because this is something I've had in mind for a long time. Wasn't it the Denver franchise that really started the excessive bidding wars in franchising? I seem to recall that as being the first big one where, sitting from my protected position, I thought bidding was excessive.
SCHNEIDER: Strat, I don't know whether Denver initiated some of those outlandish things or not, but it certainly was in the thick of it, and it was in the early part of it. It could have been one of the worst examples. If you want to pick maybe the worst example I can think of right now, that would be Colorado Springs which was ahead of that. You may recall that thing, if my memory is correct, and it's not far off, the city franchise demanded fee was thirty-five percent of gross. Do you remember?
SMITH: I believe that I do remember that. It was an outrageous thing.
SCHNEIDER: It was outrageous and made it impossible for the system to be profitable. Again, Bill had gotten that franchise. I think they all realize that they made a mistake. That may have been with CableCom. Was it?
SMITH: It was with CableCom. At least I remember this much about it and that is that Bob Clark wound up managing it for some period of time. I think that he was doing it at that time under the aegis of Bill Daniels.
SCHNEIDER: I think that's right. But you know that was a fiasco. I may be wrong but I think to this day that system has never done that much. They finally got some relief from a fee arrangement like that but you know it restricted their expansion and the quality and everything about it. It is just a good example that if the demands of the city are excessive, which they were, it's going to reflect on the service and what the public gets and the whole works. There is a perfect example of it.
SMITH: It is also my recollection that there was a requirement that that go underground?
SCHNEIDER: I think that's correct. One of the requirements there was completely underground and of course that added tremendously to the cost. It might even have been dual cable.
SMITH: I think dual cable came a little later. Thirty-five percent and underground is enough handicaps.
SCHNEIDER: Yes, that's enough.
Another big one we got, I just happened to think of, is the Oakland County, Michigan area. We also got some nice franchises in the down-river area of Michigan in Detroit.
SMITH: Did you have any particular style for raising your capital? Was it a long-term plan?
SCHNEIDER: It's all documented, I'd have to go back and do some research but through these years from the late '70s on through the '80s we did three things, primarily, if you count just borrowing. We did borrow reasonably heavy. We didn't over-leverage the company like some probably did. One thing we did was some underwritings; convertible debentures, straight debentures, one or two equity issues. You know, fairly substantial sums in the hundreds of millions.
Another major financing technique we used that worked very, very well--Baltimore, Los Angeles County, Oakland County, parts of San Francisco--we set up what we call limited partnerships. I don't know whether or not you want to go into the details.
SMITH: Go ahead. We need a record of that type of thing.
SCHNEIDER: Basically, what you did is we set up a subsidiary to become the general partner. I think, under the law the general partner had to have ten percent of the total equity. Something like that. To qualify for the tax provisions and all there is something like that. So the general partner would put up some order of magnitude of the equity money. The bulk--say ninety percent--of the equity money would come from limited partners. Then combined with this equity there would be a debt structure with traditional lenders--insurance companies, banks, institutional lending--and that way the funding for building a system was put together.
The way that came down, in the end was the limited partners would get one hundred percent of the tax benefits during the construction period, build-out period and developmental period of the system. This was all allowed, in those days, under the tax laws. They would have at the end of generally five years following the completion of fifty percent of the system, which would really mean a six year period of time or maybe a little more--they would have what we call a soft-put against us, the general partner. By soft-put I mean we did not have to actually buy it. It would be put on the market at a fair market-appraised value on one hundred percent of the system. Their ownership of fifty percent ownership of the system could be put to us after that period of time. If we didn't accept it, or they never put it then at the end of say seven years we would have a call at fair market value to buy out the limited partner. But, generally, what has happened in these situations--and history has borne this out--during the put period these limited partner interests generally were put. You know, we could then generally refinance and buy out the limited partners even at fair market values because we're only buying half the system. Without really putting any more money in it, or very little more, and we would own it all. That was the technique of financing and that was used extensively not only by ourselves, but by a lot of people--Daniels did it, and so did Jones. Their technique was a little bit different but kind of the same net result. Jones created open-ended funds, pools of money, maybe $100,000,000 fund and then he would go out and buy or build systems with it; whereas, in ours we took specific projects--for example in Oakland County--and that was that limited partnership. And the money was raised for specifically that purpose. It was a very successful technique of financing and it was good for the limited partners and good for us as a method of raising money. Another part of that--I guess a very important part--is that the limited partner always got his money out one hundred percent first before you started sharing the fifty-fifty arrangement.
