Interview Date: Saturday February 10, 2001
Interview Location: Sun Valley, ID USA
Interviewer: Jim Keller
Collection: Hauser Collection
KELLER: This is the oral history of Leslie P. Hilliard, Les Hilliard, a real cable pioneer. He's actually a member of the Cable TV Pioneers also, but goes back in the early days of cable, back to 1953 when he met one of the premier people in cable television, Bill Daniels. Leslie operated in and around the Nebraska, Colorado, Wyoming, Montana area after that and will be a real background in telling the story about the development of small systems in that area. We are here at the Sun Valley Lodge in Sun Valley, Idaho at a meeting of the Sawtooth Cable Professionals. The date is February 10, 2001. Your interviewer is Jim Keller. The interview is sponsored by a grant from the Gustav Hauser Foundation as part of the Oral History Program of The National Cable Television Center and Museum.
Les is from Scottsbluff, Nebraska and had his first meeting and his first introduction into cable television in that area. Les, you want to start out with your meeting with Bill Daniels in Scottsbluff in 1953?
HILLIARD: Actually, I didn't meet him personally at that time. He was visiting with my father.
KELLER: You were just a baby at that time.
HILLIARD: No, I was a senior in high school. My father had tried to raise money to build a TV station in Scottsbluff. In order to do that, he put in a cable TV system up and down one of the alleys on Main Street.
KELLER: Where did he get the idea to put in a cable system?
HILLIARD: I don't know where he got the idea, to be honest with you. I just know that he wanted to try to get people to subscribe to stock so he could raise enough money to put in a transmitter and everything else. He bought a Dumont Camera chain and built a shadow box so he could show movies. He established the whole thing in the studios of his radio station, KOLT in Scottsbluff. I remember we also televised the 6:00 News live so people could see that. But there basically were no TV sets in the area.
KELLER: Was there an allocation for television station?
HILLIARD: Oh, yes, there was an allocation. He had Channel 13, I think, was allocated for Scottsbluff. He was trying to raise the funds to build the station there. In the process, we built this cable system and ran drops into all the hardware stores and furniture stores that had TV sets. But there was no signal in the area to be picked up. So we had to create a signal, and we had to do this. We showed a lot of old movies that we were able to get for free.
KELLER: So you did your programming right from day 1 almost.
HILLIARD: Day one. And I was the one that ran the camera. There would be this blank spot while I moved the dolly over and shoved it into the shadow box. Then I'd run around and turn on the 16 mm. projector. That's the way we were introduced to it. Then one day, this guy came to visit my father.
KELLER: That was Bill Daniels.
HILLIARD: Bill Daniels. He was trying to convince my father to go ahead and expand this out and to put it into homes and things. Bill was trying to put together a microwave system from Denver up through to Casper where he wanted to build a cable system also. The Duhammels up in Rapid City, South Dakota, were putting on a TV station up there, and they were trying to get a microwave feed up there so that they could get network signals up there. So there was a lot of vested interest. Scottsbluff kind of sat in the "Y" between Casper and Rapid City. In my father' conservatism, he shook his head, "Bill, I don't think this cable business will ever amount to anything."
KELLER: How did he ever get into the radio business? Maybe radio wasn't going to amount to anything either.
HILLIARD: I don't know. My father was a pioneer in there. In 1929, he put on a radio station in Scottsbluff, and the Department of Commerce came out and told him he couldn't do it without a license and shut him down. Then he applied for a license and built his first radio station, the radio station there – KGKY – in 1930. So when I was born in 1934, I was born into the communications family and we've been in the business ever since. My younger brother ran the station after my father retired. The family owned that station for over 50 years. Then we got into cable. My two brothers and I went into cable as partners. In the interim, after '53, I had gone into the service and come back out, but still had an interest in cable and was fascinated with it. They built Scottsbluff.
KELLER: Bob Magness did, didn't he – TCI?
HILLIARD: Bob Magness did.
KELLER: It wasn't TCI then, but whatever Magness called his company then. I don't remember.
HILLIARD: Well I don't remember what they called it. The first development Magness did was actually Bozeman, Montana, with George Hatch.
