Interview Date: Thursday June 15, 1990
Interviewer: Kathleen Pavelko
Interview Location: Unknown
Collection: Penn State Collection
Note: Audio Only
PAVELKO: My name is Kathleen Pavelko and today is June 15, 1990. We are conducting this oral history with Mr. William David Arnold for the National Cable Television Center and Museum's Oral History Program.
It might be useful to start with simply some personal details, some family background, if that's all right.
ARNOLD: Ok. I was born on January 9, 1935 in Amarillo, Texas. At that time my mother and father were living in the panhandle, probably seven or eight years. They had both come from Missouri. I don't know if whether at my birth my father was working, I guess he probably was working for Mobil Oil Company, only it was the old Magnolia Petroleum Company at that time. Then they moved very shortly after I was born to Oklahoma City and then from there to Waco and then to Houston and then to Dallas where my mother lives today. My father has been dead seven or eight years now.
PAVELKO: Your parent's names are. . .
ARNOLD: W.H. Arnold ‑ William Harold and Virginia Lee. I have a sister that's six years younger than I am named Linda Lee Arnold. She's married. She's Mrs. Jack Norton and then in terms of myself I'm married to Mary Margaret Miller Arnold, who was a Dallas girl. She was born on June 12, 1935 also. We have two children ‑ a boy, 26, named William Wade Arnold and a daughter, 23, named Ellen Shannon Arnold. The boy's married and has no children. The daughter is getting married August 18th of this year. That's kind of the extent of the family other than my sister. There are no other sisters or brothers, living or dead. My mother had one brother who passed away many years ago. My father had one sister and two brothers. His sister and only one brother are still alive.
PAVELKO: Tell me about the ethnic heritage.
ARNOLD: What little bit I know about it. There was French and German on both my mother and father's side. I don't know, I've never been one to go back and find out so I don't have any idea whether French or German was predominant. My mother's maiden name was Rensch. Then another family name on her side was French. Now that you ask, I don't have any idea what my grandmother's maiden name would have been on my father's side. I'm sure I've heard, I just don't remember. My father's father was dead by the time I was born so I never knew him. I only knew the grandmother on my father's side and I knew the grandmother and grandfather on my mother's side.
PAVELKO: What was your father's work in oil?
ARNOLD: He was general credit manager for Magnolia Petroleum for most of the years that I remember and I suspect had been in the credit department for Magnolia, probably most of the time. Back in those days, I don't think it's true now, credit was a part of the marketing department, so he could have very well been in various aspects of marketing and eventually came to credit. But from the time I had my earliest recollection of what he did for a living, is probably when we lived in Waco and he was the credit manager for Magnolia at that time. At the time he retired about 1964 or 1965, he was general credit manager for Magnolia which at that time Magnolia still operated as a company separate from the Saconey Vacuum or what is known as Mobil Oil today.
PAVELKO: Did you grow up in Dallas?
ARNOLD: No, Houston is home to me. I lived in Amarillo about six months and I lived in Oklahoma City about seven years. Lived in Waco about five years. Then we moved to Houston when I began the sixth grade. I went to junior high and high school in Houston, so Houston has always been home to me because that's where the bulk of my friends that I made, that you make in junior high and high school, live and that's where I lived the longest. So I always think of Houston as being home in that sense. I had never lived in Dallas. My wife had grown up and gone all through school in Dallas and her parents lived here until they retired and moved to the hill country.
PAVELKO: Where did you go on to college?
ARNOLD: I went two years to Baylor and I spent twenty months in the U.S. Navy as an enlistee and I came out of school and I went back to the University of Texas. I went back to the University of Texas simply because when I went in the service there was a G.I. Bill of Rights and during the period of time that I was in the service they had taken the G.I. Bill away and then given everybody Social Security. I already had Social Security so you had to go back to school where it was affordable to go to school and going to a state university was the only place that you could do that.
PAVELKO: Let's back up and talk a bit more in detail. In what year did you go to Baylor?
ARNOLD: Well, I graduated from Lamar High School in Houston in 1953 and I went to Baylor in the fall of '53 for the freshman and sophomore years. I was in the ROTC at that time but I wore glasses then and it was evident that the ROTC would not continue on with me because the unit was an air ROTC unit. So because of eyesight I was not going to be allowed to continue and that meant that when I dropped out I was going to be eligible for the draft. Indeed I did drop out, so I did a little investigating and found out that I had a good chance for my draft number to come up. So knowing that, I kind of accelerated the number because for three months in the fall of 1955 the Navy was short of personnel, so when the Army drafted, they drafted in excess of what their own needs were. So I was fortunate enough; it was just the draw of the cards. I was fortunate enough to be drafted and I ended up being in the Navy and I spent all of the twenty months in San Diego. I went in as a seaman and when I came out twenty months later I was a third class personnel man and I was on an attack troop transport called the USS HENRICO. HENRICO is named after a county in Virginia. I spent all of my tour on the West Coast with the exception of about eight weeks that we spent in Hawaii on maneuvers with the Third Marine Division.
PAVELKO: Were you married at that point?
ARNOLD: No, I didn't get married until June of 1959 after I had come back. When I got out of the Navy, I came back to Texas and went to school and was continuing on for a graduate degree and got married during that period of time. I never finished the graduate degree because I got kind of tired of doing the graduate degree. I had gotten married and was working, and so subsequently never finished it up. My undergraduate degree from the University of Texas was a degree in accounting.
PAVELKO: Did you pursue accounting in part because of your father's work?
ARNOLD: No, I think I probably pursued accounting simply because when I was in high school I didn't have any idea about what I thought I might like to do and I took a battery of aptitude tests which indicated accounting might be of interest.
ARNOLD: Counselors, I suppose maybe. People who would put you through a battery of tests and so forth. So I took that battery of tests as did numerous other folks like that and one of the things that they said was that you would be proficient in some skills and not in others. One of the ones that it appeared that I had some degree of efficiency in and interest would have been in dealing with numbers. I just wanted an education. I thought perhaps that going to the business school was what I wanted to do and you had to have a major and that's how the accounting major came about. I've used it quite a bit in my business life, but I never had any intention of becoming a Certified Public Accountant or pursuing accounting as a profession in the sense of an auditor or accountant or a tax person.
PAVELKO: I heard at some point that one of your early jobs was as a toy salesman.
ARNOLD: Yes, when I was going to school at the University of Texas in graduate school, and had decided that I thought perhaps I needed to be finding more gainful employment and perhaps becoming employed on a full time basis, the fellow who I banked with at the Old Austin National Bank happened to be a director in a small company. It seems that during this period of time that I decided I was going to look more seriously for a full-time job, I had applied for a job at Texas Capital which was a small business investment corporation company. Those were known in those days as SBICs. The fellow I banked with was representing the SBIC on the board of several companies whom they had lent money to. One of the companies was a company in Houston called Gulf Toyhouse Inc. So when I mentioned to him that I was interested in getting a job on a full-time basis and going to work, he indicated to me that there might be a job available in Houston. So I went out and visited with the fellow who was the majority stockholder in the company, a gentleman by the name of Melvin Ward. Indeed, I ended up taking the job.
So in the summer of 1961, I went to Houston and went to work for Gulf Toyhouse and what Gulf Toyhouse did was -- if you know what a rack jobber is -- Gulf Toyhouse was a rack jobber of small bagged toys. It was under a franchise label from a company in St. Paul, Minnesota who bought the bulk of toys that were used, put header labels on and bagged them, and was called World Toyhouse. They had distributors, of which Gulf Toy was one, only the distributors were wholly owned by the people who ran them. The area that they served was Houston, over to Beaumont, Port Arthur, and over as far as Crowley, Louisiana and up I guess into the Lufkin‑Tyler area in East Texas and a little short of Dallas because that was in another distributor's territory.
The average price of the toy was thirty-nine cents and you would buy toys in large quantities. You might buy one hundred forty-four gross of some item such as Slinkys, Hula Hoops, and Silly Putty.
PAVELKO: When you say they're bagged, are they in small bags and then attached to labels of some kind?
ARNOLD: Right. They have a hook, they have a hole that's drilled through the header label and you just attach them much like ladies would probably pick hosiery off of a metal rack where they are hanging on pegs around those racks. Generally the rack was either circular in size or was oblong and flat in size and it would have a rack on the top that held box toys such as AMT models that kids would put together. Yo‑yo's. We used to sell an awful lot of yo‑yo's. The distributorship that I worked for was large and the man who owned it did a lot of buying himself so he would buy a lot of goods from the Orient. He would bring them in and they would already be bagged and we would put our own header labels on the bag.
PAVELKO: What was your job?
ARNOLD: I was the comptroller for him and managed the warehouse and took care of the office and so forth. There were really three people at the time I went down there. There was the owner who was the buyer and the merchandiser. There was a fellow who was the sales manager and then there was the partner who was doing what I was doing. The reason they came looking for somebody like myself was that the other two people had become displeased with the fellow whose place I took. They had bought him out and he had gone on his way, so I picked up managing the warehouse, the bagging operations, being responsible for inventory and in general doing all of the numbers work of any kind that was related to it.
PAVELKO: This was the early '60s. Did you have children of your own at this point surrounded by toys?
ARNOLD: No, I went to work at the toy company in 1961 and in 1963, our son Wade was born in Houston and then we moved back to Austin in late 1964. The same people, Texas Capital Corporation, also had money advanced to a convenience drive‑in chain in Austin and they were having trouble with the folks in terms of financial reporting and inventory control and so forth. So I got asked if I would like to move back to Austin. I went home to tell my wife Mary that we had been given an opportunity to move back to Austin. Her response was, "When do I need to have my bags packed?" because she had never been very happy to leave Austin to begin with to go to Houston.
So we moved back in late '64 and I had a similar kind of job with Town and Country food stores in Austin until about the early part of 1966, at which point in time Texas Capital Corporation had been a lender to Jack Crosby and Fred Lieberman who had been in the cable business for a number of years. At that time they owned West Texas Microwave which was a terrestrial microwave common carrier that began at Aledo, south of Forth Worth and carried broadcast signals out into west Texas. Texas Capital had been a primary lender to them for the construction of that system. It also had become interested in their activities in the cable business. Crosby, the Schneider brothers ‑ Gene and Richard - Tubby Flynn, Dr. Raymond Hedges, Ben Conroy and his father, had kind of come together at the instigation of Jack Crosby to see whether or not they might form one of the first MSOs that came together. There were other MSOs in place at that time. The predecessor to Group W was there, but this was one of the earlier ones that was formed by several people coming together. Texas Capital was instrumental in that because they already had a lending and a financial relationship with Crosby and Lieberman. It so happens at the time that this was getting put together, Bob Hughes who is the president of Prime today, happened to be one of Texas Capital's investment banking officers at that time. That's where he had come to know Jack Crosby and Fred Lieberman.
PAVELKO: What were Crosby and Lieberman's goals in creating GenCoE?
ARNOLD: I would suspect that Crosby, because he is a consummate deal maker, viewed this as being another deal. Lieberman had little or no interest at this time because none of his cable systems were involved in GenCoE initially. The cable systems that were involved were Abilene and Sweetwater, in which Jack had a major interest and Fred had a very minor interest. Then there was Del Rio, which Jack owned himself; Uvalde, which Ben and his father owned; Dr. Hedges and Glenn Flynn owned Tyler and Jacksonville, Texas. The Schneider brothers owned a group of companies called Wentronics, Inc. and that group of companies was comprised of Casper, Wyoming; Moab, Utah; Gallup, New Mexico; Perryton, Texas; and a half interest in Grand Junction, Colorado. I think at that point in time they had a shared interest in the potential franchise for Albuquerque, New Mexico and if I'm not mistaken their partner or their potential partner in that venture would have been Jack Kent Cooke. Wentronics also had a half interest in cable systems on the eastern shore of Maryland. The other partner was Al Carolla. Al Carolla had been in the business a number of years and he and the Schneider brothers had known each other in Wyoming. It's kind of interesting to note, if it hadn't been noted before, that both the Schneider brothers grew up in deep south Texas and went to the University of Texas.
PAVELKO: What is the meaning behind the name GenCoE and its unusual spelling?
ARNOLD: Well, we got ready to get started and everybody, once the deal got done and it looked like they were going to go forward... In fact, I then left Town and Country food store because Texas Capital was going to be the primary subordinate lender to put together this cable company. Chase Manhattan Bank, perhaps Pittsburgh National Bank, I don't recall back that far, was going to be the primary bank lender and Texas Capital was going to be the subordinate lender, I think to the tune of about $2 million. Another one of the lenders at that time was Home Life Insurance Company in New York. So Texas Capital had indicated to the group that indeed they were going to have to have an office from which the various systems were either run or at least financial information and so forth came through some central location.
Texas Capital had insisted, based on prior history of other operations and so forth, that indeed the office needed to be located either in Austin or up in Georgetown where their office was. So, in the early part of 1966, I was asked if I would like to leave the Town and Country food store folks and go to work for what was a non‑existent company at that time. They were very well along in getting the deal put together, but it wasn't finished.
So I left the convenience food store folks and for about three or four months I traveled thirty miles up to Georgetown every day. I occupied a little office up there and began to just work on getting acquainted with the industry and getting acquainted with the people. I was finding out what sort of operations each of them had and what one would need to do to kind of bring them together in a loose manner so that they had some cohesiveness, not in terms of operations, but in terms of financial reporting and creating reporting vehicles and tracks and so forth.
PAVELKO: And GenCoE means?
ARNOLD: During this whole period of time there was a lot of conversation about what GenCoE was. GenCoE turned out to be General Communications and Entertainment Company, Inc. Except that was too long. So I don't remember whose idea it was or how, but General Communications and Entertainment Company, Inc. became GenCoE, Inc. which was an acronym of that name.
PAVELKO: At the point that you were invited to leave Town and Country foods and come over to what was going to be GenCoE, did you know anything about cable television?
ARNOLD: No, I didn't know anything at all. I had heard a little bit about it, but what you would cursorily hear perhaps in the newspaper or something like that, but I knew nothing about it.
PAVELKO: I'd like to know a little bit more about the players in this. Tell me a bit about Jack Crosby.
ARNOLD: Jack Crosby was born and raised in Del Rio, Texas. His father, who is now dead, was a big, huge bull of a man and was very gregarious, a very friendly guy. His mother was a very petite, very quiet lady. His father had played football and baseball at Baylor University. At the time I first met Jack, his father was a Texaco consignee in Del Rio and I think Jack had been born and raised in Del Rio. Jack had gone to the University of Texas and had always been a very active alumnus of U.T. Jack had owned a hardware store in Del Rio. He had owned a bowling alley in Del Rio. The family owns a substantial amount of ranch land down there so he had run cattle and done other things. He had an interest at one time--if not a controlling interest--in the Coca Cola bottling operation in Del Rio. I don't know what had prompted him to get in the cable business, but he had gotten in the cable business as I recall, sometime in the early 1950s. Del Rio was probably built a year or so before the Uvalde system was built.
At that time the signals were taken off air in Del Rio off of a five hundred foot tower because it's one hundred twenty-five air miles to San Antonio where the closest off-air television stations were. Then Jack and Ben got involved because Ben had decided when the Navy put him ashore that he didn't intend to be a shore-bound sailor. He was going to be on board ship or not in the Navy at all. So when the Navy put him ashore, very shortly after that, he retired from the Navy. Ben's father and Milt Shapp of Jerrold days had been friends and Shapp had somehow or another mentioned to his father that there was this new-fangled business that if they were looking for something to do, they ought to do it.
At that time, Jerrold had the franchise for Uvalde, Texas, so Ben and his father apparently came down and looked around and Ben decided that is what he would like to do. He came down and it was Ben and his father, his sister, and his brother who were all shareholders in the system. Only Ben ran the system and moved down there. He and Jack got involved because by then it had become evident that one might transport signals via microwave and have a better picture.
