Cable Operators

SMALL-TOWN CABLE CAPITAL

3/27/2005 7:00 PM Eastern

Sikeston, Mo.— There’s not a Starbucks to be found in this small, rural town nestled in Missouri’s “boot heel” — the southeast corner of the Show-Me State.

But Sikeston, with a population of about 17,000, has its own attractions, culinary and otherwise. At Lambert’s Cafe, waiters hurl rolls the size of baseballs to patrons across a barn-sized dining room. Travel Channel proclaimed the country-style eatery and “home of throwed rolls” the nation’s No. 1 place to pig out.

Sikeston has other claims to fame, too. It’s the northernmost place where cotton is grown in the United States. It’s also a transportation hub, the spot where Interstate Highways 55 and 57 intersect.

And Sikeston is the unlikely center of what some have jokingly called a “cable cabal,” because it’s home to three small, independent operators.

In a way, it’s small-town cable’s capital.

Denver’s been called cable’s capital because of the big MSOs once based there, like Tele-Communications Inc., MediaOne Group Inc. and Jones Intercable. (Adelphia Communications Corp. is now headquartered there, and Charter Communications Inc. and Time Warner Cable both have a sizable presence in the city.)

Sikeston — a drive of roughly a two-and-a-half hours from either St. Louis or Memphis, Tenn. — doesn’t claim any big MSOs. Instead it’s headquarters for Galaxy Communications, with 55,000 subscribers; NewWave Communications, with roughly 20,000 subscribers; and SEMO Communications Corp., with 2,070 customers.

“If you wrapped us all up, we don’t have 80,000 subs, or much more than that,” Galaxy executive vice president Larry Eby said.

But the size of these three companies (two of which are family-run) belies their influence in the sphere of independent cable operators.

Tom Gleason Jr., NewWave’s executive vice president, is chairman of the National Cable Television Cooperative, which negotiates master contracts for programming and hardware for operators representing 14 million subscribers. Gleason’s been involved with the NCTC since its inception 20 years ago.

His brother, James — NewWave’s president and chief operating officer — is chairman of the increasingly powerful American Cable Association, the small-operator lobbying group whose members have just under 8 million subscribers.

Eby recently joined the NCTC’s board for a three-year term. Tyrone Garrett, SEMO’s president, is a former NCTC board member.

All four men credit the NCTC, which uses volume to negotiate lower rates for programming, and the ACA, which fights for small cable in Washington on issues such as retransmission consent, with playing a crucial role in their companies’ survival.

NCTC president Mike Pandzik and ACA president Matt Polka said the Gleasons, Eby and Garrett represent the membership of both organizations perfectly: They’re small, independent cable companies competing against direct-broadcast satellite and the telcos, serving rural areas others have shunned — and doing it all in the face of skyrocketing programming costs.

SMALL-TOWN HISTORY

“It’s an interesting phenomenon about Sikeston, but I think it’s really just a reflection of how cable started,” Pandzik said. “It started in small towns, rural communities, in that part of the country. … Sikeston is almost a big little city. It’s a cool little town.”

Located in a region that saw much bitter conflict during the Civil War, Sikeston has a convention and visitor’s bureau and a cultural center located at the historic Sikeston Depot. But it will never be mistaken for a metropolis.

Jim Dickson, the Inspiration Networks’ vice president of national accounts for affiliate sales, was in Sikeston during hunting season once. He found an ice bucket full of rags in his hotel bathroom.

A sign there said, “Please use these towels to clean your guns.” The establishment didn’t want hunters to use its good bath towels on their firearms.

“This is a sign you wouldn’t see in Manhattan,” Dickson joked. “If I saw this in Midtown, I’d be rather frightened.”

Running rural cable systems is a difficult business, and the Gleasons were among those who experienced the difficulties and pitfalls first-hand. Like several other smaller operators during the early 2000s — like Classic Communications Inc. (now part of Cebridge Connections) and Mallard Cablevision LLC — the company their father founded, Galaxy, filed for Chapter 11 bankruptcy protection in 2001.

With the reorganization, the Gleason brothers left Galaxy in 2001, then started NewWave in 2003 with systems they acquired. They’re investing roughly $16 million to upgrade them, and sound bullish about their prospects.

GROUND-UP KNOW-HOW

Both the Gleasons and Garrett don’t just operate cable systems — they’ve built many of them. They know the business from the ground up.

“I learned, the summer between my junior and senior year in high school, how to climb a pole and string cable,” Tom Jr. said.

Pandzik, who attended the University of Nebraska at the same time as Tom Gleason in the mid-1960s, said the Gleasons are part of an old and once-common breed.

“Almost every old-timey cable operator started at the very bottom,” Pandzik said. “They built their own plant. They climbed poles. They did the billing — maybe their wife did the billing on the kitchen table. It’s a fascinating industry with a great history.”

While they work for different companies now, the common link in Sikeston among the Gleasons, Garrett and Eby is either Galaxy or the retired 83-year-old patriarch Tom Gleason Sr., who founded that cable company.

The Gleasons worked for their father at Galaxy; Eby worked for Tom Jr. and Jim at Galaxy when he joined the company nearly a dozen years ago. Tyrone Garrett’s father, Travis, was employed by Tom Sr. before striking out to form his own company in Sikeston — SEMO — in 1976. That company evolved from building systems to owning and operating them.

“We’re kind of entrepreneurs by heart, and with the franchising in the late ’70s and early ’80s, we saw the opportunities in small communities throughout the Midwest,” said Garrett, 43. “So we tapped into that and watched the cable industry grow.”

