Interview Date: Tuesday September 12, 2000
Interview Location: Boston, MA
Interviewer: Steve Nelson
Collection: Hauser Collection
NELSON: Sid, thanks for taking the time to join us today for our oral and video history project. I should point out that ten years ago you did an oral history with Strat Smith in great detail, and that resides in the archives of The Cable Center, so people may want to check that out. We're here in your home in Back Bay Boston, which is really where you started. So why don't we just go back and then talk about your earlier years in Boston.
TOPOL: Okay, well, I was born about two miles from here in Dorchester, and pretty much my career starts at Boston Latin School, which as you know was founded in 1635, the oldest public school in America, the original magnet school. Several signers of the Declaration of Independence and the Constitution, Benjamin Franklin is a noted graduate and attendee of Boston Latin School.
NELSON: As is Sumner Redstone.
TOPOL: Sumner Redstone actually was a class ahead of me, right. President Kennedy's father went there.
NELSON: And a tough school.
TOPOL: A very tough school. Leonard Bernstein's a graduate. It was originally a school for Boston Brahmins. It became a school for immigrants from Europe at the turn of the century, noted for its very tough curriculum. I think in my junior year I studied English, French, German, Latin, and mathematics all in one year. Very tough to get in to, very tough to stay in. Class of '41.
NELSON: So you made it through Boston Latin.
TOPOL: Made it through and was honored to be "Man of the Year" I think in 1981 or '82, which was a thrilling experience.
NELSON: Alumni award years later. So you got out of Boston Latin and where did you go then?
TOPOL: Well, I went off to the University of Massachusetts in Amherst but the war came along very quickly. I ended up studying meteorology at the University of Michigan. That program ended very quickly.
NELSON: Was this a military activity in meteorology?
TOPOL: Yeah, it was a six month program. We were supposed to go become meteorologists but they had too many meteorologists, so I switched to communications, got my commission at age 19 at Yale in communications, had some good grades and ended up at the Harvard MIT radar school where I became a radar officer.
NELSON: And this was still part of your military training. It seems like it went on quite a while.
TOPOL: Right. Well, I ended up in Japan in the army of occupation and was involved in very early microwave links, point-to-point microwave, the early pioneering VHF, four-channel, voice channel – vacuum tubes could fill this room. You could put it in the size of a coffee cup today.
NELSON: Used for military communications?
TOPOL: Yeah. It fed voice and radio teletype. I remember a big thrill talking to a buddy of mine who was in the Philippines and I was in Tokyo by radio teletype in those days. So it changed my... I was a chemistry major before the war and got involved in physics and electrical engineering, did graduate work at the University of California at Berkley, spent a year at Naval Research Lab, but wound up at Raytheon for a summer job in 1949 and spent 22 years with Raytheon Company.
NELSON: Well, tell us, what was Raytheon in 1949? What kind of company was it?
TOPOL: Oh boy, it was the build down from World War II. I think when I joined the company it was doing $50-60 million in those days. What is it doing, $14 billion today? I don't know. But Raytheon was a pioneer in radar and in microwave tubes, etc. I came in and did some very early work in point-to-point microwave. There I picked up... by this time we were at much higher frequencies, C-Band, and eventually K-band, built some early microwave links for MCI from Chicago to St. Louis, built the first early four IntelSat stations, big 100-foot antennas.
NELSON: And when was that? When did that happen?
TOPOL: We're up to the 1960s now.
NELSON: With IntelSat?
TOPOL: With IntelSat. At Raytheon I spent six years in Europe for Raytheon where I built some solid state microwave links, early solid state microwave links, came back, and as I mentioned built the first microwave connection between Chicago and St. Louis and built the first four large 100-foot earth stations for IntelSat, and subsequent to that built the first three TVROs for ComSat.
NELSON: And what year was that?
TOPOL: That was in the late '60s. Sorry about that telephone call there, but we're at our home and I don't know whether that's my line or my wife's line but she probably has the phone turned on. By the way, my wife apologizes for not being with you today. She just had some surgery on her teeth so she's not able to be with us, but was with me all the way...
NELSON: Through Europe?
TOPOL: Through Europe. We took three small children – 2, 5, and 7 – to Europe and helped founded a company called Cellania in Rome, which was a joint venture between Raytheon and Finn Mechanical where as I mentioned we did the solid state microwave links, but then returned and headed up a communications division for Raytheon in Norwood, Massachusetts where we did pioneering work in digital communications and in satellite communications.
NELSON: Was that digital microwave? Was that the early...?
TOPOL: Yeah, we built early digital microwave, very early digital microwave, but probably the key thing was building these four big earth stations for IntelSat. I went to Hawaii, California, West Virginia, and Puerto Rico.
NELSON: So was this a contract issue by IntelSat that people bid on?
TOPOL: Yeah, actually ComSat represented IntelSat in those days here, and they put out that contract and we won that, and then subsequent to that were the early days of TVROs. I may have been the pioneer in the word TVR – Television Receive Only. ComSat put out a bid for three of them – big 30-footers, big 10-footers, vacuum tubes. We won that at Raytheon.
NELSON: What kind of cost was involved in putting in those things in those days?
TOPOL: We bid those at $250,000 each and we were the low bidder. So that gives you an idea of where it was in the cost in those days.
NELSON: What were they using them for? Not for commercial television then?