SMITH: That was the incentive to him.
SCHNEIDER: Yes. So he got the tax benefits, one hundred percent of his money back, and then you split the remainder fifty-fifty generally. Sometimes it varied. We had one, I think, at fifty-five we got and one at forty-five, but in that fifty plus or minus range is the way it worked. It was good.
SMITH: Is that an allowable system of financing today?
SCHNEIDER: It is allowable but you don't have the tax benefits and so a tremendous part of the leverage was taken away.
SMITH: That was a clumsy question. I should have said are the tax benefits there today?
SCHNEIDER: It's gone.
SMITH: Gene, in the past two or three years--I'm sort of guessing at it--you went into some sort of an arrangement with TCI. Could you explain that for the record?
SCHNEIDER: Yes. It was a little longer ago than that, Strat. As we all know, TCI was very, very aggressive in the industry in making acquisitions. You know, by '83 or '84 is when this happened--it might have been '83--they started nibbling away at our stock in the open market. Of course, you know if you get up above five percent you have to file a public document with the SEC stating what you have done and what your purpose is and that sort of thing. Well, knowing Magness and Malone very, very well through all these years, when we got wind of this we sat down and talked to them and reached an agreement that, as a part of an underwriting we were doing at the time, the way I remember this, we agreed to let them buy a block of that underwriting, bringing their interest up to about twenty-three percent, I believe it was, of the company. As a part of all of that arrangement, we entered a ten year stand-still agreement with them where they had agreed that they would not buy any more of the company's stock. They would take no position in management, no position on the board, no anything, but they would just hold it as a peer investment. That agreement is what we entered into and it worked very well and we got along very well with them.
End of Tape 2, Side A
SMITH: Describe that stand-still arrangement again so that I can get it on the tape.
SCHNEIDER: On the stand-still arrangement, going on with what we were just saying, part of the arrangement was, under most circumstances they would vote with the board of directors of the company. This was during that period of the '80s--the famous days of unwanted takeovers and raids on companies, the LBOs and all of that that was going on. We felt that this gave the company material protection against that kind of thing happening to United Cable and, of course, we didn't want that kind of thing to happen at all. We wanted to continue to develop the company, and did. You can speculate that had we not done that arrangement with TCI, somebody might have very likely taken a run at us.
SMITH: That's because you had so much public stock?
SCHNEIDER: Yes. By then, through these issues of additional stock and raising equity for expansion, the board had been diluted down, as I recall it, in the twenty-one to twenty-two percent area. But, combined with TCI's, it put us back over forty percent. It wasn't over fifty, but it was plenty.
SMITH: It was enough to protect you. Did TCI get some sort of a buy-out arrangement with you?
SCHNEIDER: No, at the end of the ten year period, all bets were off. That period would have been '83. But you might have negotiated something else then.
SMITH: It doesn't stand that way today does it, or does it?
SCHNEIDER: Well, see, what happened and this is probably one of our motivations in doing the United Artists Communications and the United Cable Television Corporation merger in May of '89. By combining those two companies and TCI very much wanted this--they already had a sixty-five percent control of United Artists. They had twenty-six percent, by then, of us or something like that. By combining those two companies and their buying a little more stock, they ended up with about fifty-four percent or so of the two combined companies and, really then had control of the entire situation, which is always what TCI wants.
SMITH: That didn't hurt the stockholders of United.
SCHNEIDER: No. The merger, as it turned out, was accepted very well on the marketplace. Actually, the merger was around $38 a share and during that period of '89 and on into '90 when the market started going down on cable in the early part of '90, the merger value had gotten over $50. So it was a very good deal for the stockholders from that viewpoint. Fifty dollars for an equivalent United Cable share. Of course, since then, as we all know, the market during 1990 got hit very, very seriously and today it's below the $38 that it originally started out at.
SMITH: You expect to see that recover, don't you?
SCHNEIDER: I, personally, have great faith in the industry and there has already been quite a bit of recovery and I think, over the next year or two, cable stocks are going to be back where they were and far higher, in my opinion. I think the industry's future is very, very solid.
