Bill Bresnan - Oral History
Interviewer: Tom Southwick
Interview Date: Wednesday August 04, 1999
Interview Location: White Plains, NY USA
Collection: Hauser Collection
SOUTHWICK: My name is Tom Southwick and we're here to do an oral history for The National Cable Television Center and Museum made possible by funding from The Hauser Foundation with Bill Bresnan. It's August 4, 1999 and we're in Mr. Bresnan's office in White Plains, New York. Bill, I wonder if you could start by telling us a little bit about your background, your parents, where you grew up, that kind of thing.
BRESNAN: Sure. I grew up in southern Minnesota, a little town, Mankato. My parents were, my mother was of German descent, my father of Irish descent. They lived in a little Irish enclave outside of Mankato, about twelve miles outside, called Madison Lake, that's where he grew up. They were both first generation American citizens. They had four children; I was the third of them.
I have an older sister, I had an older brother who passed away several years ago and I have a younger brother, Pat, who's in the business with me. My father died after a lingering illness when we were very young. I was five at the time, my older sister was nine and Pat was two. So my mother had quite a struggle to raise us, particularly in those days they didn't have a lot of welfare assistance. She had been a seamstress; made custom draperies for people before she got married and so she went back to that trade and made these draperies for people out of our home. That way she was able to keep an eye on the kids, keep the family together and yet earn money. She had a tremendous influence on all of our lives. She was very loving, still is, she's still alive by the way, she's 101 years old. A very loving person and she worked very hard for us and was extremely dedicated in getting the family raised. She didn't have much time for any kind of social life other than through church and those kinds of organizations. She never dated or anything. She just raised the family.
SOUTHWICK: What's her name?
BRESNAN: Ann. Ann Marie. She taught us a lot of very valuable lessons. One was just because you find yourself in a difficult situation doesn't mean you have to stay there; that you have it within your power to move on. Also, don't dwell on the past, she used to often say, "Don't cry over spilled milk." Just move on. She's a tremendously kind person and got along with everyone. Never had a mean word, as far as I know, with anyone and yet in a very quiet way, a very determined person. I owe an awful lot to her.
SOUTHWICK: What was your schooling?
BRESNAN: I went to both elementary and middle school and then also high school was all a Catholic school system in Mankato, Minnesota. St. Peter and Paul's in middle school and Loyola High School and our teachers in those days, they didn't have lay teachers, really, they were all Notre Dame nuns and Jesuit priests. So I have knuckles to prove I've been whapped a few times, been whapped on the ear a few times, but it didn't hurt me any. Then I went to a Mankato commercial college, which was an accounting, money school. I also attended what's now known as South Central Technical College, at that time it was really known as a vocational school and that was a two-year program in radio and electronics. I studied radio and electronics there and graduated from there.
SOUTHWICK: How did you get interested in radio and electronics?
BRESNAN: I don't know. It was something I took to very, very young and I started fixing radios for the neighbors when I was about twelve years old and I hung out down at a local radio shop, which was about a half a mile from my home and I learned a lot just by hanging around there after school and doing errands for them or doing menial jobs for them and I picked up a lot from them. Then I started fixing the neighbors' radios and these were all tube type radios, you know, and they were generally big floor-model sets. What I'd often do was just take the tubes out and take them down to this radio shop and test them and quite often find it was just the tube. Then I'd replace the tube and make a few bucks. If it was something more involved, as I went on I got better at finding other problems, but if it was something that I couldn't fix, I would take the works out of the cabinet and put it in my little red wagon and drag it down to the radio shop and they would fix it. I'd bring it back and put it in and charge a little mark up for my work. So I was able to make, for me at that time, some interesting money. So that was kind of a sideline that I had while I was going to school, but I always had a lot of jobs because none of us ever got an allowance. We used to hear friends had gotten allowances, the parents would give them money, my mom couldn't afford that, so if we needed money we had to earn it. She obviously would pay for our schooling and stuff like that, but if we wanted any spending money we had to earn it. So we all had paper routes, I caddied at the golf course, set clay pigeons at the local gun club. You name the job and I probably did it. Radio fixing was always kind of a steady thing, not every day, but once a week or two somebody would need a radio fixed.
SOUTHWICK: Before I forget, when were you born?
BRESNAN: December 5, 1933.
SOUTHWICK: So you developed this interest in radio and electronics and pursued it after high school and then what?
BRESNAN: I worked during school at this radio shop, the one that I told you about that was close to my home. I'd developed a good relationship with those guys and worked there and then was hired by a radio and electronics supply company out of Minneapolis called Northwest Radio and Electronic Supply and became a sales engineer with them. I traveled the southern part of Minnesota, worked out of Mankato, which is about 75 miles south of Minneapolis and we had a little satellite store there. When I was working for them, some entrepreneurs were going to build the cable system in Mankato and I heard about it and went down to see if I could sell them cable or any other supplies they may need and found that they would be willing to buy cable from me if we could get a certain brand of cable. It happened to be Times Wiring Cable at that time and our company didn't have distributorship for that. At that time, a cable sale might be a thousand-foot role of microphone cable or something to a radio station or a TV station or something and the concept of selling miles and miles of cable was attractive to me. So, I talked to the president of our company about it. He was very negative, you know, you'll never get the sale, but he told me if I could get the distributorship, if I on my own could get the distributorship for his company and could sell the cable, fine. So I was able to do that. I got a hold of the right people. At that time, the national sales agent for Times was Jerrold and I got a hold of the right people there and set our company up as a distributor and then sold all the cable. One of the surprising things, kind of disappointing things to me, is that they had two sales commission structures. They had one where they would pay you 3% of your gross sales...
SOUTHWICK: This is the company you worked for?
BRESNAN: The company I worked for, Northwest, yes. They'd pay 3% of your gross sales and then they'd pay your expenses and they'd give you a car, kind of a stripped down Ford or Chevy car and they'd pay your motel expenses, that's where we usually stayed, and some per diem for food. Or they'd pay you 5% of your sales and you'd pay your own expenses. So I took that deal when I signed up and so it was much more lucrative for me to make a big sale, obviously, and after I did that sale and made this guy a lot of money, his remark was, you have to be a five percenter.
SOUTHWICK: All that he could think of was that 2%.
BRESNAN: Yes, that he had to pay me an extra 2%. That company is no longer in business. No problem here of telling tales out of school.
SOUTHWICK: When was this?
BRESNAN: That was in 1955 or '56. That sale was over a period of probably '55 to '56. Mankato was one of the first cable systems to be built in Minnesota and as a result of selling them that order, which was a big order for me, I spent a lot of time working with their engineer and helping him lay out the system and helping him tally up the bill of materials from the maps and so forth and I was learning from him, just sort of an apprentice. Because the benefit to me was as we would get a section of town laid out and a bill of materials tallied up I could write up an order. So I became sort of knowledgeable; I became kind of an expert on cable. I didn't know much but nobody else knew anything. Then I got married in 1957 and didn't want to travel on this sales route where I'll be gone virtually all week, so I bought into a radio and TV shop with a fellow, a partner, in Waseca, Minnesota, which was about 30 miles outside of Mankato and we had a sales and service business there and then one of the fellows that had financed the Mankato system was going after the franchise in Rochester, Minnesota.
SOUTHWICK: The cable franchise?
BRESNAN: The cable franchise, sorry. Waseca was right on the route there, so he would stop in the shop and see me and talk about it and ask me if I would be his chief engineer.
SOUTHWICK: Who was this?
BRESNAN: The fellow's name was Joseph Poire, P-O-I-R-E. He's no longer alive. Actually, he wanted me as his assistant chief engineer. He had another fellow there who was the chief engineer from Mankato, the guy I'd worked with over there, and he moved him over, but that fellow had some personal problems with his wife and he took off in the middle of the night one time, never to be seen again and so I fell into the job. That was in 1958 and we built that system. I stayed on as the chief engineer of the company. It was sold in 1960. I stayed on with the new owners.
SOUTHWICK: How many channels was that system?
BRESNAN: Five channels.
SOUTHWICK: Was it Jerrold equipment?
BRESNAN: No, it was Spencer-Kennedy Laboratory equipment, SKL, and it was a five channel system. There was one local channel, an NBC channel in Rochester, and then we brought in four channels from Minneapolis.
SOUTHWICK: What, roughly, is the size of Rochester, or was it in those days?
BRESNAN: In those days, because it's a very fast growing town with the Mayo Clinic and IBM there, but in those days it was probably 40,000-50,000, something like that.
SOUTHWICK: Did you get a pretty good response to cable when you built there?
BRESNAN: Well, it was very interesting because I remember the engineer from SKL saying this is really a marginal town because people could get a local channel with rabbit ears really and with a small antenna on the roof you could get an ABC from Austin, Minnesota and a CBS from LaCrosse, Wisconsin.
SOUTHWICK: So three pretty decent signals.
BRESNAN: Three pretty decent with not much of an antenna, maybe a ten or fifteen foot antenna would require a rotor, but if they wanted Minneapolis, because we were about seventy-five, eighty miles south of Minneapolis and down in a river valley, if they wanted Minneapolis they really needed to put a tall antenna up. They all wanted Minneapolis because that's the capital – St. Paul and big city stations versus the small town stations in those days. So it was not uncommon to have forty-foot masts on top of the house and then a rotor so they could get the other channels as well. But, I remember the engineer from SKL, when we were putting the head end in, said this is going to be really interesting to see because this is a marginal town because they can get the three major networks. Then the interesting thing is when we were building the system through the streets and I climbed the poles – we all did everything – people would come out and say to us, kind of chastise us and say, "I don't know why you're building this system. We're not going to sign up. Nobody wants this." Probably had we taken a survey, we would have found that nobody wanted the service, but when we turned it on it was accepted very well and we were getting, first pass through, probably 40% penetration. And then it would grow relatively quickly and now that system is probably 90% penetrated.
SOUTHWICK: Do you remember what you charged?
BRESNAN: Yes, five and quarter a month, excuse me, five forty-five a month gross, but if you paid it by the tenth of the month, you'd get it for five dollars. So it was a dollar a channel, which is more...
SOUTHWICK: Were there installation charges as well?
BRESNAN: Twenty-five dollars. So this was after that period of time when companies were charging $125 installation and $3.75 a month, or something like that. We had gotten more sophisticated.
SOUTHWICK: You remained as chief engineer there until when?
BRESNAN: Until 1965, when Jack Kent Cooke bought the system and then he moved me to California.
SOUTHWICK: And who was Jack Kent Cooke?
BRESNAN: Jack Kent Cooke was a Canadian newspaper magnate, who had been a 50% partner with Roy Thompson of the Thompson Group. He sold his share to Roy Thompson and they actually sailed around the world for a couple of years and then moved to Monterey, California, actually Pebble Beach, and rented a condo there that was owned by Frank Stanton. One day, his TV didn't work and he didn't know why. He checked and found out that the cable bill hadn't been paid and that's how he learned about cable TV.
SOUTHWICK: Frank Stanton, the president of CBS, had cable in his home.
BRESNAN: In Pebble Beach, and hadn't paid his bill. (Laughter) Actually didn't realize, because Jack was renting the house and Jack didn't know about it, it was just a mix-up but anyway, that's how Jack... So he wanted to learn about cable and he got a hold of Bill Daniels and Bill gave him a primer on cable and then Jack moved to Southern California, bought an old home in Bel-Air, restored it and spent about a year doing that and then while he was doing that, he and Bill Daniels were meeting and Monte Rifkin was with Bill at the time. Actually Monte spent quite a bit of time with Jack and Jack decided he wanted to invest in cable. So Daniels helped Jack scout out systems and the first system I think he bought was a system in Lewistown, Idaho and then he bought a group the Daniels sold him that was financed by the Narragansett Group and then he bought our system in Rochester and systems in Winona, Minnesota and LaCrosse, Wisconsin. He was making a lot of waves. This is now in the summer of '65 that I joined him and he was definitely the guy out buying all of the cable systems in the country. He was sort of like Paul Allen is today.
SOUTHWICK: He'd come from outside of the business and made his money elsewhere.
BRESNAN: Yes. In Canada, by the way, he'd also been in radio and television but his main investments were with The Thompson Group in newspapers.
SOUTHWICK: And how did you first come to meet him?
BRESNAN: After he bought our system in Rochester, about two weeks after he bought it, he called me and said he'd heard a lot about me and wanted me to be his chief engineer and come out to California. I said, "Just a minute!" A little boy from a small town in Minnesota and I didn't really want any part of that. So he convinced me I should come out there and meet with him. So I did, I flew out there.
SOUTHWICK: Tell me about that trip.
BRESNAN: Well, I flew from Minnesota out to Los Angeles and he had his chief financial officer meet me in a chauffeur driven Rolls Royce, which is I think the first Rolls Royce I had ever seen. They didn't have those in Minnesota.
SOUTHWICK: That's not what the five percenters drove then?
BRESNAN: No, no, we drove a Chevrolet with a radio in it. I remember sitting in the back seat looking at this wood burrow and stuff in a Rolls Royce and thinking, what in the heck am I doing here? But his offices at that time were in the shops area by the Beverly Hilton Hotel, so he took me to the Beverly Hilton and checked in and met with him yet that night in his office for a few minutes. Then he and his wife took me to dinner at the restaurant there in the Beverly Hilton and it was kind of an awesome experience for me as a small town boy. He had, this is the gourmet restaurant at the top of the Beverly Hilton, in the Escoffier Room and we had the little trio of violins, three violins, playing at our table and I remember he asked me, "What would you like to drink?" And before I could answer he said, "You'll have a scotch. Give him a scotch and soda." So I had the scotch and soda and then a little bit later, when it was time to order the meal he said, "What would you like to eat? Give him this Dover sole; I just had this sole flown in from Dover, England, I want Mr. BRESNAN: to have this." So he was ordering for me.