HILLIARD: They ran a microwave out of Salt Lake to build that. But when they built Scottsbluff, my home town, they of course got the power company there weren't going to let them on the poles. They had to set their own poles throughout the entire town. Then later on, some other people built the outlying little towns – Mitchell and Morrill and Bridgeport and Bayard. That person built it with twin lead. These things were all about twelve miles apart. We had twin lead running, when we bought that system. My brothers and I bought it. My younger brother ran that. What we did was we got the microwave feed from TCI and ran it over the twin leads to these little towns. Then we did have a TV station there finally that somebody else built. We picked that up off the air.
KELLER: Where was the television station built? In Scottsbluff?
HILLIARD: In Scottsbluff, yes. Later on, we put in a microwave system to feed all those systems, but we always picked the local channel off air. Of course, the most logical place to put a microwave was on the water tower. So we were on the water towers of all these towns up and down the valley there.
KELLER: You had, in Scottsbluff; you had a tower for your radio transmitter, didn't you?
HILLIARD: Yes. That's where we originated ... We took the microwave and shot it up into a fly swatter, a reflector, and reflected it both up and down the valley. That's the way it was put in there. We fed it all the way down to Bridgeport at that time. That was our initial entrance into the ...
KELLER... and you bought the systems then in those small communities around Scottsbluff?
H Yes, we bought those. My brothers and I each put up $10,000. So I went into the cable business with a $10,000 investment. We built that up, and we bought some cable systems up in Montana that I operated. My younger brother operated the ones in Nebraska. My older brother was living in Texas, and he wanted to get into the cable business. So the family partnership got him started down there. We bought a cable system down there. We had an arrangement where the operating brother got 40% and each of the other brothers got 30%. Later on, we divided these systems up so that we each owned and operated our own systems.
KELLER: Was one of your brothers named Russ?
HILLIARD: Russ. He's my younger brother.
KELLER: Okay. I've met Russ before. I've never met you, but I've met Russ before.
HILLIARD: Then we had an older brother Bill.
KELLER: Bill I don't remember. I do remember Russ.
HILLIARD: Well, Russ is still in the business and still going very active down in Kearney, Nebraska.
KELLER: Is he an engineer?
HILLIARD: Yes. He was a radio ... He had his first class radio engineering license. But he was not trained as an engineer. He's got a degree in business.
KELLER: So then you built the systems around the Scottsbluff area. You went up and acquired some small systems in Montana?
HILLIARD: Well, see, I was living in Montana. I had graduated from college and went to work for Texaco. They shipped me up there. I still had this interest down in Nebraska, and I wanted to get into business for myself. I didn't want to work for somebody else. So we made this deal, and we acquired two systems up in Montana in the early '70's.
KELLER: What were they?
HILLIARD: That was the Rattlesnake Valley, just outside of Missoula. It was owned by Glen Tarbox and – I can't think of the other guy's name – two guys that ran that up there.
KELLER: Were you trying to get microwave from anywhere into those systems, or did you?
HILLIARD: No. TCI had the microwave system. George Hatch and Bob Magness had built a microwave system from Salt Lake up into Bozeman and then over to Billings and on up into Helena and to Great Falls and that area. They started building all of that area. H&B America built Missoula. Glen Tarbox was their manager. He actually built the Rattlesnake Valley before H&D built Missoula, and he got it going. So we always purchased our microwave service from TCI or, back then they called it Western microwave. I can remember that I did my due diligence on the acquisition of Laurel, went through all the contracts, and I was assured that everything was A-okay with my microwave feed, and that they had no plans to change anything or any rates or any thing else. So we signed the contracts on a Friday afternoon, and I took over possession. The following Tuesday I've got a registered letter from Western Microwave, TCI. They doubled my rates. I was just furious about it.
KELLER: Larry Rommrell?
HILLIARD: Larry, yes. Anyway, Bill Daniels owned a couple cable systems up on the high line in Montana.
KELLER: Remember, we're still talking about the mid-'50's now right?
HILLIARD: Well, no.
KELLER: Have we gotten into the '60's?
HILLIARD: No, not mid-'50's. I spent that short time in '53. Then I went into the military. I got out of the military and finished my business degree at Colorado State University. So it wasn't until the '69's until my brother and I started investing in these things.
KELLER: So we're in the mid-'60's.