TOPOL: This was still in the days of who's going to own domestic satellite. Clearly international communications, 100-footers, 85 countries started to move forward and built and international system.
NELSON: Wasn't there some issue at that point about the geostationary satellites versus the whole array, low earth orbit satellites?
TOPOL: Yeah, there was some question in those days whether synchronous satellites could actually be used. Arthur Clark, in 1945, predicted that you could put a satellite out 22,300 miles and it rotated in synchronism with the earth and three satellites would cover the earth. That was the basis for IntelSat thinking. It wasn't clear whether the distance and we were worried about echoes and echo cancellation and all that, but in the end synchronous satellites won out and ComSat had decided to build those four big earth stations, which they did, and that became a successful international communication system with big 100-footers around the world. Around this time the thought was, hey, wait a minute? Why can't we use satellite communications for domestic use? Indonesia, Canada, Russia were the first ones who thought about domestic use of satellite communications.
NELSON: We're starting to talk about application of satellite for television delivery, but before we get that far, you were very involved with microwave delivery of TV signals going way back to the very early 50s.
TOPOL: Long before the use of satellite for domestic television, we had a big build out of microwave communications which was led by AT&T.
NELSON: And this was to feed TV distant signals to the CATV systems.
TOPOL: Well, even before that, you know, as stations went on the air in the '50s and '60s, a nationwide network was built up by AT&T, but in addition to that, other common carriers started to build microwave, notably TCI had one of the largest national networks and they were a big purchaser of microwave equipment which we at Raytheon were a big supplier. I guess another big supplier in those days was Collins Radio, and a national network built first by AT&T and other common carriers was put into place.
NELSON: And this really enabled the CATV systems who used them to go from 2, 3, or 4 channels that they could pick up with an antenna to start to report distant signals, which is a major change in the business.
TOPOL: Right. During this period that cable television was born in the '50s, cable television in those days was community antenna television – people put an antenna up on a hilltop and picked up off-the-air signals and all the programs that cable television utilized in those days were the same programs that were transmitted off-the-air by broadcast stations. As we mentioned, the broadcast network was built out mainly by AT&T so that you had a nationwide, national microwave network which was built out mainly by AT&T. As cable systems started to develop, there was a desire for more and more programming, so distant signal importation became the next way for cable to create programs, always the same programs that the broadcast stations had. We built a lot of microwave systems to bring programs, say from Denver up to Montana, etc., and this was the whole network of distant signal importation.
NELSON: Sid, when this microwave network was built out for moving around distant signals, I guess originally the broadcasters had used it, but when the CATV system, so-called, started importing distant signals, what was their response to that?
TOPOL: You know, I don't think there was a problem with distant signal importation. The television network the broadcast stations had built up throughout the country, AT&T followed them, built a microwave system to feed signals to every broadcast station in the country, networks got built up – ABC, CBS, NBC, originally there was a Dumont network which left – and we had network feeds feeding all the broadcast stations throughout the country. Eventually PBS got built out. By the way, PBS was the first network to use satellite delivery of their signals to all their stations. During this time, cable television grew and originally there were 3 channels, 5 channels, 7 channels...
NELSON: Just whatever was in the local market?
TOPOL: Whatever was in the local market. Some creative cable operators understood that if they could bring in signals from, for example if you were building a cable system in Wyoming, if you could bring the Denver stations up to Wyoming you could increase your subscriber count here.
NELSON: Or bring the Cubs games on WGA down to St. Louis, for example.
TOPOL: Right. There were several, known as other common carriers that had built out this distant signal importation, but it was basically led by TCI. You had something called WTCI and built out this network, but cable television really didn't become an economically sound business just...
NELSON: On the broadcast signals.
TOPOL: On just bringing in the broadcast signals.
NELSON: And that of course gets us back to where we could divert it from the satellite delivery. I just wanted to get that microwave history, but now you're working with ComSat, IntelSat, you build the earth stations – this is the late '60s.
TOPOL: Coming back to Raytheon, first we built the four big 100-footers, then we built the 3 30-footers, and then the whole fight went on of who's going to own domestic satellite communications, and as we said earlier other countries already had started a domestic satellite communications, notably Indonesia and Canada on using synchronous satellites. We had already given up then on low flying satellites and synchronous satellites became the way and it became obvious that the best use of synchronous satellites was television transmission where you could put one signal up and it could be received by hundreds or even thousands of what became TVROs – Television Receive Only. So now we're kind of up into the period of the early '70s. Cable was built out, it was still picking up television signals, either locally or distant signal.
NELSON: But all of this was still on microwave basis.
TOPOL: The concept that anybody who was technically sound and financially capable could built a domestic satellite system, neither AT&T nor ComSat got the monopoly on this. So we reached the stage now where various people were going to build domestic satellite systems. WTCI, RCA, Western Union, AT&T, ComSat.
NELSON: Are you still at Raytheon during this period?