So my recollection of that was that besides being close to each other, about seventy miles apart, they had then developed an interest as to whether or not it might be to both of their advantages to create a microwave company and deliver the signals from San Antonio via microwave, and they ultimately did do that. The company was called Southwest Texas Microwave and Jack built that system. It came out from San Antonio, went to Hondo, down to Uvalde, past Bracketville, over to Del Rio and then in subsequent years it turned north and went up as far north as Sonora and Eldorado.
PAVELKO: Microwave would seem to be well suited to most of Texas as a line-of-sight system.
ARNOLD: Right. You're going to be able to go probably the maximum twenty-five, thirty, maybe a little bit more in miles.
PAVELKO: At what point did you meet Jack and Ben?
ARNOLD: I had met Jack probably in the early part of 1966, because he was in and out of Texas Capital's offices and I had made his acquaintance. I guess maybe in April or May of 1966, kind of preparatory to being brought on full time, I had already been working a while on this and it was then time to, so to speak, introduce me around to some of the other principals to see if they would be amenable to having me employed to do the accounting function. Sometime in the spring of that year, I made a trip to Uvalde and met Ben and visited with him a while and went on to Del Rio and met and sat down and visited with Jack for a while.
Sometime subsequent to that--I don't remember if I went to Casper or whether the Schneiders were in Texas--I met Gene and Richard Schneider. It was not quite of the same importance to meet Flynn and Hedges because Flynn and Hedges were investors in the Tyler and Jacksonville system but they were kind of absentee in the sense that a fellow named John Mankin, Sr. had been managing that system for them from its inception. They were just not that involved in the business and did not intend to be involved going forward with GenCoE other than as passive investors, whereas the Schneider Brothers-- Ben and Jack--intended to be very actively involved in the cable business that was going on.
PAVELKO: The John Mankin, Sr., you just mentioned, is he the same gentleman whom you've succeeded at the Texas Cable TV Association?
ARNOLD: Right. John Mankin, Sr. was a delightful fellow. He's now dead. His widow Chloe is still alive. He was managing the Grapette bottling company in Tyler, when somehow or another--and if I've heard I've forgotten--Dr. Raymond Hedges and Glenn Flynn decided that they ought to build a cable system in Tyler. I believe Tyler claims to be the third system that was built in Texas in early 1953. For whatever reason they came to Johnny, Sr. to ask him whether he would or he wouldn't like to be in the cable business and run that operation for them. He did indeed do that.
In 1959, he, Ben Conroy and two or three other people were instrumental in becoming co‑founders of the Texas Cable TV Association. Flynn and Hedges were very kind to let Johnny manage the limited affairs at that time of the association out of the Tyler cable office. So Johnny became its first and only executive secretary until he retired in 1982, at which point in time I got offered the job and left the operating side of the industry and went to work for the association.
PAVELKO: We will get to that at some point. Let me ask you to cast your mind back to 1966 and you're making a transition from Town and Country to a business whose operation was unfamiliar to you. What were your feelings about entering the business? Did you have a sense of entering a business that was in for an enormous growth spurt? What sort of things were in your mind?
ARNOLD: I don't think you thought about it being a business that was going to grow enormously, it was just a business that was very, very interesting. When you stopped and thought about here was television service and if you had lived as I had for several years in Austin or in Houston there were television stations present, although not that much when I was in junior high and high school. At the time I got to college, there were television stations in most of the major cities and thanks to Lyndon Johnson, there was one in Austin early on. So it was kind of interesting to think about that out here in Del Rio, Texas once you realize that the television didn't follow the curve of the earth that the only way they received television was by virtue of bringing that signal in off of tall towers.
So it was very interesting in that sense because if you think about Texas with large, flat areas of great distance, where there are hills and very rugged countryside, the only way television was going to come was via this particular mechanism at that time. Obviously there are now different ways ‑ MDS and DBS and any number of other ways you might receive it.
At that time it was a very interesting concept and it was kind of like being on the cutting edge of a new industry, maybe not necessarily from a technical standpoint, but on the cutting edge of something that was new and innovative. Being in that business was not unlike what I had done before. Gulf Toyhouse had been something that was a retail type business; I guess you should say not retail but wholesale. It was a wholesale type business in that you sold to the grocery store, but you weren't really so much concerned about the grocery store as your customer, you were concerned about Mr. and Mrs. Shopper as your customer, so you were kind of in the retail business. The same was true with Town and Country food store; you were in the business where you were selling to the general public, though I guess this was not considerably different because indeed you were selling a product to the general public. Many of the things that would have occurred in the grocery operation and in the bag toy operation had some resemblance to the cable operation. You did not have the inventory problems that you had in the other two businesses, but other than that there was not a great deal of dissimilarities in the businesses.
PAVELKO: You touched very briefly on the capitalization of GenCoE and the banks involved in providing the funding necessary to get it off the ground. What were GenCoE's original plans for the use of those funds?
ARNOLD: Part of the monies that were derived from putting together the systems that we mentioned earlier went back to the folks who had contributed to their systems. So it was a way of the initial investors cashing out partially and yet being able to continue to be involved with the entities in the systems they had and to build a bigger complex from which to do business. It may have been some vehicle for estate planning because you held stock in an entity that was more easily disposed of or that you might ultimately take public or would find somebody that would be interested in buying from. I think that back at that period of time probably, Jack, being a deal maker and so forth, perceived that indeed if you could create an entity and it began to get big that you could begin to go out and buy other systems which indeed did happen. Very shortly after GenCoE was finished being put together there were several other purchases that were made.
PAVELKO: You talked about spending the first three or four months getting familiar with the business, getting acquainted with it. How did you do that?
ARNOLD: Oh, I guess after you spent time pouring over the documents and the information already gathered and the vast amount of paperwork that had been gathered for the lenders, Texas Capital, you began to know a little bit about this business. Home Life did not know, I don't think, as much about the business at that time. The Chase Manhattan Bank, if my memory serves me correct, did not know quite that much although they had been a lender in the business. You did reading about understanding what the industry was about at that time, so you could speak the language or talk the lingo and at least understand what was happening. Then I began to spend some time out in the field, after I had made my initial go around and had gotten the blessing of the principals that were going to be involved and they were satisfied with me at that point in time. It had already been pre‑determined that the office was going to be opened up in Austin because Texas Capital had insisted upon that as part of their participation as a lender.
Then after that I spent considerable time out in the field. Maybe a week at a time in different locations becoming acquainted with the people who were at those locations. Just kind of understanding how they did business so that when you went in and attempted to ask them to do things differently or at least to comport to some sort of mode of operation that would allow for reporting and so forth that you didn't impose any more burden on them than was absolutely necessary. Then you made the transition for each one of them which had been essentially an individual operation or in the case in Wentronics, three or four of them.
I spent some time in Del Rio and probably by June of 1966 I had gone to spend, I suspect, a week in Casper, Wyoming. Casper was the headquarters for the Schneider brothers. They both lived in Casper at that time. In fact, Richard still lives in Casper and Gene lives in Denver. But I had gone to Casper to stay a week to kind of see what was going on and if my memory serves me right, I went about the seventh or eighth of June or something like that and I didn't come home until July 4th. It came the end of the first week and we weren't near through and I would call home and tell my wife, "Well I think I'll stay another week and I'll be home at the end of the next week." It just kept on going like that. I made probably two or three trips back to Casper at that point in time because they had already begun to centralize their operations so it was a matter of kind of transferring and changing that reporting structure around. I went to Moab. It was probably several months or approaching a year before I ever went to Gallup and it was probably a year and a half after the operation was put together before I ever went to Perryton, Texas.
PAVELKO: Were there special challenges involved in putting together an MSO that crossed state lines at that early stage?
ARNOLD: No, not really. I don't think there were any business considerations that were unusual for cable at that point in time. The Second Report and Order had been issued in April of 1966 that addressed some of the regulatory aspects that the Federal Communications Commission was attempting to impose on the cable industry. I guess their primary concern could be characterized that they were afraid the cable industry might put the broadcast industry out of business. And so it had been made very clear at that point in time that you could not import distant signals in the major markets or into large cities. I don't think they were called major markets at that time. You were kind of restricted to being a business in the rural areas simply by virtue of what had happened as a result of the Commission's regulations. But I don't recall anything that was unusual in terms of operating across state lines.
The rules and regulations that related to delivery of many of the off-air signals to the rural areas were via common carrier microwave and that was driven by whatever the FCC said to you.
PAVELKO: In those days, how were systems built? How was the financing raised? What were the rate structures like? What was it like to be an operator in the mid 1960s?
ARNOLD: I guess I didn't see any systems built until about 1969, but like in the mid '60s I can remember listening to Ben and Jack and others talk, and generally what happened was that the person who had the idea, had external financing from somebody who understood the business. Probably an example of that is Ben Conroy and his father and Milt Shapp. Jerrold understood the business, wanted to sell the product, didn't mind advancing some money to underwrite that. Benjamin and his father became convinced that it appeared to be a reasonable business deal so they didn't mind putting some of their own money in. Then to some extent the balance of the financing for the system came from the fact that back in those days an installation fee could have been anywhere in the neighborhood of $100‑$150 per home. To have service installed today you think about $5, $10, $15, $20 installation fee that's many times waived as part of a promotion. In those days they didn't do that. Maybe you paid $125 for the installation and the service was $5 a month, so you looked at the installation as being a substantial investment, a substantial payback of the investment that you made to put the plant in place.
In terms of rates, I don't think we saw any rate increases to speak of or I didn't see any from about 1965 or 1966 until maybe 1972 or 1973. The rates were essentially controlled by the cities. The business had continued to grow within the areas and so you were not approaching a point where you were saturated and so you continued to derive greater revenues every year by hooking up additional customers. I guess maybe it wasn't until the early '70s, until people said, well you can kind of see from where we are now to the end of the houses that we can serve and costs are creeping up, bringing additional services. We now begin to need to talk about rate increases. So then you went back and did battles with cities at that time seeking rate increases and those increases were probably in the magnitude of twenty-five and fifty cents. It was not until '70, maybe '71 that you began to go around the cities and seek rate increases.
PAVELKO: At what point did the relationship between installation fee and monthly charges reverse itself to the situation we find now, with smaller waived installation charges and more substantial monthly service fees?
ARNOLD: I imagine by the middle '60s it had begun to do that because I don't ever remember any place where we collected $125. I imagine our installation fees were in the $15‑$25 range.
End of Tape 1, Side A
ARNOLD: ... We're, again, in fairly rural communities. So by the time you got to the mid 1960s, Del Rio was ten years old. Uvalde was more than ten years old. Casper, Perryton, Gallup were all more than ten years old, so you had moved up to a fairly substantial subscriber base. But keep in mind you had done that because you had, probably in most instances, been outside the availability of any off-air television signal of any kind. So as TV had become more widely recognized and had gained popularity and as sets were sold, people had become subscribers.
PAVELKO: The parallels between Pennsylvania and Texas are very interesting as early developers of cable television for in some cases, similar reasons, although dissimilar topography.
ARNOLD: Well, that's right. The topography influenced it, but just as the great distances in Texas from one fairly major urban area that could support a television station in that time to lesser areas made it difficult. By the same token, that was flatland that made that difference. When you got to Pennsylvania you had a very compact state but you had a very mountainous state, very high hills, so signals still didn't move around easily. Or you would find a community around the backside of the hill from where the station was. It was topography that drove the animal, although in one instance it was bumps and the other it was flat.
PAVELKO: At what point did GenCoE get sold to Livingston Oil?
ARNOLD: Probably in 1967, I think. It may have gotten finished up in late '67. Livingston Oil Company, I'm not quite sure how the connection got made or I don't recall, but Livingston Oil Company at that time was based in Tulsa, Oklahoma. Its president was a fellow named Wayne Swearingen and if I'm not mistaken his brother at that time was president of Standard Oil of Ohio or one of the larger major oil companies. The principal stockholder in Livingston at that time was Baron Von Thyssen-Borassema -- he owned control by virtue of owning seven or eight percent of the stock or a very small number. I don't know what had prompted Livingston to do this, other than perhaps they had some cash flow from oil royalties that were not producing earnings and they wanted to get into a little bit flashier business or whatever. Somehow or another Livingston came courting. The principals at that time were primarily Gene, Richard, Ben, and Jack. After much negotiation GenCoE, which had grown by virtue of acquisitions of other systems but I don't remember if at that point in time we had built anything yet. GenCoE had grown and Livingston acquired GenCoE in return for cash and if I'm not mistaken an issuance of preference stock. One of the things that Livingston did was to say that they didn't know anything about the operation of the cable business so it was their intention to leave the operation of the cable facility in Austin. They just wanted to learn and they wanted to grow. It probably wasn't six or eight months until all of a sudden Livingston had decided that really what they needed to do was to move the cable operation to Tulsa.
At that point in time, relationships had already become a little strained between the old GenCoE folks and the LVO folks so I had no intention of moving to Tulsa. What I did was box up the office, took a couple of the girls who worked for me, and we moved everything to Tulsa, Oklahoma. I guess I lived in Tulsa about two months at the hotel. The girls traveled back and forth every other weekend to come home. Livingston had no office for the operation up there so we literally set up shop and assisted them in hiring people to run it. When that was completed we came back home.
When that happened Jack and Ben then suggested to the Livingston folks that they felt that since this arrangement hadn't worked out, and that perhaps Livingston had been somewhat at fault for it not having worked out, that as far as they were concerned they thought that Livingston should sell back to them Del Rio and Uvalde. Now the Schneider brothers were not asked to move to Tulsa or do anything at that juncture. They subsequently did move but the people who had been asked to move were Jack and Ben because Jack was still the deal maker and Ben was in essence the operations manager for the group of companies. So after long and arduous negotiations, Livingston agreed to sell back to Ben and Jack, Del Rio and Uvalde. That was the beginning of Communications Properties, Inc.
The initial shareholders at Communications Properties, Inc. were Jack Crosby, Bob Hughes, Ben Conroy and myself. We bought Del Rio and Uvalde back on a promissory note with the understanding that we were going to put together a very small company and take it public and from the proceeds of the public underwriting we would pay Livingston Oil back. In the meantime the system at Kerrville had come on the market. It was owned by a gentleman named J.D. Brance. He owned seventy percent of it. I've forgotten the name of the man who owned thirty percent of it. He was a real estate man. Mr. Brance had been the retired chairman of Fort Worth Steel Company. Lived in the hill country and had bought the system. In fact, Kerrville may have been the second system built in the state or at least certainly in the top ten of the first ten systems built in the state. Mr. Brance was getting up in age and so we were able to negotiate a contract with Mr. Brance. So Communications Properties, Inc. got started and finally went public in May of 1969 with three systems ‑ Kerrville, Del Rio and Uvalde. At which point in time the Schneider brothers--Gene in particular--became the operating officers for the LVO properties. He moved to Tulsa and lived there a number of years. LVO continued to expand and build properties. Then LVO spun off the cable properties to its shareholders. That became the genesis of the company that was called United Cable Television. United Cable Television today is part of United Artists and that has come about by the recent merger of United Artists, United Cable Television and the Daniels Cable Properties.
PAVELKO: When you joined Crosby, Conroy and Hughes as one of the principals in CPI, was this your first entry in being an equity member?
ARNOLD: Yes, the first time I owned any equity. And the first time that Bob would have owned any equity. Of course, Jack and Ben would have been equity owners by virtue of Uvalde, and Jack by virtue of sole ownership of Del Rio.
PAVELKO: What was your operating role when the changeover from GenCoE to CPI occurred?
ARNOLD: I continued in the same posture I had been before which was kind of the primary numbers person, the internal numbers person. As treasurer of the company I was not responsible for raising external funds or capital accumulation, but was primarily responsible for the internal financial reporting and administration of the company. That continued until about 1974 or '75 at which point in time the CPI group of companies had grown substantially. There were four operating regions and Ben was the Operating VP for all four regions and he also took care of one of those regions directly himself. I had an occasion to move over and take over the region that Ben had been operating as a region by himself.
By that point in time, CPI had bought some of the systems that Jack and Fred had owned. I will refer to them as the "second set" of systems because Jack and Fred had sold the first set of systems to Cox Broadcasting probably in the very early '70s, but they had not sold all of them. The systems that we acquired were Lafayette, Indiana; Williamsport, Pennsylvania; Midland, Texas; and part of Philadelphia, Pennsylvania.