HILLIARD: Mid '60's, early '70's is when we got into systems up in Montana. There were a lot of systems built up there by that time. Bill Daniels owned a couple of cable systems up there – Glasgow and Sidney. He also got microwave feed from TCI. So that's how I tied up with them. I said, "How do I protect myself?" They said we'd have to make a filing with the commission. I said, "How do I do that?" They gave me the name of their law firm.
KELLER: This was Bill?
HILLIARD: No. It was his managing operator. I can't remember the guy's name. He was just a really wonderful guy. Bill had a lot of super people working for him.
KELLER: Present company excepted, because I was with him at that time.
HILLIARD: Were you? No, he was a .... I don't remember. It was John Saeman.
KELLER: No. Saeman came much after that.
HILLIARD: Alan Harmon? No, it wasn't Harmon. Anyway, he advised me ...
KELLER: Dick Cox, Winton Cox's son?
HILLIARD: No. I knew Winston Cox. He was in the oil business in Billings. When I was with Texaco, I met Winston Cox and worked with him there and knew who he was then.
KELLER: He backed Bill in the early days, didn't he?
HILLIARD: Oh, yeah. Bill returned that. He gave Rocky Mountain College $1 million in Winston Cox's name as a gift to memorialize Winston. Winston took his life some years later. You're thinking of Dick Cox.
KELLER: Dick's his son.
HILLIARD: Yes, and Dick ran the Billings system. I think Dick still lives there. He does a lot of real estate there in the Billings market. Really nice people.
KELLER: You've got the microwave from them at that point, bringing into Laurel.
HILLIARD: We always did. We had to fight them, and it was a futile fight. We had lost before we had even made a filing.
KELLER: Now, you lost because you took the service from TCI or Western Microwave – or from the Daniels organization?
HILLIARD: No, no. The Daniels organization and we both took it from TCI ...
KELLER... who had built the system from both Denver and from Salt Lake.
HILLIARD: Yes. But the one from Denver didn't come up beyond Casper. Another group picked up the signal out of Casper, and they brought it up to Sheridan, Wyoming. But that's as far as that link went. The one from Salt Lake came up into Montana and split outside of Bozeman and went north to Helena and to Great Falls. Outside of Bozeman it also turned and went east over to Livingston and Billings and over to – on up to Glendive and to Sidney that way. So you had two arms of this thing stretching out there. Bill Daniels took feed from Western, as well as us there. So as a group, the independents went together and tried to fight the rate increase, but it was a futile fight. But I did get connected with Cole, Raywid and Braverman as an attorney and have been with them ever since. Bob James handled that case back then, and Bob and I have become personal friends. I know Jack Cole and have met a lot of the people in the organization. Lately it has grown so fast and so big that there are people in that organization that I don't know. I know the older guys, but I don't know the young ones.
KELLER: So where did you go after Laurel? What did you do?
HILLIARD: We had the Rattlesnake Valley and that. So then I started buying up little cable systems in and around the Billings market. I bought Big Timber which was built by Mac Clark. Do you remember Mac? Mac sold his cable systems. He had Big Timber and Harden. He sold those to George Hatch. Later on, I bought them from George. He only held them a couple of years, and I bought those two and combined them with my organization.
KELLER: For the record, George Hatch owned and operated the Salt Lake City Tribune Company and published the newspaper in Salt Lake City. He also had a television station there, as I recall at one time or another.
HILLIARD: Yes, he did.
KELLER: He was also the original partner of Bob Magness in their original venture throughout Wyoming and Montana.
HILLIARD: Yes, he was. He was a delightful gentleman. I flew down to negotiate with him. Bruce Dickinson, with Daniels & Associates, helped me on that acquisition. We sat there and talked for about an hour and came to terms on the thing. Bruce took a lot of notes. George just said, "I'll have a contract typed up and send it to you." It was probably the fastest cable deal that I've ever done. It seems like the longer you've been in the business, the longer it takes to negotiate deals. Nowadays, you're lucky if you can get them done ... I've just sold a cable operation down in Texas to Time Warner. That only took nine months. You know how that is.
KELLER: So then, as you continued to expand your operation, would you buy and sell or did you buy and retain the systems as you moved on?
HILLIARD: To be honest with you, this one that I just sold it the first cable system I've ever sold. I've always bought and retained.
KELLER: Over the last forty years, you've been just buying and retaining them.