TOPOL: Kind of transitioning from Raytheon to Scientific Atlanta and picking up Clay "Tom" Whitehead's open skies policy at the Office of Telecommunications Policy. It was a wide-open deal. A very important thing happened at this time, a nice young many by the name of Chuck Dolan who had the idea that if cable television was going to go anywhere it was going to have to have its own programming. He had some systems in New York and Long Island and he had the idea of bringing Madison Square Garden events live, uncut, no advertising where he would charge. He also had the idea if we could bring movies uncut we could have a business. He founded something called HBO, Home Box Office. This was still a part of Sterling Manhattan, not yet owned by Time, Inc. I remember having a meeting with him where he was asking me questions about how microwave could do this and I was saying it's going to be really very difficult because to bring microwave to all these headends, which were in remote areas, and getting the frequencies and getting the towers was very difficult. Just around this time he sold his whole system to Time, Inc. and another nice young man, Jerry Levin comes into the picture. Jerry, I think, was a young attorney and they bought out Chuck Dolan. He went off to Long Island with a few small systems, which subsequently became CableVision, and Jerry Levin took over HBO.
NELSON: Now tell me, before we get ahead of this, how you transitioned from Raytheon and found yourself at this small company Scientific Atlanta because you went from something that was a very well established company, although probably the defense business was the biggest part of their business, to leaving your home in Boston and winding up in Atlanta with this kind of small company.
TOPOL: In 1969, Raytheon got a letter from a man by the name of Justice Martin, who headed up Robinson Humphrey, was on the board of Scientific Atlanta, wondering if Raytheon was interested in acquiring Scientific Atlanta.
NELSON: And how big was Scientific Atlanta at this point?
TOPOL: 13, 14 million dollars in about six different businesses. All kinds of different businesses, including meat packaging machines by the way, and so I was asked by Charles Francis Adams, who I got the call to go down...
NELSON: And he was the CEO of Raytheon?
TOPOL: The CEO.
NELSON: And a descendent...?
TOPOL: Of the original John Adams and John Quincy Adams.
NELSON: I just wanted to bring that in with your Boston Latin story.
TOPOL: Yeah, I think maybe one of his grandfathers or great-grandfathers was a Boston Latin schoolboy, but clearly a Harvard... oh, they were all Harvard men. And so I went down with a team of guys to look at Scientific Atlanta and I found this broad array of products of little, tiny activity going on in microwave and some ideas in satellite and some ideas in cable, and I came back and said, gee, I don't think this is for us. I was then running Raytheon's communications division.
NELSON: And what was the scale of that operation?
TOPOL: We were probably doing maybe 30 or 40 million – military digital communications, point-to-point microwave, I was the supplier to these other common carriers, a big supplier to TCI at the time, and CPI down in Texas. I can remember all those names. I can remember those names! In any event, I came back and said, gee, this isn't for us. So about two days later I got a call from a headhunter – was I interested in being president of a company somewhere in the south? – and I said, no, no. My kids were in high school, etc. In any event, Scientific Atlanta decided to become one of these other common carriers and build microwave systems in Florida, which competed with Monty Rifkin, by the way, who also had a microwave system in Florida, and I turned them down. We stayed in touch. I became a supplier of microwave equipment to Scientific Atlanta, we stayed in touch, and two years later I had dinner with the then chairman and president Glen Robinson, appeared on Route 128...
NELSON: He came up to see you?
TOPOL: He came up to see me. He had not yet found a president.
NELSON: For two years!
TOPOL: Yeah, for two years, and invited me to come down with my family and kids, which I did. This was two years later, the kids were a little older, the situation was different at Raytheon. To make a long story short, I agreed to come down as president and showed up in December of '71 with two girls that I took out of Newton High School here, which was not very easy, and left one of my daughters at Brown, and my wife, a great support and help, agreed to come down, and the rest is history. I sold off a bunch of stuff at Scientific Atlanta in the early days, got out of the microwave systems – actually sold that to Gene Schneider, by the way, when he was at LVO Cable, probably a fact that very few people know. And Ed Taylor, at that time, he and I convinced Ted Turner to go into satellite communications. But, that's how I got down here. So I arrived December '71, two girls went into a very fine school – Westminster – and bought a house, moved down there, and started to shed some of the old stuff of Scientific Atlanta, and at that time I had the idea that I was going to build a major telecommunications and instrument company modeled after Hewlett Packard.
NELSON: Now is this an idea you had when you went down there, or did it take a while for you to figure out what to do with this thing once you got there?
TOPOL: What appealed to me was I was middle management at Raytheon, which is the worst place in the world to be, is middle manager. You get pressure from the bottom, you get pressure from the top, and besides, Raytheon just wasn't interested in telecommunications. It was a radar and missile company, did very well in the Hawk Missile and the Patriot Missile and was a great company. They would then and through many ups and downs even today have made some efforts to consult with them and get back in telecommunications. They just are a military government company. So when I got down there it was a big thrill because Glen was kind enough to give me a free hand and I started to build some strategic plans, and it was clear to me that the way to develop pay television in America was the cable satellite connection. So I took my experience of the three TVROs that I built for ComSat, delivered for $250,000 each, they put them in the warehouse, they never used them – all vac and tube stuff – and said, hey, if cable television is going to develop its own programming it's the satellite that's going to do it. So now we're in the early '70s and Hub Schlafly, God bless him, who was then running TelePrompTer, he had the idea that I'm going to build a transportable satellite earth station and I'm going to experiment with this idea of pay television, etc. I learned that he had a budget for $100,000, I bid $100,000, he couldn't believe that Scientific Atlanta would be interested or capable of doing this because we were not... we were a little teeny-weeny company no one knew anything about. We built off-the-air antennas and headend equipment a little bit and a bunch of other stuff, but I convinced him, along with a nice young man who was working with me then, Howard Chrisman, that we should be the supplier and we won the job, we built this transportable earth station in 90 days for $100,000, it cost us $150,000 to build it, and schlepped it out to Anaheim in 1973. This is a key event. Anaheim 1973, National Show.