You asked earlier and I didn't answer you about systems being built. I guess the first systems where I was involved in construction were the Abilene and Sweetwater systems which GenCoE had. A funny story comes to mind. There's a person who's been in the business in this part of the world forever. His name is Glenn Scallorn. He was Jack's manager in Del Rio. He still lives in Del Rio and manages the system today. He had been an old coach who had come to work for Crosby and he was going to Abilene probably three days a week to oversee things. There were others of us who were out there a couple of days a week. At that time Glenn smoked big old black cigars. He loved to eat fried chicken. It was always a dire test of your strength to determine who was going to have to spend the night with Glenn in the hotel room that we kept permanently rented because Glenn's idea of a big evening was when work was over was to buy a little beer, order greasy chicken into the room, and he'd sit around in his underwear and watch TV and smoke those cigars. So by the time midnight came, you smelled like greasy chicken and black cigar smoke. It was always a test about who was going to have to stay with Scallorn in that room.
PAVELKO: What's Scallorn doing now?
ARNOLD: Scallorn is the manager, still today, of the Del Rio system and as an added responsibility manages and oversees the Uvalde system. He's owned systems of his own. He had been in Del Rio as a coach. That's where Jack first knew him. He had gone to college at Trinity University in San Antonio. He went up to Eastland, Texas and was a coach in Eastland and apparently Jack was getting to where he was doing bigger and better things and more active and so he got in touch with Glenn and convinced him to come back to Del Rio and become the manager of the Del Rio cable system. Glenn's been back there ever since.
PAVELKO: Still play football?
ARNOLD: No, he doesn't play football. He plays a little bit of golf. He's been around in this industry since probably 1961 or 1962.
PAVELKO: When did CPI get sold to Times Mirror?
ARNOLD: In January of '79, probably, it became final. It had been under negotiation, due diligence trips had been taken probably since summer of '78. But the offer to the shareholders to make the exchange was dated January 5th and had an expiration date of January 29, 1979.
PAVELKO: How did you feel about that process?
ARNOLD: I think I probably felt like we shouldn't have been selling. I guess it's kind of interesting to look back in the early part of '79 when CPI was sold to Times Mirror and the sale price was $17 a share. By the end of that year, United Cable which was one of our predecessor groups was worth in the neighborhood of $30‑$35 a share and it was about comparable to us in size. So I think there were a lot of people who felt like we probably sold out too early in terms of what the value was. That's hindsight and that's always 20‑20, so it's kind of hard to tell. I don't think in the long run that being sold to Times Mirror is certainly not something I was enamored of because I just, as a personal matter, had never been very interested in working for a large company. I certainly was never terribly enamored of being a part of a large company.
PAVELKO: But you made the initial transition?
ARNOLD: Oh yeah, I made the transition and stayed with Times Mirror until 1982 at which time I had begun to look around to find something else to do, because it had become evident to me or at least I thought that Times Mirror would probably be consolidating some more again and changing so there would not be a regional operations center in Austin. I had no interest in moving away from Austin so it meant that either they were going to move it or abolish it all together. Either one of which would have meant some difference so I had begun to give some consideration about what I was going to do at that point in time.
PAVELKO: Let's talk about that decade at Times Mirror and what was happening in the business in those ten years. You had a perspective from a much smaller company, much smaller MSO at that point. You're embarking on a decade's service with a very large firm at a time of a lot of change in the cable industry. What was it like from '72 to '82?
ARNOLD: Keep in mind that you were still CPI in 1972, so when the Third Report and Order came in 1972, and this was kind of a watershed, I suppose, you might say for the industry because all of a sudden, the Commission had somewhat reversed itself. You had activity at the Supreme Court about copyright. You had certain other things that were happening. All of a sudden the Commission was suggesting that maybe the broadcast industry wasn't going to disappear as a result of the cable industry being in business. They had relaxed their rule about the importation of distant signals into major markets. So you began to see a shift in activity. You began to see more activity in areas that were either major markets themselves or part of major markets. For example, we had the franchises in Marshall and Gladewater and we did not build those franchises until after 1972 simply because they were in an area where you could not import a distant signal from Dallas into that market under the existing rules. Once that was changed, we built Marshall and Gladewater and imported signals via microwave from Dallas only going east this time. Interestingly we transported those signals over a microwave system that Glenn Flynn and Dr. Hedges owned called East Texas Microwave. The East Texas Microwave signal interestingly enough came from Dallas to Tyler. It went from Tyler on to Marshall, Gladewater, back up to Texarkana and all the way up to Little Rock, Arkansas.
PAVELKO: An enormous plant.
ARNOLD: And delivered independent television station signals and PBS signals from Dallas out through that area. Back about that time another interesting little anecdote I suppose is that we bought and built Texarkana. CPI did. We found out about Texarkana because there were three little systems north of Abilene and Sweetwater called Anson, Hamlin, and Rotan. And then there were three little systems above that called Stamford, Haskel, and Munday. The Stamford, Haskell, and Munday systems were built and they had been put up for sale. The seller, interestingly enough, was Mesa Petroleum Company and T. Boone Pickens. Jay O'Neil and myself and Glenn Scallorn, and I think there were eight or ten people had decided that we would buy the Stamford, Haskell and Munday systems individually for ourselves. They already had management in place and people to operate them. In the process of negotiating to buy those systems we found out that Mesa Petroleum company had the franchise for Texarkana, Texas and Texarkana, Arkansas and they didn't know what to do with it.
So Ben and I went back, when I came back with that information to us corporately as CPI and said if we've got any interest we might be able to acquire the Texarkana franchise. Then Ben and I went back up and visited with Boone Pickens and subsequently we bought one half of the Texarkana franchise from Mesa with Mesa retaining a half. About a year or so after when we got ready to build Texarkana and Mesa was going to have to come up with their part of the money, they weren't real sure they wanted to do that just as they hadn't been sure they wanted to continue in the business. So we bought the other half of Texarkana from Mesa Petroleum. But the original holder of the Texarkana franchise in an unbuilt stage had been Mesa Petroleum. It's always kind of interesting. I remind my wife from time to time when she has derogatory things perhaps to say about Boone Pickens that Ben and I had met him and visited with him and she never remembers that and she'd never believe that we had ever done that.
PAVELKO: I gather that your wife is an active political figure.
ARNOLD: I'm not sure that I'd describe her as a political figure. I would describe her as a volunteer. She was a Plan II graduate at the University of Texas, which is an honors undergraduate program. She went on and got a masters degree in government from the University of Texas. She spent eight or nine months in London as an occasional student at the London School of Political Science in economics. From the first day we've been married she's always been a volunteer and I guess she describes her job as being able to do volunteer work for the city of Austin. She is generally a very liberal-oriented lady. Very environmentally concerned. She spent, I believe, seven years on the parks board. She spent five years on the planning commission of which four of those years she was chairman of the Commission. She's now in the Water and Waste Water Commission. I guess a couple of feathers in her cap is that the University of Texas owns some land upon which one of the municipal golf courses in town sits. On two different occasions in the last twenty years, she's done battle to keep the university from taking that land away and developing it. I suspect that she would probably consider that to be one of the real feathers in her cap. She's never had any interest in running for political office. I guess that's why I say she's not politically inclined, although doing the kind of volunteer work she does is very politically involved. She has no interest in subsequently holding an elected office.
PAVELKO: Do you share her liberal inclinations?
ARNOLD: No, she and I don't get along very well politically. Probably the very first year that we ever didn't cancel each other's vote out at the presidential ballot box was the year that I got her to agree to vote with me for the guy from Illinois. The reason I got her to do that was he needed a certain number of votes to be able to receive his funds from the federal electoral commission.
ARNOLD: Yes, Anderson. I convinced her that we both needed to vote for Anderson so he'd get his money because we were going to go vote and cancel each other out.
PAVELKO: Has this provided some spice and leavening in the relationship?
ARNOLD: Oh yes. Very much so.
PAVELKO: '79 ‑ '82 then was your time with Times Mirror.
ARNOLD: Right. I should go back a little bit and interrupt you. Probably about 1974, the industry really was beginning to take rate increases very seriously. So at the tail end of my tenure as treasurer, we needed somebody that would go on the road full time doing nothing but rate work for the CPI systems. So a new treasurer was hired for CPI. I spent the next three years, probably, gone ninety percent of the time to all of the systems that we had in the country, doing nothing but rate work. I guess part of the reason why I was reasonably well suited for that was I had a good knowledge of the systems. I had an accounting background so I was able to talk from a financial standpoint, do the preparation and so forth. I guess for the next three years I was gone substantially ninety percent of the time doing nothing but rate work. No point in bringing this history and not looking is there? Don't tell me this is one of the years that we didn't... My God, I bet it was. May have been one of the years that we didn't list all the systems and where they were in the annual report. There's a picture of Fred Lieberman, it's one of the few times that you'd ever see him with a tie on. There were probably 35 or 40 systems around.
One of the groups of systems that had come when we acquired Lieberman and Crosby's second set of systems from the old TeleSystems Corp group had been what's been referred to as the Pioneer Valley Systems in Massachusetts. So there was Amherst, Greenfield, a number of systems up in that area. There was state control in Massachusetts as well as in Connecticut and so for rate matters you appeared before the state agencies to plead cases and do things. In fact, I can think of a little anecdote of sorts.
Jim Stilwell and I of TeleSystems were in Amherst, Massachusetts one evening at a rate hearing and we were cold as hell. It was pretty late in the evening and the hearing had been going on and on. There was also some conversation about subsequent renewal of the franchise. That wasn't happening then, but they were having a conversation about that. The room was pretty warm and everybody in the room was bundled up and the room was beginning to have a real odor of people in it. Stilwell was talking and explaining about two-way transmission. Somewhere towards the end of the evening, some lady that had been pretty vocal that had boots on, got up in front of the audience and said, well, by God, she didn't want two-way transmission because she didn't want anybody watching her undress in her bedroom, and I can remember from the back of the room, came, "And I can't imagine anybody would want to watch her undress."
PAVELKO: Tell me a little bit more about the rate work. In what ways did you assist and advise the system, perhaps moderate their initial goals or attempt for a rate increase?
ARNOLD: You didn't necessarily moderate their initial goals because in those days, if you stop and think about it, not many managers had ever gone and gotten rate increases. So that was about the last thing they ever wanted to do was go and talk to cities about rate increases.
PAVELKO: So this is coming from the corporate...
ARNOLD: This is a top down sort of situation in which you were beginning to say, "We need to do something about increased revenues to cover the costs. No longer is continually putting on more subs going to do it. We now have to do other things." So it was a matter of a corporate decision in which you would sit down with systems and say, you know, this is what the situation looks like to us. You certainly went to the system manager for counseling, guidance and feel about the local situation, and then you sat down and this was one of the things that I spent a lot of time doing. You would then sit down with him and then perhaps play with two or three different varieties of rate increases to see which one might best suit your circumstances. See which one you thought the cities might best be amenable to. Try and determine how much the cities were going to whack on you in terms of regulatory lying and bantering and horse trading to try and determine where you would want to be. You generally then went and put your presentation on. Very, very seldom did you ever get even an affirmative or a negative vote on the first evening. So that meant in many of these communities you might return time and time again before you ever succeeded in getting that particular rate proposal acted upon.
We owned Springfield, Illinois at that time. Springfield was a difficult town from a political standpoint because Springfield's local government comprised five commissioners and they were five commissioners based on the form of government that occurred after the flood in Galveston in 1906. In order to cope with the flood in 1906 which killed 10,000 or 12,000 people, the city switched to a commissioner form of government so that there was somebody in charge of the police department, somebody in charge of the water, somebody in charge of administration, so on and so forth. For some reason, Springfield had adopted that form of government, subsequent to that. So you were up there dealing with each of five departments who came together as a council, but it was really difficult because it wasn't a council from the standpoint of it being an administration who came forward and made some proposal to the council. You went around and pleaded your case to each one of them. I imagine on the first rate increase in Springfield, I probably made eight or ten trips to that community before we finally got it done.
I used to go up into the New England area and I might stay three or four weeks up there. I'd go up on Monday and I'd come back to Washington, D.C. on a Friday, rather than come all the way home because I just had to be back on Monday again. I found a hotel that had a washing machine and a dryer where you wash your underwear and your socks. I would spend the weekend running around in Washington and then go back up into the Hartford Pioneer Valley and other systems.
It was in Greenfield, Massachusetts one evening where we were in a rate hearing, that may have been the second time I had been there. We were pleading the case and talking about the numbers and so forth. Some fellow in the back of the room stood up and said, "It doesn't make any difference what those numbers say. You can't trust that son‑of‑a‑bitch because he talks funny."
PAVELKO: Wasn't listening to himself, was he?
ARNOLD: I guess not. We all got a big chuckle out of that. You really ran into some unusual situations and you ran into council people who had absolutely no understanding of financial matters of any kind. You ran into some councils who were very bright and understood financial matters very well.
PAVELKO: It must have been a difficult time in terms of your personal life.
ARNOLD: Oh no. I was very lucky in that regard. Mary is an only child. Her father was an engineer. For a large part of his life, he worked for a company that built power plants and bridges and so for a large part of her life when she was young and growing up, her father might very well have been away from home, ten, twelve, fifteen days at a time on job sites in his capacity as the engineer for the company. So she was always very good about that. This was not something that was foreign to her and it was not unusual in her scheme of things for people to be gone. She's very resourceful so she got along fine by herself and it was not a problem. Which was very fortunate because there are marital relationships in which if you were gone three or four weeks at a time, they wouldn't last very long.
PAVELKO: Let's talk a bit about your very first relationships with Texas Cable TV Association. I'm not talking about as president, but early on.
ARNOLD: I had kind of left the numbers side and was doing rate work and had hoped to come to the operation side and did indeed get the operations part of the business as mentioned earlier. When that happened there was more of a reason for me to be a little more involved in association matters. You began to go to the trade shows and do things. Ben had always been a very big supporter of the association. I began to get involved in association work doing things as a director and on the various committees and myself and another fellow, named Jake Landrum who's been in the business for absolutely ever, began to give John Mankin, Sr. a little bit of help with the trade show because even by then, John was getting a little up in years. Didn't travel as well anymore. Had a little bit of problem with glaucoma and so forth. So we began to do more of the leg work and things that needed to be done away from Tyler.
I guess I had become fairly active in the association by 1975 or 1976.
PAVELKO: In which official capacities did you serve?
ARNOLD: I was a director on two different occasions for a couple of years and I was an officer one year. Then for a while Jake was associated with our company and if I'm not mistaken, the year that Jake became associated with our company he was an officer and I was a director. The association didn't provide for there being two people from one company so I dropped out as a director so that Jake could continue on, although I continued to be involved with the trade show and doing other things.
I guess that harkens back to another set of circumstances when the office was in Tyler. Whenever there was a matter of a legislative need or the occasion for somebody to perhaps go listen to a committee hearing or do a little work of a political or legislative nature and thank goodness we never had a lot in those days, because there were Ben and I in Austin, Jay O'Neil was in Austin, Jake Landrum was in Austin, all with different companies at that time. We generally then would get a call from Johnny saying, "Dick Craig (association counsel) says that something's up and you may need to testify or somebody that understands what it is needs to go and sit and listen."