HILLIARD: And upgrading. Seems like I always buy systems that are in just desperate need of rebuilds. I end up rebuilding all these systems. No, I haven't grown very fast or very big, but have enjoyed the industry over the years. I think the largest I ever got was up to about 16,000 subscribers. I just sold off about half of my subscribers just this last month.
KELLER: How did you get down to Texas?
HILLIARD: This is where my older brother was.
KELLER: Oh, that's right. You bought those systems down there.
HILLIARD: He wanted a partner down there. My younger brother didn't want to go in with us. So I went in with him, and we bought a cable system down there, and then built the one next door to it.
KELLER: Where was that?
HILLIARD: Silsbee, Texas and Lumberton, Texas. They're just north of Beaumont. As a matter of fact, you just cross the bayou there. One side you're in Beaumont, the other side you're in Lumberton, so you're there – just like that. But we just finished rebuilding that thing into a 750 MHz, two-way, with 75 – 80 miles of fiber in that system. It's just a beautiful system.
KELLER: That's the one you sold?
HILLIARD: This is the one I sold. We put in a new headend building, concrete floor, concrete walls, and concrete roof. I mean, it wouldn't burn no matter what. It had an Onan generator out there, enough air conditioning. When we put the air conditioning unit in down there, the guy said, "What are you building here, a meat packing plant?" "No. We're just going to keep all this electronics really cool." We put in all the wires that came in overhead and dropped down into the racks. All the racks were on wheels, and we could literally roll them back and clean underneath them and roll them forward and keep them all in line. It was just a beautiful, beautiful system, the fiber lasers in there.
KELLER: What did you propose to do by building the fiber in a small market like that?
HILLIARD: Well, we tied these two systems together. There were two systems of over about 3,500 subscribers each. I put in a synchronous ring in there. What my intention was to do was to bring in internet and HITS. But I had this crazy theory that the deeper you can get your fiber into your system, the less problems you're going to have with your electronics, the closer you're going to be to your customer, less ingress you're going to have through your low frequencies. The more fiber you put in, all of a sudden your problems disappear. So that's the reason we did it. I'm redesigning, redoing my cable system up in Laurel right now.
KELLER: You still own the same system. That's right; you said you didn't sell any.
HILLIARD: SA is designing it for us.
KELLER: Scientific Atlanta.
HILLIARD: Yes. I got a hold of my rep down there and he said, "How deep to you want to go?" I said, "I want a node for every 150 homes. I want to go really, really deep with fiber." You know, the biggest expense with fiber is the construction. The cable is not that expensive, if you think about it. Once it's in, they keep upgrading what you stick on the ends of it, so to redo it is no problem at all. So when I get done with it, I want to put in about twice, three times the number of fibers I need so that if something might change in the future, I can have it.
KELLER: Did your system in Laurel require rebuilding?
KELLER: You're just adding fiber, then, to the existing system.
HILLIARD: Yes, and we're going to upgrade the electronics.
KELLER: How many subscribers do you have in Laurel?
HILLIARD: In Laurel we have about 1,600 – 1,700.
KELLER: That's probably one of the smaller markets that has the fiber system.
HILLIARD: Well, but no. The smallest market in Big Timber, Montana. It's got a synchronous ring in it, two-way. It's got 600 subscribers.
KELLER: That's your system also.
HILLIARD: That's my system.
KELLER: What are you doing with it?
HILLIARD: We're tying it in. We're going to put in a Cisco router for our internet. We're going to put in HITS. We're going to go first class with it, all the way, a 750 two-way. I'm crazy, but I made a statement one time, "If you're ever going to get to the altar, you've got to be a beautiful bride." So I'm trying to make all my cable systems beautiful. I'm at that age where I'm thinking of retiring.
KELLER: Then why did you sell the ones down in Texas?
HILLIARD: To be very honest with you, they made me an offer I couldn't' refuse.
KELLER: I figured that was it.
HILLIARD: We had just completed it. We hadn't rolled out the internet yet. We hadn't rolled out HITS yet. It was just finished. They made us an offer.
KELLER: Time Warner?
HILLIARD: Time Warner.
HILLIARD: Beaumont, Texas. That used to be a TCI thing. Then they combined with ... TCI combined with Time Warner and Time Warner took it over. Then TCI sold out to AT&T. That's a story in itself because they wanted to buy me. They redid the price. We all agreed to the price, but they didn't know who was going to buy me.