NELSON: It was in Anaheim?
TOPOL: It was in Anaheim but it was the National Show in the spring. By that time Chuck Dolan was in Long Island with his little systems, Jerry Levin was taking over HBO and had ideas of putting on live events and movies, and there was a fight at that time scheduled at 10:00 in New York – Ernie Shavers and who else? [Editor's note: Jimmie Ellis was the other fighter] Jerry Levin will tell you, I can't remember. We were in Anaheim and the idea was to demonstrate how a live fight could feed cable systems. 7:00 in Anaheim, Jerry Levin's now running HBO, rents a suite, beautiful hors d'oeuvres and drinks, we're going to watch this fight live...
NELSON: Invite everybody in.
TOPOL: Invite everybody in. We got to get the drinks and the hors d'oeuvres, we come back to watch the fight, it's all over. One guy knocks the other guy out in the first two minutes of the first round. I've told that story 100, 200 times already, but that little fight made billionaires in the cable industry.
NELSON: Well, people saw the potential. Hopefully some of the fights would go ten rounds.
TOPOL: The potential of carrying live events, which led to pay-per-view and the World Federation of Wrestling and the Olympics and everything else like that, plus the idea of uncut movies which was a big deal. This was the spring of '73, Hub Schlafly is moving this transportable around the TelePrompTer system, the only things you could pick up at that time were Canadian programs because the only satellites that were launched then were Canadian domestic satellites. By this time Western Union gets very interested domestic satellites, and HBO gets very interested, and we kept talking about this. I had a demo in the front lawn of Scientific Atlanta. The next major event was the Thrilla from Manila.
NELSON: This is now, what?
TOPOL: This is now... we're talking this thing from '73 through '74, picking up Canadian programs, which no one was interested in. I kept inviting people to Atlanta to say, look, this is the way pay television was going to go but at that time we were still bicycling tapes around with little $25 scramblers, and I remember...
NELSON: I want to understand everything. Before the fight there wasn't HBO, but basically tapes were being bicycled.
TOPOL: But HBO did do the Madison Square Garden, which they brought in via microwave to Manhattan, they did do tapes and they bicycled it around. Everybody kept saying to me, "Sid, you've got a great idea, it's a great idea, but where's the programming going to come from?" Where was the programming going to come from? In those days, when we had a show that show was dominated by Jerrold...
NELSON: A cable trade show.
TOPOL: A cable trade show. Jerrold dominated the show. They ran the one single big cocktail party that everybody went to, okay? There were no programmers at the time. We were picking up off-the-air signals, either distant signal importation or local signals, and that was it.
NELSON: So it's a hardware business?
TOPOL: It was a hardware business at the time. So now the concept of movies and sports comes in and the question is how to deliver it, and we had proven satellite was a way to deliver it, and HBO made a decision to go on the satellite, the RCA satellite, and I was able to convince Bobby Rosencrans and Ken Gunter to buy some earth stations. I think they bought seven earth stations.
NELSON: And what were they running at the time?
TOPOL: With UA Columbia, I believe it was UA Columbia, okay? And then Monty Rifkin had a system over in Jackson, Mississippi and he was running of course ATC, which was a major, running it out of Denver, and we kept talking this thing up as a way to go, etc., etc. One of the major MSO people was worried, what would happen if the satellite falls out of the sky? No problem, I'll take the equipment back. And then the other big question as I mentioned before was where was the programming going to come from? Well, this brings us up to '75, HBO decides to go on the satellite, Bobby Rosencrans has this Florida system, Monty Rifkin has his Jackson, MS system, we have a station in the front lawn of Scientific Atlanta. It was the time of the Southern Show, the Southern Cable Show, the Thrilla from Manila, 25 years ago this month.
NELSON: And here we are, we're in September...
TOPOL: I think it was October 1, we found out it was October 1, and we bring the fight over, the Ali-Frasier fight. Did that go 15 rounds? I'm not sure. I forget. Anyway, we bring it over via satellite, it's then sent back up again by I think RCA at this time, and it goes to 3 earth stations – Florida, Mississippi, and Atlanta, Georgia. Big hit. The rest is history.
NELSON: And that was it. It was just a small distribution at that point.
TOPOL: Yeah. And the rest is history. People saw that, saw the potential of that, and we started to build earth stations, and we couldn't build them fast enough. 10-meter, 34 receive onlys that... Bill Bresnan now is running TelePrompTer, gives us an order for 50 of them, and that launched this business and it really took off.
NELSON: So there was an instantaneous reaction from the Thrilla from Manila to we've got to move on this.
TOPOL: So the answer to the question of where is the programming going to come from got answered relatively early – movies. We're up to our... we've got plenty of movies, okay? We can show this movies uncut and we can charge for them, and there are plenty of sports events that we could probably get in on that aren't covered by the broadcast networks, hence the birth of ESPN, hence the birth of HBO and Showtime. A real sleeper here was religious programming. They were one of the first to jump on this thing to see that they could... they were willing to give the cable television headends free antennas if you would carry us because then the money came pouring in. Jim and Tammy Baaker – we were the ones that helped them build this big city, where was it? In North Carolina? So this thing just took off. We couldn't build earth stations fast enough, receivers fast enough.