By 1977 the NCTA had brought their trade show to Dallas several times causing a conflict with ourselves. We had initially met in April all the time and NCTA moved to April and we moved from April back to February. Of course, the weather was kind of miserable. There was one year during the trade show that a horrible ice storm hit Dallas. There was room for fifty-five, ten foot by ten foot booths in that building. All of the rolling stock was displayed out in the parking area, they'd rope off the parking area. That particular year we were meeting on Wednesday through Friday if I'm not mistaken. In any event, the ice storm came the evening before the show opened. And no one ever got out to look at any of the rolling equipment because it had become literally frozen to the ground. The show was over on Friday and some of those folks didn't go home until the following Tuesday or Wednesday and that was because it took that long for the ground to thaw so that ditch witches and other pieces of equipment like that could be moved off. We then decided that between the weather and the NCTA coming to Dallas that we ought to look for another place to go. You have to keep in mind HBO had gone on the air in 1976 with their pay service and so people were saying there's a reason now why you can move into the metropolitan areas because you have pay programming. So there was quite a growth in equipment, programming services and we were beginning to end each of the show years with ten, fifteen, twenty people who wanted space and we couldn't give it to them. So Jake and I looked around and we ended up moving the show to San Antonio and the first year was in 1979. So we finished up in Dallas at the Marriott in '78 and had a show in San Antonio in '79 and the show's been down there ever since.
As we did that, Jake and I became more and more active in tending to the show because Johnny, Sr.'s health was beginning to deteriorate by then. He was beginning to have a little trouble with cancer of the colon and his eyesight was getting worse. He loved to continue to do the phone work and he'd take the orders and do those things you can do sitting in the office. But he was not able to do the things that were necessary to do away from the office.
End of Tape 1, Side B
PAVELKO: Let's see. We were talking about your role with NCTA and you said that although you had not been a director you served on one of their committees?
ARNOLD: I served on an accounting committee for a couple of years and then again I had involvement with those folks in the sense that often NCTA comes to state associations to ask for grassroots lobbying help and so forth. By the time the mid '70s came around, Johnny was unable to travel and do those things. And because Benjamin and the folks were not opposed, then I, along with others who were willing to do that, were beginning to be involved by virtue of making grassroots trips and doing other things from a lobbying standpoint. Having had knowledge of and some working relationship although not direct with a number of folks from NCTA. . .gosh, if I could think of the names. This doesn't go back a long ways but Bob Wheeler, Robert Schmidt who were past paid presidents of the association are people who I knew well. A couple of the general counsels for the association were people I knew well, Wally Briscoe, who Benjamin may have mentioned. He was a fairly close friend whom I had met by virtue of being involved in NCTA. I guess I first met Strat Smith simply because he and Ben were friends but he was involved with doing things with NCTA from time to time and represented the association as counsel.
PAVELKO: Let's talk about the transition then to Texas Cable TV Association. You had been working to assist Mankin in those roles that he was not able to fulfill. When did you make the official move?
ARNOLD: I was president of the association in 1981. And in late '80, Johnny had indicated to the membership, to the board that he felt like he needed to retire and what he'd like to do is finish up the year '81, health permitting, and then he'd retire at the end of that period of time. It had always been said that whenever Johnny retired, they would move the association office to Austin where it made more sense for it to be. But they wouldn't do it as long as Johnny wanted to run the association.
PAVELKO: It was where at that point in time?
ARNOLD: Tyler. We sat down and did a little calculating and figured that we needed to have a full-time person; Johnny had continued to be part-time. We needed to have an office. Perhaps we needed to have a little more presence than we'd had as political matters were heating up and just in an attempt to provide more services or at least ones the membership might want. So we put together an estimate of what a budget would look like for a year with a full-time person on. It became very obvious very quickly that we weren't going to do it on a half a cent a subscriber a month and so we then decided we needed to advise the membership that indeed the dues would have to increase to a penny a subscriber a month, but it wouldn't be until January 1, of '82 before that happened, so that they'd know ahead of time.
So then we got about the business of actively looking for someone to fill that position. I talked to two or three people. I'm sure others talked to people about it. I guess maybe at the board meeting in May or June of '81 I was asked whether or not I would consider taking that job. I said, "Yes, I would consider taking that job," because by then I had determined that indeed Times Mirror was not going to be much longer in the Austin area by virtue of moving the office or just discontinuing the office. Either one of which were not going to be satisfactory as far as my own personal circumstance was concerned. Yes, I'd be very interested in taking the job, but that I thought they ought to think about that a little bit. I wanted them to be sure that they weren't just looking for an easy out so that the job was filled.
August or September came and I told him yes I'd be interested in doing it and so the board said that's what they wanted to do. So I then told the Times Mirror people that I was going to leave and I'd like to leave at the end of the year because I was still doing some rate work for them. Plus, part of the remuneration that regional managers, which was what I was at that time, Times Mirror had a bonus arrangement and I wanted to see through to the end of the year so that I could get the bonus. They were kind enough to say that would be just fine. I worked through to the end of December 1981 and went to work for the association in 1982. Johnny continued through the trade show of that year and then literally quit going to the office or doing anything by April as his health was rapidly deteriorating and he passed away in May of '84.
PAVELKO: When you came on board in 1982 it was as executive secretary?
PAVELKO: Can you tell me a little bit about the structure of the association?
ARNOLD: The association--and this is probably true for all of them in the country--has as members the systems, not individuals. Then you have associate members and the associate members are people who provide goods and services to the industry. I think that's true for every association in the country. So you have system membership and associate membership. There are some systems who may indeed have membership with respect to extraordinary membership or recognition of somebody who has provided a service to the industry. Association has a board of directors and in our particular case there are two associate members on the board and nine elected directors and then those eleven elected directors, nine plus two, they then select three officers and those officers, by virtue of being selected officers, become directors of the association. There is a chairman, a vice‑chairman, a secretary‑treasurer, nine system member directors, and two associate member directors.
PAVELKO: What about the staff structure at Texas Cable TV?
ARNOLD: There's myself, a lady named Miriam Morgan who has worked with Ben and I off and on since 1968 or '69. Another young lady named Darleen Koenig who came to work for, I guess, GenCoE, in about 1970 or 1971. Then we have recently taken on, on a contract basis, a lady who's assisting the association and doing public affairs work and other things. We're kind of experimenting to see if there's a place where the association can provide some public relations assistance to the membership.
PAVELKO: If I can go back and ask you to recount for me, the founding of this association. I know that was before your involvement.
ARNOLD: I am told and having read that in late '57 or '58, and maybe before then, there had been a period of time when apparently the Texas Association of Broadcasters had indicated some interest in having the cable folks become some type of classification of membership. As I think Benjamin says, "We got invited and uninvited on two occasions." In any event, by '57‑'58, there was enough interested people like Ben, Jack Crosby, John Campbell, Hershel Tyler, and the Threadgill family, that they felt like they ought to have an association. So they had an initial meeting at a hotel in Mineral Wells. They met there and they formed and then they had the subsequent meeting, an organizational meeting perhaps, in Dallas and that would have been in early 1959. Johnny Mankin Sr. was the first executive secretary. Benjamin was the first president of the association for two years running.
Then they began to solicit members from around the state. It grew over a period of time as people became aware that membership was available. There has fortunately never been a tremendous amount of activity at the State House that galvanizes people to come together to protect themselves. There has always been a very few people who have kept an eye on what was happening and managed to keep everybody's chestnuts out of the fire or tend the matters in that sense. Perhaps the association might have formed earlier had cable been the focal point of a lot of statutory activity. Today the association represents somewhere between eighty-five and ninety percent of the subscriber base in the state. There's one fairly large group of systems that are not members and then there are probably fifty to one hundred very small entities that aren't members, who may not know we exist or just presume it really isn't worth their while to belong.
PAVELKO: How many system members now?
ARNOLD: Kind of depends upon how you talk about it. There are, to give you an example, over eleven hundred incorporated communities in the state of Texas. Probably eight hundred plus of those communities have cable facilities in them. There are a number of cable facilities in unincorporated areas. In terms of physical cable systems, there are probably somewhere in the plus or minus six hundred physical systems. That's because like in Austin where I live there's one physical system, but there are ten or eleven incorporated communities which that system serves. When you boil that down further and talk about ownership entities, there's probably in the neighborhood of two hundred ownership entities.
PAVELKO: I knew it wasn't a simple question.
ARNOLD: About two hundred fifty associate members also.
PAVELKO: How would you list and rank the main activities of the association?
ARNOLD: I don't know whether you could rank them. I guess you could put them out and, depending upon who looked at them, you could rank them. I suppose at the top is the group putting on the trade show, simply because the trade show has been around now for thirty years. And so it has a history of its own. It's been a fairly well recognized trade show for a state and regional show. When the show moved from Dallas to Austin it became a profitable operation on a continuing basis. It had not been profitable in the past or very marginally profitable, simply because there's not much you could do with fifty-five ten by ten booths and the industry was not that large. When we moved to San Antonio, the show grew very quickly from fifty-five booths to probably one hundred eighty or one hundred ninety and the following year, oh, two hundred fifty or two hundred seventy-five and then got as high as four hundred ten booths one year. Now it's settled out to where it's about three hundred fifty - three hundred seventy-five ten by tens and one hundred seventy or one hundred eighty exhibitors. We spent a lot of time working on the show.
PAVELKO: What is it officially called?
ARNOLD: We call it the Texas Show. I don't know that you could say it had an official name. It had always been referred to kind of as the Texas Show and I guess in the early '80s we kept referring to... We talk about the association sponsors it. We now refer to it as the Texas Show with the last two digits of the year in which it's occurring. The one that's upcoming is Texas Show '91.
PAVELKO: And it is held in what month?
ARNOLD: February. In San Antonio.
PAVELKO: Give me some idea of the scale of the association ‑ annual operating budget, revenues in and out, something like that.
ARNOLD: The annual revenue including the net show revenues, dues, interest income are probably in the magnitude of $500,000 ‑ $700,000 a year. And we generally use up most of that money. From year to year we may have a small excess depending upon how well the show did.
I guess another thing we attempt to do is we attempt to do is to be as active as possible in causing members to make lobby trips to Washington and try to be present in Austin. We generally try to pay for a large part if not all of those trips so that you're only asking that person to give of his time because you're assuming that they're really making the trip on behalf of the industry. They're not making the trip necessarily just to lobby on a matter that only relates to their system. So that's one of the ways you can help. The large expanse of the state makes it kind of difficult to do some of those things. You also serve as a clearinghouse for ideas and information.
Another one of the things we're proud of is we've been active in pole rate negotiations for many, many years and that precedes my having been there. I was active before because I was active on the system side. We've established negotiations with Bell, Texas Utilities and others where we've been able to at least hammer out an understanding about how the pole rate calculations are done. In some instances we have been able to negotiate on behalf of the industry.
PAVELKO: On the lobbying side, are there some special challenges involved when you're lobbying a biennial legislature?
ARNOLD: I don't think there are any unusual challenges. In our case if I were over there on my own and only representing the association it would be pretty difficult, in my opinion, because if you don't have an issue or you're not opposing a piece of legislation and if you aren't sponsoring a piece of legislation then it's pretty hard to drop around all the time because if you haven't got something you want stopped or something you want done, they really don't want you over there bothering them. You may be a nice guy and you may spend a lot of money entertaining them, but if there isn't some reason for you to be around, it's pretty difficult.
I guess that's one of the more difficult aspects of a biennial situation is that it comes and goes and you don't even have the opportunity to just have casually been around in the off years.
If there are not things going on in the off year that affect you or if you don't have a big interest in items that directly affect you, then it doesn't make much sense to be over there and be seen because people wonder why you're there.
PAVELKO: When is the next session scheduled?
ARNOLD: The next regular session starts in January of '91.
PAVELKO: They'll meet consecutively for one hundred twenty days.
ARNOLD: Yes, I think it's a little more than one hundred twenty days. It's from the second Wednesday in January to the last day of the month of May.
PAVELKO: Then committees continue to meet after this...
ARNOLD: Committees meet in the interim and they do study work and this year, for example, they had six special sessions. That's been because they could not agree on reform for workman's compensation insurance and they could not agree on reform to meet the court order mandated change in school financing. That's not to say that they won't meet again in special session over other matters later on.
PAVELKO: Special sessions are called only when there's a topic to be addressed or can they be general special sessions?
ARNOLD: No, they are not general. Special sessions are called and the governor outlines what the call is and outlines what the topics are to be discussed.
PAVELKO: You mentioned that one of your roles is to encourage and to fund the grassroots lobbying efforts of your members both in Austin and in Washington. I've read that you consider that an important activity for cable operators to engage in. Tell me a little bit about why you think it's important and why you sometimes perhaps have difficulty making the case for that to be done.
ARNOLD: Well, I think as the industry has changed you've seen changes in the operators. So if you would use Ben as an example, if you harken back to when Ben was in Uvalde as an owner and an operator and equity person he got to know people in the community. He became acquainted and you certainly went to some trouble to become acquainted with legislators from the state and perhaps even from the national level. As cable systems have changed hands over the years and larger companies have grown out of those, you've seen those people who had the political contacts move on and you have not found new managers that come in being encouraged to have those political contacts. Or they may indeed be encouraged to have those political contacts, but those contacts don't happen overnight. It may take four or five or six years unless you happen to be the guy's next door neighbor for you to develop a close relationship with a legislator, particularly at the state level.
So what has happened is that some of the close contact that you've had from a legislative standpoint has begun to slip away as ownership has changed because as new people come in they may anticipate only staying two or three years before they move on or are promoted away or do other things. One case that comes to mind is a fellow named Tom Creighton. Creighton had been in the cable business early on with John Campbell and Bob Magness. And he then was a state representative and state senator so when he didn't seek re-election, you lost a contact. As cable operators sold and moved on, you found that you had less and less direct contact through operators with either state legislators or national legislators. So I guess it's important that operators try and make those acquaintances. Obviously one way to do that is by causing them to lobby. Another way is causing them to make the effort if they live in the elected officials' hometown to at least get to know him so that perhaps when you call they might know who they are or might at least return the phone call.
That's become more difficult to do as corporate people so often these days say don't worry about politics, we'll take care of politics at other than the city level. State politics are just there in the middle. They don't even think about who ought to be doing that. That's one reason why state associations feel like that's a void or a place they need to fill. System managers probably are not paying much attention, worrying about what's happening in Austin. So it becomes the role of the association to at least worry about what happens in the state.
Of course, constituent contact is through the membership in the state, not necessarily through corporate. But those guys (the elected officials) still feel good when beautiful, young ladies like yourself come to call on them as constituents and tell them what they think needs to be done for them.
PAVELKO: Does the association play a professional development role for its members or perhaps for some of its members?
ARNOLD: Not in the direct sense. I think part of that reason is the sheer geography of the state makes it very difficult to do things. We can't prove this, but I think we have concluded that it's pretty difficult to hold a meeting and get everybody to come to that meeting because of the sheer size of the state. If you were to do professional development sort of things, you'd have to hold a dog and pony show and do it in four or five areas of the state and have somebody to manage and tend to it. We, not unlike other states, try and support the various professional organizations as much as we can, both financially and through good words and deeds and efforts. SCTE, CTAM, CAB, any of those. CAB's probably not, but CTAM, and SCTE are professional organizations where an individual joins and belongs. So to the extent that you can assist either through your good offices or through financial, you try and do things that would assist them.
SCTE has, the last couple of years, had a two or three-day training session in Texas. We try and help them get the word out and we'll hold a little happy hour cocktail sort of thing in the evening. We would do the same sort of thing with CTAM.
PAVELKO: It might also include duplicating corporate professional developments as well.
ARNOLD: Yes, that's a very big problem. I didn't even think to mention that. It also becomes very hard to do because you never can tell whether you are duplicating corporate and therefore you're being totally ineffective. Or whether you are not conducting and or doing something that corporate doesn't presume that there's very much need for so therefore there is not much encouragement given to the system. So it fails and falls under its own weight, because there is not enough interest generated.
PAVELKO: What is your assessment of the image of cable television with the general public in 1990?
ARNOLD: Oh, I think the general public has an image of cable that's not too terribly bad. Notwithstanding that cable's image, per se, is probably tarnished somewhat, but I think I would hasten to add that that may be more perception than reality. We've become a large industry. We've become very successful. As much as I think one would say you may use the telephone a few minutes every day. You use the television a few hours every day, so when the television isn't working, in your mind, it's a bigger problem than if the phone isn't working because of your perception of what you're using. That would not be necessarily true if you were talking about a person who was running a business and office. If the phone wasn't working, he's upset and he really doesn't care whether or not the TV works. But in terms of the people whom we appeal to with our service the general residential person, when the television isn't working it's a problem ‑ or they think they have a problem. So it becomes perception somewhat.