SOUTHWICK: Kind of a take charge guy.
BRESNAN: A take charge guy, but in a very nice way and extremely charming. His first wife, Jeannie, was there and was extremely charming as well. He then asked me about my family and we talked a lot about family and when it got to my brother Pat, he got very interested in Pat. Pat at that time was selling display advertising for the local newspaper in Mankato in the Mankato Free Press. He said, "You know, Pat ought to come out here and work on our marketing." I said, "Well, you know, it's not fair. Pat's got a job. You bought the company out from us so I don't have a choice but to be here talking to you. But Pat's got a job." He said, "Nonsense, nonsense." I said, "How do you know you're going to like me? Maybe you ought to see if you like me before you take on my brother too." He said, "I know already. I love you." So he said, "I'll tell you what you do," and this is something I learned about him that he often did. When he had a difficult decision to make, he would gather as much information as he could from as many people as he could. He would ask opinions of anybody that he respected in that particular field and did as much homework as he could do. But then, if he still couldn't make up his mind, he would when he first woke up in the morning before his mind was cluttered with anything, he would ask himself, what should I do. So he explained that all to me that night. So he said, "I'll tell you what you do now. Two hour time difference in Minnesota, Pat probably goes to work at 8:00, right?" "Yes, probably." "Okay," he said, "you probably should call about 7:30 their time, it's a two hour time difference, so you set your clock for 5:30, put in a wake-up call for 5:30 at the hotel and soon as you wake up you ask yourself, should I or should I not call Pat. Is it or is it not right for Pat? But you can't argue with yourself. You've got to make that decision instantaneously because if you argue with yourself, your mind gets cluttered." So he said, "Do that tomorrow morning." So I did. The next morning I did it, I asked myself is it right or is it wrong. Well, maybe on one hand on the other hand... I argued with myself. So I didn't call him. So I get to the office about 7:30 and he was there and he said, "Did you call Pat?" "No." "Why?" I said, "Well, I got to debating it in my mind and you told me I couldn't do that." He said, "Well, that's right. Try it again tomorrow." So the next day I did the same thing and I had the same struggle. I wasn't sure I wanted to stay there and I didn't want to pull Pat all the way out there and have him quit his job and get out there and find I'm gone. So, anyway, I went through the same thing and came in that next day and he asked the same question and I said, "No, I didn't call." "Try it again tomorrow." So the next day is the third day and I kind of went through the same thing and I said, "Oh, the hell with it. I'll call Pat and let him make the decision." So I did. I called Pat and I said, "I don't know about this guy, but here's the deal. Are you interested." And Pat said, "Yeah, I'm interested." So came on out and spent a little time there and then moved up to a system he bought in Key, New Hampshire to run that and get that brought into the fold and then moved on to several others. So he was with us the whole time, but it was an interesting experience for me and it gave me an insight into how he made some very important decisions. He's extremely disciplined in his way of dealing with difficult decisions.
SOUTHWICK: So he hired you as chief engineer for all of us systems and you moved to California?
BRESNAN: Right. Actually, he made me vice-president of engineering and then a couple of months later, executive vice-president and then later, president of the company.
SOUTHWICK: What were the issues that you had to deal with running these systems, which he'd assembled from disparate owners?
BRESNAN: At that time, the new state of the art was twelve channels and all of these systems are either three or five channel systems. And so it was rebuilding the systems and buying coax and amplifiers and so forth and bidding that stuff out, testing the equipment and we set up a little laboratory in the basement of the building and tested equipment. At that point, aluminum cable was becoming very practical and so we were rebuilding using aluminum cable.
SOUTHWICK: The advantage of aluminum cable was?
BRESNAN: Lower loss and more permanent, too, but the big advantage was lower loss.
SOUTHWICK: That refers to the sheeting that goes around the cable itself.
BRESNAN: Exactly, the outer conductor. So we were bidding that out and rebuilding the systems. We were buying more equipment, more cable, more contractor time than anybody.
SOUTHWICK: Were you the biggest cable company in the country?
BRESNAN: No, we were second. But we were doing more rebuild activity. Jack was very, very smart on business and marketing and pricing and all of that kind of stuff and he could easily see that if you can buy a cable system that's got five channels, that's selling five channels for five dollars a month, and you've got to rebuild it to carry twelve channels that you can up it, not to twelve dollars, but you can up the price some and more than pay for the cost of the rebuilt through the pricing changes. Also, he could perceive that you could in some of these markets get better penetration by increasing the channel offerings.
SOUTHWICK: And financing wasn't an issue because he had money.
BRESNAN: He had a lot of money, yes, and he was very wealthy. But he didn't use a lot of his own money. He actually was able to, because he was wealthy, he was able to borrow, and so he'd financed most of it.
SOUTHWICK: What did you put on a twelve channel system? How did you fill it?
BRESNAN: Well, we brought in as many television channels as we could.
SOUTHWICK: Using microwave lines?
BRESNAN: In many cases microwave, or tall towers, but the CARS-band microwave services had come out about then, if I remember right, so that we could own our own microwaves. Prior to that, cable companies could not own a common carrier microwave signal company, or facility, I should say, that served itself. Common carrier had to be separate and offer services to anybody that wanted them and was willing to pay for them. But then the FCC had authorized these community, I can't remember what the acronym CARS stands for anyway, but it's community antenna relay system, I think. But anyway, a cable company could actually own and operate its own microwave system. That came along somewhere along in there. We also carried a weather channel, which was a camera scanning back and forth over the local weather dials that had time and temperature and humidity and wind velocity and wind direction and so forth. We had a news channel, which was a camera focused on a teletype machine planking away. We never did it, but some companies in order to fill channels actually focused a camera on a fishbowl or an aquarium. There were kind of unique things. We had message wheels that we rigged up where we could run messages.
SOUTHWICK: It would be a little 3 x 5 card that would appear on the camera and then switch to another one?
BRESNAN: Yeah, exactly. You could rent those card spaces out to local vendors and merchants and so forth. We once rigged up a flowing message wheel with Archie 59 cable reels and a barbecue spit that turned it. We had to make do.
SOUTHWICK: Was a lot of your job traveling around to these systems or did you pretty much stay put?
BRESNAN: Yes, quite a bit. I had to travel to all of them, particularly as we had the rebuilds going on. I was probably gone half the time.
SOUTHWICK: How many subscribers were you serving roughly?
BRESNAN: We hit a peak in 1967 of about 110,000-112,000 customers, 110,000, I think. We were the second largest cable company in the business at that time. And then we sold off two of them. Jack decided that he wanted to get out of the business. He had then also bought one sports team. He bought the Los Angeles Lakers and moved out to LA from Minneapolis by Bob Short. He applied for the NHL expansion franchise for LA when the NHL was expanding. This was in '65, also, and he was competing with a number of people for the LA franchise including some movie stars, Jack Lemmon and people like that, and he ultimately won that franchise but in order to do it, he ended up having to build his own arena, which turned out to be The Forum. The reason he had to do that is one of the applicants for a franchise was Dan Reeves who had the football team, Dan Reeves, Sr., had the football team in LA and they played at the LA Coliseum and next to the LA Coliseum was the LA Sports Arena and that Sports Arena/Coliseum complex was run by the three government entity coliseum commission, which was LA city, LA county, and California state and because Reeves was a big tenant there, he had clout with the coliseum commission. He was able to get the coliseum commission to say that the only applicant of all of the applicants, and there were several of them for the NHL franchise, the only one that could have guaranteed play dates for the Coliseum would be Reeves. Play dates are very important because the whole league gets screwed up if you can't guarantee your play dates. So at that point, Jack said, "Heck with them. I'll build my own arena." I'll build an arena in Inglewood, California, named The Forum and that's what he did.
SOUTHWICK: But he needed some cash to do that?
BRESNAN: He needed cash to do that so he was getting a little bit stretched out. He decided to sell the cable and we sold off a couple of the pieces. We sold Barstow, California and Laguna Beach, California. So we were down to 92,000 customers at that point and then he did a deal with H&B American, which at that time by the way, was the largest cable company and they had about 125,000 customers and we had 92,000 and we merged those two companies together. H&B was a survivor but Jack was the largest shareholder of H&B. He had about a third of the outstanding stock of H&B and I became president of the new cable entity known as H&B American Cablevision Company. The chairman of that company was a fellow here in New York, he's no longer alive, but he was the president of the New York Rangers hockey club, and Jack happened to know him through their sporting enterprises. His name was Bill Jennings and Bill was a non-active chairman but he was the chairman of H&B and a lawyer with New York law firm, ????, Simpson, Thatcher and Bartlett.
SOUTHWICK: So you ran the combined cable company?
BRESNAN: I ran the cable company.
SOUTHWICK: Which had what, 250,000 subscribers?
BRESNAN: Yes, a little less, about 220,000, something like that. And then we got that up to a little over that when Jack got talking to Irving Kahn about merging H&B in with TelePrompTer. One of the things, when Jack's company was privately held and then we merged this company with H&B, we merged it into a public company, and one of the things that concerned Jack is that H&B, while it was a good cash cow, the H&B systems were all pretty much the same as the former Cooke systems which were classic type markets. So they're very predictable cash flow, you could upgrade them and extend them, you could do things, but Irving Kahn, at the time chairman of TelePrompTer, was expanding into major markets and was betting on PAY-TV. He was betting that pay TV would ultimately be cable's mission and that to do that successfully had to be in the major cities, and so he was getting franchises in major cities. His price earnings ratio, his stock, reflected a lot of pizzazz. The PE ration of H&B reflected a cash cow – stable. He wanted ultimately to sell his H&B stock.
SOUTHWICK: Jack did?
BRESNAN: Yes, he wanted to monazite his holdings in cable and was trying to find the best route to do that. So he was smitten with the idea of merging H&B into TelePrompTer.
SOUTHWICK: Because it would have created a company with a higher PE ration and his stock would have been worth more?
BRESNAN: Right, and the company would have more pizzazz. And we complemented each other fairly well in that we had the cash cow, they were getting the new franchises and the cash from H&B could help build the franchises. Bill Shea, his lawyer in New York at the time and a fellow sportsman, the guy that...
SOUTHWICK: Shea Stadium.
BRESNAN: Shea Stadium was named after him. Shea & Gould was the name of the law firm at the time, and Bill Shea urged Jack to merge with TelePrompTer. Bill Jennings, the H&B chairman, urged that we do a deal with Chuck Dolan, Sterling Manhattan at the time, because Jenning's thought was that if H&B needs some pizzazz, getting into New York City will give it that.
SOUTHWICK: And there were two operators in New York City, Dolan and Irving Kahn.
BRESNAN: That's right. Sterling Manhattan had the lower half of Manhattan and that was Chuck Dolan's company and TelePrompTer had the northern half of Manhattan. Interestingly, Irving Kahn chose, as I understand the story, you'll probably get this from Chuck Dolan, but as I heard the story, they had a drawing or a coin flip or something to see who got the choice of the markets. Irving had the choice and Irving chose northern Manhattan, which includes a lot of residential area but a lot of poorer demographic areas and so to sell pay TV in those markets was kind of hard. He chose that because he said that's where the people live, whereas in lower Manhattan you have a lot of businesses and offices and so forth and he didn't see people watching TV there, but of course you have tremendous opportunity for data transmission and telephony and so on, which Manhattan Cable has been able to tap into.
SOUTHWICK: What did you think at the time? Did you think that cable could make it in the big cities?
BRESNAN: I was very concerned about it and I remember coming back to meet with Chuck Dolan at that time and it was the first time I met him, which was probably in '69 or so, '68 or '69. First of all, I didn't have the same vision Irving had on PAY-TV. I couldn't see it, you couldn't touch it, you know, and how you're going to offer it... the technology wasn't there to offer it.
SOUTHWICK: Was he talking about PAY-TV as sort of a monthly service as it evolved, or pay-per-view?
BRESNAN: Pay-per-view, yeah. Nobody had thought of the monthly concept yet then, of the monthly subscription concept. All of the efforts that had been directed for pay TV at that time were on a pay-per-view basis and there was the Midwest Video thing in Bartlesville, Oklahoma, there was a famous players test up in Canada, there was a test up in Hartford, Connecticut, and these were all pay-per-view. The technology, this was before...
SOUTHWICK: Primarily movies, theatrical films?
BRESNAN: That's right. Well, TelePrompTer was doing some sporting – they were doing fights. Because TelePrompTer actually started doing theatrical exhibition of prize fights on large screen projectors and that's how he got into cable. It was a natural extension of his audience there. So the technology, with having a technical background, my concern was how do you deliver it, how do you collect for it, how do you pay for it? I just didn't see how you could do it. And you couldn't. We didn't have chip technology at that point so all this stuff was specific circuits and very expensive to make, but if we were going to do something in New York, I much preferred to do it with Dolan because I didn't trust Irving. Neither did – there were two people really close to Jack at the time regarding cable; Jim Locker, his chief financial guy and myself – and neither of us really trusted Irving and didn't really want to do that deal with him but Jack was absolutely smitten. The main reason we didn't really want to do the deal with him was Irving insisted on having a voting trust on Jack's stock. Jack and Irving were very opposite characters.
SOUTHWICK: How so?