His brother Shannon, who is nine years younger, is SEMO’s vice president. Their father, now 65, still helps out.

HAILING FROM KANSAS

The Gleasons aren’t originally from Sikeston. The brothers said their family hails from Kansas, and their dad and uncle later owned radio and TV stations in that state and Nebraska before they built their first cable system in the Cornhusker State.

The father obtained the cable franchise for Sikeston in 1969 and moved the family there in 1970.

“Dad and his partners, they built Sikeston and a bunch of other towns around here,” Tom Jr. said. They sold the Sikeston system in 1979, and it was later resold to Falcon Cable, which became part of Charter Communications Inc., the town’s current cable operator. Galaxy’s offices remained in Sikeston.

“We’re here because, as you can tell, because of building the cable system,” Jim said. “There was really never a time to leave. Galaxy grew and grew over time.”

Eby, a 36-year-old Sikeston native who joined Galaxy just one year out of college and stayed on after the Chapter 11 reorganization, said Tom Sr. remains an icon there.

“He’s an extremely respected person,” Eby said. “[The Gleason brothers] wouldn’t brag on their dad, but I will, ’cause he’s a wonderful man.”

Hand in hand with that, Eby said, it’s no coincidence Tom Sr. kept the company’s headquarters in Sikeston even after Galaxy sold the local system.

“He has said on many occasions that the reason he wanted his headquarters here in Sikeston is because of the strong work ethic and honesty that he found here,” Eby said.

There’s an 18-year gap between 59-year-old Tom Jr. and Jim, 41, who was only seven when his family relocated to Sikeston.

“I’ve just sort of given up on the fact that everyone thinks he’s my son,” Tom Jr. joked about his younger sibling.

CULTURE OF GALAXY

Tom Gleason Sr. strove to install a strong consumer-focused corporate culture at Galaxy, along with a sense of pride. Many still carry a wallet card inscribed with Galaxy’s creed.

The creed says, in part, “Galaxy Cablevision considers our customers our employers.” It has a list of 17 “basics,” which includes avoiding “using technical terms that only you understand” with customers.

“It’s not just words. It’s what they believe,” Galaxy president and CEO William Chain said of the creed. “The old man [Thomas Sr.] used to give you $50 if, in fact, you could pull it out of your wallet.”

Eby joked, “I give them $20. Times are tough.”

Galaxy has promoted that creed for 12 years, according to Eby, who shares an alma mater with Jim Gleason: Southeast Missouri State University.

The Gleasons, Garrett and Eby are friends, and in a town as small as Sikeston, they can’t help but see each other at the local country club or at charity events, like a recent fundraiser for St. Francis Xavier School.

“That’s where Jim’s kids go, my kids go, and Ty’s kids all went there,” Eby said.

Sikeston’s Midwestern ways — a slower pace, friendliness, Bible-Belt values and low-cost living — were a pleasant surprise for Chain, a partner at Anchor Pacific Group, which manages the MSO for majority owners Cerberus International Ltd. and Cerberus Partners.

Although Chain has worked for cable companies around the country, he’s an East Coast native. He spent more than two years commuting once a week to Galaxy in Sikeston from his home in Connecticut.

“On Monday when I got here, it took me 24 hours to get to be what they call 'Midwest,’ ” Chain said. “I would have to deprogram myself from being East Coast to Midwest. They’re quiet. They have much better values than we know. They work less hours, but they get more done.”

About a month ago, Chain and his wife moved to Sikeston. “More people wave to me here that I don’t know than wave to me home [in Connecticut] that I do know,” he said.

If any big-city visitors to Sikeston experience sticker shock, it’s over how inexpensive things are here. Chain and his wife recently had breakfast, lunch and dinner in town for a grand total of $24 — for both of them.

Keeping information like that a secret, though, is harder in a small town like Sikeston.

“It’s so small that if I go to buy steaks at McKinnie’s on a Saturday morning, on Monday someone will say, 'I understand you bought two steaks at McKinnie’s on Saturday morning,’ ” Chain said. “You think I’m kidding? I’m not embellishing. It’s true.”

Sikeston fan Chain concedes the town — part of the 79th-ranked Paducah, Ky.-Cape Girardeau, Mo., DMA — lacks the typical monster shopping malls and, yes, a Starbucks. He also acknowledges that it’s a haul from the St. Louis or Memphis airports.

“It’s on a route, but not exactly a stop that’s easy to get to,” said Dickson, who holds the Gleasons, Garrett and Eby in pretty high esteem. “They’re some of my favorite people. They’re salt of the earth, but also savvy business people.”

Dickson particularly credits Jim Gleason as being politically smart. Jim and Tom Jr. are the first to say they’re proactive in local and state politics.

“You couldn’t hardly not be involved in the local politics,” said Jim, whose father-in-law is a former Sikeston mayor. “I don’t know how you’d choose not to be involved.”

His role as ACA chairman also kind of forces him to be politically active — at least enough to know the state legislators, his U.S. congresswoman and his senators.

“Any business person in these-sized communities almost has to be somewhat politically active to know what’s going on,” Tom Jr. said. “Politics are done differently in small towns than they are in the big cities. It’s more of a friend-to-friend situation.”

Despite its small size, Galaxy has made news from Sikeston over the years. Four years ago, the Gleasons successfully defended the company’s $5 overdue-bill charge in court.

“Our case ended up being certified as a national class action, if you can believe that,” Jim Gleason said. “We went to court and we won.”

And for two years now, after a dispute with Viacom Inc., Galaxy has not carried such popular services as MTV: Music Television and VH1.

Somehow, this Bible Belt operator has still managed to get along without them.

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