I think the public thinks that the services are good. I think there is some bitching about price, but there's always bitching about price. There are, obviously as I referred to, renegades--or bad apples--or people who have taken advantage of the situation in our industry and who are charging prices in excess of those that they would be reasonably accountable for. But I don't think, by and large, that's a large part of the industry. I guess I think the industry has not done a very good job of telling its story. Had we done a better job of telling our story and moving forward we might not be having quite as many problems as we're having today, but again that's kind of hindsight so that's real easy to make that observation.
PAVELKO: If you were asked, or if you feel it important to offer advice, what do you tell cable operators about telling the story?
ARNOLD: Well, we don't get asked very often but when we get a chance to tell them I think what we try and say to them is that if you're doing good things, you need to tell somebody because most of the time other people are not going to tell folks about good things you are doing. If you're doing unusual things, you need to tell people that you're doing unusual things so that people become aware. I guess an example of this--and it doesn't relate to Texas--is a story I heard in Seattle about a year ago. There are two systems in Seattle ‑ one in the north and one in the south, if my memory serves me right. One of those two systems each of their customer service operators has the names of four or five or more shut‑ins who are their personal responsibility. If not daily, at least every other day or third day, they call that shut‑in to find out how they're doing to see if everything is all right, to be some contact with the outer world. Apparently that's very much appreciated by shut‑ins. But nobody knows this is being done.
You have to tell the story over and over. It takes a while for those sorts of good deeds to be recognized and so you can't go and do one good deed and think that ought to last me for the whole year. I think there are a lot of operators involved in their communities, but they don't get around to telling the story very well. That may be because they don't have a press person on staff. Maybe corporate isn't doing a very good job of assisting them in whatever matter is necessary to get that story out. There may be any number of reasons. I don't think we've told the story very well. I think if indeed you thought people were really unhappy with you, price is serious. But if price were an absolute fall down then I think you would find people beginning to voice their displeasure by not taking the service. Yet cable is continuing to increase its penetration in the homes every year.
PAVELKO: What's cable penetration in Texas now?
ARNOLD: Probably between sixty and sixty-five percent. Probably not very much different from the national norm. Fifteen years ago it would have been much longer but because there were only rural systems that were fairly well penetrated. You had not built the major cities, but now all the major cities in Texas have been built and so indeed you would probably see a situation in Texas that is not unlike the norm for the nation.
PAVELKO: I think the national penetration is either fifty-four or fifty-five percent.
ARNOLD: Yes, and it kind of depends on whether you are talking about TV households or homes passed, but both of those numbers are not very far apart in that sense.
PAVELKO: You mentioned the association's role in negotiating statewide agreements and also simply to play a good office's role in negotiations with both the power company and with Southwestern Bell. Tell me a little bit more about those activities.
ARNOLD: Well, those activities, I guess, from the association's standpoint got started in the late '70s after the pole attachment act was passed and various companies began to do battle with utility companies over the rates that were being charged. At that time CPI brought suit against General Telephone in Del Rio and in Texarkana. I think the first complaint at the Commission was brought against by CPI, we were also responsible for the first complaint that was brought against the Southwestern Electric Power Company. There had already been a complaint brought against Bell by the Amarillo system and the Beaumont, Port Arthur, and Galveston systems. There had been a ruling handed down that was only applicable to the complainer. So if you were not a complainer you didn't get the benefit of the ruling.
Over the years, we (the Texarkana system) has been a party to two or three complaints against SWEPCO and we were a party to at least two complaints against General Telephone. I and a couple of others went to Bell in probably 1978 or 1979 and said to them we were going to use our good offices to cause as many association members as possible to file a complaint so that as many people as possible would get the benefit of the rate reduction.
After a rather trying period we finally ran into somebody who was willing to sit down and visit with us and so we were able to facilitate the first instance where Southwestern Bell offered a sale to all pole attachments that was uniform throughout Texas and was one that the association could come forward and say we have negotiated with them and while we cannot bind you, the number that they are offering you is fair, reasonable, and is the best we can do. We've been able to continue to do that. Of course this was always within the context of the guidelines of the pole attachment formula but there's always room for argument in there. That's where you are able to facilitate and to determine whether they were or they weren't doing, or whether you had some question about the manner in which they calculated. That has continued forward all these years with Bell although they aren't really happy about that. And then the last couple of years, we have helped in the sense that Bell, in producing and putting out the first go around of numbers has, unfortunately, made mistakes in both of those years that we were able to draw to their attention in both instances and they resulted in lower rates for operators in Texas.
PAVELKO: Do you have a sense that that kind of activity on behalf of the membership is appreciated that they look to the association?
ARNOLD: This is probably a terrible thing to say but I think no, it's not appreciated. They probably don't even stop to think about it. I rather doubt it. Surely, there are some who do but those would be people who would be interested in the association as an operating entity and who pay some attention. The others probably wouldn't even think about whether we had or hadn't been involved. That's probably kind of a good case of telling the operator that if he doesn't tell his story good enough that's probably a case of where we don't get out often enough and remind the members that we were instrumental in perhaps saving some money for them or doing some things that they benefitted from.
PAVELKO: Fair enough. I have a few more small questions, but let me ask you what some of the areas are that we haven't covered that you would like to address.
ARNOLD: These are just little anecdotal stories that I had to tell that I had thought of so I don't know where they fit in all of this in terms of being in any sort of order.
PAVELKO: I have found that when you ask somebody to be anecdotal, they go completely cold on you, so I've chosen not to do that. On the other hand I was told that I would have no trouble in getting you to be anecdotal so if there's something you haven't gotten around to, go ahead.
ARNOLD: Tower Antennas had been acquired by a savings and loan in Cleveland called Citizens Savings and Loan. Citizens then apparently after a couple of years was either looking to enlarge their base or to do something with it. So CPI acquired Tower Antennas from Citizens Savings and Loan except it ended up being a reverse acquisition because what happened when you were all done, Citizens Savings and Loan ended up having a majority ownership in the CPI group at that time. That continued on for a while until the Citizens Savings and Loan people got in serious financial shape. In order to solve their problem, Fred Lieberman and Jack, to some extent, bought most of the stock that they had. So Fred became a major shareholder in CPI, by virtue of buying the CPA stock held by Citizens.
End of Tape 2, Side A
ARNOLD: Claude Stevanus continued to be responsible for those systems, and I think one of the interesting things is that you make some marvelous friendships in this business, or at least I have, and those friendships have continued through the years. Two years ago we kind of had a reunion, like a bunch of young schoolgirls and Ben Conroy and myself met Claude Stevanus and Paul Snyder and Jim Stilwell and Al Bloom in St. Louis and spent the weekend just running around and giggling and laughing and having the best time and telling old stories about each other and bringing each other up to date about all the things that happened. You hasten back and think about those and there have been some really beautiful friendships and good old friends that were made. Claude was one of them.
Another one of the stories that we tell about Coshocton is that Coshocton not being very big didn't have lots of places to eat. Claude Stevanus always used to say that they had the very best stuffed mangoes at the YWCA. The YWCA was a couple blocks in back of the office. At noontime every week, older ladies in town cook lunch at the YWCA and that's where people came to eat for a dollar or two a plate. Claude always talked about, "My God, the Y had marvelous stuffed mangoes." I used to say to him, "Claude, I don't understand." He'd say, "Oh yeah, they're stuffed with hamburger meat and spices and things." I'd say, "Claude, not mangoes. Mangoes are fruit." Claude assured me that mangoes were not fruit and so we went over one day and sure enough on the day they had stuffed mangoes. What Claude knew as a mango was a stuffed green bell pepper. Claude is about twenty years older than I am and all his life, Claude had known a green bell pepper had always been called a stuffed mango. So to have a little fun with him we got some canned mangoes out of the Texas valley and sent them to him. So there was always a big laugh whenever Claude talked about having stuffed mangoes. He'd eaten stuffed mangoes all his life and it had been a green bell pepper that had been stuffed and baked, but to him that was a mango.
PAVELKO: What kind of ethnic background is Stevanus, I wonder?
ARNOLD: That's interesting. I guess I never thought about that.
PAVELKO: I'm trying to figure out why he wouldn't know a stuffed pepper when he saw one, if he's eastern European.
ARNOLD: He wasn't the only one. That is what it said on the blackboard, "Stuffed Mangoes". You came in, they had fried chicken, and black‑eyed peas or meatloaf or whatever. There it was written in longhand, "Stuffed Mangoes". Then there was the time that we were in Coshocton and I guess Ben was there and I was there and Paul was there. There must have been about fifteen or twenty of us. We were eating in one of the two places downtown. It was a pretty nice day and we were kind of sitting in the back room and we said to the lady waiting the table, could we look at the wine list. She said she didn't understand what we were talking about and we said could we look at the wine list to see what kind of wine they had. She said, "Yeah, just a minute." She guessed so, so the minute she came back, she had the little small pads like you see diners use. They're about as big as a notepad that you take the order on. She had written down on that pad sheet that they had "Mogen-David" wine, and one other kind of sweet wine. And she said, "Here's the wine list." So we always laughed about that. Laughing at it, I said, "Could I get up and go back and look?" She said, "Yeah, I'll take you over there." She was pretty exasperated with us by then. So we went over and there was a bunch of wine laying behind the bar and there was Mogen-David and two or three other like Thunderbird or Mad Dog 20‑20, or something standing up, obviously wine that was selling. There was some wine laying over that was kind of dusty and dirty and lo and behold it was about a half dozen bottles of a very nice Bordeaux wine, but they didn't know what it was, so they didn't bother to sell it to anybody. We drank it all that night.
PAVELKO: They probably figured it was old and out of date.
ARNOLD: I think you're right. In fact, your saying that makes me think I believe the lady said to us, something about you don't want to drink that wine because it's pretty old. I think that's right. I had forgotten that. You don't want to drink that wine, Sonny, that's the way she was referring to us, you don't want to drink that wine, Sonny, because it's pretty old.
PAVELKO: My husband and I are lovers of wine and we've had several similar experiences from places around the country.
ARNOLD: It's just wild, isn't it. Then another place, Claude lived up in Sugar Creek and the Amish make marvelous Swiss Cheese. He often would bring to Coshocton when we would leave to go home, a wheel or a half a wheel of cheese and we would bring it home on the plane. I remember that was back when they were first maybe beginning to do some airport inspection. I used to carry a half a wheel of cheese home in a box. They'd ask you what was in the box because it was heavy and I used to always tell them I was carrying home a sewing machine.
PAVELKO: And they didn't look.
ARNOLD: They didn't look. It was heavy and you'd just say it was a sewing machine in there. Usually it was a box from the hardware store that Claude had brought it in. On a couple of occasions, you'd go up to Claude's house for supper and you'd go by the little wine place and see the big heads of cheese floating around and the Brie and sampling and tasting. It's just the best cheese in the world. Absolutely the best cheese in the world.
PAVELKO: You learned a lot about the country because of the kind of travelling you've done?
ARNOLD: A little bit about limited places. One of the things about the travelling was that I've enjoyed Washington considerably when I used to go up to the New England states and didn't come home on the weekends, because it didn't make sense. I'd come back on Friday night and spend all day Saturday and Sunday running around Washington with my list of places I wanted to go. That's been delightful and I've gotten to see a lot of Washington that I would have never seen because of that.
I can remember in Casper that first trip that we were up there the Schneider brothers saved everything. In fact, Mrs. Schneider, their mother who had been widowed a number of years worked in the office. Her name was Gladys and she was a marvelous lady. She saved everything. They never threw anything away. So a fellow that was an assistant manager in the Casper office at that time, named Wendell Owen, who is now the regional manager for United Cable in the Baton Rouge area. I met him when we first went up there and he was kind of just showing me around and showing me where things are and telling me how they did things. He and I spent a whole weekend that first month I was there filling a pickup and taking it out to the dump and dumping stuff, we made many trips.
PAVELKO: On behalf of the Cable Museum, I'm appalled.
ARNOLD: Well, I can assure you that what we were dumping back at that time, was kind of interesting. They had had a fight as had a number of other states had a fight as to whether cable service was subject to an entertainment tax. So there were all sorts of stubs and records and things that had been saved. The matter had long ago died and gone away. Yet nobody had gone in and thrown any of this away. They would have old work orders and things that were ten and fifteen years ago well past the statute of limitations, either federal or otherwise. They just had rooms of them filled up. We just spent the whole weekend, all day, two different days, we'd just load them up and take them out and dump them. It's amazing how you can save things that you don't need like that.
PAVELKO: All of these are small components in a very large mosaic.
ARNOLD: Yes. Years and years ago Ken Gunter and the United Artists people had collected many of the first taps and other passive devices. I think y'all have that. I don't know what shape it's in. It was brought to the Texas Show and put on display in probably 1974 or 1975. I think it's now being donated and going up there to y'all.
PAVELKO: There's a fairly large body of very early technical equipment that the Museum has from a variety of various ends. Of course, if you're ga‑ga about coax you can see a lot of kinds of coax.
ARNOLD: That's right. You know, in travelling, I've been to Rumford, Maine on one occasion, and that was just for a day I flew up from Philadelphia on a rate matter. It happened to be when the trees were turning. That was gorgeous. I've never been there any other time when the trees were turning up in that part of the world. So that was interesting. I've been in Hartford when we were building the Hartford system and we were sitting through the hearings trying to determine who would be awarded which franchises. You would go and sit for five days and maybe do nothing, but you never could be away from the hearings because you never could tell whether somebody's testimony in the hearing would have some bearing on something you were going to say, so you went and spent five days listening to people testify at length. Then you'd go off and you'd come back and you'd go on again. So you got to see a little bit of Hartford, and again you made friends with some folks up there. I've been to Boston several times because you went to Boston to do rate work before the Massachusetts Cable Commission.
PAVELKO: You're a Texan, born and raised, and essentially have lived here all your life.
ARNOLD: The only time I've lived outside of Texas was when I was in the Navy and I lived in San Diego.
PAVELKO: I assume, in part, because of your wife's commitment to Austin.
ARNOLD: Oh, absolutely.
PAVELKO: Do you travel a lot now?
ARNOLD: Yes, I still travel some. It runs in spurts and it kind of depends on what's going on. We go to Washington to do lobbying. I've been to Atlanta to the National Show. Next Monday I'm going to go to Oklahoma City and meet with four or five of my counterparts who want to sit down and talk a little bit about where the phone companies are coming from and going to right now, where we have a common interest in terms of Southwestern Bell Telephone. I attempt to be active with a group that kind of loosely calls themselves the "Cable Television Tax Professionals". They're tax managers of major MSOs, or anybody for that matter who wants to come and those are folks who do not only income taxes, but do state and property taxes. I know a little bit about that sort of thing, so I have some interest in going and trying to help so I attend those meetings. I've been to CTAM once or twice, though it kind of runs in spurts. It may run, again, in spurts.
You may be asked to speak before a Rotary or Kiwanis or maybe once or twice in a very short period of time, and then you may hear from no one for years. Then it may perk up again and do things. Sometimes you travel on behalf of pole line negotiations because you're certainly not going to get the utilities to come see you. During the Cable Policy Act activities, we probably took two or three different groups of twenty or twenty-five people to Washington over the course of a couple of years. Then made numerous trips there on your own to lobby or to call on people. I don't travel like I did when you were on the operating side, but you still seem to travel. Sometimes you don't go any place at all for a while and other times you're gone a lot.
PAVELKO: What do you see as your career plans now?
ARNOLD: I don't think I've got any career plans. I'm fifty-six years old. We're not going to move away from Austin, so I suppose as long as I'm doing a decent job for the Association, and they are glad to have me, then that is exactly where I'd like to be. Unless I discover something or something happens, I'm not looking to go out and do something else.