KELLER: Just at that time.
HILLIARD: At that time because they didn't know what partnership or what entity was going to buy us. So this thing got drug out for a long time. We ended up with a company called TWAN – Time Warned Advanced Newhouse Communications.
KELLER: Newhouse? That's right. Newhouse would be in there.
HILLIARD: Advanced Newhouse Communications. When we went to the city councils, we had to get them to approve, pre-approve, the merger of AOL/Time Warner and the assignment of the franchise internally from TWAN to Texas Cable Partners Limited, I think it is. Anyway, that partnership is AT&T and Time Warner.
KELLER: Did the city council people understand it?
HILLIARD: Oh, yes. Everybody and one particular lawyer did. He was the lawyer for the city of Lumberton. He was really, what you would call, a dog in the manger. He could find every reason in the world not to approve the transfer. The transfer was all right. They didn't like these mergers. They didn't like these assignments. Well, between the first and the second reading of the ordinance of transfer, AOL got their approval to take over Time Warner, so we had to modify it. That got us beyond that problem. They had to put in specifically that it had to be a partnership controlled by Time Warner. Well, Time Warner runs it all, you know. But this guy – he loved to play the country bumpkin. My attorney just pulled out his hair. He said, "This guy's not an attorney." But it was a lot of fun and very frustrating because this guy would not call Time Warner and ask them what they wanted. He wouldn't talk to them. They had to call him. He just was delighted that the Time Warner attorneys at Holland and Hart out of Denver had to call him. He would be busy or they could call him tomorrow, but he would never call them. My attorney kind of got in good with him, and he, at one time in the conversation, said he was a pirate. So my attorney always would call him and say, "What's an old pirate up to today?"
KELLER: Let's talk a little bit about some of your more memorable experiences in operating small systems.
HILLIARD: That's maybe where we'll run into a problem. I think I have Alzheimer's setting in. I don't remember all the things I ever want.
KELLER: Some of the things you do remember that you either had great memories, fond memories of, or not so fond memories of.
HILLIARD: Probably one of the fondest memories, or most hilarious memories that I have, is that I got called on the carpet by a little city council down in Forsyth, Montana. They wanted me to come down and answer some questions from some of their citizens. I didn't know where I was going to be so I took my attorney, Jim Murphy, with me. We drove down to Forsyth which is about 100 miles east of Billings there. Through the process of the whole thing, it seems that on Nickelodeon, in their teaching little children numbers and everything else, some family had determined that we were bringing Satanic messages to their children and they wanted to know why. They just read us over the coals.
KELLER: What did you say to them?
HILLIARD: I said, "I have no idea about this. This is an educational program. We think Nickelodeon does a marvelous job. We've have nothing but high praise for Nickelodeon from anybody. You're the first people to ever say anything about it." Anyway, through the whole process, they said, "You'll have to take it off."
KELLER: Who did? The council did?
HILLIARD: The city attorney.
KELLER: The city attorney?
HILLIARD: The city attorney for the city of Forsyth told us we were going to have to take this thing off.
KELLER: Because one family complained?
HILLIARD: That one family complained. I said, "Just a minute. This is where we run into a problem because we're independent operators, and we operate under the First Amendment to the Constitution. You can't tell us what we can put on our cable system." This guy jumped up and said, "I don't care what it says in the Constitution. Here in Rosebud County," (that's where Forsyth is); "the First Amendment does not apply!" I turned to my lawyer and I said, "Jim, tell me about this. Why doesn't the First Amendment apply here?" He said, "Jeez, that's news to me too."
KELLER: So you know, no one ever called him on it – that's the only reason.
HILLIARD: That's right. But we never did anything about it. We still operate there. The whole idea that the First Amendment didn't apply was hilarious to me. But you don't run ... You run into these weird things at the darndest times in your cable business, and it's usually when you're dealing with city councils.
I guess my most memorable council experience was in the city of Missoula because our little cable system in Rattlesnake Valley was part way in the city and part way out of the city so we needed a franchise to operate inside the city. This is before franchises ever came into existence. We, prior to this just operated under just a city license. They decided that we all needed new franchises so they brought in a consultant out of Portland. He was an interesting guy because his training was avionics engineering. How he got into the cable consulting business, to this day, I don't know.
