Daniel Aaron has a story to tell. In
Take The Measure of the Man: An American Success Story
), he and co-author David Long tell it well. Aaron, Ralph Roberts and Julian Brodsky have been the "big three" at Comcast Corp. since its founding nearly 40 years ago. Aaron retired (as cable division CEO) in 1991, 11 years after he was diagnosed with Parkinson's disease, and left the board of directors in 1997. He served as National Cable Television Association chairman in 1977-1978, helping to broker a key compromise over paying copyright fees to broadcasters. (For Aaron's 1973 campaign to join the association's board, a compatriot handed out tape measures to members at large and a leaflet that read: "Dan Aaron. Take the measure of the man." At 5-feet-7, he defeated a 6-foot opponent.) Aaron's first cable contact came in 1955. As a reporter at the
Philadelphia Evening Bulletin
, he wrote a feature on Jerrold Electronics Corp.'s Milton J. Shapp, for whom he later worked. The story of his early life, before and after his family escaped Hitler's Holocaust and settled in the United States, is as stirring as his cable recollections
are droll. Here is Chapter 12, "To dream … the impossible dream."
Early in 1963, I joined Ralph Roberts in his office in the old Barclay Building, later called the GSB Building, on City Line Avenue at Belmont in Bala Cynwyd, just outside Philadelphia. The 11th-floor office was small — just one large room divided into individual spaces by ancient, tall, metal file cabinets. Five of us shared this space: Ralph; two secretaries, Mrs. Ann Gardner and Kit Marshall; the bookkeeper, Millie Zappacosta; and myself. Besides her secretarial duties, Mrs. Gardner ran Ralph's flourishing toiletry business, Mark II ("The Mark of a Man"), contracting to have the product made by a "filler" company in New York. Our quarters were bursting at the seams, with no room to even think about hiring another person, when along came Julian.
The powerful teenager who had played basketball at the Neighborhood Center in South Philly had graduated from high school with honors and finished his education with a master's degree from Ralph Roberts' old alma mater, the Wharton School of the University of Pennsylvania. After graduation, Julian joined the Philadelphia accounting firm of Adler, Faunce and Leonard and became a practicing CPA. In the late 1950s, he spent much of his time in the outlying Pennsylvania communities with his firm's CATV clients. For tax advantages, he was helping each of these clients convert from a "C" corporation to the newly enacted "S" corporation. (Under the rules of a C corporation, all profits are taxed at the corporate tax rate, and then any proceeds distributed to the owners are taxed at the individual's rate, a so-called "double tax." In an S corporation, profits are allocated to the owners and taxed based on the owner's rate, thus avoiding the corporate tax on those profits.) While making these conversions, Julian learned much about the community antenna systems and reported back to his Philadelphia accounting office:
"CATV is the greatest business in the world. These guys put an antenna on the top of a hill, run wires through the trees to a central location, and then hook up individual homes to receive a clear television signal. They charge their clients $100 to hook up and then use the $100 to wire up the next street. There is a three-buck-a-month service charge, they don't pay taxes, they keep it all; it's the greatest thing since stealing."
After Ralph Roberts sold his Pioneer Belt Co., he called his local accounting firm, Adler, Faunce and Leonard, and asked them to assign one of their bright young accountants to work with him. The firm sent their young tax expert, Julian Brodsky. Ralph wasn't quite prepared for the accountant they selected. Julian was a powerful 6-foot-2, with a dominating personality and a raucous voice. And he was ever so bright. Ralph was very satisfied with him and put him on retainer as the company's CPA.
Each quarter, Julian arrived at Ralph's office to do the tax work for Ralph's toiletry business and for his small personal securities portfolio. It soon became evident that with Millie's help, Julian would be able to balance the books in a much shorter time than the allotted and chargeable eight hours. This allowed Julian to spend time chatting with Ralph, and this is how Julian became privy to the possibility of Ralph's new business venture in cable TV.