BRESNAN: Well, Jack was a very polished, charming guy and Irving was kind of a rough and tumble guy. They both were very smart, but I mean, I don't want to get into a lot of negative on Irving, but they were not cut out of the same cloth. And Irving knew that, and Irving insisted on this voting trust, that Jack's stock would be in a voting trust.
SOUTHWICK: That would be controlled by Kahn?
BRESNAN: That would be controlled by Kahn and that really did not seem wise to Jim Locker and myself.
SOUTHWICK: Effectively making Cooke a passive investor with no real control over the company.
BRESNAN: Exactly, right and at the time, Jack had, by doing that deal, his approximately 33% of H&B got converted into about 16% of TelePrompTer, whereas Kahn had somewhere around, I think, 5 or 6% at that time and maybe even less. So Jack was far and away the largest shareholder and Kahn was getting control of his stock. But anyway, Jack just wanted to do the deal so bad that he did it and I guess about four or five months, maybe less, three or four months after we closed that deal, which was September of 1971, I think it was - no it was '70 - we learned a few months later that Kahn was being investigated by a grand jury for bribing a city council and mayor in Johnstown, Pennsylvania. So here we had just merged with this guy, given him control of our stock and the guy is being investigated for federal crimes. And sure enough, he was indicted a month later or so and that was I think in January of '71. At that point, Jack requested Kahn to resign, to step down.
SOUTHWICK: What was your role at that point? Had you moved to New York or were you still in California? Who were you working for?
END OF TAPE 1, SIDE A
BEGINNING OF TAPE 1, SIDE B
BRESNAN: No, I had not moved to New York. I was working for Kahn. I was working for TelePrompTer and I was vice-president in charge of the west coast – a job they actually created for me because I just didn't want to have anything to do with this guy. And actually had told Jack that I really wanted to leave and start a company and he said, "No, please stay with me until we get through all this." I didn't want to move to New York. I didn't like the man, Kahn, and I didn't think I'd get along there and I'd move out and before long I'd be gone. I was itching to start a company. But he leaned on me pretty hard to stick with him until he got through that. So I did and they made me vice-president in charge of the west coast, which is really not much of a job, frankly. We had the old H&B...
SOUTHWICK: But you didn't have it very long, either, did you?
BRESNAN: No, I didn't. I reported to Hank Simons, who was Irving's vice-president of operations, I guess was his title, maybe senior vice-president of operations. Hank was a very nice guy. I liked Hank a lot, but he and I were kind of at different ends of the spectrum in that he, obviously, was very loyal to Irving and reported to Irving and I was loyal to Jack and kind of was the odd man out as far as Irving goes. But Hank was a gentleman and that made it possible for us to exist under those strange circumstances.
SOUTHWICK: So Irving gets indicted. What's Cooke's reaction?
BRESNAN: Cooke asks Irving to resign, to step down as chairman and to resign from the board and to let the company fight this out.
SOUTHWICK: What was the impact of that indictment in terms of the cable industry in general?
BRESNAN: It had a very negative effect in general. One of the things that bothered me a lot, was you'd hear people say, well, this happens all the time. He just happened to get caught. And that's really not true. I mean, there may be a few cases of it, but I had never gotten involved in anything like that. I didn't know anybody that had gotten involved in anything like that and I thought it was really an injustice that the industry should all be tarred by saying this is what always goes on. But Jack wanted Irving out of there because it was a real black eye, not just for the industry, but particularly for the company.
SOUTHWICK: Right, and the stock went down fast.
BRESNAN: Yes, it went down like a rocket in reverse. Kahn refused to – this was his company, he founded it and he was going to captain it all the way until wherever it ended up. So then Jack brought an action to force him to resign. He also brought an action to rescind the voting trust and he engaged in a proxy battle. I don't know, not being a securities expert, but this is the only case I know of where you bring a proxy battle where the opposite side has the voting trust on your own stock. It was a difficult situation to be in, but that's the situation he was in. Kahn was ultimately convicted in late '71, I guess.
SOUTHWICK: We can check that.
BRESNAN: And then he was removed from office and the voting trust was nullified and we had a special meeting of the shareholders and elected a new board and a new chairman, Ray Shaffer, the former governor of Pennsylvania was elected chairman of TelePrompTer and then we started the arduous task of digging through things trying to find...
SOUTHWICK: And that left Jack Kent Cooke in effective control of the company?
BRESNAN: Yes, he then had effective control of the company.
SOUTHWICK: And what did he ask you to do?
BRESNAN: The company was losing money at the time because they had built into major markets. We still didn't have any equipment to offer pay TV, by the way, but these major markets were being built into it.
SOUTHWICK: New York, primarily?
BRESNAN: New York, St. Petersburg, Seattle, Tacoma, Tampa, some markets in New Jersey – he had gotten the franchise in Trenton, he hadn't built that yet. He had started systems in a lot of markets and the problem is you had nothing to sell the people that they couldn't get without cable. The other big market was LA and they were in with Hughes Aircraft Company. Both LA and New York, by the way, were joint ventures with Hughes Aircraft Company.
SOUTHWICK: Oh, really.
BRESNAN: In LA and New York, you had some reception problems. In LA, in the canyons of the Santa Monica mountains, is mainly where theta cable, at that time, was located because down in the flat lands, the valley or the LA Basin itself, people got very good reception from Mt. Wilson, but in the canyons they needed cable. In New York, because of the buildings...
SOUTHWICK: That would block the broadcast signals. Otherwise you could get them clearly?
BRESNAN: Right, so cable could get some penetration there but it wasn't great. It was in the 20-35% range, somewhere in that penetration.
SOUTHWICK: Now, there was another problem that was created in those urban areas and that was the ingress and the ghosting problem. Was that something you were involved with because as I understand it, Dolan went to – that's how converters came to be used, I guess. Is that correct?
BRESNAN: Yes. That's right. That was a company called International Telemeter, I think it was, that built those first converters or at least to lay claim and I think successfully got the patent claims adjudicated in their favor. Theirs were the so called Mendel patents on converters.
SOUTHWICK: And those were the first converters used for cable television?
BRESNAN: Yes, that's right and that was yes, to resolve the problem of ghosting and they'd just convert all of the channels to an unused channel. In this case, channel three and in there would be no ingress in the TV set on that channel because there was no local channel on that. So anyway, TelePrompTer had built into all these markets getting very low penetration, 15%, 18% maybe, and losing a lot of money. Along with that was the fact that the company, then totally distracted with all of the legal problems and money was being spent defending against the Cooke legation, the proxy fight, against the criminal allegations, I mean it was just a...
SOUTHWICK: A mess.
BRESNAN: A mess, yeah. A real mess. So we had to figure out how to bring the company cash flow positive.
SOUTHWICK: What was your position in the new company when it was restructured?
BRESNAN: Let's see, I was president of the cable division and appointed to that in 1974, I think it was. I moved back here, or I shouldn't say back here, I moved here in 1972.
SOUTHWICK: To New York?
BRESNAN: Yes. So one of the big loss problems was right here in Manhattan. TelePrompTer had claimed that they had somewhere around 55,000 customers, if I remember right and we couldn't make that jibe with the revenues we were getting. So we did a lot of work trying to figure out what really was going on and what had happened is they were counting free – they had a lot of free outlets they were giving to building supervisors, building owners, building lawyers, anybody connected in any way with a building got free service – but counting them as a customer. And then there was an awful lot of illegal connections; people stealing the service. I remember coming back after, I spent a lot of time in northern Manhattan at the cable office in uptown Manhattan, and I remember coming back to tell Jack Cooke – I think they were counting 54,000 customers at that time – I said, "Jack, we'll be lucky if we got 34,000."
SOUTHWICK: Wow. What was his reaction?
BRESNAN: He was not surprised. He was very upset, but not surprised. So we had to do a lot of things all at once. We brought in a number of our senior people from the field to do budgets. We had to get the banks satisfied that we had this company under control. So we did projections system by system what we thought we could do. In many cases it was to stop construction. Systems that were partially constructed, we stopped them. As painful as that was, because we had money tied up already in them, at least we stopped further outflow of cash. There were many systems that we just turned the franchises back to the cities, to the communities, that hadn't been started yet. We just said, "We're very sorry, we can't do this." It was very painful, obviously, but we shed a lot of those systems and therefore those capital needs.
SOUTHWICK: Did you have to layoff employees as well?
BRESNAN: Yes we did. We laid off, I think if I remember right, around 500 people and that was probably the most painful part of the whole thing. All of the families that were affected by that, but we absolutely had no choice. The company was that close to bankruptcy and I think the only reason that we didn't take it into bankruptcy was just we were all too stubborn. Cooke was determined and we were right with him.
SOUTHWICK: Kahn had borrowed very heavily to finance the construction in New York and the other major markets?
BRESNAN: That's right and he actually had, the banks had extended his credit beyond the limit that he had. If I remember right, he had a $40 million dollar loan, something like that. It seems like small numbers today, but that was a big, it was the largest cable facility at the time, and I think he was up to about $50 million when we took over.
SOUTHWICK: And these were all bank loans, not insurance company...
BRESNAN: No, bank loans. So we had to negotiate with the banks to a work out plan, in effect, and fortunately we got through it all. We had the help of some very talented people. Jerry Green was our chief financial officer. He's the fellow that the Jerry Green award is given in honor of at the NCTA, the Vanguard Award. He was unfortunately killed in a plane crash a couple of years later. We had Jeff Marcus was our vice-president of sales.
SOUTHWICK: You brought in some hotshot marketing, young marketing...
BRESNAN: Marc Nathanson was our VP of marketing.
SOUTHWICK: Did you hire them?
BRESNAN: Jack actually hired them and then they worked for me, but he actually hired them.
SOUTHWICK: You had to get the number of subscribers up to what level?
BRESNAN: Well, we promised the bank we'd hit a million customers by the end of '73.
SOUTHWICK: There was a slogan.
BRESNAN: "A million or more by '74." That was the slogan, that's right. You remember that?
SOUTHWICK: Uh huh.
BRESNAN: And Jeff Marcus grew a beard and we had an agreement that I would shave his beard when we hit a million customers and I think you have a picture of that.
SOUTHWICK: We have a picture of you doing that. Did they develop some new marketing techniques that hadn't been used before?
BRESNAN: Yes, Jeff really cranked up direct sales, that had been his forte up until then in the industry and he had created direct sales forces throughout the country for us and had some very aggressive budgets that he was able to get close to meeting. Marc did a tremendous job on the overall marketing plan. They were very good. We had some really good people.
SOUTHWICK: There were some things going on in Washington during this time as well, in terms of regulation in the late '60's and early '70's. Did that impact the business?
BRESNAN: Yes, because you couldn't bring distant signals into these markets. Of course, one of the problems of Kahn building into the major markets was they had the major signals, the major market signals, already in their market.
SOUTHWICK: They had the three broadcast networks and probably a couple of independents.
BRESNAN: And the independents, so it wasn't like some of these other markets where you were trying to import distant signals, but in many of them even then, what were considered at that time semi-classic. Take Rochester, that's now considered a classic market but at the time it was considered more of a semi-classic market because they had some local signals, but they wanted the distant signals from Minneapolis. If there were local signals available in a market, even like I mentioned Rochester had from Austin, Minnesota and LaCrosse, Wisconsin, you couldn't bring in the distant signals.
SOUTHWICK: You had to carry the closest ones first before you were allowed to bring in anything further.
BRESNAN: That's right. So we went through, there was a whole series of FCC rulings starting with, I guess it would be in the late '60's, the Carter Mountain Decision, where they determined that if the importation of a distant signal into a cable market of any size had a negative financial impact on a local broadcaster you couldn't bring it in. In other words, the FCC thought that their job was to protect the local broadcaster and it wasn't important what the people got to see on television, what was important was that that local broadcaster would be healthy. Now their argument for that, obviously, was that the local broadcaster is serving the public, serving all of the public and they need to be financially healthy to do that and that if cable comes in and drives the broadcaster...
SOUTHWICK: Takes away viewers.
BRESNAN: Takes away viewers, impairs his finances, that he then may go out of business and not everybody has cable or can get cable even and therefore the public is harmfully impacted. What really turned out in many of these cases is that when cable came in it actually helped the local broadcaster because he cleaned up his act. I know in the case of Rochester, for example, where I started, the local broadcaster, an NBC station, consistently ran over, his news and sports would run over so that The Tonight Show – they'd cut in and you'd miss the opening part of it, you know. Cutting into the network was always very sloppy and you'd miss the first part of the show. When cable came and we started importing the Minneapolis signals where they hit the network right on time, pretty soon the local channel started doing that and as they cleaned up their act, all of the local citizenry liked it, including the local merchants who said, well, maybe I'll advertise now that you're running a real TV station. So, in actuality, the local station did a lot better after cable came. And that's true throughout the country.
SOUTHWICK: Is it also true that you brought the signal to areas that maybe couldn't get the reception as well of the local station off-air.
BRESNAN: That's right, because we carried the local channel on our system and so people didn't need an antenna. They'd get it and they'd get it clearly.
SOUTHWICK: But the broadcasters didn't see it that way?
BRESNAN: No, they were worried at first.
SOUTHWICK: Were you involved with the NCTA during this period? When did you first become involved?
BRESNAN: I first became involved in '66, I think '66.
SOUTHWICK: As a member of the board of directors?
BRESNAN: As a member of the board, yes. Cooke was at that point the second largest operator in the business and NCTA wanted somebody and I remember I resisted at first because I was so busy doing everything I was doing. George Barco was the one that I remember called me and said, "We've got to have Cooke represented," and at that time Frank Thompson was the manager of the Rochester system, which Cooke owned, and I said, "Well Frank's on the board." He said, "We want somebody from the home office on the board." So finally I agreed to serve and I think I went on in '67 and been on ever since except for a year, I guess it was.