NELSON: So what was happening with Scientific Atlanta as a result of that?
TOPOL: Well, what was happening is 40 quarters in a row, 10 years in a row of improved sales and earnings. From a little teeny company that no one really barely heard of that did off-the-air antennas and headend equipment, a little company that we used to have to at shows go out in the hallways and bring people in and tell them who we are, we became the number two supplier to Jerrold and the company grew.
NELSON: But you were number one in earth stations?
TOPOL: We were number one in earth stations and number one in headends, but they were number one in distribution equipment and of course number one in set top. It wasn't until later that a famous meeting between Monty Rifkin, Jay Levergood, and I at the airport in Atlanta where he said, "Sid, you guys have got to get into the converter business," and I said, "Gee, we don't know anything about building this high volume equipment. We know how to build headends and earth stations and amplifiers in reasonable quantities of thousands. You've got to build these things in lots of a million!" He said you've got to do it because the reliability of what's being supplied isn't good. Stuff gets delivered out of the box and a large percentage don't work.
NELSON: And they were essentially the only major supplier at that time.
TOPOL: Yeah. Oak was around. Remember Oak?
NELSON: Yeah, but what market share did they have?
TOPOL: Jerrold owned the converter business and had factories in Taiwan and eventually Puerto Rico and so forth and so on. So we thought about it and said, okay, we'll go into it. Boy, that almost destroyed me because we decided to go headlong into the first addressable converter, a 50-channel addressable converter.
NELSON: That was your opening gambit.
TOPOL: Yeah, a famous model, and we decided to build it in Atlanta with my loyal team of guys – Jack Kelly and Larry Bradner, and so forth and so on – and it wasn't meant for Atlanta.
NELSON: From a manufacturing standpoint.
TOPOL: From a manufacturing point of view, and we had now at the end of 40 quarters in a row were in the early '80s. I just went from the early '70s through the build up to the early '80s.
NELSON: But you know, in terms of the problems with building the boxes, before we gloss over it, that rapid growth, the 40 quarters with the earth station business driving it primarily, were there times where it was difficult keeping up with that in terms of manufacturing, service maintenance, all those types of things?
TOPOL: See, what happened is that everybody bought an antenna and one receiver, okay? We could keep up with the antennas pretty heavily, and we had trouble manufacturing but finally had a breakthrough on the receiver manufacture. Our only antenna competition was Andrew at the time, but they were not in the cable industry and we were in the cable industry. Suddenly, from one antenna to one receiver for HBO, two or three programmers showed up, ESPN showed up, the religious channels showed up, the news channel, etc., etc., and you went from one antenna/one receiver, to the receivers were geometric – five receivers, six receivers, ten receivers, twelve receivers, and we couldn't build receivers fast enough, and that's when we almost had to put other people into the business.
NELSON: Because the demand was so great.
TOPOL: The demand was so great and that fueled... we were in other businesses. We were still a major instrument supplier in both antenna measurement and telecommunications instruments.
NELSON: So now you're gearing up to manufacture boxes?
TOPOL: Yeah, so suddenly due to the satellite cable connection instead of delivering five channels or six channels or seven channels or even 12 channels, people were delivering 50 channels. To deliver 50 channels you had to have a set-top box and if you were delivering pay television you had to have a scrambler, a descrambler and addressability.
NELSON: And why did you go right into addressability from the get go? Because there were a lot of systems then that were doing 20-channel type systems.
TOPOL: Yeah, well, addressability, we figured that's where it's going to go. If you're going to have pay television you didn't want to send... you wanted to be able to from the headend turn people on, turn people off, and then pay-per-view started to rear its head and so forth.
NELSON: As opposed to trapping.
TOPOL: Yeah, yeah.
NELSON: Who came up with that technology, the addressability technology?
TOPOL: I think Oak. I think Oak was... Oak was a pioneer in converters and the trouble is they had a CEO whose name I can't remember who wanted to do everything. He wanted to be a Rupert Murdoch then. He wanted to be a programmer and this and that and so forth, and it was too early to do that. Now, of course, that's where we are. I mean, we have the Ruperts and the AT&Ts now.
NELSON: Well, you know, you still don't have, you don't have an SA or GI, Motorola now, as programmers. There's still a line you can't be everything to everybody.
TOPOL: Yeah, the closet to that is John Malone at Liberty Media. He's got a piece... I think he owns a piece of Motorola in there.
NELSON: But his company is not cranking out boxes, shipping boxes.
TOPOL: No, I think what happened is there became a separation between the hardware guys and the programmers and the MSOs. At one time they were merged in there a little bit. As a matter of fact, Jerrold owned systems. J.C. Sparkman came from Jerrold to TCI, and Monty Rifkin, I think, came from TelePrompTer. There was a merger there, but that's separated. I think the operators did better than the manufacturers in terms of personal wealth, but we've all done pretty good. So here we are now...
NELSON: So you're putting out these new addressable boxes.