In early 1963, when Ralph decided to buy the Tupelo system from Pete Musser, Julian, who was fascinated by the potential of CATV, walked into Ralph's office during his scheduled quarterly visit and announced: "You are not doing this without me. I have just resigned from Adler, Faunce and Leonard."
Although Julian had notified his employer of his intentions, it would be six months before he became a part of the organization. By the end of 1963, Julian arrived in our office with a card table and chair in tow.
"What's that for?" I asked.
"There's no furniture in here for me," Julian retorted.
So Julian and his card table and chair occupied the prime spot next to the door until we moved to larger quarters down the hall.
In the beginning, Julian wasn't terribly busy. We were operating only one cable system, along with Ralph's aftershave business. So Julian focused all his genius, all his energy, all his financial training — which would eventually help our company raise billions of dollars — on dissecting my expense account. After days of Julian's torture about a luncheon at the local restaurant, Williamson's, I finally turned to Ralph for help, only to have him show me the back of his hand to sample still another whiff of the newest and most calming scent of the toiletry business. (Scent is to the toiletry business what taste is to the winery; it takes a highly developed sense of smell. In those days, I would often arrive at home smelling as though I had spent the day in a bathhouse.)
When we purchased the Tupelo community-antenna system, three other systems were included in the sale: Okolona CATV, just south of Tupelo on U.S. 45; West Point CATV, still further south on the same highway; and Laurel CATV, located close to Mississippi's southern border. A new 10-channel capacity plant was already under construction to replace the Laurel system. I took responsibility for supervising construction and operation of the system, and I soon learned every bump and turn on U.S. 45 as I traveled the 200 miles between Tupelo and Laurel.
A YEN FOR P.B.
Through our travels in Mississippi, Ralph and I found Weidman's, the only restaurant in the state that served corned beef and cole slaw sandwiches and placed jars of peanut butter on their tables. Ralph was so addicted to their peanut butter that he would bring along his own large spoon in order to empty the jar before they took it away. Whenever they saw Ralph, they saw their profit for the day eaten up in peanut butter.
Once the new Laurel system was in operation, we found that a degradation of signal in the system was destroying the quality of the picture. The cable, which was designed to keep water out, did the reverse. It kept the water in, decimating the TV picture. The mayor of Laurel called me in Philadelphia and roared, "Fix the system or take the damn thing off our poles."
I could just see myself schlepping miles of cable on my back to keep the system running and to escape the wrath of our subscribers. The mayor didn't much care when I told him that the problem was common to all rebuilt cable systems.
I booked the next flight to Memphis, then drove to Laurel carrying with me a precious 3-by-5 package that I'd been given which supposedly contained the fix for our problem. When I opened the package in Laurel, surrounded by every employee on our staff, the magic ingredients turned out to be a dozen sawed-off broomstick handles with the instructions, "Beat the hell out of every inch of the cable."
It actually worked until the next rain, when the procedure needed to be repeated. Broomsticks became standard equipment on all our service trucks. Fortunately, a new type of coaxial cable soon became available that enabled us to replace the faulty cable and end this problem.
It was in supervising these Mississippi systems that I developed my theory of cable-system management: the system manager is the center of our universe. He is the one who runs the system, takes responsibility for its performance and represents our company in the community. Our goal was to be a local company and not to be considered "foreigners" who pulled money out of the community. The only Philadelphia supervision was enforcement of the budget, which was shaped by the manager and myself in a series of tough negotiations. Once approved, the budget ruled Britannia, and these negotiated budget projections were used to borrow money.
I do not pretend to suggest that this approach is always successful. Some managers require more supervision, others less. I soon found that the Tupelo manager, whom we inherited, resented any supervision. He was difficult to work with and difficult to direct, but he intimidated me with exaggerated tales of his power in the community. It all fell into place in a conversation with a cabbie on my way to the airport to take my weekend flight back to Philadelphia and my family. The cabbie asked me what I was doing in Mississippi, and I told him we were rebuilding the local cable system. This prompted a stream of invective about the manager of our system. Was I aware the manager was a bigot and a whole lot of other things, too?