SOUTHWICK: Probably the longest tenured director ever on the NCTA board.
BRESNAN: I think so, probably. I went off during '74 when TelePrompTer was going through all the problems, I just couldn't take the time. Then I went on and after we got the problems resolved I went right back on.
SOUTHWICK: I don't want to divert too much, but I did want to ask, between that experience on the NCTA board, and also, I would assume many appearances before city councils and city governments around the country, you who had an engineering background primarily and a technical background, became involved much more in an essentially political process. Was that a difficult transition for you?
BRESNAN: I never really thought of it. I would just go in there telling them what we were doing and what we proposed to do and it was just sort of what you had to do to get by, you know.
SOUTHWICK: And everybody did everything that was necessary.
BRESNAN: Yes, so I never really thought about that.
SOUTHWICK: Okay, getting back to TelePrompTer, we were talking about getting a million or more in '74, which you did do and I guess got the banks settled and what was the next step in the evolution of that company?
BRESNAN: Well, then we continued to grow it for awhile and then other companies were coming on our heels. For awhile TelePrompTer was the largest and ATC was coming on strong, American Television Communications, which ultimately became Time Warner's property, and TCI was coming on strong. Jack Cooke was not active in running the company at that point. He had moved from California to Washington. He had earlier had 25% of the Washington Redskins and he had an option on most of the rest, which was owned by George Preston Marshall's estate and he ultimately got that. That was his love, was the Washington Redskins, so he moved to Virginia and took charge of them. We were faced with a situation where we either had to get some serious equity infusion and do some growing or we were going to be an also ran.
SOUTHWICK: Before we get to that, there was a technological development in terms of transmission of cable programming.
BRESNAN: Oh, yes!
SOUTHWICK: That came along and kind of changed the business a bit.
BRESNAN: Changed it a bit, thank you. In 1973, yes '73, TelePrompTer did a test of satellite transmission using the Canadian Anik satellite. The U.S. had not put any satellites up yet then; hadn't authorized any satellites, I should say.
SOUTHWICK: How did that come about? How did you get involved in this? Did you inherit this?
BRESNAN: Yes, actually Irving had started it and Hub Schlafly mainly. Hub had done a lot of work.
SOUTHWICK: Hub, who was Irving's deputy?
BRESNAN: Well, he was Irving's senior vice-president, or executive vice-president, I can't remember, but his chief. He was co-founder of TelePrompTer with Irving and...
SOUTHWICK: And he stayed on after...
BRESNAN: Yes, he stayed on for awhile. Hub actually is the inventor of the original TelePrompTer prompting device. That was TelePrompTer's original mission, to rent these prompting devices out and run them and operate them, and then they got into cable. They got into the fight promoting and then into cable, but Hub had been the senior engineering guy and co-founder of the company with Irving and Hub got very interested in satellite transmission. At that point, the telephone companies were trying to control the whole concept of satellite transmission because they had all of the long line...
SOUTHWICK: Meaning AT&T?
BRESNAN: Yes, AT&T. All of the long line microwave services that were carrying the network signals around were controlled by AT&T and they saw, obviously, the satellite as a replacement for the microwave and they wanted to control that. So they had proposed that they would put these satellites up. Actually, originally they were non-stationary and non geo-stationary, so they'd have a whole string of them up and complex tracking systems at the receivers and transmitters. Hughes Aircraft Company had come up with its concept of the geo-stationary satellite where you could put it up 23,000 miles above the equator and it would be revolving at the same angle and velocity as the Earth was rotating.
SOUTHWICK: And Hughes was a major shareholder in TelePrompTer?
BRESNAN: They were the second largest shareholder in TelePrompTer. They were the largest before the merger of H&B and TelePrompTer and Cooke became... So we pushed that concept along, or I should say really, Hub pushed that concept along and we hired a fellow from Comsat, a guy named Bob Button. We contacted the FCC and said, "We really want to show how simple it is to use satellite receivers and that the cable industry could really afford to buy a satellite receiver and put it in its hometown and receive these signals and provide service that we couldn't afford if we had to rent services from a complex system set up by AT&T. We want to prove that." By this time, Canada had put up a satellite, the Anik satellite, so if we can get special permission to send signals around the county using the Anik satellite, we'll provide the FCC with the results of this test. We got permission from the FCC and the Canadian CRTC, their body, to do this. So we sent signals from different from different places in the U.S. to the Anik satellite, and from places in Canada for that matter, and received them in different places around the U.S. We bought a portable Earth station, it was an 8 meter dish, about 25 feet in diameter, approximately. It came apart in sections like pieces of a pie and mounted on a tractor trailer with a little head end building behind the cab and the thing could be set up in a matter of three or four hours, if I remember right. We took this all around the country and showed that anywhere from the Northeast to the South, anywhere, that it worked very well. We even went to the Rochester, Minnesota cable system, which was my first system, where IBM had a very large facility at the very end of the cable plant at that time and we sent data from their facility in upstate New York to the satellite and down to the Rochester head end and then through the cable system and showed that the cable system also could send the data. It wasn't pictures, just data, in that case. So the FCC ultimately did open up with a ruling that allowed the users to own satellite receivers and for private parties to own satellite transmitters so it was open to all qualified entities and citizens. That made a tremendous impact on our business because then we could send signals from one spot to all over the country. In the meantime, by the way, HBO had developed the subscription pay TV concept. About the same time HBO was doing that, Theta Cable was doing it also. They'd created a channel called the Z Channel, which was movies.
SOUTHWICK: In Los Angeles?
BRESNAN: In Los Angeles. Just to digress for a moment, we bought two 2 inch ampex tape machines, big machines that stood on the floor and cost about $600,000 a piece, if I remember right. We were just about broke, but it was a good investment because it was a tremendous hit in Los Angeles.
SOUTHWICK: To show movies over the cable.
BRESNAN: To show movies, yes. The Z Channel. We sold the Z Channel for, I think, $9.95 month, if I remember right. So that really gave us a shot in the arm and at the same time, HBO was doing it here in New York, starting it in New York and by microwave down into New Jersey and Pennsylvania. So we thought if we could get those movies and the pay services around the country that that would be a good shot for the industry and would also help us in these markets that TelePrompTer had built into that were getting 15-18% penetration because we weren't able to offer them anything they couldn't get, and it proved to be true. In the fall of '74, I guess it was, I think that's right, you can check that date, HBO put a signal up on satellite, a fight to Vero Beach, Florida, a UA Columbia system. But prior to that, I got a little ahead of myself, in 1973, part of our trip of the satellite truck was to the NCTA Convention in Anaheim, California and we had the then Speaker of the House, Carl Albert, address the Convention from his office in Washington D.C. We microwaved the signal from Washington from the capitol to Germantown, Maryland where there was an up station that we were able to use, sent it up to the Anik Satellite and down to the Anaheim Convention Center.
SOUTHWICK: And you were chairman of the NCTA that year?
BRESNAN: I was, yes.
SOUTHWICK: And you introduced that and threw the switch to make it happen.
BRESNAN: That's right and it was a pretty amazing thing because most people hadn't seen it yet. So we had the truck parked right outside the convention center so people could tour through and look at the thing and they couldn't believe it. Most of what we were receiving was French language television from the Anik Satellite, we were just demonstrating the downlink during the several days of the convention, but for the opening session we actually were able to send Carl Albert from Washington. So that had a big impact and we continued the tour the rest of that year and then submitted our report to the FCC and the CRTC and then we're back to where I was.
SOUTHWICK: When HBO decided to go up on the satellite, did they come to you and ask you to participate? How did that evolve?
BRESNAN: Yes, they were trying to get the various cable operators to participate. They came to us and to others – Bobby Rosencrans at UA Columbia, he was the first one. ATC had an early one in Jackson, Mississippi, I think it was. We needed help badly because we were bleeding pretty badly from a cash flow standpoint and so we came up with a plan that if we put these dishes in each of our major systems that we'd get the cash flow we needed to get healthy.
SOUTHWICK: These are big ticket items!
BRESNAN: Yes, they were.
SOUTHWICK: $100,000 a piece?
BRESNAN: Yes, at that time, the FCC did not authorize the small aperture dishes so these were 10-meter dishes, about 33 feet in diameter. So they took a huge concrete pad to hold them down and they were around, anywhere from $85,000 to $125,000 installed, depending on the local situations.
SOUTHWICK: Why go with HBO? You were TelePrompTer, why not start your own movie service. Why did you need them?
BRESNAN: Well, they were up and running with a good product and we needed cash flow immediately and that was the best thing we could do. So we bought, I can't remember how many of those dishes we bought, I think 25 was our first order, from Scientific Atlanta. That was a very difficult thing for me because Hughes Aircraft was our second largest shareholder and they decided - about that time they were building the satellites but not the receivers. They looked at that as almost a consumer electronic kind of thing. They were into the real big ticket items, but they decided that there were going to be thousands of these sold and that they wanted to get into it. So, we had two board members, the chairman and CEO of Hughes Aircraft Company and the chief financial officer were on our board, on the TelePrompTer board. But they were real gentlemen about it, they bid and Scientific Atlanta bid and we ground them both a little bit and we were able to grind SA a little bit more than Hughes. It's one of those things you never forget, I was at Scientific Atlanta's offices and excused myself from the meeting so I could call Hughes to tell them that I was going to give the order to SA. I tell you, they took it like real gentlemen and agreed it was the best thing to do because they had the best price and so we put these around the country and voila! The cash flow started coming in. It was a transformational event for the whole industry because prior to the satellite, the industry was made up of a bunch of isolated systems all around the country and just overnight, as these satellite receivers started popping up we had a national network. We had an interconnected, national network, which totally changed the industry.
SOUTHWICK: What was the first one that TelePrompTer put in and actually got up and running? Do you recall?
BRESNAN: I can't remember.
SOUTHWICK: You had some colleagues there. What was your relationship with Russ Karp?
BRESNAN: He was the president of TelePrompTer Corporation. TelePrompTer had three divisions. It had the cable TV division, which was about 85% of our revenues and then the other two divisions were Muzak Corporation, the background music company, and FilmMation Associates, which made animated cartoons for Saturday morning television.
SOUTHWICK: And you were president of the cable division and reported to Karp?
BRESNAN: I reported to Karp, yes, and Karp reported to Cooke.
SOUTHWICK: What was his background?
BRESNAN: Russ has a financial background and was a lawyer, actually I should probably say he was first a lawyer with a very strong financial background. He had been with one of the movie studios prior to joining TelePrompTer. A good man.
SOUTHWICK: And so the satellite came along, all of the sudden you were able to sell HBO to many of your customers...
BRESNAN: Yes, plus we got our basic penetration up because people would take basic in order to get the HBO, so we had a lot of basic lift by offering HBO.
SOUTHWICK: And did you, at that time, start to think about getting into the business of creating your own program?
BRESNAN: Well, we had a contract with HBO, I can't remember the duration of it, it was a multi-year contract and I believe, if I remember right, we had the ability to get out of the contract by notifying them a year in advance. This is going back. Anyway, we could give them a notice in advance and get out of the contract and we started talking to HBO and this was really Russ Karp's idea because we were far and away the largest affiliate of HBO's at the time. He thought that we should have more benefit than we were getting. So he had some negotiation with HBO and then he started talking with ShowTime and ...
SOUTHWICK: ShowTime had been started by...?
BRESNAN: By Viacom, at that time it was called Vee-a-com. And then what he wanted to do, was he made a proposition to ShowTime that we'd buy half of them and that we would throw all of our systems, all of our systems would become ShowTime affiliates. That was rejected by Viacom but eventually they came around and decided that they would allow us to do that. And so we notified HBO that we were going to be dropping our affiliation with them and go with ShowTime, because at that time, we thought erroneously that you could only sell one service – you had to be either affiliated with ShowTime or HBO.
SOUTHWICK: That the customer only wanted one.
BRESNAN: That the customer only wanted one and therefore, it only made sense to carry one.
SOUTHWICK: So you had to change all of your...
BRESNAN: We changed all of our customers from HBO to ShowTime.
SOUTHWICK: Hundreds of thousands, perhaps. What was the reaction from you customers?
BRESNAN: It wasn't bad. A few little hiccups but considering the enormity of the transaction, it was relatively minor. And then of course, we ended up owning half of ShowTime and then I can't remember how long thereafter, maybe a year or two thereafter, ShowTime came up with the idea that maybe we can, because HBO had the majority of the cable companies as affiliates, so it was to their benefit to try to get the cable companies to try and take on ShowTime, too. So they did a test, I think down in Louisiana somewhere...
BRESNAN: Thibodaux, yes. Thibodaux, Louisiana. They put in ShowTime as a second pay service and low and behold, they found that they had more total pay customers with two than they had with one.
SOUTHWICK: So they were a multi-pay, then.
BRESNAN: That's right, they were a multi-pay.
SOUTHWICK: Talk a little bit, if you will, about the technological challenges of delivering pay television. This was the era, I assume, of traps. Was that the first way that it was done?
BRESNAN: Yes, traps and converters were the two. Converters were easily defeatible and so traps really were mainly and mainly the negative traps at that time, trapping out the HBO signal.
SOUTHWICK: So the signal would go to the whole system in the clear and then you'd put a negative trap on the drop cable that goes into the house where they don't want it.
BRESNAN: That's right.
SOUTHWICK: Can't they just go out and take that off?