TOPOL: Yeah, new addressable boxes, and the demand is ferocious. The demand is ferocious, and I tried to build them in Atlanta, and that was a big mistake, to make a long story short. I had to pull back 400,000 boxes, you know, recall. I had a recall situation. We had to pull back 400,000 boxes. By this time we were already developing our new box, the 8500 and had already made contacts in Asia to build some components for that new box. The big problem we had was the stability of what is known as an up-down converter. We were moving ahead with a new design which we had going, and in context Jack Kelly had already gone to Asia and found somebody, and Matsuda convinced us that hey, not only could we make the components but we'll build a factory for you to build the whole unit. This is a dedicated factory in a place called Gei Fu, and you don't have to put up any money but if you don't meet certain minimum quantities over the next five or ten years we have the right to manufacture that box ourselves. Well, we far exceeded... they built a fabulous factory, a fabulous factory, and I remember going there with Alex Best who is now at Cox to visit that factory when it first rolled out. The quality control and the quality improvement, we set a whole new standard for reliability.
NELSON: What year was this?
TOPOL: Early '80s, we're now in the early '80s.
NELSON: Yeah, so I'm just trying to put that in perspective.
TOPOL: The 40 quarters in a row we're a cable satellite connection, okay? Now we're in the early '80s and converters become the big issue and the network becomes the big issue, and building reliability and millions.
NELSON: What happened in that 41st quarter? It was a winning streak that ended. You keep referring to that, so I'm just wondering what the 41st quarter was all about.
TOPOL: Depression, depression.
NELSON: What caused that?
TOPOL: Well, first of all, cable construction started to go down, we were in the middle of a recession, and we had a recall. You put all those together, and we had to build up. So we had a couple of tough quarters and we started to rebuild in the '80s, and of course got ready for the '90s. The '90s... I'm bringing you right up, we'll come back again, but just to take it from building this factory in Gei Fu... today Scientific Atlanta has a factory in Mexico with over 5,000 people that can't build digital boxes fast enough.
NELSON: So it's kind of a parallel to what happened with the...
TOPOL: Yeah, in the early '80s we couldn't build addressable units reliable enough, okay? And we finally beat that. Today, ten years later, or 15 years later, or almost 20 years later, we can't build digital boxes fast enough and we found out we don't have to build them in Asia anymore, in Taiwan or Korea or Japan. Most of those manufacturers have moved their plants to Mexico. Most of the TV sets which are made for the U.S. market are made in Mexico. They're not made in Asia, and they're owned by Asian companies. So Mexico has become the center of building high volume. By this time Scientific Atlanta had hired and acquired some real experts in manufacturing over there and now have built a fabulous plant in Mexico.
NELSON: I assume at this point SA was already a public company.
TOPOL: Oh yeah, SA was a public company even when I got there, on the American Exchange. To give you an idea, the market value of SA when I arrive there was 900,000 shares at $7 a share, which I think is 6.3 million, okay? I think today the market value of SA is closer to, I don't know what the number is, 10-12 billion dollars.
NELSON: We're talking a rather substantial increase over that period of time. And that must have been true of a lot of the hardware/technology companies, as well as you talked about the MSOs in terms of their valuation and growth. Now you're rolling out these addressable boxes and you've got people looking at essentially 50 channel systems. This is the state-of-the-art. What was the next milestone?
TOPOL: Let's go back. We're then talking the early '80s. We had finished up the cable satellite decade, we started to get into the converter decade. We had problems in Atlanta, we moved it.
NELSON: Now you've got your manufacturing down.
TOPOL: No, no, we didn't get the manufacturing until later. The '80s were a difficult period of transition. Actually, cable construction decreased in the '80s if you look at the records. The only really big requirements in the '80s were converter boxes. The distribution business and the build out of headends had actually slowed down, and we kept talking about rebuild, the rebuild market, the rebuilt market. We kept talking about rebuilding 12-channel systems to 50-channel systems and rebuilding 50 to 100-channels systems, but it really didn't take place until the end of the '80s when we had some relief. We had some relief from the FCC for awhile. I don't remember exactly.
NELSON: Well, there was the deregulation in the '80s.
TOPOL: Deregulation triggered off the rebuild market and then the cable companies started to raise rates accordingly, and then I think we had re-regulation again, but there was a period there from the late '80s to the early '90s of deregulation that really started the rebuild market, and then the rebuild market went to... I wasn't really close then, went from 450 to 850. Fiber started to come in, and eventually we started to talk about interactive systems again. I want to point out that interactive systems were around during this whole period that I'm talking to you about from the early '70s. We had built an interactive box in the early '70s and built a couple of systems, of two-way systems. Two-way amplifiers were in design back in the '70s, but we never put...
NELSON: What drove the need for that, who had the idea for that?
TOPOL: We never put the amplifiers in. In other words, two-way systems were capable of being built a long time ago and amplifiers were built with two-way capability a long time ago, but the reverse amplifiers was not installed because interactive television never really got off the ground. We had the original Warner Amex experiment, okay? What was that called? Qube. And that didn't go anywhere. Interactivity really didn't come into play until really very recently when the Internet was born.
NELSON: But people are anticipating this. That's why you built the amplifiers that way. Somehow people felt that there would be some kind of demand?
TOPOL: We talked about a lot of things that are being talked about today, banking and shopping, and we talked about how you could...