"Turn the taxi around and please take me back to the office," I told him.
I fired the manager on the spot.
This taught me a lesson I would not forget: People are basically the same all over the country. A person difficult in Tupelo is a person who will be difficult anywhere.
After hiring a new manager, I stayed on in Tupelo to determine how best to sell a product with which the potential user was not familiar. I soon settled on door-to-door selling. We needed something to get us in the door, but in those days we were short of money. Luckily, we found a Mississippi company that sold discontinued goods, and as an incentive to homeowners to sign up for cable, we gave away shoeshine kits. You could tell a cable subscriber by the shine of his shoes at church on Sunday.
Within a year we added Meridian, Miss., to our portfolio. The story of how Meridian was brought on board has been the subject of company lore for years, and it goes something like this: "A young Ralph Roberts got into a craps game in the pine woods of Mississippi and wound up owning the cable franchise in Meridian, Mississippi." But the real story is just as wild and says something about Ralph Roberts' excellent sense of timing, once again being at the right place at the right time.
Meridian lies 175 miles from Tupelo, three-quarters of the way to Laurel. One day, Ralph was driving between the two cities on his customary inspection tour of the company's cable-TV systems. Late in the afternoon, he decided to stop at one of the local roadhouses for a little rest and relaxation. Mississippi in those days was "dry." Roadhouse clubs were set up to circumscribe the law; there, public drinking was legal, as was gambling. The clubs boasted that they had the best food in town, and I can testify that in most cases this was true.
Ralph stopped at the Queen of Hearts and, testing the laws of probability, found himself at the craps table. Ralph tends to talk with anybody who happens to be nearby; being the schmoozer he is, he soon began conversing with a young gentleman next to him who was also trying his hand at craps.
"You have a very interesting accent. Where are you from?" asked Ralph.
"Well, I am a Harvard graduate living in Meridian, and during my four years at Harvard I did my best to rid myself of my accent so I would not sound like I came from Mississippi. What do you do?"
Ralph told him he was in the cable-TV business.
"That's interesting," Ralph's new acquaintance answered. "Today we had a referendum as to who would win the Meridian cable franchise. The contest was between Mr. Royal, who owns all the movie theaters in town, and Mr. Goodling, who controls the Dixie Trucking Co.
"Now I'll tell you something," continued the young man. "Mr. Royal is going to be very surprised, because he thinks he won. What Mr. Royal doesn't know is that a number of voter certificates came in late today, and after the final count, it was Mr. Goodling who won."
"How do you know so much about this?" Ralph asked.
"I counted the ballots. I'm the auditor for Meridian. And I'll tell you something else: If you go to the City Council meeting tomorrow morning and watch them open up the ballot box, you can see for yourself that Mr. Goodling is the winner, and Mr. Royal is going to scream his head off. And as a matter of fact, if you want to buy the franchise, after the count go and see Mr. Goodling in his office. I don't think he really wants to build a cable system."
By this time Ralph had all he could do to contain himself. He let out a long "Ohhhh?"
Ralph spent the night in Meridian, and the next morning he appeared at the City Council meeting. The young man was right: Mr. Royal lost the franchise to Mr. Goodling, and Mr. Royal did scream his head off.
After the proceedings, Ralph headed for Mr. Goodling's office to see what deal he could make. He found a huge office located in a "three-foot building." (The building extended into Meridian's commercial zone, which was in the next county, by three feet. This extension evidently gave the building's owner the lower tax rate of the next county.)
A take-charge secretary greeted Ralph and announced his presence to Ron Goodling. After congratulating the winner and making some small talk, Ralph said, "We are in the cable business. Are you interested in selling the Meridian franchise?"
The answer came quickly and it was to the point.
"Young man, everything I own is for sale, including them," Goodling said, pointing to a picture of his wife and two daughters.
A deal was consummated on the spot, and the Meridian TV franchise became ours.
In order to proceed with construction, a bond of $100,000 was required to protect the county from the possibility of our defaulting. Also, the franchise stated clearly that, within a year of the date of issuance, 90 percent of all applicants who desired cable must be connected to the system.