BRESNAN: They could and in some cases they did but the biggest negative to that was the cost because you had to buy traps for your non-pay customers, so the cost was inversely related to your revenues.
SOUTHWICK: I see.
BRESNAN: If you had more pay customers, you had fewer traps – fewer pay customers you had more traps so it was kind of a crazy economic formula or financial formula.
SOUTHWICK: Was the trap a device that had been around or was this something that had to be invented?
BRESNAN: Well, traps had been around for other purposes. We used them principally at our head ends to trap out interfering signals or adjacent signals, so these kinds of traps had been around. They were mainly tunable and you had them in the head end to get rid of interference and unwanted signals of any sort. So it's just a case of taking the concept and mass producing them - so they'd be relatively inexpensively because the ones we used in the head end were expensive – mass producing them and making them fixed so that they didn't vary at all and because they're extremely sharp, you want them to trap out the same... You don't want them tunable, you want them to just trap that signal out and keep it out. So they had to make them fixed, they had to make them non-tamperable – the only way they could do it is just take them out – and they had to make them relatively inexpensively. So that was a challenge and that was met by a number of the passive equipment makers. So there was a big trap business created in the mid-70's, I guess it would be.
END OF TAPE 1, SIDE B
START OF TAPE 2, SIDE A
SOUTHWICK: Let me make sure I understand this. You'd go into a town and you'd put traps on all of the home and then sell HBO and when you sold one, you'd take the trap off? Is that the way it worked?
BRESNAN: Well, or in many cases what we'd do is go in and offer a free trial, a 30 day free trial and then we'd trap those who didn't want it.
SOUTHWICK: I see. So that saved you trapping a lot of homes. And what did this do in terms of the financial situation at TelePrompTer?
BRESNAN: Tremendous impact. We went cash flow positive. Of course, we'd done a lot of other things by peeling off the negative operating system results and so we were cash flow positive before that, but it was a tremendous shot in the arm getting the additional revenue for the pay service, but as I said also, we got lift for basic service as well.
SOUTHWICK: Particularly, I assume, in the urban areas, which had been the biggest...
BRESNAN: That's exactly right.
SOUTHWICK: And this became, then, attractive for these urban areas that didn't have cable to have them, which led to your franchising effort. Tell me about how you set that up at TelePrompTer.
BRESNAN: I guess we started actively going after franchising again in about 1978. Some of the major cities were starting to want cable because of the pay services. Also, by the way, after the satellite we had ESPN and C-SPAN, so we had some services that were in addition to the pay services.
SOUTHWICK: USA Network, or the Madison Square Garden Network which became USA.
BRESNAN: Yes, exactly. So cable was starting to become attractive in the major cities because they could get some programming that they couldn't get without cable and so cities were starting to issue our requests for proposals. Once that started, it got going very quickly, it got going very fast, I should say, too fast for any of us. I think if you ask anybody in the business, they'd say we wish it would just slow down a little bit. But it was sort of like the last big buffalo hunt because once these franchises are granted, they're granted. The only other way you could get them would be to buy the system or buy the unbuilt franchise. So, all the major companies were mobilized quickly to go after cable franchises. We hired Norville Reese to be our vice-president of community development and Norville had been with Governor Shapp's office. He was the Secretary of Commerce for Pennsylvania while Governor Shapp was the governor. When Dick Thornburg unseated Shapp, Norville served in the transition team that turned the government over to Thornburg and then at that point, he was out looking for a job. I can't remember how we found Norville, or how he found us, but anyway, we found each other and he's a great guy. He was a terrific asset to us and he organized an effort to go after these franchises and then later on, a person you know, Jane Hartley joined us after she was in the Carter White House and when Governor Carter left the White House, she joined us. This was after, our efforts were getting more cranked up, more cities and more activity and a lot of it in democratically controlled cities at that time, so she and a number of her former associates at the White House came on board and worked a lot of the communities. That was about the time that Time Warner, or I guess it was Warner at the time, not Time Warner, came up with the Qube concept, which was two-way interactive television. And they really kind of dominated the franchising for a while because they were offering Qube and none of the rest of us had that. As it worked out, it was an impractical service at the time but they got a lot of franchises. Of course, TCI benefited from some of those by buying them back from Warner at a discounted price. A deep discount from the investment that Warner had put into those systems and converted them from the interactive Qube system back to plain Jane cable systems.
SOUTHWICK: Describe for me, if you will, the process in how you at TelePrompTer dealt with it. I gather it would begin by a city issuing a request for proposal, inviting everybody in to bid on the system.
SOUTHWICK: What would you then do? How would you decide whether or not to bid and how would you decide what to bid?
BRESNAN: We had a team of financial people in the home office. Actually, I should say a team that included financial people, marketing, engineering and operating people and they would take a market – the engineering people would decide what kind of a system to build. And they would work really with the marketing people as to what the marketing people thought you had to offer in order to win the franchise. So between the marketing and the engineering people, they'd come up with a proposed franchise - a proposed system, I meant to say - and a proposed channel lineup. Then the financial people would take a look at it and we'd model it to see whether we could make it make sense financially.
SOUTHWICK: Was there a tension there in terms of trying to stretch it a little bit?
BRESNAN: There was very much a tension, yes. To the community development people, the most important thing was to win the franchise, period. But as far as I was concerned and Russ Karp when he was there and others, and the board and so forth, it doesn't make sense to win the franchise if you're going to lose money on it. They'd say, "But if you don't offer this, you won't win the franchise." Okay. So, yes, there was a lot of tension. Part of what really went on in the industry was that franchises were won promising one thing and then delivering something else. That was always a difficult thing for me to deal with because I really didn't want to be party to promising something I knew we weren't going to deliver, even though I knew that you could probably fast talk your way out of it later.
SOUTHWICK: And the other guys were doing that.
BRESNAN: Yes, they were doing that. So, we still won a significant number of franchises and built in a significant number of areas, but never really had to go back and say we're not going to do what we promised we would do. That kind of thing still goes on. The FCC had their auctions for the wireless licenses a couple of years ago and guys were bidding high prices and then coming back and saying, well we really can't do what we said we'd do, and so forth. I have a real problem with bidding something when you know you can't do it.
SOUTHWICK: When you say that, are you referring to technically can't do it or financially can't do it?
BRESNAN: Financially can't do it.
SOUTHWICK: Too many channels, too many...?
BRESNAN: The technical cost of doing what you're promising to do doesn't work financially so that you know you've got to come back and tell them you can't do it. So we didn't do that.
SOUTHWICK: I don't want to get off too much, but also during this period, after the launch of the satellite and through the end of the '70's, things began to change somewhat in Washington as well. You got some more favorable rulings from the FCC. Can you talk a little bit about that?
BRESNAN: Yes, well first of all, from a marketing standpoint with the satellite in place and the satellite receivers... By the way, another first that TelePrompTer did was install the first small aperture satellite, which was up in Lake Kalispell, Montana. We got permission from the FCC to experiment with a small antenna, which I think at that time was four or five meters, four and a half meters, maybe, in diameter.
SOUTHWICK: As opposed to the ten meters?
BRESNAN: As opposed to ten meters. The potential negative of those is they have a broader reception beam and so if the FCC wanted to move the satellites closer together and drop satellites in between, potentially you could have interference with the smaller dish. We installed this one with their permission, and by the way, they were licensing the satellite receivers at that time, and it worked fine and took a lot of measurements and so forth, and finally they authorized the use of those. When that happened, then you could put the dishes in much smaller cable systems, they were much cheaper to install. With the ten meters, you had huge concrete requirements and because they were so big, they were kind of ugly and we had a lot of unique zoning problems. The most unique of which, by the way, was Santa Cruz, California, where we had to build a house façade to hide the dish, so we had a phony house front. It looked like a house but it was really a dish. We had to dig holes in some places. We had to make a hole to put it down in or look out of a hole so just maybe the rim would stick out a little bit and put some bushes around it. So those installations got very big. Once we got dealing with the smaller ones, it was much less expensive, so that made it possible to get into a lot of the smaller markets. Further, it created the market for the programming, which created more programming. It caused more programming to be created, so that the industry got much more influential. People wanted our service. The FCC started to come around to see where they had to accommodate us a little more in order to accommodate the public more. The big cities wanted us; originally we were just little small towns. Now, big cities wanted us.
SOUTHWICK: You were kind of the good guy on the block.
BRESNAN: We were becoming good guys, yes. So rulings started to ease up. We were able to bring distant signals into markets. We had quite a copyright controversy over copyrights, which we finally got resolved in '78, I think it was, with the Omnibus Copyright Act.
SOUTHWICK: You had the pole attachment legislation?
BRESNAN: The pole attachment legislation, that's right. The phone companies were denying us access to the poles, so we got pole attachment legislation passed. That was '78, too, I believe, which allowed us to get on the poles. So things were really starting to go our way.
SOUTHWICK: Now, talking about programming, there's a fellow from Atlanta who came on the scene about then, in the late '70's.
BRESNAN: Actually, he came on the scene in the early '70's, because I remember when I was chairman of the NCTA, which was in '72-'73, he requested to come to a board meeting...
SOUTHWICK: This is Ted Turner.
BRESNAN: ...Ted Turner... to speak to us about...
SOUTHWICK: Did he call you on the phone and say, "I want to come."
BRESNAN: Yes, if I remember right.
SOUTHWICK: Did you know who he was?
BRESNAN: Yes, because we were carrying his signal on the microwave in Alabama. We had created a joint CARS-band service with GE and TelePrompTer. I think there was one other company involved, I can't remember, and picked up his signal and brought it down across through Mobile and southern Alabama and then brought it up north into our TelePrompTer systems. He was delighted with that obviously because it extended the reach of his UHF TV channel, which had a relatively small radius in the Atlanta area. Now he was reaching way over into Alabama. So he was delighted with that, and then he came down with Roger Rice, I think it was, and wanted to promote better relationships between the independent broadcast channels and cable systems and maybe do more of these kind of arrangements where we could put in a CARS microwave system and extend the signal out. So that was sometime during the summer of '72 and the summer of '73. I think it was a board meeting we had in Florida. He was just as entertaining then as he is now.
SOUTHWICK: Tell me about it.
BRESNAN: I can't remember much. It was a breakfast meeting and I know he had us in stitches the whole time, but he did a good job of presenting that but then we didn't hear much more until, obviously, until he got on the satellite. When was that? Seventy...?
SOUTHWICK: It was shortly after HBO, so probably '76, maybe?
BRESNAN: '76, probably.
SOUTHWICK: And then he conceived this idea of a news channel. Did he come to you?
BRESNAN: Yes, he came to TelePrompTer. I remember Russ Karp and I met with him in Russ's office. He had a cigar; he always had a cigar at that time and pacing back and forth like he still does and had this concept. If I remember right, he needed 20 million dollars. I think he was going to launch it with 20 million dollars and he was looking for the top cable companies, if I remember right, the top ten cable companies, to commit customers, commit systems serving customers to take his service. If we'd sign up then he could finance it and get going.
SOUTHWICK: He was also asking you to pay, wasn't he, on a monthly basis per subscriber?
BRESNAN: Yes, he asked us for, I think it was 15 cents a month he wanted per customer.
SOUTHWICK: Was that a new concept?
BRESNAN: That was a new concept, yes, because all of the broadcast stations were getting network compensation from the networks.
SOUTHWICK: It worked the other way around.
BRESNAN: It worked the other way, yes. The networks paid the local broadcast station for the coverage. But he said he needed this because he wouldn't have any audience at first; he wouldn't have any viewership at first and so he needed to have this revenue and then as advertising revenue came in, he could lower that. So he said it will start out 15 cents a month, but then we'll drop it to 10 and then we'll drop it to 5 and then 0 and then eventually I'll be paying you guys. It didn't work out that way. It didn't work out that way, but I don't think even Ted envisioned that the service would be as terrific as it is.
SOUTHWICK: What did you think of a 24 hour news channel?
BRESNAN: We thought it was a good concept. We were concerned that he couldn't do it for the 20 million. And I was really deferring more to Russ Karp there, because he had a broadcast background as well, and a production background, so he had a pretty good sense of what those kinds of costs might be and he just didn't believe it and he was right. It turned out that he couldn't do it for what he had hoped to do it but thank God he did it.
SOUTHWICK: I wanted to ask you about a couple of other programmers. What was your first contact with Brian Lamb at C-SPAN?
BRESNAN: Brian came around looking for money and at that time, he was, I think, managing editor if I remember right, for Cablevision Magazine.
SOUTHWICK: He was their Washington Bureau Chief.
BRESNAN: That's what it was – Washington Bureau Chief – of Cablevision Magazine and he had talked Bob Tisch, and who was Bob's partner there? I don't remember, but anyway, I guess he had talked Bob Tisch into giving him kind of a free hand to try to create this thing and I think he, bless Bob, Bob says, "Go ahead, try it. If you can do it, bless you; if you can't, you've still got a job." So it was a good thing and Brian came around. He was looking for, I believe, $25,000 from the top ten companies and that would give him $250,000 which he thought he could start the thing with. TelePrompTer, we were one of them, UA Columbia was one. I think UA may have been the first one to sign up.
SOUTHWICK: Yes, I think Bob Rosencrans was.
BRESNAN: Yes, I think he was, and all of the major companies signed up really. That was a tremendous move on our part and we didn't realize it at the time, how brilliant we were. (Laughter)
SOUTHWICK: It was an amazing time when a guy with an idea could just make it happen. I don't think that's true anymore these days.
BRESNAN: It's a lot harder. You sure as heck can't start a television channel with $250,000 now.