I enjoy what I'm doing. It's kind of interesting. I don't think there are many people who get to leave an industry that they really enjoy, and I really enjoy the industry, from the operating side and get to move over to another industry, namely the Association industry, but be able to represent the industry that you think you know a little bit about. So you haven't lost your friends and you haven't lost your contacts, so it's not like that you left the business of newspaper or broadcasting and gone into ditch digging or left the welding business to go into launching satellites for NASA, and that you left all of the people you knew behind and had never any reason to see or visit with them...
PAVELKO: Quite the opposite actually. You've not only not lost contacts you've, I guess, considerably expanded.
ARNOLD: Sure, you've expanded because as you've done that you're seeing more people, so you met people that maybe you knew by name, or you met people that you've heard of, or you just met people that were interesting and so forth. So your realm of acquaintances has grown and it's been nice and the fact that I have a background and a history in cable makes it easier to do for me.
PAVELKO: Let's look ahead for the moment to the point when you decide that you are going to retire. How do you think you'll assess your contributions to the industry at that point? What do you think your most important contributions will have been?
ARNOLD: I suppose if you talk about some things I've done, you would say I've probably been as active or more active than most in terms of pole rate negotiations and have knowledge about those things. To some extent, they are aware that you have knowledge about what you are talking about, so maybe it makes it a little easier to do. I guess the other thing is that a person who has been around a while has a continuity and if that continuity can rub off on other people who come behind you, you can share your experiences and stories and assist them in meeting people that you know, that will help them go on. Maybe your ability to have continuity is the most you can do if you haven't contributed something that's unique and unusual in a big way.
PAVELKO: I would guess you would serve as a point of continuity not only as an individual, but certainly through the Association.
ARNOLD: I think, sure.
PAVELKO: And by making the Association a vital organization.
ARNOLD: From that standpoint, the Association has always been a vital group. It just hasn't had as much visibility, but that's because that's the way you wanted it. We always had a low visibility intentionally. We didn't want to be seen or heard as an industry. That has changed to the extent that you can cause the Association to do things and hopefully things that are right from the standpoint of where the industry's going or right from the standpoint of the system operators where you can be helpful to them and not necessarily a hindrance or an aggravation or counter-productive to what corporate is saying to them. Then you're being helpful to them and you're creating, hopefully, some continuity and maybe you're causing them to be a little more interested in becoming acquainted with and knowledgeable with elected officials and other people outside themselves that maybe some of the problems we have now, we wouldn't have had them had it been ten or fifteen years ago. The people who would have been managers would have been managing those systems for ten or twelve years. Would have known a lot of those people and some of this consternation might not have happened.
A lot of rate increases have not been handled well in current times. You've seen a lot of rate increases where you've opened up the envelope with your bill that month and there was the rate increase in it. It made you angry and I don't know whether you can say gee, that was the manager's fault or you can say corporate made him do that or what. Common sense tells you that, even in hindsight, that wasn't a very bright way to do that. You might have saved yourself a lot of grief but somehow or other somebody didn't think of it. Maybe the manager thought of it and tried to tell corporate that that's not what needed to be done. Corporate wasn't paying attention to him, because they had a plan and the plan is that in March this is supposed to happen. It doesn't make any difference what else is happening in March, this is supposed to happen in March so you do it in March. Notwithstanding, somebody says, March isn't a very good month. Nobody's paying any attention to it.
PAVELKO: That kind of short-sighted activity hurts the industry.
ARNOLD: You put people out in the field to try to tell you what's going on in the community and hope they know. It's not true with all of them, probably a very few of them, but then when the guy or gal who you've put out there to tell you what's going on tells you, and you don't pay any attention to it, then it's kind of like the proverbial, "I hired the lawyer, but I'm going to tell him how I want the case tried." You shouldn't have ever bothered to hire him in the first place, because they're not even paying attention to him. It's not going to do you any good.
PAVELKO: There's some more of those anecdotes.
ARNOLD: Oh yeah. I'll tell you some more stories if you want. There was a, he is now dead. In fact, he was a heart transplant. A very dear friend of all of us. His name was Dale Mathis. We first met Dale Mathis, knew of Dale Mathis, I guess, even in the mid '70s. He was quite a cable guy and had an incredibly fertile mind about engineering things and gadgets and gimmicks and so forth. I guess I first met him when he did contract work for West Texas Microwave when I first got involved within the cable business in '66. Lived in Colorado City, Texas. I guess he had lived there all his life. He was involved with several systems out there and we, in the CPI days, bought those systems. We referred to them as The Seven Systems. There were seven of them and he was involved with one of them. He was kind of a heavy-set, jocular guy and he always ran around with an unlit cigar in his mouth chewing on it. Anyway there were two five-hundred-foot towers in Colorado City, lashed together at the top in an H frame. It so happened that they ultimately were used where the microwave path from Dallas came to Colorado City and went south on to El Paso and went north from Colorado City on to Amarillo and up into Kansas with Dallas signals. Anyway, he ran the system there and this was back in the days when you had syndex, must‑carry and other things.
He always got tired of running out to the tower to switch and do things and so he created a little switching system at the tower so that he could call up on the telephone and could switch the signals at the tower to accommodate whatever needed to be done from his house. Somehow or another we found out what the secret phone number at the tower was. So on those evenings when we'd get to drinking and cutting up late at night, we'd always wait till 10:30 or 11:00 and we would call the Colorado City tower from wherever we were in the country and just change the channels. We just drove him nuts. I think he knew we were doing it but he couldn't be sure and he had no idea how we'd gotten the number and I don't know whether one of us told or what. But he'd just say let's call Dale and there would be a race for the phone to call. Hell, you didn't want to talk to Dale. You'd call the tower, do whatever was necessary and you knew the channel had changed in Colorado City.
PAVELKO: What did you change it to?
ARNOLD: Just another channel. He changed his signaling technique after he'd found out that we had the number.
PAVELKO: Probably changed his phone number too.
ARNOLD: Oh, he still could laugh at it. He passed away about a year ago after having had one of the first heart transplants under a unique system here at Baylor Medical in Dallas. He lived about seven or eight months after that and then an infection took his life. I was a pallbearer at the funeral and afterwards we went to his house. It is amazing and again this is something that the Museum needs to do and I think that it has been mentioned to his widow, but I don't know whether she would think about it again or not. He had two structures that were like garages that had been added on to the house that were just full of old cable equipment and things that he had made or done. There are two key rings hanging on a hook back there that are as big around as this plate your toast is on, which for those of you who can't see is about eight inches in diameter, and he used to carry those keys around because those were keys to all of the pass gates and the pastures where the microwave towers were. There must be 250‑300 keys on those two rings.
PAVELKO: Rattling as he walked.
ARNOLD: He could find the key he wanted immediately on those rings as you moved into those pastures to work on those remote microwave sites. My wife likes to tell a story about, I guess, one of the Seven Systems which was a Junction that is about 250‑300 miles from Austin. That must have been in the early '70s, maybe '72, '73. There had been a very, very hard freeze in that area. It was coming up on New Year's and ball games and so forth. All of those signals were being brought in via Southwest Texas Microwave from San Antonio. Lo and behold, sure enough, what you didn't want to happen, happened. That was mainly a number of the poles that carried power to the headend loaded down with ice and the poles broke off on the ground. She loves to tell the story that on New Year's Eve about 9:00 p.m., I went and borrowed a fellow's pickup and we had already located a gas generator because there wasn't one to be had out there. I left about 10:30 or 11:00 at night and drove until about four in the morning. We got there with a gas generator and we drove over to a small community about fifteen or twenty miles from the headend site on New Year's Day and I got the guy who sold propane out of bed. He was still drunk as a skunk from a party the night before. He took us out to the yard and we loaded up a tank of propane and brought it back and got the gas generator started in time for the bowl games to be shown on Sunday. Mary always refers to that as the, "Mail Must Get Through" story.
Then when you were talking about travelling, one of the most interesting places that I went is Moab, Utah. If you've ever been to Moab, it's a pretty place. It's carved out of nowhere. I don't know whether it has changed now, but when you come in to land, the landing strip's literally carved out of the side of the mountain and because of the way that the winds blow and the plane lands, even though the plane would be going down the runway, the axis of the plane is turned about ten degrees to the perpendicular of the runway, simply because of the winds. So you landed as if you were landing sideways. You always looked out the window and thought that any second that wing is going to touch that rock wall over there.
Ed Drake, which is another name that may or may not be on your list, was the manager in Utah for the Schneider brothers at that time and then went on to be involved with United Cablevision. I'm not sure what he's doing in the business today. He and his wife managed that system out there for them. You were talking about microwave. In Utah there are cable television districts, tax districts. The microwave site that fed Moab, Utah with one of the distant signals from Salt Lake City was on top of a mountain that was one hundred twenty-five miles away. So it gives you some idea of the elevation of the mountain as it looked down into Moab to be one hundred twenty-five miles away on a line of sight.
But it was interesting. The Drakes knew a couple, a man and his wife, who ran a restaurant. That restaurant was about fifty miles out in the desert through four or five pass gates, snuggled up against the bottom of an old mountain. You had to call and tell them you wanted to come and then see if they were willing to invite you. They had three house trailers that were pushed together and they lived in one of them. One was a kitchen and the other was the restaurant. The food was just out of this world. They were just the most interesting people in this world to talk to.
PAVELKO: Food is important to you, I gather.
ARNOLD: I love to cook. I do all the cooking at my house.
PAVELKO: Marlowe and Marliene both mentioned the dinner at your house.
ARNOLD: Yes, it was at Benjamin's. Benjamin and I just got together and did the cooking.
PAVELKO: In fact, Marlowe remembers quite distinctly the Sazerac cocktail.
ARNOLD: Has he learned how to spell that word yet?
PAVELKO: Well, he wrote it down, but I don't know if he spelled it correctly.
ARNOLD: I don't think he did because he wrote a thank you note and I don't think he had it spelled right. I don't know whether Benjamin sent him home with any Pernod bitters or not. You have to make it with Pernod bitters.
PAVELKO: He said that Ben had looked high and low for just the right stuff in order to make it.
ARNOLD: Well, then he probably found him some Pernod bitters.
PAVELKO: What do you like to cook?
ARNOLD: Oh, I don't have anything special that I like to do, Kathleen. I just enjoy cooking. There may be a half dozen things that I can do kind of from scratch without looking. I've probably got a collection of forty or fifty cookbooks that I use randomly so you may just go through cookbooks and sit down just looking at things until you think, gee that looks kind of interesting. If that's interesting let's see how many other variations there are of that. Then often the family and/or people who come to eat say, "Boy, this is good!" You tell them that's right and you'll never eat it again because there were two or three cookbooks out and that's a little bit of everything. You don't pay any attention. That's just the way it got fixed and it will never get fixed like that again.
PAVELKO: My husband gets very frustrated with me that way because frequently I'll make something that he really enjoys and I'll never be able to reproduce it.
ARNOLD: Got on my little list here, something else that's kind of interesting. In the early years in the business, pole attachment bonds were very difficult to get because insurance underwriters didn't understand what those bonds were about.
PAVELKO: What were they about?
ARNOLD: Well, they were a guarantee that if indeed you didn't pay the pole rental fee that there was money in the hands of the utility company with which to remove the attachments you'd make to their poles. They still exist today. Unfortunately, they have not gone away. Those kinds of bonds were very difficult when utility companies began to ask for them because underwriters didn't understand what they were and because there was no experience, nobody knew how to rate the risk. As you began to build bigger and bigger markets, the demands for bigger and bigger bonds came along.
And I was involved at that time with a fellow who is now dead, named Ben Doherty, Sr. He had been selling fire and casualty coverage to the industry for a number of years. He was able to cause underwriters to understand a little bit better about those things, and to package the bonds in such a manner that they became a little bit easier for operators to get. That always kind of sticks in my mind because that was a real problem then and it still is today. The underwriter may give you the bond, but he may charge you a very inordinate premium for the bond because he doesn't understand what the risk is and because he can't look back and see if any of those have defaulted. There's never been an occasion to my knowledge where the bonds have been called to either pay to remove this facility or to pay for the rent. He was able to develop a technique that allowed the underwriter to do a better job or to find insurance companies to whom he could explain the risks.
He was also one of the first people, although I'm sure not the first, who were able to help operators in finding coverage for cable plant, because again people didn't understand the risk. By doing it under an inland marine type of coverage where the risk wasn't regulated by underwriting rules of regulatory authorities, but under inland marine or aviation policies where the underwriters truly assessed the risk themselves, again, this was kind of an innovative thing. Probably that's gone by the wayside today in a sense that the people have learned a great deal since then.
Back in that time, it was very difficult to get bonds. Even in the mid '60s and '70s, as you begin to build plants and began to do business perhaps, with larger utility companies or in bigger markets, they wanted bigger bonds that could really provide problems. Often the bonding company then wanted a surety from someone. You not only gave them the bond, you bought the bond from the insurance company, but the insurance company wanted a guarantee from you that you would pay. Which meant a letter of credit or a surety or a compensating balance of some kind so if the bond was several hundred thousand dollars, that it was just the same as if you were putting it up. If you couldn't find a company that understood, that would either take your guarantee or would take a surety from you or would take some sort of promise and understand that indeed it was probably never going to be called on.
PAVELKO: As the technology changes and we move from coax to fiber and the equipment at headends changes and so on, it occurs to me that the opportunities for innovative approaches like the ones you just described continue to be present.
ARNOLD: They probably do. Maybe the field of insurance makes it easy to think about. I think you're going to continue to be innovative. One of the things that's coming about now that's bringing some consternation to the industry is that the utilities phone and electric are beginning to say if you put fiber on these poles and you're not using fiber for cable television purposes, then we think that the attachment rate for a non‑cable use of fiber should be considerably different that the attachment rates for the same kind of fiber for cable use. I don't know that there is a way that you can be innovative but you've got those same sort of confrontations with the utility companies over fiber, particularly where one and or both, think that maybe being in the data business, two-way is something they'd like to be in someday.
PAVELKO: It's a huge area of future concern.
ARNOLD: It's just incredible.
PAVELKO: Are you looking forward to playing a role in that?
ARNOLD: Oh yeah, if I'm around long enough it'll be fun. It's always fun to do battle with the utility companies over the pole attachment thing. Pole attachments are big deals to them and they generally play hard ball for the most part about those, although generally the people you're visiting with, probably don't understand very much about the plant or they don't bring the people along who do understand about the plant, so you're dealing with the lawyers or the number crunchers and the plant engineer, whether it be electric or telephone is the guy that may or may not be brought to these meetings, but he is not included very much. Generally what you end up with is, in my impression, a lawyer sitting down and saying, "Well, we've agreed to write a tough old contract here and we're just going to say that we can't do these things and we go on about our business." I think pole line disputes are going to stay around and they're going to stay around particularly in light of the fact that if indeed you're putting fiber up, you might ultimately use it for two way. Then, depending upon who is going to want in that business, they are not going to be real happy about having to make space available to you on a pole to put up a potential competing type of service.
PAVELKO: Are there other areas we need to address?
ARNOLD: Not that I can think of. I'm sure that some will come to mind.
End of Tape 2, Side B
PAVELKO: I thought I'd start today by asking you to give me a case study, if you will, in a couple of areas. To pick an example of each one of these areas. Let's start with the pole attachment negotiation. It might be useful to explain this process, to take one piece of negotiation, one incident and explain what's involved, how you approach the situation and exactly how the interaction, both with the utility company and with the cable operators involved, would have worked.
ARNOLD: Pole attachments became a problem I guess you might say from the very beginning of cable systems because telephone companies in particular were not interested in having cable operators attached to their facilities. So there had always been some degree of confrontation over the years about that. It continued to grow and become an evermore demanding sort of issue before the FCC and other bodies.
In 1978, I believe, that date may not be right, there was passed a federal pole attachment statute that indeed assured cable operators the right to attach to utility poles. I suppose it might be said that there had never been any legislation or case law that had ever prevented them from attaching to poles. It had been more a question of at what price. So the federal pole statute delineated to some extent that indeed they had a right to attach to poles and that because there had been serious disagreements about what price was that there became a federal pole attachment formula that you went through.