KELLER: Do you remember his name? It's not important. I just wondered if you had or not.
HILLIARD: No, I don't remember his name. If I would have had a chance to talk to Jim, ... Jim Murphy, my attorney's here. But this guy was something else. It was all obvious what the consultant was for – cross the city's palm with green and you can get your franchise. Well, we argued over the rate and everything else. Then they wanted to create a public access channel. They wanted us to buy all the equipment for the access channel. They wanted us to pay the salaries for everybody in the access channel. I said, "No – can't do."
KELLER: How many subscribers did you have there? How many then?
HILLIARD: Then about ...
KELLER: This would have been '84 or '85.
HILLIARD: In '84, '85, we probably had 1,200.
KELLER: Oh, boy.
HILLIARD: But we were dealing, at the same time, TCI. They were trying to get us both, see. TCI said, "Rather than fight it, here's the money to buy your equipment and everything else. We'll pay you the franchise fee," and went on. So we went round and round. I just refused to buy them all kinds of equipment. I'm going back for a renewal on that same franchise and the city's saying, "Well, we want to upgrade all the equipment in our public access channel." I'm not too excited about this because between TCI and ourselves, they take in about $150,000 a year and they pay out over half of it to the administrator of the access channel. That's almost more money than I'm making running my own systems. Of course, the city of Missoula had to shut down their public library last summer because they didn't have enough money to run the public library. But they sure have enough money to spend on this access channel.
KELLER: Do they use it?
HILLIARD: Does who use it?
KELLER: Missoula. Do they use the access channel?
HILLIARD: They show the city council meetings, and they have a number of preachers that use it. Other than that, it's mainly alpha/numerical notice of meeting type thing. I don't think it's very well used. What's happened since this whole thing started in Missoula was the university there got a PBS channel. They have a nice PBS operation there, excellent, well-done operation. The one in Missoula is tied to the one in Bozeman. They got that tied together with fiber, and they run them as kind of a single entity.
KELLER: You carry it on the system though?
HILLIARD: No we don't.
KELLER: They don't give you direct ...
HILLIARD: We carry it on the system in Missoula but no other systems. We carry it there, yes. And we carry the Spokane PBS there too because they have a satellite.
KELLER: Does the Missoula system give you a direct feed to your headend?
HILLIARD: No. We take it off air.
HILLIARD: I would like to have a direct feed.
KELLER: Have you ever asked them for it?
HILLIARD: No, we've never done that. We have a direct feed from the TV stations there through the now AT&T operation, but because our systems butt up against each other, we bring their signal right into our headend and then out again. We have our own satellite dishes, and we are inter-tied with them. We get this public access channel through their system too. It's kind of a convoluted arrangement.
KELLER: But you don't actually serve the city of Missoula, do you?
HILLIARD: We only serve the Rattlesnake portion which is north of the Interstate [highway] there. The main body we do not. But our franchise allows us to.
KELLER: So you have a franchise for the entire area?
HILLIARD: For the entire area, and they have a franchise for the entire area also. We are on a good relationship. We've always had a good relationship. We don't step over their line, and they don't step into our line. The guy that used to run that – Steve Proper. Steve is now AT&T's director of franchising and administration out in Salt Lake City. I just spoke to Steve not more than a week ago. We both have to go back to the city council for renewal of our franchise.
KELLER: They both come up at the same time?
HILLIARD: Yes. We have a very peculiar franchise there. We have a one-year franchise. They have a 15-year franchise. Ours is renewed every year -
HILLIARD: - automatically.
KELLER: I didn't think the '84 Act allowed that. I thought you had to have a termination date on your franchise.
HILLIARD: Well, it's a yearly franchise. It's a termination date. It comes up in February of each year. To be honest with you, I've not been to the council meetings when they voted on that thing for the last five or six years. It's just automatically renewed. See, in the state of Montana, we didn't have a franchising ordinance. So we operate in all of our cities on a city license rather than a franchise. Only in Missoula's do we operate under franchise. But this is going to be in question now too because the city of Billings decided that they wanted to raise revenue, and we've got a couple of telephone companies over-building the Qwest system there. As a result, the ...
KELLER: You mean the telephone system. Qwest does not have a cable system in ...