SOUTHWICK: And probably not if you're an individual anymore, either, because it's the big companies – Discovery and Viacom and everybody – who are doing it. So TelePrompTer was kind of riding high but had to build all these franchises and Jack Kent Cooke was beginning to look elsewhere for his future, what took place next?
BRESNAN: I sat down one day and wrote a long letter, a handwritten letter, to Jack. He didn't like getting handwritten letters because they're hard to read and if he got one he would have his secretary transcribe it and so I seldom wrote him a handwritten letter and when I did, he knew it was because I wanted it super-confidential. And I wrote him a several page, on a legal pad, handwritten letter telling him where we are in the industry, what's happening in the industry and that we're really at a crossroads where we either have to get a major equity contribution to grow or be satisfied by being a second tier operator because that's what we will be. If that's what he wants, that's okay, but this is what's going to happen. I took him through the whole thing and he called me right after he got it. He read it, he did not have it transcribed due to the sensitive nature of it and said he thought I was right and that we ought to look for buyers. The awkward thing for me at that point is that I had not shared this with Russ Karp and he had not shared it with Russ Karp. I knew Russ wanted to run the company and he wanted to keep it going because I'd had some discussions with Russ about where things were going and all that. I thought the welfare of the company and the investment and the shareholders and everything was greater than our jobs and that we really needed to deal with this.
SOUTHWICK: What was the prime motivating factor in your mind that made you come to that conclusion?
BRESNAN: Well, the major market situation was starting to heat up and that would take a tremendous amount of capital. That was really the main thing. So if we even wanted to bid on these things we had to be bigger. We could take on debt but you have to have a certain amount of equity to do that.
SOUTHWICK: So, Cooke called and said I agree with you, then somebody had to break it to Karp?
BRESNAN: Cooke did that, but the awkward time was then he had me log – we did kind of an exhaustive study of who the potential buyers might be and he had Jim Locker on the West Coast, his financial fellow on the West Coast, doing a lot of that, too. So, he and Jimmy and I were doing a lot of analysis of who the buyers might be and even though the company wasn't all that big, it was small by today's standards, but at that time it was a big deal. He came up with Westinghouse.
SOUTHWICK: Cooke came up with Westinghouse?
BRESNAN: Yes, Cooke came up with Westinghouse. That was one of the names we had, but he picked them because they had a lot of money at that time.
SOUTHWICK: And they were broadcasters.
BRESNAN: And they were broadcasters. I can't remember how he made contact with Dan Ritchie, but did.
SOUTHWICK: With Ritchie, but not Danforth?
BRESNAN: Well, Danforth at that time was co-chairman, and the chairman was Bob Kirby, but I think if I remember right, he contacted Dan Ritchie first and then Ritchie contacted Kirby. I remember we then had a meeting in the Waldorf, in Jack's suite in the Waldorf, in New York with Dan and I didn't meet Kirby until a little bit later. Now, by that time he had talked with Russ Karp and Russ was on board so we were kind of through that awkward period and then it moved pretty quickly. Bob Kirby, who was the chairman of Westinghouse Electric at the time, was very aggressively trying to change the company and I think he was moving it in the right direction, changing it from a manufacturing company to a services company. Dan Ritchie was the chairman and CEO of Group W Broadcasting and Bob was very sympathetic to the things Dan wanted to do. Dan wanted to expand the broadcasting, the production company, Group W Production, Group W satellite, the satellite business, getting a lot of support from Kirby. Danforth on the other hand, who was at that time vice-chairman, not co-chairman, vice-chairman, was more of a factory oriented guy and he kind of resented the capital that we were absorbing. We'd spend 50 million dollars building a city and he needed 5 million to build a new relay plant or something, so there was quite a tug of war within Westinghouse - the electrical company people versus the broadcasting and cable people. And Kirby was very much in our camp and really saw the industrial age is passing and the information age is rising. Kirby was right, as it worked out. Then Kirby mandatorily retired and Danforth took his place.
END OF TAPE 2, SIDE A
START OF TAPE 2, SIDE B
SOUTHWICK: In terms of the sale of TelePrompTer, why pick one buyer? Why not go out and say, "We're for sale," and see who came up with the best price?
BRESNAN: Well, because we were going after cable franchises at the same time. We were in the heat for these major city franchises and all of the competitors were looking for edges against their competitors. If we were to disclose that we were for sale, that would have hurt the effort. We just wouldn't have won anything because the competitors could say, "You don't know who your provider is going to be if you give it to TelePrompTer because they're going to be sold."
SOUTHWICK: And Westinghouse was probably an asset, in terms of the franchising, because they were a known name and respected and had tremendous capital resources.
BRESNAN: That's right and that's one of the things we were looking for was somebody that the cities would recognize had the capital to do.
SOUTHWICK: Do I understand it correctly that Kirby was chairman when the acquisition was made, but then stepped down and Danforth, who had not been really excited by it took over?
BRESNAN: More than that, what happened is that Kirby didn't even tell Danforth that he was doing this deal because he knew Danforth would be opposed to it. So the deal was done and I was told, and I don't know whether this is true or not, but I was told that Danforth read about it in the Wall Street Journal the next day. So he was very angry, and philosophically, he wasn't aligned with the whole concept, so it was kind of double whammy. But he was a gentleman, he had a different philosophy. I mean, I certainly enjoyed working with him but not as much as with Kirby because Kirby wanted to nurture us and was enthusiastic about it, but Danforth was a real gentleman and doing what he thought was right for the company.
SOUTHWICK: What was your role after the sale?
BRESNAN: I became chairman and CEO of Group W Cable. Russ Karp resigned and we changed the name of the company from TelePrompTer to Group W Cable and that was a wholly owned subsidiary of Group W Broadcasting and we changed the name of Group W Broadcasting to Group W Broadcasting and Cable.
SOUTHWICK: And you reported to Dan Ritchie?
BRESNAN: Yes, to Dan Ritchie, and I went on the board of Group W Broadcasting and we had meetings, I guess it was quarterly if I remember right, in Pittsburgh at the Westinghouse Electric Company because Bob Kirby was on our board and some of the financial people were on our board.
SOUTHWICK: How did that change life for you? You'd essentially worked for Jack Kent Cooke for many years before that, who was an entrepreneurial guy, who had great confidence in you and you could go to him and there'd be a decision made and that was it. All of a sudden you're working for a huge electronics company of which you were a part. How did...?
BRESNAN: Right, it made things a lot more difficult. Working with Dan Ritchie was great, because Dan is much more entrepreneurial, too. But he was bound as we all were by the rules and the committees and all of the things. They had a whole structure which included, if we wanted to do something we'd have to, first of all it'd have to be in our budget which is understandable, it'd have to be in our strategic plan, which is also understandable. You revise your strategic plan every two years and they have half of their business units one year and half of their business units the next year so they have an even flow of these strategic plans.
SOUTHWICK: So if you wanted to do something, you conceivable had to think of it two years before?
BRESNAN: Yes, if you wanted to get it through quickly, that's right. I mean relatively, I shouldn't say quickly, relatively quickly. It had to at least be in your strategy. You wouldn't necessarily need the exact project but it had to be in your plan. And then they had what they called a management review committee that we would meet with every quarter and they would review everything that went on in the company. They had what they called a MPRC, the major project review committee, and any acquisition or disposition of 5 million dollars or more had to go through the major project review committee. And these committees were made up mainly of staff officers, staff level people at the Westinghouse Electric Company, financial people mainly. So the thing about it was that it gave you tremendous insulation that if you screwed up, there was nobody to blame. Because if it was in your strategic plan, or if it complied with you strategic plan I should say, you had it budgeted and your board approved it and your major project review committee approved it, and it went bust, well, it's nobody's fault. It gave me great insight on how a lot of these large companies operate and how inefficient they are because there's really nobody accountable. They can cross the responsibility from this guy to that guy.
SOUTHWICK: There's so many fingerprints on it, you can't tell who's really done it.
BRESNAN: Exactly. So it just happened, if it blows up it's nobody's fault.
SOUTHWICK: What was the impact on TelePrompTer of this kind of process in terms of the way the company worked, the system level or however you want to describe it?
BRESNAN: It slowed things down quite a bit, obviously.
SOUTHWICK: So if you wanted to do an upgrade or bid on a city, it took a longer time to get a decision?
BRESNAN: It took a longer time and we learned in a short period of time, I was only there three years from '81-'84, but we kind of learned how to live with the process. We found that they had some companies that helped them with the strategic planning process and we had some good people at Westinghouse Electric that gave us some good tips. We had one fellow that joined us, Howard Miller was his name, and he had been through the processes there at the electric company a lot and he knew kind of how you had to do things. And one of the things, he put us in touch with one of these consulting agencies that does work for the government, for NSA, down in Virginia and we went down there. They spent a couple of days with us working on our strategic plan and we knew that if we had them help us that it would be a respected strategic plan. So we went down there and we had a round table that we had a discussion at and they had kind of a coordinator, a proctor, a guy that would draw questions out of us and they'd have a guy on a computer running this stuff on a big white board. And then there was a pipe coming down from the ceiling that shot ozone into the air because that's supposed to make us think more clearly.
SOUTHWICK: Did it?
BRESNAN: I don't think so because I remember we ended up, my last comment the last day was garbage in, garbage out and I think that's what we got. We spent three days there, I guess, breathing in this ozone and the guy was ruining the computers putting this stuff up on the wall and it was pretty weird. But we had a strategic plan that Westinghouse Electric bought off on. So we got their blessing.
SOUTHWICK: How did you evolve the process of deciding to leave Group W?
BRESNAN: What happened is just prior to the deal, Cooke told Westinghouse he'd sign all of the officers up for three years, three year contracts, and we all agreed to that. Even before we closed the deal, I told Dan Ritchie, you know we have this three year contract, if he wants me he's got me for three years, if he doesn't, don't worry because I don't want to be here if he'd rather have somebody else. He assured me he wanted me and so we got along fine. I think he appreciated my giving him that opportunity and Dan and I had a good relationship, but as we got to the end of the second year, which was 1983, on my birthday, the Friday before my birthday, I had just celebrated my 25th anniversary in the business. Westinghouse had a great big party in New York for it and I had my 50th birthday coming up the following Monday. And I had been wanting to start a company for many years, even before moving from LA to here in the late '60's. Jack would keep saying, stick with me through this and then when we agreed to sell, I said, this is a good time for me and he said, no, no you've got to wait until I sell, so I kept on. But anyway, I realized that I was turning 50, I'd been in the business 25 years, if I don't start this company, I'm never going to do it. So I talked with Dan that night, it was a Friday night and I said, "I really think that I would like to leave at the end of my three year deal." So this was a year prior, actually, almost a year - December of '83 versus October of '84, I think it was October, and he said, "Well, think about it," he understood, I was consulting with him like a brother almost and "we'll talk again Monday." Then that Saturday, I called Jack Cooke at home to get his advice and he strongly encouraged me to do it – now.
SOUTHWICK: Now that you weren't working for him anymore.
BRESNAN: He said, "Willie! I've been wanting you to do that for years!"
SOUTHWICK: He called you Willie?
BRESNAN: Yes, at times, about half the time. When he was happy, particularly. So anyway, he encouraged me to do it and then I went in to see Ritchie that Monday and told him that's what I wanted to do. So he went along with that and what we did is we put an announcement out that I was planning to do this and I would stay with the company, stay with Westinghouse, through the end of my contract and then work part time for them and part time setting up. So it was all above board and I didn't have to sneak around or anything. I got a lot of calls from people asking what am I going to do, would I like to do something with them and I kept a yellow legal pad and I ended up with – when people would call in, I'd write them down – and I ended up with three pages of calls from people. A lot of them were flaky but there were a lot of very good ones and I had breakfast with John Malone early on, I guess it would have been probably January or so, January or February of '84, in New York and he suggested that I should consider doing a partnership with them.
SOUTHWICK: And you'd known John for a number of years?
BRESNAN: John and I had been friends since he entered the business in the early '70's because I was at TelePrompTer then and we were Jerrold's biggest customer at the time, I guess. So, we'd been friends since then and he said I should consider doing a partnership with them and it sounded pretty good. In the meantime, I had visited with a number of friends – I had visited with Gus Hauser to get his thoughts, Steve Simmons, Doug Dittrick, John Saeman, Gene Schneider, all kinds of people that had made changes.
SOUTHWICK: And Hauser, having done essentially the same thing you did.
BRESNAN: Exactly, as did Steve Simmons and Doug Dittrick and so just to get their thoughts on what they did and what they thought they did right, what they thought they did wrong, what they'd recommend and that was one of the most rewarding things because it was just really heartwarming, the camaraderie that's in the business. These guys would just open up and tell you exactly how they did it, what they felt they did right, what they felt they didn't do right and how they would do it if they did it over and spend as much time as you want. That's one of the nice things about this business is the people in it, but after having done all that and then I met with John and his idea just kind of gelled with what these people were recommending. So I told John, let me think about it and talk to Barbara, my wife, for a day or two and I'll get back to you. So I called him back a couple of days later and said, "I'd like to do that," and he said, "Good." So we had a handshake over the phone, in effect.
SOUTHWICK: Tell me a little bit about Malone. What is he like to work with?
BRESNAN: He's a terrific guy. I really love the guy. I mean he's just a genuinely decent person. If it weren't for him I wouldn't have this company, obviously. Very supportive, doesn't interfere, he picks people he trusts, obviously, and if he finds out he can't trust them or they're going a different direction then he wants to go, he just gets out of the partnership. He really lets you run it.