When Julian let the Maryland Casualty Co. know we had obtained a franchise in Meridian, Miss., they issued the needed paper. But the local insurance broker for our bonding company was a good friend of Mr. Royal, the sore loser, and he told our casualty company there was no way that we could fulfill the contract in the time allotted. He insisted we would forfeit the franchise, and warned that the subsequent legal fees would be excessive. It didn't take long for Maryland Casualty to cancel the bond.
We prided ourselves that whenever we entered a town where we wished to do business, we attached ourselves to the best people we could find. A senior lawyer of Meridian named Mr. Snow, a gentleman with flowing white hair and the look of William Jennings Bryan, was our contact. We took our problem to Mr. Snow. His telephone call to Maryland Casualty sounded like this:
"This is Mr. Snow of Meridian, Mississippi. I would like to talk with the vice president handling bonding issues."
When Mr. VP came on the line, Mr. Snow continued: "I understand that your company cancelled a bond for Meridian Community Antenna System. I just want to tell you that if your company doesn't reissue that bond immediately, you will never do business in the state of Mississippi again. And if you think this is an idle threat, you tell your chief counsel what I just said."
Then, we all sat around Mr. Snow's office and waited. Sure enough, within 45 minutes, a call came in from Maryland Casualty.
"OK boys, the bond has been restored," announced the man with the flowing white hair.
The sore loser still wouldn't give up, and at his urging, the city demanded a surety bond of $125,000 to secure Maryland Casualty's $100,000 bond. We phoned Julian to tell him that the money was due in 24 hours. In an amazing show of support, our Philadelphia legal counsel, under the direction of Fred Wolf of Wolf, Block, Schorr and Solis-Cohen, put up the cash, borrowing from the employee bonus fund.
Our triad was in full bloom. Ralph had purchased the franchise, Julian had arranged the financing, and it was now up to me to figure out a way to install the system in time to meet the deadline of the contract. The city of Meridian was so confident that we would forfeit that city council had already planned to allocate the $100,000 to purchase new voting machines.
In those days, all the players in this industry, including us, sold cable TV the same way: Once a franchise was received, areas with a density of 70 to 100 houses per mile were wired. Less densely populated areas of a city might not receive service for months. The usual marketing approach was to buy ads in the local paper announcing a grand opening, rent a large hall, set up booths with TVs blaring and sign up subscribers on the spot for cable service. We would almost automatically garner 20 percent of the potential users right away. For the remainder, it was a hard sell, using door-to-door salesmen and creative promotions. It usually took several years to reach the 50 percent saturation that was needed to make a system financially successful.
Meridian required a different approach. We could not hopscotch over the less densely populated parts of the community, because if we did, there would be no way to meet the required 90 percent service level. How could we possibly connect 90 percent of those who wanted cable?
After much soul-searching I decided: "Let's hide. Let them find us!"
We took offices on the top floor of the Dreyfus Building in downtown Meridian. We placed no identification on the door. The technical equipment we used was sequestered outside town; the trucks we rented had no signs; the drivers either couldn't speak English or were sworn to secrecy. We then used a marketing technique that was rifle-driven rather than the usual shotgun approach. Targeting the most densely populated areas we wished to cable, we started construction on a street-by-street basis. As we laid the cable, we mailed fliers to houses on those same streets, letting them know of cable's availability. Within a few days following the mailing, a salesman was at the door to sign up potential customers. The result: No one could sign up for cable until a salesman appeared at the door. We had 100 percent correlation of applicants to subscribers. And that's how we wired Meridian.
No sooner was the cable in place than a complaint was filed by one of the citizens. The Meridian contract had a clause requiring that the installation of cable would not affect the existing quality of the TV picture. The homeowner attested that before cable, his TV picture from New York had been excellent, but that once the cable lines were run in front of his home, his reception deteriorated and he could no longer receive New York. The accuser invited the judge to come to his home to satisfy himself that the New York station could not be received. It would have been national news had a TV signal from New York been seen more than 1,000 miles away in Mississippi — so, as the accuser knew, the judge could not see New York on his TV screen. It was obviously a setup to keep us from meeting the conditions of the franchise.