HILLIARD: No, no. They have the telephone system. There are a couple of other ones going into it – Avista is going into there. Montana Power's telephone system called Touch America is building there. So when we're all done, we'll have three telephone systems in the city of Billings. As a result, they've had to cut some streets and do some things like that. So the city council decided, "Hey, this is the same as cable TV. We should charge them right-of-way access." So about two months ago, they imposed a 4% franchise fee on the gross revenues of these three telephone companies – not only the telephone companies, but of the gas company and the power company and all the utilities.
So Montana Power Company and Montana Dakota Utilities, the gas company there, have filed suit against them under the logic that the franchise fee is based on a percentage of sales and if you don't take gas or you don't use electricity, you don't pay this. Same way if you use Qwest but you don't use these other ones, you don't pay this franchise fee. It's a lot like cable. If you get your TV off over the air or if you get it from MMDS, or if you get if from DBS, you don't pay a franchise fee. So basically it turns out to be a sales tax, and in the state of Montana, it's illegal to charge a sales tax because we don't have a sales tax. So now they're taking this to court and saying, "It's illegal for the cities to charge a sales tax."
KELLER: Don't the telephone companies and the power companies operate under a Certificate of Convenience and Necessity issued by the state and are subject to the Public Utilities Commission up there?
KELLER: That ought to be an interesting case.
HILLIARD: Yes, but now they put this over on top of them because they say, "We are local rule over our particular entity so we can impose these requirements on these people." It'll be interesting to see. In the cable industry, it's so commonplace to pay franchises that we never ever tried to fight it. We are allowed to pass through those costs so we do. Power companies and telephone companies and gas companies have never run into this before. So we have this case being heard up there. It's going to be interesting.
KELLER: How did a small town boy like you get into Harvard, and what was your experience back there?
HILLIARD: Well, I didn't get into Harvard actually. I went to one of their advanced management classes.
KELLER: How long did it last?
HILLIARD: It lasted for three weeks for three continuous years. I have never, ever enjoyed anything more than I did that. If they would have allowed us to continue every year, I'd still be going back there. It was more fun. You were in among people that had their own businesses. I was in a class with just little over 100 people from 31 different nations in the world. It was just fascinating. Harvard is where it is because of its professor. They have the most marvelous professors. These guys are top flight. When I went through school, went through college it was just drudgery. You had to do this and you had to do that. This was totally different. It was all exciting. It was about ... everything was business. That's what I enjoy.
HILLIARD: These professors led you, led the class. They would throw out questions and then you would respond to it. You'd hear from somebody and it was really interesting. We had a gentleman from Spain, and he wanted to tell a joke. He said, "Forgive me for my poor English" and everything. But he told a joke and it was really good. But everything was that way. It was just marvelous. These people are brilliant people that I was there with. The professors guided this thing beautifully.
You do everything by case study there. We came up with a personnel case study about the cable industry. This was a continuing case study that went over about four or five periods. Before we started, the professor got up there and he said, "Les, you cannot ask a question, and I don't want you to talk to anybody else about this." So this was a personnel thing. Basically they put it in the Minneapolis area. It was about this guy who had been hired to do all this stuff, get the cable business going. To hear everybody talk about this guy and how after he tried to get everything through the city council, meet all the obligations that his bosses had committed to the city council and everything else, we went through all this. He finally got to the end of it, and they fired the guy. They got rid of him. So that was the end of the discussion. They said, "Okay, this is where the case ends. What do you think? Was this guy any good? Did he deserve to be fired? Did they just use him or what was it?"
So there was a big debate about it, and they finally turned to me and said, "Les, what do you think?" I said, "I thought he did a marvelous job. This was during the franchise wars where you promised the moon, and you got the franchise. Then you start building as fast as you could and then you had to renege on some of the things, the promises you couldn't make or fulfill. The guy did a great job. He did everything I would do." So later on they said, "Yes, as a matter of fact, he got out of the cable business. He went to the city of Washington, D.C. and went into real estate and made literally millions of dollars." So the guy was not a dummy.
KELLER: So he was an actual man?
HILLIARD: He was that. Every single case study that Harvard does is a true and honest case study. It's really interesting. None of these studies that they do at Harvard are any creations. Now they may change a name to protect somebody. They may change some dollar amounts not to disclose the dollars that a business did. But the actual case is an actual happening. What's interesting about Harvard, you do these case studies, you debate these case studies, and then when it's all over, this is the end of it. Then they will interview the person or the company CEO that the case study was written about, and they'll show you what this guy actually did. They allow us to determine what the guy should have done, but then they show you, in an actual interview, what he did do and how he did do it.