SOUTHWICK: So this was structured how? TCI provided the financing and you provided the management?
BRESNAN: Essentially that's how it worked out. How we structured it first is a 50/50 partnership. The concept is we'd borrow as much money from the bank as we possibly could and we'd put in – let me back up – we put in a million dollars each of equity, we'd borrow as much money from the banks as we possibly could and then what additional money we needed, TCI would put in as subordinated debt. Then I had one more request as we got on; I had one more request of him. As we started putting the deal together, I realized that I had paid a fairly large amount of income taxes when TelePrompTer was sold to Westinghouse because I had shares with TelePrompTer and I had unexercised options that had large spreads on them because some of the options were granted in the four dollar range and we sold TelePrompTer to Westinghouse for 36 ¼, so there was a lot of gain there. So I paid a lot of income tax for the year 1981, the tax year 1981. You can carry losses back three years to recover income taxes that you paid.
SOUTHWICK: You wanted the losses from the company?
BRESNAN: I wanted the losses from the partnership, the depreciation and interest and so forth. So we structured the deal in a way that I got 99% of the losses the first two years, which allowed me to recover these taxes, so I was going to recover 3 million dollars, I think, or maybe it was more than that, almost 4 million dollars of taxes. So, originally I was going to raise my million dollars of equity by selling securities that I had but then, when I realized I was going to be able to get all these taxes back, I went to John and said, "John, why don't you lend me the money, the million dollars and I'll just pay you when I get my taxes." He said, "Fine." And so we did. So, a year and a half later, whenever it is I got the government tax check, refund check, I was able to pay him off. So, the bottom line is, we structured the deal where I didn't have any of my own money in it at that point, and John was very cooperative in doing that. And then we bought 28,000 customers from Group W that I knew they wanted to sell in the upper peninsula of Michigan. We also, at that point TCI was in the process of buying Marquette, Michigan from somebody else, so he agreed he'd put that into the partnership, too, because it was in the upper peninsula also so we'd have...
SOUTHWICK: The cluster?
BRESNAN: Yes, so we had 44,000 customers in one partnership there and at then we agreed to buy Midland and Bay City, Michigan from the Garrity Estate and then had to put another million dollars in, so I did that. And then, at that point, I guess TCI and I each had 2 million dollars of equity in. I think we had around 22 million dollars of subordinated debt from TCI and then the rest was bank debt and then about that time, Doug Danforth, who had taken over Westinghouse, decided to get out of cable. So TCI and others were buying up Westinghouse's cable companies. So I got two more systems; I got Duluth and Brainard, Minnesota and Superior, Wisconsin out of that deal. I think, if I remember right, at that point we were still 50/50 partners and then John suggested that if I wanted to take some cash off the table that they would buy and option to take up to 80% of our company. So they would raise themselves from 50 to 80%. So I did that, knowing full well that that would be worth more later probably, but at the same time, it gave me the opportunity to take almost 20 million dollars off the table, which I thought with the uncertainty of where the phone companies were going to be, where satellite DBS is going to be, it probably would be prudent to take the security, even though I'm probably giving up future gains, which I did. I did give up future gains, but it was the right thing and so it was good for us, for Barbara and me because it gave me the security, and it was good for TCI because they were able to buy some of that at what turns out to be relatively low prices.
SOUTHWICK: Bresnan Communications is a family enterprise as well. You involved Pat?
BRESNAN: My brother Pat's involved.
SOUTHWICK: And your sons.
BRESNAN: My sons, Mike, Bob and Dan are all in the business.
SOUTHWICK: What were their roles in the company?
BRESNAN: Well, the oldest boy is Mike and he has an engineering undergraduate degree and an MBA. He worked for TRW in their space communications when he first graduated from college, or from university with his engineering and then later got an MBA. He joined us first in our Marquette system and ultimately ended up managing that and then came back here about ten years ago, I guess. He now runs our U.S. operation. Number 2 son, Bob is a lawyer; he's our general counsel and Dan, our third son, also has an engineering undergraduate degree and an MBA and he runs our international operations. He's really the longest term employee, even though he's the youngest son, because when he was in college, he was in charge of our MIS part-time. And then, my brother Pat, who's been with me since those early days with Cooke, is in charge of our community development.
SOUTHWICK: And you kind of hit the curve just right, because you were getting up and running just as the 1984 Cable Act deregulated rates and the great boom started. So it was a good time to...
BRESNAN: Yes, we closed out deal with TCI on October 31st of 1984. You know, kind of a funny story to go back to, Westinghouse versus Malone, because Malone, again, is an entrepreneur, very much like Cooke. When I knew Westinghouse wanted to sell those upper peninsula properties, I talked to Dan, Dan says fine, but he says, "I'll need to clear it with Westinghouse Electric." I said, "Yes, I understand. Fine." So he talked to them and they were okay, but they wanted to have the process go through their acquisition and disposition group, which was fine, and they did all that. So it was an arm's length transaction and I understood that, because I was an officer of the company, but then when we got all done negotiating the deal and agreed upon it, it took forever to get a contract drafted that everybody in Pittsburgh would agree with. So it went for months and word was kind of getting out in the systems that something was going on.
SOUTHWICK: Hurts morale...
BRESNAN: Well, they wanted to know what's going on. I remember we convinced them they needed to issue a press release and they didn't want to issue it until the agreement was signed and so we got them to issue it saying it was in the preliminary stages or something. So they horsed around with that and I think we went through several drafts of a press release that would announce that they're in the early stages of negotiating a sale to me. I remember when I called John Malone, I said, "Yes, we've got this press release but they keep changing it all the time." He said, "Wait until they're done changing it and then I'll see it." So I said I'd send it to him after they're done changing it. I think they went through nine drafts and this was over a month and a half or something like that. They'd draft it and then they'd go to the legal department in New York, and then the legal department in Pittsburgh and back and forth and they'd change a word and this and that. Finally, when they're all done and they all signed off on it, I said, "Okay, now before we release it, I want to run it by Malone and see if he wants to do anything." So I call John, and I say, "Okay, John. They're finally done. They've got draft number nine and they tell me this is ready to go, so do you want to see this on?" He said, "Does it look okay to you?" I said, "Yes." He said, "Well, then it's okay with me." And it was a good object lesson as to why he was growing and they weren't. He was spending his time doing important things and they spent weeks of laboring over a stupid press release. And again, it wasn't anybody's fault, because it's just the process that has to go on.
SOUTHWICK: And everybody feels they have to make a change because it's their job.
BRESNAN: It's their job, I guess.
SOUTHWICK: And then everybody else has to sign off on the change.
BRESNAN: So, the end to that story though is that then we negotiated a bank agreement with the Toronto Dominion Bank. We went to them and said, "We need money right away because we need to close as soon as possible during '84," so that I get the tax benefits that I referred to. So we don't want a fully documented loan; we want a demand note and fortunately having TCI on my side helps with that. That's kind of a strange request for a guy not in business going in and saying, I want to borrow 20 million dollars on a demand note, but TD, bless their souls, went along with it. We later converted it to a fully documented loan, but I got a demand note for 20 million dollars and I got TCI to agree to sell those systems and to put the subordinated debt in and we got Westinghouse to agree to sell the system, but nothing was signed until the day we closed. Westinghouse took all that while to negotiate the agreement so we signed the agreement and closed it on the same day. We'd gone to the franchise authorities and gotten the franchises transferred without a signed agreement. I had nothing signed with Malone, it was all a handshake – a handshake over the phone – but I felt perfectly comfortable with John on that because that's the kind of guy he is.
SOUTHWICK: Amazing. It's very characteristic of this business, isn't it, that people can do that.
START OF TAPE 3, SIDE A
SOUTHWICK: Tell me a little bit about the involvement of BRESNAN: outside the U.S. How did you come to decide to do that and what was the experience?
BRESNAN: Well, you remember when the telephone companies were getting very active; Bell Atlantic was getting active and they were going to buy TCI and prior to that there were other incursions?
BRESNAN: We got concerned, it turned out erroneously, but we got concerned that we may not have an opportunity to grow in the U.S. and so we should look into other countries. Our whole philosophy had always been to try to build value by, in effect, sweat equity. We've never really gone out in the market and just bought cable systems at the market price because we weren't flush with money, we weren't a bank, we weren't a venture capital fund; we were guys that had some knowledge of the business and wanted to create value by running them, building them, whatever. Blood, sweat and tears. So that's the way we built the U.S. operation and that's when we thought about maybe some opportunities, if not in the U.S. now if the phone companies are going to be buying up everything, we can't compete with them from an acquisitions standpoint, so we'll look overseas.
SOUTHWICK: This is the early '90's?
BRESNAN: Yes, and we developed kind of a screening process for countries that we would look at. We wanted a stable government politically, a stable economic system, an honest government – we weren't going to go in and pay bribes and stuff like that – we wanted an honest court system, hopefully you don't need it but if you do, you want to be able to get a fair shot. Most importantly we wanted a safe place for our people to go to, at least as safe as you are in the U.S. We didn't want a place where executives are kidnapped and stuff like that. So you go through that kind of process and you eliminate a lot of countries. Also, I should say, the developed countries, Western Europe for example, we thought, again, we'd have to go in and pay market price so not as good an opportunity to add value and build value. So we ended up looking for the developing countries, emerging countries that have a good promise but aren't way on the bottom, they're part way up.
SOUTHWICK: What did you end up with?
BRESNAN: We ended up with Chile for Latin America, we picked Chile. Not a big country, but it met all of our criteria and in Central Europe we ended up with Poland, and they too were very good. Good markets.
SOUTHWICK: And where did you build systems?
BRESNAN: In Chile, we bought a system first in Santiago. It was a small system in Santiago and then we built out Santiago, Val Paraiso, Vina del Mar, a whole large group of systems built out that country pretty well. The central part of the country – we didn't go up into the desert and we didn't go down into the Antarctica area, but the central part of the country. In Poland we did kind of the same thing. There we bought, our first opportunity was to buy 49% of the operator, and operator I should say, in Warsaw. We ultimately bought them out entirely and we bought out a bunch of other operators in Warsaw and we rebuilt the system and built out the system. So we just recently sold Poland, but prior to our sale, we were the largest operator in Warsaw, the second largest operator in the country. We had systems in Warsaw, Krakow, Katowice and Szczecin and Grajew. In Grajew and Szczecin we have a telephone system over the cable.
SOUTHWICK: And did that prove to be profitable?
BRESNAN: Yes. Everything we built was 750 megahertz hybrid fiber coax system and everything we rebuilt was to that standard and we were probably 85% rebuilt when we sold. So it was virtually all 750 hfc, a fiber ring around the downtown area of Warsaw and downtown Krakow. We got the first, and as far as I know still the only data license. They actually license data separately there and we got that in Warsaw and provided two megabit internet service there. In Grajew and Szczecin, we offer telephone service over our cable system using cable telephone interface units, two Lucent 5BSS switches. The interesting thing is that where we offered service, and we intentionally of course first started offering it in areas we thought we'd do the best, half the people we offered it to took the service.
BRESNAN: And then as we got into some of the areas that we thought wouldn't be quite as good, we got 35-40%. So we beat our expectations.
SOUTHWICK: You had a great response.
BRESNAN: Yes. The people there have to wait about three years to get a telephone from the state run telephone system, whereas from us they can get it in about three days. It's really a culture shock for them. And the phone works! And all the bells and whistles – they get multiple lines, we give them two lines, and they get call waiting and caller ID and conferencing and it's all there with this technology.
SOUTHWICK: How many customers did you have in Poland when you sold?
BRESNAN: We had about 390,000 total customers, about 60,000 were what is the equivalent of MATV customers here. Because you had to offer that in the buildings, it's required by the state that people can get some TV. And about 330,000 basic cable customers and where we started out the telephone systems, we had about 6,000. We'd just started those.
SOUTHWICK: When TCI made the decision to sell out to AT&T, how did that affect you because TCI had been your largest partner, I mean your partner? Did you then have AT&T as a partner?
BRESNAN: Yes. We were excited about it because it gave us the opportunity to offer telephone services because we were gearing up to do it at that time in Poland and we since did it and we knew it worked and it was a great business. So we were excited about the opportunity of being able to do AT&T branded telephone service here. We had rebuilt virtually all of our systems. As you know, we did a restructuring of our company last February where we tripled the size. We had in the U.S. here, we had about 220,000 basic customers and we did a deal with TCI and brought in the Blackstone Group as additional equity partners and acquired another 440,000 customers from TCI. So we tripled our size. Virtually all of our systems at that point had been rebuilt. 92% of our customers at that time were on hybrid fiber coax systems and about 77% were on 750.
SOUTHWICK: And you'd begun offering data services and internet access?
BRESNAN: We began offering data and internet access and local area networks, private networks, virtual private networks for business customers and institutions. We were doing distance learning, doing a lot of advance services. So we saw the AT&T partnership, or alliance as a natural development of our efforts to use cable for non-traditional cable services.
SOUTHWICK: But your partnership didn't require you necessarily to sell to them?
BRESNAN: What we did is we decided that we were going to do an initial public offering because the market was good and we wanted to grow and the market was good for cable and communications stocks in general.
SOUTHWICK: This was last year?