SMITH: You're now chairman of United Artists Entertainment combined company?
SCHNEIDER: I'm chairman of that combined company, United Artists Entertainment and of course I kept all of my stock that I could through the merger. I'm probably the largest individual stockholder in that company. There are some institutions that are larger, and of course TCI. I might mention that as a part of that, United Cable had started developing overseas activity in the late '80s.
SMITH: United Cable had started that?
SCHNEIDER: Yes, we were really about the first company to get into England and other places overseas. We're moving that along quite well. TCI had a very conservative attitude towards that and so did some of the United Artists people. As a result of the merger, prior to the merger--this was fully disclosed in the merger--they agreed to sell to a new company that I formed called United International Holdings, which is where we're sitting, the overseas properties and investments including the Blockbuster stores here in the United States that we had started--we were the largest franchisee of Blockbuster--to United International subsequent to the merger. So that's how United International got started and that is where we are today.
SMITH: I want to get into United International and this is a good place to do it, but for the sake of the record tell us what the Blockbuster stores are.
SCHNEIDER: Video rental stores. We, in United Cable pre-merger days, had been approached by Wayne Huizenga, the head and chairman of Blockbuster, who had quite a background and he had put together this waste management company which had turned into about a nine billion dollar company. He had gone around and acquired these little ma and pa garbage companies all over the country and combined them under one corporate umbrella, spruced them up and made a nine billion dollar company out of it in a few years. Wayne then got onto this Blockbuster idea. I think this would have been, initially, in about '87. He wanted to get a cable company involved with him in it and we're the ones that did it. With the exception of Wayne, United Cable became the largest stockholder in Blockbuster. TCI did not want to be in the video rental store business again as a result of the merger. So it was agreed we would sell it out to United International subsequent to the merger, which we did. But we have franchise rights to about one hundred twenty-seven stores and about ninety-five or ninety-seven of them are now built and operated. About twenty of them have been built under United Cable, and the balance have been built since we took it out of United Artists.
SMITH: That, then, is a very significant part of your operation?
SCHNEIDER: It is a very substantial company that is owned by United International today. You know that company is grossing eighty-five, ninety million dollars now.
SMITH: Now, was that the company that sponsored the post-season football game at Joe Robby Stadium in Miami?
SCHNEIDER: That's the Blockbuster parent company. The way Blockbuster is structured, they now have probably an area of sixteen hundred stores, about half of which are franchised--which is what we are--and the other half are company owned and operated stores. Wayne bought, outside of Blockbuster, the Joe Robbie Stadium.
SMITH: He bought the stadium?
SCHNEIDER: Do you remember that?
SMITH: I didn't know he bought the stadium.
SCHNEIDER: Yes he did. As a result of that, he got about fifteen percent of the Miami Dolphins and now he is a major applicant for the baseball major league expansion franchise down there. He's hoping to put that in his little stadium. Wayne is a big-time operator.
SMITH: That stadium was designed for football. It wasn't designed for baseball.
SCHNEIDER: I think he figures there is a way to make it for baseball.
SMITH: Gene, I'm most interested, for the record and personally, in the decision to go international. I'd like you to tell us what motivated you to do it and how you franchise overseas. Give me some leads to ask you some more questions about it.
SCHNEIDER: Okay. As the '80s wore on and getting towards the middle and later part, you know the franchising game in this country was coming to an end or had really come to an end. There was still, even in the middle '80s quite a little bit of building out yet to do but the franchises themselves were basically gone. We had always been aggressively seeking expansion of the company and we got interested in what seemed to be happening in Europe. England and some of the other countries were creating and developing cable legislation to create the framework for development of cable and we initially went into England. By the way, that did stay in United Artists as part of the merger but we're the largest franchise holder and operator in England. United Artists is but United Cable started it. As a part of that, through various contacts we got wind of situations in Norway and Sweden and Tel Aviv, Israel. We proceeded on those and invested and acquired local partners. You always want to get local partners. Possibly the only place you don't need that is England.
SMITH: Mr. Schneider was called to the telephone and it is close to quitting time for the day so this interview will be renewed on a future date at Mr. Schneider's convenience.
End of Tape 2, Side B