KELLER: That Minneapolis system was a case study in itself with franchising battles up there.
HILLIARD: Oh, yes. And I think that's where it was arranged. They just said Minnesota. I just assumed it was either Minneapolis or St. Paul or some one of those around there.
KELLER: Minneapolis was a real donnybrook.
HILLIARD: Oh yeah. Harvard is a marvelous place. I've never enjoyed myself so much.
KELLER: Do you like Boston?
HILLIARD: I love Boston. What a beautiful city that is. We were there long enough that I got to learn how to run a scull and get out there on the river and paddle up and down the river there. I went over to the Weld Boathouse there at Harvard, and they taught us how to do it and put us in a scull and got me out there on the river. You know, you don't do too much of that in Billings, Montana.
KELLER: No. There's not much water up there.
HILLIARD: It's fun. It really is.
KELLER: What are you going to do now for the remaining years that you're going to work?
HILLIARD: I don't know. I'll be very honest with you. My cable systems have been listed. But I'm treating them as if there's not going to be a buyer, and I'll be back here next year as a cable operator and going forward. I'm 66 now, and I've sold off my Texas operation, and I plan to sell off my Montana operation. I hope to go into retirement.
KELLER: AT&T is a natural for your Montana system.
HILLIARD: That's true, but AT&T has Montana and Wyoming on the block. They've been ...
KELLER: Well whoever owns it; it's a natural for you to pick up that one in Missoula.
HILLIARD: All those around there. We also own the cable system outside Spokane, Washington that serves the Air Force base there. The AT&T and our system have fiber that meet at the Sprint point of presence. Yes, that's a natural for them too.
KELLER: Then what are you going to do when you stop working?
HILLIARD: I have two sons. My oldest son is going into the coffee business – coffee kiosks – those little kiosks. He wants to get in that business. He's out in the Portland area. I'll try to help him in any way I can. My youngest son works for HPC Puckett in the brokerage business.
KELLER: San Diego?
HILLIARD: No, he's actually in Topeka, Kansas. That's where Tom started and most of his staff is in Topeka. My son is there on an internship. I told him that I wanted him to learn how to buy and sell companies, not necessarily cable companies, but to do the due diligence to run the mathematics, to find out just how you go about ... You can buy cars and sell cars, but buying businesses and selling businesses is a completely different ballgame. There are a lot of details you've got to know. There are a lot of legal things you have to go through. I said that there's no better way to do it than to actually get in and get involved in it. So he was involved in the Texas operation. He's involved in the preparing of the book for our Montana systems. But he's doing a lot of other stuff.
KELLER: He's going to be the broker, obviously.
HILLIARD: Yeah, right.
KELLER: Les, we're getting right near the end of the first hour, and I think this may be a time to wrap it up. Anything else you want to add to it before we do so?
HILLIARD: I think cable's been a marvelous industry. I really, really do. It's been good to my family. Both my brothers have been in the business for years and years. My sons have labored in the business. I started out wearing jeans. My wife reminded me just a few minutes ago where one time my insurance agent said, "Les, you must be doing better. You're not coming in here with dirt on your jeans. You're wearing some decent clothes for a change. It's been good. It's a marvelous industry. There are a lot of marvelous people in it. I had a beautiful introduction to the business through my father's association with Gene Schneider and Bill Daniels and a lot of people in the cable business – of which he never got into. But he knew these people and they were his friends. They treated me royally throughout the years. I cannot find fault with our industry at all. We've been generous through our CTAM and through all the different organizations. Look at what Dan Ritchie has done down there at the University of Denver and the Cable Museum and everything else. Look at all the money that Bill Daniels has given away over the years. It's been a very generous industry, not only to each other, but to America. I feel very fortunate that I've had a little part of it or been a person on the side-lines watching.
KELLER: Let me say "amen" to that. This oral history has been brought to you through the courtesy of a grant and donation from the Gustav Hauser Foundation and is part of the Oral History Program of The National Cable Television Center and Museum. I appreciate it very much, Les. Thanks very much.
HILLIARD: Thank you.