I was called before the local judge, who granted my request for a 30-day delay. This gave me time to fly in experts from all over the country to testify that the cable lines were not the culprit; reception from New York had never been available in Meridian. The complaint was dropped.
Not only did we comply with the terms of the bond, but we also received a glowing commendation from the city council of Meridian, congratulating us on a job well done. Stranger still, we set a record for the highest penetration of an original system, achieving nearly 50 percent immediate saturation. It occurred to me that selling door-to-door might be the way to market all our new cable systems. It made sense. We were introducing a new service to the community, and a salesman at the door could explain the nature of the service and answer all of a resident's questions. Little did I realize that the industry would soon adopt my technique.
For our subscribers in Meridian, we published a newspaper bringing to them up-to-date news of cable. Included was a bingo card, and at noon every day we would televise the winning numbers. The prizes we gave away, such as a clock from the local jeweler, were solicited from retailers in town to avoid our being cited for gambling. Glenn Colvin, one of our installers and a native of Meridian, had a wonderful sense of humor, and he became our bingo announcer who gave the winning numbers over the air.
PICTURES OF KIDDIES
We didn't have many cameras in those days, and the ones we did have projected a very narrow visual field. Our whole studio was about as big as a card table. We focused the camera right on the numbers. Off screen, to add excitement to our bingo game, Glenn would imitate someone in our imaginary "studio audience." Using two voices, he sounded like this:
"Now here is a lady in the front seat. What did you say, ma'am?" And in a squeaky voice he would answer, "Oh, goody, you called my number!" Glenn later became manager of the Meridian system and then vice president and general manager of the region.
In another effort to interest the public in cable, we sponsored schoolchildren's trips to our "headend" antenna. We would then take pictures of the kids and broadcast them that night on cable, much to the amazement and delight of their parents.
Ralph was always interested in expanding our CATV business by purchasing more franchises, so when I enthusiastically suggested he think about Sarasota, Fla., he did. I had vacationed in the area, had seen Longboat Key and the other islands, and I was taken with the region's natural beauty and its potential as a vacationer's paradise. It was a retiree's dream come true. Seeing the sun go down over the island sands and disappear into the Gulf of Mexico didn't hurt. My intuition told me that Sarasota would expand and that this region held exciting potential.
The owner of the Sarasota franchise had done a poor job of promoting it. He had a wooden leg, and this prevented him from climbing telephone poles to attach cable wires. So, after obtaining a variance from the township, he laid his cable in the sand, just a few inches below the surface. In a hard rainstorm, the cable became exposed and posed a nuisance. This didn't seem to bother the man with the wooden leg, who would simply recover the exposed wire with more sand. By 1966, he had 100 customers with only 10 or 12 miles wired. His company consisted of a large cardboard box where the records were stored, a bunch of ledger cards, and a beat-up old office on Pineapple Avenue with a tower on the roof that provided the signal for the headend.
Ralph quickly learned that the citizens of Sarasota could receive CBS and NBC clearly even without the aid of coaxial cable. ABC's signal came from a greater distance than the other two network stations, but it could be seen clearly about half the time. As Julian put it, "In order to receive the networks, all the Sarasota citizens had to do was to hook a simple coat hanger to their TV sets, so why would they need cable?"
It had always been a cardinal rule that in order for cable to be profitable in a community, at least two of the three network signals had to be poor. Sarasota defied that principle. This did not bode well for buying the Sarasota franchise, but I was determined.
It was a hard sell, but Ralph finally decided to buy the franchise from "the man with the wooden leg," only to find that a few days before his call, Sarasota had been sold to a Texan for the paltry sum of $10,000. A call to the Texan revealed he would gladly sell for a profit. But the price was more money than we had.