BRESNAN: Earlier this year. We only did the partnership with TCI and Blackstone last February, February of this year. And then we decided that we would do an initial public offering. So we were in the process – let me back up. In conjunction with that deal with TCI and Blackstone, we also issued some high yield securities, high yield bonds and that went very well, we were way over-subscribed and we were looking to raise, originally, 295 million and the brokers had orders for over 2 billion. So we knew that we were well accepted in the market place and we ended up taking around, I think, around 400 million. We knew we were very well accepted in the market place, so we thought this would be a good time, probably, to do an IPO. So we started that process and we had drafted the S1's and we got about half way through the process and we started getting inquiries from people who wanted to buy us. My first reaction was, no, we're not for sale. We're doing an IPO. Then all of the sudden it occurred to me, that's not for me to say because we do have partners here I'd better check with. So we decided we'll listen to what they have to say. And then we decided, well, if we're going to listen to what they have to say, we'd better listen to what others may have to say. So, Goldman-Sachs was going to be the lead underwriter in our IPO, so we told Goldman to just hold back on the IPO right now while we look at our options and we also engaged Waller and Daniels to help Goldman, since they knew the cable people real well. So then those bankers invited the logical interested parties, well first to ask them if they're interested, if they are, sign a confidentiality agreement and we'll give you information on the company and then if you want to you can bid. So we did that and to my surprise, we got some very high offers and decided to sell.
SOUTHWICK: Did you go to sleep and then make that decision when you woke up in the morning, first thing?
BRESNAN: No, it wasn't that hard a decision. It wasn't one of those. I mean it was hard in that I had mixed emotions because this was my baby. This is our fifteenth anniversary we'll be celebrating October of this year and we built some tremendous relationships in the communities. We have a great team of people here and in the field. Great relationships with our customers and with our communities and I really love this company, I love this business. In all of the things that we had been working on for so many years, the high speed data and the telephone stuff was starting to go. We were really getting momentum and our company, with the high yield deal we did and the tremendous success of that, we would have had a great IPO, I know. So we had the momentum going and based on, if all the deals close that have been announced, and we didn't sell, we'd be number 11 in the market, in the business. So, once you get to there.... So we really were starting to get it going good, but on the other hand, the offer was very good. There was kind of a unique feature in our deal, in that we ended up as a result of all of the transactions, we ended up with a fully funded interest of 10.2% in the new company, but we had a promote, a carry, based on the return on investment that our partners would get, Blackstone would get. And because they were getting such a tremendous return over such short term...
SOUTHWICK: So quickly after they had made their investment.
BRESNAN: Yes, so quickly, which was really the key, they had several hundred percent return which triggered our deal, which gave us in effect another 10 percentage points of the economics of the deal. If we'd kept going that would just go down. So it was just a decision that you couldn't turn down.
SOUTHWICK: And who ended up as the ultimate buyer?
BRESNAN: Paul Allen, the Charter Group.
SOUTHWICK: And you expect to close next February?
BRESNAN: Next February, yes.
SOUTHWICK: Terrific. What are you going to do now?
BRESNAN: I don't know yet, but we'll do something. I want to keep as many of our team together as I can. It will be a much smaller team. First of all, Charter will take on, I believe, all of the field people. They're great people and Charter, from the due diligence they've done, they realize they're great people and they've indicated to us they want them all. So the only part of our team that I have to be concerned about is our team here in White Plains, which is about 70 people. Our international group only represents about 12 of those.
SOUTHWICK: Does the sale cover the international properties?
BRESNAN: No, they were sold, let's see... We sold Chile to TCI a couple of years ago and we sold Poland to a Polish company and just closed on that in July of this year. So they're fresh out of business right now and they're looking at other countries right now as we speak. So, we actually have people off shore right now doing some work. So I think that we'll probably continue the international. The question then, is on the U.S. side what we can do because I think it's going to be hard, it's going to be impossible to do exactly what we've done in the past here because of the consolidation that's gone on. Leo Hindery mentioned the other day that when all of these deals close next year, 97% of all customers will be operated by 7 companies. So there may be some niche things that you can do, but I have a deep love for the CLEC, the Competitive Local Exchange Carrier business. I was with Bob Brooks when he formed Brooks Telecommunications, which later became Brooks Fiber Properties, which we sold to WorldCom a couple of years ago. That was a very successful deal and we're doing a lot of CLEC type business in our systems now. So we understand that business pretty well and like it. We did quite a bit in the internet area and that's very interesting. So we'll probably do something in related fields to cable and telecommunications and the question we haven't resolved yet is how much of it will really be operating and how much will be more venture capital type activity. I don't know the answer to that yet. Right now we're busy just running the systems we have and getting them ready to sell to Charter. One of the deals by the way, when we took over the TCI systems they were about half rebuilt so we had to do the rest and we have a, I think it's a 90 million dollar capital budget for this year and one of the things we've represented to Charter is that we will continue our capital budget so that when they take them over, they'll essentially be mostly rebuilt. So we're continuing with the capital projects. We've got the franchises to get transferred in several hundred communities, so we've got our plate full right now. But as soon as that's done, early next year, we'll be looking to do something else and I'd hoped to hang onto as many of our team as we can, although those people will be very employable. They're top of the line people and they'll do great and they're well taken care of financially. This promote that I mentioned that gave us another 10% of the business we had distributed that, of course it was intended to be a seven year business plan, so we had seven year vesting for all of our key people to participate in the equity and over 70% of that promote is allocated out to our people. So they'll all do very well. When we close, there will be 30 millionaires made, which is nice. They helped build the company.
SOUTHWICK: Wow. That's fantastic. Well I wanted to, if we've got a minute or two left on this tape, I wanted to ask you a little bit about your involvement with The Cable Center and Museum and how you got involved with that to start off with and what you hope to do with it?
BRESNAN: I got involved in, I think, about '86 or '87, somewhere along in there. The Cable Center had a representative from the NCTA Board on The Cable Center Advisory Board, and that had been Ed Allen and Ed's health was failing so he wanted to reduce his travel. He called and asked if I would take his place. He and I had been friends for a long time. I told him I would and so I guess I attended my first meeting somewhere along about '86 or '87 and I was surprised to find we were just an advisory board. I had pledged a $50,000, what they called a major contribution; that's what they were asking for at the time. I paid it by the way and I found out that the check had to be drawn to the university because they had the 501C...
SOUTHWICK: Penn State?
BRESNAN: Penn State University, yes. They had the 501C3 corporation and so forth to be tax deductible. It had to go to them and then I found out that we were only an advisory board; that Penn State actually made all the decisions. Of course, I found by going to the board meetings that it's a very difficult place to get to. My first trip I tried to travel commercially and I flew to Pittsburgh – I traveled a half hour to get down to LaGuardia, then flew to Pittsburgh and hour – and then waited for a couple of hours and got a commuter flight into State College and so I'd spent several hours and a very miserable flight through the weather in Pennsylvania on that little plane. And so this is no good. And then I started driving and it was about a four and a half hour drive in my car and that was no good. Ultimately, in the meantime, I'd bought a private plane and so I could fly down there more comfortably in a jet that would go above the weather. So that made it a little more tolerable but I thought to myself, how many people are going to be able to do this? So it was hard to get to and it was a situation where we didn't control – the industry who was raising the money – didn't control our future and then we had a difficult relationship with the then dean of communications. They later got a terrific person in, Terry Brooks, but the person before her was very difficult and didn't really respect cable, didn't respect cable operators and saw us as a way for him to get a new communications school built. So, we just had a lot of trouble relationship-wise there and we were down in the sub-basement, two stories below ground level, and non-air conditioned, non-temperature controlled, non-humidity controlled, I mean and it was not a place to put archives or anything. So a group of us decided we had to change so we formed a group, we put money in out of our own pockets to pay our out-of-pocket expenses, legal fees or whatever, we paid our own personal travel expenses and other expenses and hired whatever people we needed to hire, which was mainly legal advice to get ourselves extracted from there. Ultimately we were able to negotiate a favorable settlement with them and I think made both sides happy. We formed a couple of committees, by the way, in that process, Ben Conroy had resigned as chairman and so I ended up as chairman, and we formed a couple of committees to do legwork. We formed one to select a new site and we had suggestions of a number of potential sites. We ultimately selected Denver.
SOUTHWICK: Where Dan Ritchie, your old colleague, is chancellor of the university.
BRESNAN: My old colleague, Dan Ritchie, is chancellor of the university. Dan was very proactive in wanting to get The Center there, made it known that he would do whatever he could, whatever would be possible to do to make sure that he accommodated our needs and one of them was that we said we really needed to have our own free-standing building and facility that we owned and controlled. We needed our own legal entity, we needed to have our own board that ran that legal entity and ran The Center and all that he went along with. So the university leased us property on campus for a dollar a year for 99 years. We're putting our own building there, it's our own board of directors – the university has one member on the board, Dan Ritchie – and we've set up our own 501C3 corporation three or four years ago, so that all the contributions that come in, come to The Center. So it's totally structured in a much more appropriate way for our industry.
SOUTHWICK: What do you hope that it does?
BRESNAN: It has several functions. It will have the library, The Barco Library, which will house all the archives and studies on cable, the whole documentation on cable, which by the way is being converted, is being digitized and will be available on the internet. We have our own web site, www.cablecenter.org and some documentation is now on there, it's our goal to have it all on there so it will be available around the world for anybody doing research or any studying. That's part of it. There will be a museum, which will house some of the old, earlier equipment and so forth. That's a relatively small part of it, but it will be there. There'll be a video tower, which will have about 100 screens for all of the programming to be shown and demonstrated and it will be one of those digital deals where you can break the screens up or make them into big screens or little screens. There will be a demonstration academy where we'll have all the latest technical equipment on display and demonstrated. We expect to get that contributed about 10 million dollars worth from the vendors that serve our industry and that those who contribute it will upgrade it, give us upgrades and equipment and software as they have upgrades. They'll be a Hall of Fame where people that have contributed a lot to the industry will have their biographies there, they're pictures and you'll be able to call that stuff up digitally on the screen. There will be programming pods where you can sit and look at programming and a lot of these things will change. We'll have a number of themes – how programming has helped society and democracy, how has it helped financially, the economy, how it's provided news – and there will be a lot of themes that will show how the cable industry, through its programming has served society. Then I think, the most important part in my view, is the Institute, which is a joint venture between the university and The Center for educational functions. We will provide everything from one day seminars, or two day seminars, all the way up through post-graduate degree courses in cooperation with the university. So we'll have advanced management programs where you can go for a month or six weeks or whatever, we'll have multi-day seminars on specific things and we'll have undergraduate degrees and post-graduate degree programs in all phases of cable, which can be marketing and technical and legal and business and accounting and financial and so forth. I think, with the way the industry is changing so dramatically, the need for trained people is just mind boggling. We can't get enough network administrators, for example, out of these computer sciences colleges. So that's exciting and it's a need that really needs to be filled in the industry, but it will be a place where scholars can go; where public policy people can go, congressman or majors and city council members who want to know about cable if they're renewing a franchise and want to learn what's going on in the cable industry. It will be for students, researchers, journalists can get information on the industry and you won't necessarily have to go there, you can also get it over the internet.
SOUTHWICK: We're talking about The Cable Center and you indicated that a good deal of this information is going to be used by scholars and people doing research and how you're making that available.
BRESNAN: It's all being digitized and will be available on the internet so that people from all over the world will be able to access this data – www.cablecenter.org.
SOUTHWICK: Very good. We mentioned a number of figures going through this – John Malone, Ted Turner, Jack Kent Cooke, Irving Kahn and others. My sense is that Leo Hindery had a great deal to do with your company in the last few years.
BRESNAN: Leo did. Leo and I were friends back when he and I were both partners with TCI – he with InterMedia and me with Bresnan Communications – and we hit it off together a lot because we had a lot of the same philosophies and same beliefs. We both were very grateful to TCI for what they've made possible through their faith in us and their support of us and I was delighted when Leo joined TCI, the parent, because he really understood the relationship, what the partners can do and what their concerns are. He has been just wonderfully supportive. Leo's a very unusual man. He's tireless; I don't know if he ever sleeps because he's up at three in the morning, or some such time, and I know I've talked to him as late as 10:30, 11:00 at night, so he doesn't get much sleep. He's tremendously dedicated, has some very strong beliefs in what's right and what's wrong, morally and ethically and lives by those beliefs and so he's been a wonderful person to be able to relate with at the company. He also, because of his faith in us, he was very instrumental in this last expansion that we had where we acquired the additional 440,000 customers from TCI.
SOUTHWICK: Which helped TCI because it got them off the books – TCI got that debt off the TCI books – that was the strategy?
BRESNAN: That's right, that's exactly right. It took not only TCI's debt for their own properties off the books, but it lowered their ownership in our company to the point where they could take our debt, which was on our books for our company, because they were more than 50% owner they had to consolidate onto their balance sheet, too. So they not only dumped their own debt that related to the systems they were transferring over; they dumped our debt off the balance sheet. So it was very significant to them. It gave them the opportunity to concentrate on their major markets. These were mid-western, secondary, tertiary markets, which is what we do well, and so it gave them the opportunity to shift those systems - the rebuilding of them, the upgrading and so forth - to us where they knew that we'd be doing it well because we're very hands on and allowed them to focus on...
SOUTHWICK: Pittsburgh and the bigger urban markets?
BRESNAN: Exactly. So it was good for them; it was good for us. Leo and John saw that and I'm very grateful.
SOUTHWICK: Terrific. Thank you very much. I appreciate it.
BRESNAN: Thank you. The pleasure is mine.
SOUTHWICK: This has been an oral history of Bill Bresnan, conducted for The Cable Television Center and Museum here in Mr. Bresnan's office in White Plains, NY on August 4, 1999. This oral and video history is made possible by The Hauser Foundation Oral and Video History Project of The Cable Center Oral and Video History Program.