TOPOL: Voting, how you could determine what channels people were watching, and polling and all that kind of stuff. And the Qube system was an experiment... when TCI bought those systems, I think they pulled out the whole Qube system and went back to a straight broadcast. So up to some years ago, this was a business of broadcast television driven by movies and sports, and any effort to deviate from that was not a winner, and the guys got rich on broadcasting movies and sports, and then news and documentaries and so on and so forth. Basically, people have a love affair with movies and sports, have a worldwide love affair with movies and sports. You put the Olympics on, for goodness sake, and 2 billion people are going to watch it.
NELSON: On three channels!
TOPOL: You put on world soccer and that's the biggest audience. Today, for example, you can watch every football game on a Sunday afternoon. You can watch every hockey game, you know. We ought to talk about how these hundreds of channels got born, okay? We've got to talk about that for a moment because as we developed the cable satellite connection there were those people who said, "Hey, why the hell can't I put an earth station in my backyard, and now that all these programs are up there why can't I do that?" And we were building those systems and had them in the Neiman Marcus catalog and a few other catalogs. We, as a company, had to stop building them because people were stealing the signals and they were stealing in the middle of cable television franchises, and our classical customers didn't like that and we didn't want to be on the bad side of these guys, so we pulled out of what became a backyard earth station, C-band business, okay, which grew to several million subscribers because eventually the programmers scrambled their signal and that became a business for money, and it pretty much took it out of the cities and kept it in the rural areas. We're now in the era where people are starting to think about high definition television. I don't think cable and satellite guys understand how high definition television impacted them.
NELSON: And how did it come about?
TOPOL: The Japanese had this idea that higher resolution, 16 by 9, large pictures were the way to go, and they had what I would call a Mickey Mouse system called MUSE, which was an analog, and they meant to do it via satellite. Suddenly the world woke up to satellite HD TV and it was going to be the greatest thing since sliced bread and it was going to drive the whole semi-conductor industry and Japan was going to win this war, and if we didn't do something about it we were going to go down the drain. It turned out that HD TV didn't become the driver, personal computers and the internet became the driver for semi-conductors. But what HD TV did do was create digital television, and my colleagues at General Instrument, I have to say, were the guys who said, hey, if we digitize the signal we don't have to have a bigger highway. We can take the redundancy out of the picture, and that is only transmitter signal when there's a change from the previous frame to the next frame – don't ask me about all these algorithms – but they found out that there was such a thing as digital compression and you could take this big HD TV signal and put it into 6 megahertz.
NELSON: Data compression had been going on in the computer world for a long time.
TOPOL: Right, right. A really bright guy said it can't work, and they made it work, okay? Around this time, the satellite and the cable guys, particularly the satellite guys who were struggling how to compete because they couldn't get enough channels, said hey, wait a minute, if you can take HD TV and put it in six, we can take six and put it into one, and 500 channel television was born, which became 200 channel television because...
NELSON: Or at least the concept.
TOPOL: Hundreds of channels got born.
NELSON: We're coming up to the age of digital, of compression, of HD TV, of broadband, interactive, etc., etc., but just give me a little sense of what Scientific Atlanta's role was in the emergence of these new technologies and your role in that. I assume you weren't just passive bystanders in this process.
TOPOL: Oh, no, no, no. What Scientific Atlanta was, we became a major supplier of advanced analog set top converters – the 8600 series, which followed the 8500 hundred series – we're now talking mid-80s, late-80s, mid to late '80s, and people by that time now were starting to move from 50 channels to 100 channels. This was before compression, this was before compression. By this time volume control had been well evolved into... one of the great contributions of the cable industry was the proliferation of...
NELSON: The remotes?
TOPOL: Remote control, remote control. One of the things that was quite clear in the whole cable industry was keep it simple. Keep it simple. It was really simple for a guy to come home with his remote control, he had lots of channels, as I said lots of movies and sports, and he loved it. And so things were going along quite well putting in more and more advanced analog systems for the cable network. By this time, as I mentioned HD TV and compression started to come in and our colleagues at General Instrument came up with a system which eventually became kind of standardized and Scientific Atlanta was also developing some systems and eventually it became fairly standard of which way this thing was going to go. General Instrument, now Motorola, came out with the first broadcast box, heavily promoted, as you know, by John Malone who made some predictions and it would take them a long time to get compression up and running, to get the software, to get the boxes out...
NELSON: The digital boxes?
TOPOL: The digital box, and they came out with a broadcast box. At this time, another interactive experiment after Warner Amex got born, and the famous Orlando project of Time Warner.
NELSON: Full service network.
TOPOL: Full service network, which moved out slowly and carefully, and Scientific Atlanta won the contract to build the full service network, two-way box, along with silicon graphics and a few others, and I was down there in one of the early experiments of movies on-demand with Jerry Levin and it was beautiful. Movies on-demand, which you can now do with digital interactive boxes was essentially a VCR. You could stop it, you could pause it, you could do all kinds of things with it. You could decide show me all the movies that Ingrid Bergman was in, or...
NELSON: And you were doing this in Orlando.
TOPOL: Yeah, doing it in Orlando. But the problem was it was big, it was hot, it was heavy, and it was expensive.
NELSON: The box?
TOPOL: Everything. Everything associated with it, okay?
NELSON: How expensive?