The formulas are essentially the same but because the chart of accounts for electric utility companies and the chart of accounts for telephone companies are somewhat different, the formula delineated those particular accounts in their respective charts of accounts that would be contained in the formula. One of the major stumbling blocks over the years had been the amount of space on a pole that cable should be responsible for paying for. It was known as its space, in the sense that you were already on a joint-use pole, so you were talking about a shared occupancy. Therefore, when you got ready to share the costs of the pole, it was a matter of trying to determine what portion of that pole should be allocated to you.
Once the statute was done, then negotiations became a little different because notwithstanding that utility companies, phone or electric power, didn't just race to change, if you filed a complaint then they had to respond to the complaint. The statute and the Commission, who was responsible for overseeing the statute, operated on the assumption that if a complaint was filed then they made some effort to see if the parties could not negotiate the disagreement between themselves. Then if they couldn't the Commission would undertake to mediate the dispute and come back with the finding based on the facts that comported presumably with the formula as to what an appropriate rate was and a refund from the time the complaint had been filed-- if indeed there was to be a refund--until the complaint was settled.
I guess, in the very late '70s and early '80s, as people began to file those complaints, one of the things that occurred was the complaint was only applicable to the person who was filing the complaint and the utility company. The utility company had absolutely no obligation to extend whatever finding arose from that complaint proceeding to any other entity. So folks like our association and or companies, then began to go to Southwestern Bells or Houston Lighting and Powers or Texas Electric service companies--large utility companies who covered a wide area--and attempt to find someone with whom to negotiate. That was always very difficult to do because you would be referred to the plant engineer, perhaps with the electric utility company as being the person who had pole line plant as his responsibility. He would tell you, yes, he had pole line plant as his responsibility but determining the numbers for pole attachment fees he had absolutely nothing to do with, was not familiar with perhaps the statute. Knew what safety precautions he was interested in, knew what sort of engineering standards he was going to impose such as some utility companies required that if you attach to their poles you must separately anchor your plant. Others do not require that you separately anchor. They may require that you anchor your plant by stranding to their anchors and not to separate anchors, and things of those nature. So you would move from the engineer around until you found somebody who would admit that they maybe knew where to start ‑ probably weren't responsible for, but knew where to start.
So companies would go forward much as the Texas Association did with Southwestern Bell for example. In late '79 or early '80, we approached Bell and said we realize that they had already been the loser of a complaint proceeding that involved Amarillo, Beaumont, Port Arthur, and I think Galveston. We were prepared to encourage as many other operators as possible to file a proceeding against them. In those days the proceedings did not get consolidated until you literally got to the hearing level at which point, if indeed, hundreds of complaints had been filed against Bell Telephone. As they matriculated up to the Commission, the Commission at some point in time would consolidate that hearing because the facts were the same. Bell's financial information was not different for City X as compared to City Y unless the phone company could demonstrate that the cable operator was doing something differently or unless they could demonstrate that their plant configuration was different than the assumptions that were underlying for the operation of the formula.
So in that particular instance we hunted around and finally found someone in St. Louis who could sit down and visit with us. He was an attorney on the Bell staff. His name was Lynch and I think his first name was Jim. I'm not positive now, but his last name was Lynch. He was familiar with the law and could understand the law and could understand the process and so we were able to sit down with him over a period of time and negotiate out an agreement that applied to Bell Telephone poles in the state of Texas, for example. And that Bell would make that offer available to all pole attachment holders in the state, not just to those who might have been joining us in talking to him about it. They reluctantly agreed to continue to visit with us on that basis, so they have continued to do that.
The pole attachment statute also had a sunset clause and about a year before the sunset clause became effective, which would have been about 1981 or 1982 maybe, the NCTA in the waning days of Congress, got someone to amend a piece of legislation that removed the sunset clause. Nobody realized it until it was too late. So the statute is on there in a permanent fashion now.
Subsequently, the Commission has held hearings and new rule makings and they afforded state associations a greater role in complaint proceedings. It used to be that state associations had no standing as far as the Commission was concerned to be a party to the complaint. The Commission's new rules now acknowledge that state associations have been active in negotiating pole attachment rates or bringing parties together or representing the cable industry at least as a single individual rather than hundreds of operators coming to deal with one utility company. So associations now have standing and can indeed initiate complaints on their own, although I don't know that many of them have.
So I suppose that threat, if you will, coupled with some just practice that occurred has been that you proceed to sit down with say Bell Telephone, for example, and you take a look at the information that they bring to you. You attempt to determine to the best of your ability whether or not that information appears to be correct. One of the things that you're unable to do is you really have no way to verify whether or not the information that Bell is submitting to you is accurate, whether it has been properly classified or not.
A good example of that sort of thing again, is in the context of something that has happened Southwestern Bell, for example, has been chastised by the FCC for improperly allocating a million and a half dollars of lobbying expense to overturn the modified final judgment in the process of the allocation of that expense. That expense should have remained in the corporate part of the accounting process to be borne solely by the shareholders. That was a minuscule portion of the expenses they had. They had no effect, but that again just goes to point out, at least in the opinion of the cable operator, that Bell is continually cross‑subsidizing operations between regulated and non‑regulated or improperly allocating expenses so that the rate payer bears that portion.
Bell took the position in about 1982 or 1983 that as they went forward they would calculate the pole attachment fees for each of the states based on information contained for that particular state. One of the problems with that is that none of that information is public in terms of individually, on a state basis, unless you happen to have a tariff proceeding or a rate proceeding or something by where you could go through and look at the file, because generally each of the states will accept from Bell their Form M report to the FCC which is a combined report for all of the states that are operating.
One of the things that I did for the states that were involved with Southwestern Bell was to gather up all of the information from the states and at least spread it out so that you could determine whether it footed and cross‑footed and whether it appeared that the information for each of the states came together to equal the total for all states in question. And then we have been able to be successful in pointing out places where Bell, in the process of attempting to calculate the rate, has misused the formula or has interpreted it incorrectly. So on a couple of occasions we've been able to secure changes in a proposed rate as a result of being able to scrutinize them.
I guess a recent example is--I still don't quite understand how it happened--when we did the pole rate for the year 1989 with Bell, Bell had made a mathematical error, a computation error. We had a very difficult time in getting them to admit that they had made a computational error, but when they finally did admit it the rates for each of the states were less anywhere from fifteen to twenty cents a pole. In the process, it was interesting that the rate for the state of Arkansas was still substantially above the prior year's rate. In visiting with the fellow from Arkansas, I encouraged them to complain a little bit to Bell about that. They did and he has recently indicated back to me that by virtue of their raising questions with Bell about that rate and why it appeared to be out of order, Bell has admitted that indeed the rate had been miscalculated. About the only thing that you can assume without knowing the facts are that, contained within the expense portion of the functions for the state of Arkansas were some items that did not belong there as compared to other years. Only by virtue of our encouraging those folks to do that, did they stay on it. They ended up with about a sixty-five or seventy cent per pole reduction from what the rate was to the other. So those are kind of examples about how you monitor or look at.
We've been involved in another situation where Southwestern Electric Public Service Company in Shreveport, whom we had filed against in the late '70s when I was at CPI, were very antagonistic and had continued to tell us that they didn't understand why the Federal Communications Commission had anything to do with an electric utility because they were under the federal electric regulatory folks and so forth and they had unlimited amounts of money. They would fight this matter. I think that probably had a lot to do with their plant engineer, a crusty old guy who was really not interested in doing anything where cable was concerned. We had many battles with him. Two or three at the Commission level and in each of the instances we prevailed and they lost. There has been another recent complaint proceeding that was about five or six years old. As a result of that proceeding, they had gotten to a point where they thought they had reconciled the numbers to some extent but unfortunately the lawyers representing the four or five companies complaining and the lawyers for SWEPCO, had gotten cross‑wise. So the Arkansas Association and the Texas Association were able to meet outside of the context of those meetings with those folks and try and address the concerns that SWEPCO had about some changes that they wanted made.
The pole attachment agreement and the associations were able to do some sampling of member systems to see whether or not those changes would present a problem. Upon determining that they wouldn't, provided that an appropriate period of time was given to make the changes, then we were instrumental in then concluding those negotiations which had already arrived at a negotiated rate for the year in question. SWEPCO, having a new plant engineer, was now interested in not having to deal with these problems. They were amenable to a five-year rate, provided that they could get some of their concerns settled with changes in the contract.
This is the place where the associations could respectively come and represent the membership. You couldn't bind the membership, but you could sample, visit with, talk to, circulate, drafts of the information that would have been difficult for SWEPCO to perhaps have done, because not everybody who was a pole attachment owner was a member of the complaint process. So again they were only being forced to deal with the four or five companies that were complaining and really had no way to tell how other companies would have felt about changes that they were proposing. That's a case where the associations can come forward and be of some service in kind of negotiating some settlements. That's been true of others.
That same thing was true with Texas Utilities company. They used to have three wholly owned operating subsidiaries. Two of them were pretty easy to get along with. One of them was very difficult to get along with. They folded those subsidiaries into the company so they became operating divisions and were no longer companies separate and apart from themselves. So that meant that instead of relying on the financial data of each of the individual companies, you now had to rely on the financial data of the entire group of companies which meant that you were dealing to some extent with a different set of folks. So in recent years, in dealing with them, we've been able to do some of the same things. Take a look at their calculations, suggest where perhaps they have made errors in the calculations or have interpreted the data incorrectly. About a year ago, we were able to secure a five-year agreement for them that looks like it's probably a fair agreement for both parties. And at least it would afford the cable operator, to the extent he is concerned about that, a known quantity in terms of what future pole attachment rates are going to be for a period of time.
That agreement, as well as the agreement with SWEPCO, required that in the year preceding the year in which the rate expires, each of the utility companies would offer to come forward and I think it's safe to say, might have obligated themselves to come forward and begin a series of negotiations so that indeed you did not have a surprise number for the first pole rate of the first year proceeding the anniversary of the other rate.
PAVELKO: How significant, as we look ahead, are pole attachment negotiations and pole attachment agreements as the trend is more and more not to hang stuff on poles but to bury it or to deliver it in some other way?
ARNOLD: Well, it's important, but it's not so much important from the standpoint of burying it. It's much more expensive to bury plant, direct burial, which means you bury in your own conduit, but also the maintenance expense is somewhat less. When you do direct burial, then you are really not concerned with any attachment fee of any kind because you have a presumed right to use the right of way, and as such you have a right to bury. The place where going underground could become expensive to you is in very heavily populated and constructed areas wherein you would be forced to go in Bell conduit, "if there were conduit available." Conduit space rents on a per foot basis and so it is not unusual for, in this part of the country, I think the rate in Dallas is in the neighborhood of fifty cents a foot a year.
So what that means is that if you have plant and Bell conduit in the downtown area, you're paying about $250 a mile for the use of conduit space. Had you been on the surface and assuming there were an average of forty poles per mile, that probably wouldn't be true downtown, and your Bell rate, presently to attach to a pole is $2.25, then your comparison of $250 to being the conduit would be compared to 40 x 2, or something less than 100, in the neighborhood of $80 to attach aerial facilities. So it becomes considerably more expensive if indeed you've been in conduit. But it doesn't become more expensive if you've removed your facility from the poles and directly buried it.
Another confrontation that is brewing now is with the advent of fiber optics. Bell Systems as well as electric utility companies are saying to cable operators, we have leased you space for cable attachments. In our opinion, we think the federal pole attachment law only applies to you where you're "delivering cable service" and should you not be delivering cable service, then we do not think the federal pole attachment formula is applicable. Therefore we're going to seek a pole attachment rate that is not within the scope of the federal pole formula. There is such a dispute going on right now in Dallas, between Texas Utilities and their subsidiary Dallas Power and Light and TCI in which Texas Utilities have refused to allow the local cable operator to attach any additional fiber plant to the poles. The operator is attempting to build fiber links between his sub‑headends and to make his AML become the backup to the fiber, rather than the primary use. The electric utility is preventing an attachment of fiber to any poles, because they're contending that fiber attachments are to be priced at a different rate, because they do not intend to be in the business of monitoring what the cable operator might be doing or not doing with the fiber. Therefore, they would assume that he's doing other than non‑cable uses. If I'm not mistaken, the rate that has been proposed is a rate that could very well reach the magnitude in excess of $100 per pole per year for fiber attachments.
Southwestern Bell Telephone is also making noises about doing the same thing. From the perspective of the cable operator, you presume that what you're seeing there is a concern about a cable operator becoming a competitor with phone and/or electric utility for data transmission service or other two-way types of communications perhaps other than voice.
PAVELKO: As opposed to a legitimate concern about additional costs associated with maintaining fiber attachments.
ARNOLD: Yes, it is hard to perceive that they have additional costs. Although much of the argument over many of the years was that when you put another person on your pole plant facility, that increased the costs markedly. It certainly does increase the costs, I presume, for everybody, because it's a little bit harder to work around two sets of strand on a pole than it would be around one set of strand on a pole. But there has never been much agreement between the two industries that indeed it is anywhere near the magnitude of expense that either Bell or the utilities would contend that it was.
PAVELKO: While we're on the subject of telcos, let me ask you a philosophy and future question about the relationship between the cable industry and the telcos. You mentioned that you are going to Oklahoma, I think you said, to meet with some colleagues, your opposite members in some other states to talk about what the telcos are up to these days. What are the telcos up to these days?
ARNOLD: Well the telco is kind of the topic of conversation, or one of the several major topics of conversation of the cable industry today. The telephone industry's interest in having the telco/cable cross ownership restrictions removed as relates to the Bell operating companies meaning the seven companies that were divested from AT&T, under Judge Green's modified final judgment ‑ those companies are precluded from being in the cable television service ‑ period. Until such time as the modified final judgment would be amended or until a statute in the form of legislation was passed that would obviate that ruling.
With respect to other telephone companies, General Telephone, Continental, United, anybody else that's other than a Bell company, under the Cable Policy Act of 1984 which codified a ruling that the FCC had in place for fifteen or twenty years or more, those phone companies are able to be in the cable television business in any area other than their own service area. So General Telephone, for example, here in Texas, I guess their largest exchange area would be San Angelo. If they wish to be in the cable television business in Austin, Texas, there's absolutely nothing preventing them today from being in the cable business in Austin, Texas.
Interesting to note, you don't see General Telephone out building cable plants in other areas. They would like to build cable plants in those areas where they already have existing telephone plant which is certainly understandable, but then the problem becomes how do you prevent General Telephone from cross‑subsidizing their telephone operation and the cable operation. I think it's been proven over and over again that indeed telephone companies and many of their problems for fifty years or so, have resulted in legal questions being raised about them. Just as the breakup was and several of the consent degrees of past years have had to do with phone company's propensity to engage in anti‑competitive behavior because of the position that they had with respect to their core business: telephone companies.
So that is a very large question today. The phone companies would like very much to be in the cable business because they view that as a way to, in my opinion, turn around and say to regulatory authorities at the state level, that indeed we have to accelerate the depreciation of the present copper plant in order to recover the cost of that plant so that we can turn around and put fiber optics in. Of course, the cable industry contends today that there is nothing the telephone plant cannot do, except deliver full motion video. So that while the phone company is saying we can bring you all these goodies if we're only allowed to have fiber optic plant, it's the cable industry's contention that many of the goodies that the phone company is saying they can bring you if there's fiber optics can be brought to you today over copper plant provided they wanted to do it. I think the fact of the matter is they don't want to do that. They want to be able to be the person that has fiber to the home or fiber to the pedestal and they want to be allowed to be in the business of delivering video. So you're beginning to see an ever increasing confrontation between the groups in that regard as in reflected and proposed legislation right now. As is reflected by activity.
I think it's interesting to keep in mind that prior to 1972 when the Third Report and Order codified that one could not own cable systems in the same service area, where they owned radio, TV, telephone companies, newspaper media and others without exemptions, that prior to '72, General Telephone owned fifty or sixty cable systems around the country. They were forced to divest those systems as a result of the 1972 ruling. Here's somebody who has been in the business before and was never happy about being made to get out of the business. It's kind of interesting, at least to me, that in wanting back in the business, you don't find them wanting back in the business, apparently in a non‑service area. They'd like to be back in the business, but they'd like to be back in the business in their service area.