Our contact at the Philadelphia National Bank, Jack McDowell, suggested we talk to Philadelphia's Evening Bulletin. For a stake in the business, Julian and Ralph got the Bulletin
to put up the money. The Bulletin
would own the system; we would run it. I started to rebuild the Sarasota system.
After the rebuild of Sarasota, we obtained franchises for some areas outside the city, including Longboat Key, and for the first time found ourselves competing with another cable operator who was franchised in the same areas. It became a frantic race to the finish.
We brought in a group of contractors and put Jerrold in charge of construction. We soon found ourselves meeting our competition head-on in the construction process. The final confrontation took place early on a Monday morning in a housing development.
All the utilities in the development were underground, and we were required to lay our cable the same way. We spent Sunday scouting for every construction vehicle we could find or rent. We needed machines that dug trenches and cut through bedrock, coupled with punching equipment to dig tunnels underneath homeowners' driveways.
That Monday morning, residents of the housing development saw the entire neighborhood in bedlam. We and our competitors were working frantically to claim as many customers as we could. Machines were digging everywhere. The punching machines needed to be completely immersed in a hole to do their job, and homeowners looked out their windows to see large holes next to their driveways. It took hours for the people of the neighborhood to find out what was going on.
By noon, the mayor intervened and insisted we obtain permits from each homeowner to dig under their driveways. That brought an abrupt halt to the chaos. We spent the rest of the day in negotiations, dividing up the territory with our competitors.
A few years later, we bought out the competition.
Soon after, we applied for a franchise in Venice, Fla., 25 miles south of Sarasota, and won, beating out our competition, the General Telephone and Electric Corp. However, our victory soon revealed a serious problem: A disgruntled GTE refused to allow us to attach our cable wires to its poles. What to do?
It has always been my belief that little is ever accomplished through litigation. Suing GTE for pole attachment was not the way to solve the problem. As a businessman I was convinced that nothing good happens when one goes to court. Julian and I were walking the attractive tree-lined streets of Venice when the idea hit me: "Hell, we'll bury the whole thing." So rather then string our cable from pole to pole, we buried it in the sandy soil (but unlike our predecessor in Sarasota, we dug deep enough to keep it buried in a rainstorm).
In the late 1960s the Bulletin
became disenchanted with the Sarasota franchise. As Julian put it, "A guy named McLean, who ran the Bulletin, got out of bed one morning and decided that the world was coming to an end. He told his people, 'Sell off everything, except my newspaper.' "
We desperately wanted to buy the Sarasota cable system from the Bulletin, but once again money was a problem. We had no choice but to help the Bulletin
find a buyer. The Storer Broadcasting Co. was looking for a property east of the Mississippi, and they offered the best price.
Julian, Ralph and I traveled to Storer's headquarters in the Midwest to finalize the sale. For the signing we met George Storer Sr. in his office, surrounded by memorabilia of his lifetime in broadcasting. I particularly remember looking at an old Zenith radio on his credenza as he recounted his entry into radio, when, as an early advertiser, he recognized the power of this new advertising medium. I also remember the pained expression on Ralph's face as he signed away one of our prized cable-TV systems.
In subsequent years, when we applied for new franchises and the application asked, "Have you ever sold a cable system?" that same pained expression would reappear on Ralph's face. Camouflaged by a smile and through gritted teeth he would always give that singular answer, "Sarasota."
In a meeting after the transaction had been consummated, Ralph asked the 80-year-old broadcaster if he realized that he was buying a cable system at an exorbitant price. He was paying $300 per subscriber, and it would take him 10 years before he could get his money back. With all due respect, at his age and with this kind of projection, how could he justify buying the system?
Spoken in a deep southern accent, the words rolled slowly off George Storer's tongue:
"When my daddy started me in the communications business he was looking ahead for my future, and I am thinking years and years ahead for my sons. I am buying it for their future."
It was a lesson that the three of us never forgot.
As the meeting was breaking up, Ralph said to Storer, "Someday we'll be back to buy the Sarasota system."
Storer put his arm around Ralph and told him, "Young man, I have never sold a property in my life … and the company that bears my name never will."