TOPOL: Oh, thousands of dollars per box. That was out of the question. A lot of people... it became criticism again of interactivity, etc., etc., Two or three things happened after that. One, the cost of memory came down, the cost of components came down dramatically so that that box could now be built much smaller and much less expensive and much cooler, and SA was fortunate to be able to contract with Time Warner for the first production boxes. Time Warner was still convinced that there was great demand for movies on-demand. Simultaneous with this, a rapid development of internet came along, rapid development of web pages, rapid development of email, and all the things that everybody's on. Rapid development of the PC. And interactivity, including me, became something that was keep it simple, and that is I learned how to use a PC. Not everything in it, but my kids convinced me to buy a PC. The first one was a MacIntosh Power Book 180.
NELSON: And I have to say for the record here, since I do know you've said that you're somebody who had a lot of skepticism about interactivity.
TOPOL: Skepticism until I started to use it, okay? So then there became great demand pull for people like me and a lot of young people that they wanted to bring the web pages up fast, they wanted to be able to do this fast, and lo and behold, the interactive digital network became the way to get web pages up fast, along with movies on-demand, along with the cost of components coming down, and today you can't build digital boxes with built-in cable modems fast enough.
NELSON: So the vision of the full service network, even to a greater degree than it maybe appeared at the time, is occurring, and even while they shut FSN down Time Warner really hadn't shut down that whole notion at all.
TOPOL: No. The marketing guys had some data which indicated there was demand pull for movies on-demand. At that time internet wasn't mature, but in addition to that broadband was invented. Today the great exponent of the full service network, believe it or not, is AT&T Broadband. Who was AT&T Broadband but TCI and Media One? Plus the Boston Cablevision system, by the way, which is a big system. So a lot of these things all happened together and today you have another burst of not being able to built hardware fast enough.
NELSON: And how about where is Sid TOPOL in all of this?
TOPOL: Where am I in all of this?
NELSON: You were chairman of SA and you retired from there at some point.
TOPOL: I slowly retired in the late '80s, early '90s as a non-executive chairman, and then remained on the board for some time, and then retired from the board. I'm emeritus now, I attend various functions, I'm going to be the guest of Scientific Atlanta at the Kaitz dinner in a couple of weeks, and I do go down for the annual meeting, etc., etc., and maintain very close relations with Scientific Atlanta because it's a part of me. I tried to retire completely a couple of times and flunked retirement really badly, really badly. I played around trying to help the Christian Science Church with a Monitor channel, retired from that. Today, the cable network, everybody sees the cable network now as the broadband network. Of course, you've got a fight from DSL and some wireless, but cable network looks like the broadband network, which is going to be two-way digital and be able to do a lot of other things. We're talking about music downloads, we're talking about TIVO and replay today being built into cable boxes so that the VCR will probably disappear and you're going to be able to do all those things that are really exciting things. The challenge ahead still is can the MSOs get a return on investment? They're working on that. I think it will come. I'm hoping that this whole AT&T thing will work itself out here, and that will be a major player in the U.S., but in the meantime, software guys are going wild with all kinds of application software for the boxes and the networks. The liberates, the open TVs of this work, along with Microsoft who is fighting to get in there, and we'll see, but in the meantime, there's a great future for what was this little community antenna television where you put an antenna on top of the mountain and strung some cables down to a local television set store to sell more TV sets.
NELSON: And you talked about how the MSOs will probably come around and see great returns in this, and the software guys. How about what we call the hardware guys, how about SA?
TOPOL: No, the hardware guys are going to do well. Everybody is trying to find some way that they can get in on the transactions. This is the whole thing that in addition to supply – the software guys have learned how to do that – and the real effort is going to be on the part of both hardware and software guys to try to get involved in revenue per month, revenue per year. One of the nice things about the cable guys was that although they had a little churn, they didn't have to rebook their customers all the time, and so I think everybody, software and hardware guys are going to try to see how they can get into that, and the way they get into that is transactions in the home. What other transactions in the home will there be besides watching movies and sports? What other transactions will there be, and how can you get to be part of that? Now to come back to myself, how did I flunk retirement badly? I formed a little company called – which you're familiar with – the TOPOL Group, LLC, which the lawyers say for tax reasons is the way to do it, and many of the software and hardware and systems guys who have come out of universities and laboratories and so forth, who find this digital interactive network fascinating and have all kinds of applications for it, have no connection to the cable industry, and the cable industry is still a bit of a club, as you know, and we're going to have a big club meeting at the Kaitz dinner in a few days. So there are opportunities of trying to help some of these companies get introduced to the cable industry and understand the character and the flavor and the personality of this industry. And so I've done some investing and some consulting, but a lot of philanthropic work as well. I have a TOPOL Family Fund at the Boston Foundation and I try to be active in the city in helping with scholarships at various... My wife's university, college created a scholarship for the intercity and through the Telecommunications Council and through Boston Latin School, and that's where I am.
NELSON: And I should add that I know that you received many honors when you were in Atlanta for your community involvement, you've been an honoree of the Kaitz dinner, so while you've been greatly involved on the whole technology evolution of the industry, I think there's also a part of Sid TOPOL that's very much the community oriented person, not merely a gear head.
TOPOL: I might say one of my biggest thrills was Broadcasting and Cable had the round of people of the century, and to find myself in that list with Guillaume Marconi was one of my great thrills. I mean, this was the guy who invented radio, you know, and so to be on that list... And of course it's been a pleasure working with you, Steve, and The Cable Center and the whole oral history project. I appreciate that.