PAVELKO: How do you assess the mood of Congress? The mood of the general public as regards changing the current regulations which would forbid telcos from being involved in providing data transmission and video service. It would seem to me that there is a substantial body of opinion which supports the telco approach.
ARNOLD: I would tend to agree with the latter part of your statement that there is a substantial body of opinion. I don't think the body of opinion is the majority yet. I think the body of opinion that supports that change supports it because they think that the cable industry is in dire need of some form of competition and that, correctly or incorrectly, that form of competition is going to cause prices to decrease dramatically and so therefore they are in favor of competition. The phone companies have done a very good job currently of saying, oh, you've got this problem with another industry that needs competition and they are, in my opinion, bringing themselves to the fray by saying gee, we reluctantly would be glad to help you people with this competition problem you have and we will be glad to be the people that will provide that competition. In order for us to do that, you've got to let us remove the restrictions of the modified final judgment if we're a Bell Telephone company and you've got to amend the cable policy act to let us be able to provide cable service in our own service area.
I think if those folks who believe that if they took a serious look at and really became a student, if you will, of the manner in which telephone companies have operated over the years, they probably wouldn't do that. It's kind of ancient history, but Florida and Texas for many, many years were the last two states of any size that did not have a public utility or a public service commission. Texas ended up about fifteen or eighteen years ago with a public service commission solely because Bell Telephone got caught having three sets of books so to speak. They had a set of books that they used for tax and reporting purposes. They had a set of books that they used for property tax purposes and they had a set of books that they showed city governments in terms of how well they were doing or how not well they were doing. In that particular situation there was also two or three mysterious deaths in the form of suicide and other events. As a result of that rather ugly episode, if you will, the state of Texas decided that they better have a public utility commissioner who could oversee what the phone company was doing.
So while that's not very convincing to a lot of people that, in my own mind, is an example of a situation of a phone company being unable to handle a situation where it is very easy to be anti‑competitive in nature. It just isn't their nature to not do that. It is, in my opinion, their nature to be very anti‑competitive in that situation and to be very sure of themselves in the sense that they are positive that the way they've done it is the correct way and that they are right.
I guess, that would harken back to our comment earlier about the pole rates in Arkansas. When we got finished again for the rates in '89, we had corrected two sets of mathematical errors before they got the rates right, and then, of course, suggested to the Arkansas folks that their numbers still didn't look right. There just couldn't have been that kind of dramatic increase in a couple of the expense accounts that were used to calculate the pole rates. Sure enough, upon going back to Bell, Bell admits that yes, those numbers weren't right and need to be adjusted. Those adjustments would have never been made had the cable operator not pressed Bell to do that. While that number is significant to the cable operator, that gross number is the number Bell rounds off when they report numbers, so it does not become a significant number to them at all.
PAVELKO: But it is a significant number ultimately to the individual cable subscriber because whatever costs the cable operator is bearing will be passed through to the consumer.
ARNOLD: I think it is safe to say that if indeed you think Bell is going to do a job better than the cable operator ought to do the job, I would suggest to you that you either need to go to downtown Dallas and look at the multitudes of headquarters people that are here that have nothing to do with the daily operation of the phone system in the field necessarily in making it function or that you go to St. Louis and look at corporate headquarters for Southwestern Bell in St. Louis, and look at the literally hundreds of thousands of people up there and you think, how is Bell ever going to separate who is doing which of those chores. You can rest assured that probably a large part of the expense of the unregulated subsidiary at some point in time is going to get funneled over to the regulated side because indeed they are going to be guaranteed an opportunity, so to speak, to recoup those costs.
PAVELKO: Are there any other areas you'd like to touch on, vis-à-vis the telcos?
ARNOLD: I guess, most cable people are kind of anti‑telco and I'm kind of anti‑telco in that sense. I think telcos and cable could probably coexist but it would certainly take a monumental change on the part of both groups to do that. It's interesting to note that in England and western Europe, for example, where I think five of the seven Bell operating companies have cable franchises in England, that in many of those instances they are partnered with existing cable companies from the United States for the expertise they want. They bring an expertise to it because in England a cable operator is able to also provide telephone service to the potential customer.
It's kind of interesting to note that under that set of circumstances cable on telephone seem to be able to exist with each other side by side. They haven't built any cable plant that's all fiber direct to the home. They have built cable plant that's been fiber and coax in a hybrid situation which is kind of contrary to the statements that they continue to make to folks in the United States which is you got to let us in the fiber business so that we can do X and Y, when indeed really when they're building cable plant in other areas, they're building cable plant just like the cable operator in this country is building cable plant. They may be building a fiber trunk and a fiber distribution system to the pedestal and then they're taking coax from the pedestal to the house.
PAVELKO: I was reviewing some of CPI's annual reports and wanted to pursue with you a little bit, CPI's brief foray into the broadcasting end of the business with the purchase of KFJZ-AM and KWXI-FM and the Texas State Network. Why did you get into it and then why did you, relatively quickly, get out of it?
ARNOLD: CPI did a couple of things like that and I think it was like any other company at that time. As you were growing in the cable business, you were looking at other areas that might either be compatible or in which you would have an interest. Again, you must keep in mind that Jack Crosby was a very prominent shareholder and Jack does enjoy and does thrive on making deals and looking at business combinations and arrangements. What appeared to be a very advantageous purchase of a fairly substantial radio property came to the market. It was decided that there conceivably might be some synergism perhaps, in doing that. Jack had been in the radio broadcast business before so that it was not completely strange to him.
Several of us had invested in a small radio station in south Texas for several years as passive investors, so again being in the radio broadcast business was not something that was not absolutely totally new. So we proceeded with the Fort Worth stations, and purchased them and went along for a while. They had management in place but as we moved along, as things began to continually change in the cable industry and demands for money to build plant and equipment came along and other things occurred, and the manager of the station, if my memory serves me correctly, then opted to retire, then it left you without management in place, so you came about to look at that as, not necessarily being the thing you wanted to do.
I think during that period of time, also, other broadcast properties that might have been available began to escalate rather rapidly in price, probably as much as cable systems had done. So it did not appear to be as lucrative a proposed business operation as it had been when you bought the Fort Worth stations because stations begin to increase in price a little bit.
We got in another business in a similar way. We had CPI Microwave, which was a data transmission link from Dallas to Austin, San Antonio and down in the valley and from Austin over to Houston. And again, we built that thinking there was synergism, I think, and again it was something similar to what businesses we had been in before. While it was different it was still microwave. We were familiar with West Texas Microwave in southwest Texas. The Tower Antenna Systems had a microwave subsidiary that served systems up in that area. So we thought here was a way to get in the business, except it consumed far greater quantities of capital, I think, in order to get up and running than we had anticipated that it would. Again, at another juncture, because the capital demands of that business had taken into account with the additional capital demands that were being made for cable properties, for expansion of new builds, we sold the microwave business to Western Union after several years of operating them.
PAVELKO: To whom were the broadcasting entities sold?
ARNOLD: That's interesting; I hadn't thought about that. Let me look, out of curiosity. I think it's going to be in that prospectus stuff.
PAVELKO: The announcement that they were going to be sold.
ARNOLD: We're in '76. I bet you this doesn't say. Isn't that strange? Boy, I don't remember at all. Well, we ought to at least mention that we disposed of it.
PAVELKO: As a neophyte in reading corporate annual reports, I'm amused...
ARNOLD: About the lack of information.
PAVELKO: That, but the casualness with which you refer to divesting of a business which might have an annual revenue of several million.
ARNOLD: It would be like for a lady having breast cancer or having a small carcinoma and you just kind of off-handedly mention that you think you might have a lump in your breast. Then in the following annual report you make no mention of whether the breast had to be removed or whether you died.
ARNOLD: Then you think, that must have been serious. Good serious or bad serious. But nobody ever got to hear the final installment. It's incredible. You're exactly right.
PAVELKO: Let me ask you about the stations that you bought. Tell me a little bit about them.
End of Tape 3, Side A
ARNOLD: The station in south Texas, was barely profitable for us while we owned it individually. We subsequently sold it simply because there appeared to be some interest in people that were willing to buy it. It was reaching a point in time where additional capital investment was going to have to be made. None of the seven or eight people that were involved were particularly interested in coming up with additional capital. The fellow who had been managing the station was anxious to move on and do other things. It appeared to make good sense to dispose of it rather than necessarily end up with a station for which you didn't have a manager in place and had to worry about directly.
So KRIO was sold at a profit and from time to time I still hear from the fellow that used to manage that station. I think he's up in Tennessee or Kentucky someplace now. He always had a cigar in his mouth and he was always a very jovial and very friendly and laughing guy. My recollection is most of the people you met at the Fort Worth radio station were very friendly, very jovial, very outgoing people. I guess when you're out selling time and in that kind of business, you can't be but otherwise.
PAVELKO: Yes, that's true. Broadcasting tends to be a jovial, congenial, glad‑handing kind of business.
ARNOLD: That's right.
PAVELKO: I have really just one question left. That is that I would like you to tell me about Ben Conroy.
ARNOLD: Ben is a person that I met when I first went into the business. Ben has been my mentor in the cable business for the twenty plus years I've been in the business. Ben and his family have very fortunately become very close friends of Mary's and mine and so what started out as a business relationship has traversed over the years into continuing to being a business relationship of sorts, notwithstanding that Ben's retired now, but has moved into a close personal relationship. Ben has six girls and one boy and as you can imagine with the oldest child, Kate, who now lives in San Antonio and is married and has three children, she's thirty-four. So if indeed, I've known Ben twenty-two or twenty-three years, Kate as the oldest at age fourteen, I've known all the children since they were young and were around the house a lot.
Ben and Toni are very unusual and interesting people. Ben's brother is married to Toni's sister. The brother and the sister have eight children and live in California. Ben's father, who was in the cable business with him, was a very interesting man. While Ben is as tall as I am and a large guy ‑ Ben's father was a short fellow, kind of like a bantam rooster, who had apparently done very well for himself in numerous business ventures, one of which I think was wholesale furniture manufacturing. I had always known him as a retired gentleman. Apparently had a very acute sense of investments. Over the period of time, both during his working life and then in his retirement, he had done very well with investments he made. In fact, he tended to the money for several spinster and or widow lady friends of he and Mrs. Conroy's. Ben's mother is still alive and lives in California, near the brother and his wife.
But Ben's been a very interesting fellow to know and to be close friends with. He graduated from the Naval Academy, stayed in the Navy until such a point in time as they told him that he was going to have to come ashore and so he decided that the Navy he knew was the Navy at sea, not the Navy at shore. It was at that juncture that kind of put him in the cable business. He is an excellent gardener. He right now keeps about 2/3 of an acre of ground under cultivation at his office in South Austin, keeps probably 1/4 an acre of ground under cultivation around the house. With all sorts of fruits and vegetables, much to the delight of his friends because you continued to be, as you get into the growing season and the produce begins to be more than the family can eat, of course, these days without there being all of the children and their friends around, that's a greater number rather than a lesser number. Just a couple of weeks ago, we were recipients of fresh plums and peaches and we have tomatoes. Four or five kinds of fresh lettuce. Corn from time to time. A little bit of okra, sometimes eggplant. To give you an idea, a couple of years ago, he had a bumper potato crop and so we had potatoes nearly all during the growing season that were very good.
Ben's got an incredible mind and an incredible amount of intelligence and it goes across a number of areas. An example is Ben at a very early age became an aficionado of blues and ragtime music. As I understand that story, they lived in New York at that time and his father used to take him down to Basin Street East when he was ten, eleven, twelve and thirteen and spend the evening with him, while Ben listened to the old greats play piano and while he was immersed in this music, this has continued with him today. He is a marvelous boogie piano player although he likes the rags better, he is a marvelous boogie piano player.
I guess one of the anecdotes that I didn't think to tell before was in 1971 or 1972, I went to the National Trade Show (NCTA) in Chicago. That show started on a Sunday and was over on a Wednesday. Ben was at that show. Ben said to me on Wednesday, why don't you and I go to St. Louis to the St. Louis Ragtime Festival. It's kind of interesting to note as an aside that this is the first year in twenty-seven years that the St. Louis Ragtime Festival is not being held. That was about the fifth year of the festival and Ben said, you like the music. Ben had been to festival one and two, but had not been back to any of the succeeding festivals. So Ben and I went to St. Louis on Thursday morning I guess and stayed there Thursday, Friday, Saturday and came home on Sunday.
The interesting part about that was that during that period of time, we had been looking at another house to move to and I had been over once to look at the house but had not paid much attention to it. Mary wanted to move, that was fine with me, so when Ben and I got home on Sunday, I had to call from the airport to find out where we lived, because Mary had moved from the house we were in to the new house and I didn't have the slightest idea where it was. I had no idea what the street address was. Her mother and father had helped her move during this period of time. Her explanation to her parents had been, Bill was out of town with Ben on a business trip and couldn't get back. Ben and I went to every festival after that with the exception of one year, up until this year. This is another example of through people you meet people.
Ben and I met and made numerous good and gracious friendships that were music people who Ben's much more closely acquainted with because of his knowledge of music. When people ask me, what do I do with music I say, well all of you people play and there have to be listeners or y'all wouldn't play. So the talent I bring, if any, is I come as a very interested listener.
Ben's a good cook. He is a wine connoisseur-‑loves good wines. Has a lot of knowledge about good wines. He's just really a regular all-around person and a very interesting person to know and to be acquainted with. He has a lot of opinions on different things. He's been a very strong ally of the industry for all the years that he's been involved in. I guess it's interesting to note, he was the NCTA's tenth chairman, to give you some idea of the influence that he had in the industry. He was instrumental in getting the Texas Association formed up and has been very instrumental in work with the Museum. He has that sense of history which is, I suppose, as I remarked earlier, part of the reason for the oral histories because of his interest in oral histories that are done at the Naval Institute.
I guess there are a lot of stories one might think to tell about him. None of them seem to come to mind right now. He certainly been a very dear friend. He's a very vibrant fellow. You certainly wouldn't look at him and know he's sixty-six years old. You'd think maybe he was in his mid fifties. I think a lot of that credit goes where the mind stays busy and the hands stay busy and there's always something to do. He retired shortly after the CPI‑Times Mirror merger got done because it was evident they were going to move corporate headquarters to California and he had no interest in moving away from Austin.
In fact, after that event occurred he didn't have an office to stay in, and the regional office that I was responsible for which was responsible at that point in time for about 100,000 subscribers in Texas, Arkansas and Illinois. We had an office in Austin, only away from the downtown area and so he came out and used some space in the regional office that we had, and this is kind of an example of his dry wit.
This may be one of the things we can't publish when it comes to it, we had a young lady in the office named Jeannie and Jeannie had been typing one day continually from morning until well after lunch time on some project that we were undertaking that had really been intense. Of course, Ben always had the tendency to intimidate people because he always appeared to be stern. He had a funny sense of humor and he had a way with making people think he was being stern when he was really laughing at you on the inside. He likes to play practical jokes a little bit and things of that nature. Jeannie had been at the typewriter for five, or six or seven hours, and I had stepped out and I was rubbing Jeannie's neck and back and we were talking about the job that was being done and Ben walked out of the office which happened to be adjacent to where her typewriter was and came around and stood in front of her desk. She looked up and her eyes got big and she said, "Yes, Mr. Conroy, may I help you?" He looked down at her with this kind of stern look on his face and said, "I'm in charge of front rubbing and you just let me know when you're ready," and with that he turned around on his heel and walked back into the office and Jeannie just wanted to die. We tell that story all the time. I still see Jeannie in the grocery store every once in a while. She still continues to ask about how Ben is. That's just kind of a sense of how he likes to play practical jokes and do things in a kind of serious, jovial mood. Mixing the two up.
PAVELKO: Wonderful stories. That completes my list of questions.
ARNOLD: Very good. It's been a pleasure to do, my dear.
PAVELKO: Thank you, sir.
End of Tape 3, Side B