Cable Television: The First 50 Years

Chapter 1: Introduction

Revolutionaries With a Vision

By Thomas P. Southwick

Television, during the second half of the 20th century, changed the world more profoundly than any invention since the printing press. In just 50 years TV revolutionized government, diplomacy, warfare, education, economics, family structures, entertainment and nearly every other aspect of life.

Yet television did not reach its full potential until the development of cable and its related business, satellite-distributed programming. Broadcast television was limited in the audience it could reach and the programming it could deliver. Its economics drove it to offer the lowest common denominator programming to audiences in the biggest population centers.

Broadcast television delivered nothing at all to those outside the range of its signals and very little choice for anybody with interests beyond basic sitcoms or dramas.

The advent of cable changed that. It enabled television to reach a universal audience with a wide array of programming.

The first printing presses churned out books using Latin text, leaving most citizens unable to read the books that were printed. Not until printers began to produce works in the vernacular languages of the masses did the technology reach its full potential.

Cable played the same role for television, allowing it to reach a much wider audience with a much richer array of offerings.

The first cable system began service in 1948, 50 years ago. This is the story of how the industry grew from modest, home-made operations into a business delivering hundreds of channels of programming into 68 million television homes in the U.S. and millions more around the world.

Although a group of Canadians made a major contribution to the development of cable, the story of how the industry was born and grew is a quintessentially American tale. Its cast of characters includes small-town entrepreneurs and big Wall Street players, backyard inventors and giant high tech firms, Presidents and city council members, crackpots and visionaries. Many of the early entrepreneurs were from small towns such as Mahanoy City, Pa.; Astoria, Ore.; or Casper Wyo.

The systems they invented and nurtured were quickly discovered by big companies, some interested in making and selling equipment, others aiming to extend media empires into new territory. Later they were joined by a band of programmers who believed they could make green the vast wasteland that Newton Minow had labeled television in the 1960s.

Along the way they were subjected to winds of economic and political change. Sometimes they sailed with the wind, sometimes it nearly capsized them. They faced the opposition of some of the most powerful interests in the nation: the broadcast television networks, the phone companies and various levels of government.

At times they were their own worst enemies, taking advantage of a near-monopoly status to raise rates, ignore customer service and build themselves one of the worst public images of any business in the nation.

Always they were driven forward by the rewards that came to those who fed America's insatiable appetite for television. In a single decade (1948-1958) the number of U.S. homes with television sets grew from less than a million to more than 42 million.

Out of all this change and turmoil, the founders of the cable business created billions of dollars in wealth. And they also gave birth to a communications system more powerful than any known previously on the planet.

This series of articles was accomplished with the cooperation of dozens of companies and individuals, and particularly with the help of the Cable Television Center and Museum which has made it a goal to preserve the records of the industry.

Introduction

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Chapter 1: An Industry Is Born

The pale November sun had already dropped behind the Front Range of the Rocky Mountains when Bill Daniels pulled into Murphy's Restaurant in Denver for dinner. He was cramped and more than a little bored after the long drive up from Hobbs, N. M. It was 1952.

Daniels was on his way to the oil fields of Wyoming to start his own insurance business.

At five feet, seven inches, with blue eyes and dark hair, Daniels had the straight back, square jaw, and cocky air of a fighter pilot. He also had the flattened nose of a boxer unafraid to take a punch. He was both.

While at New Mexico Military Institute before World War II he won the state Golden Gloves boxing title, and would have gone further had he not broken his hand on an opponent's head during the regional championships.

He turned down an appointment to the U.S. Naval Academy to sign up as a Navy fighter, making $187.50 a month. Two weeks before he completed flight school, the Japanese attacked Pearl Harbor. Daniels saw duty as a fighter pilot in North Africa and some of the grittiest fighting in the South Pacific. In the waning days of the war, he won the Bronze Star for heroism when a kamikaze plane hit his carrier, the U.S.S. Intrepid, and Daniels risked his own life to carry wounded shipmates to safety. He was called back for service in the Korean War.

By 1952, his days in the boxing ring and fighter cockpit were behind him. Like millions of others in his generation, he had returned from war to find there was no longer a place for him in the family business, and that the old home town seemed awfully small and tame after dodging flack and downing Zeros. Even a stint in the Blue Angels didn't give him the kick he was looking for. Nobody shot at the Blue Angels.

Daniels was restless, itchy, looking for something exciting, something big, something quick. He was looking for something that would ensure he would never face the fate of his father who had died five years before, broken financially and emotionally by the Depression.

Daniels found it in the bar in Murphy's Restaurant.

As he walked in, the ex-Golden Gloves champ saw a device showing a live boxing match. The show was Channel 2's Wednesday Night Fights, and the device Bill Daniels was watching for the first time in his life was a television set. He was hooked: "Most people you meet today, they were raised on television. But I didn't even see television until I was 32 and I thought 'My God, what an invention this is.'"

He drove on up to Casper, Wyo., and opened up his oil insurance business. But he kept driving back to Murphy's for the Wednesday night fights. And he kept thinking there must be a way to bring this magical device into Wyoming, which had no television at all. "I couldn't get it out of my mind. How do you get that great invention to a small town that didn't have any television stations?"

An article in one of the Denver newspapers caught his eye. It described a new enterprise that had been doing just what he had in mind: bringing television into areas beyond the reach of broadcast signals. It was called cable television.

He went back to Casper and brought together a group of oil men to raise the money to build a cable system for Casper. Each of them put up $5,000 and borrowed additional funds from the local bank. Daniels had $250,000 to work with.

But he had no idea how to build a cable system and needed some engineers. One of his partners recommended his two nephews, Richard and Gene Schneider of Texas, both trained engineers, both ex-GIs and both looking for something exciting, something big and something quick. Daniels called them up and talked them into getting into the cable television business.

They wouldn't be the last to start down the road to multi-million dollar fortunes by answering a phone call from the fast-talking insurance salesman from Hobbs.

The two brothers came to Casper and, with the help of a broadcast engineer named Tom Morrissey, began to construct the first cable system in the state. The Schneider brothers provided the laconic, methodical and technical yin to Daniels' voluble, shoot-from-the-hip and financial-minded yang. It was a complementary mix. Gene headed up the operations side and Richard was chief engineer.

Before anybody could watch TV in Casper, there had to be a signal. Cable systems up to that point had simply built a big tower, placed an antenna on top and then run wire to all the homes in the town. But the Denver signals couldn't reach Casper, even with a huge tower. The farthest they came was Laramie, 150 miles to the south.

So Daniels and the Schneider brothers, and their newly launched Community Television Systems of Wyoming Inc., went to AT&T and persuaded the giant telco to relay Denver channel 2's signal from a tower in Laramie up to Casper via microwave hops. It was the first attempt in the nation to relay television signals to remote areas via microwave. Before AT&T agreed to do it, the telco had to have a check for $125,000. Daniels plunked it down before he had a single subscriber or any concrete evidence that his business could be successful.

(Footnote: AT&T charged $7,800 a month to microwave a single broadcast channel into Casper, by far the largest recurring expense for the cable company. When additional stations launched in Denver, Casper residents wanted them as well, but AT&T wanted even more money to relay additional broadcast signals. So the cable company allowed subscribers to vote on which station's programs they wanted to watch on the single channel. A cable system employee would then sit up on the mountain at the microwave relay station and literally switch channels for the entire town. From 7:30-8 p.m. on a given night, the system might be delivering Denver's channel 2. At 8 p.m. it might switch to channel 4 and an hour later to channel 7.)

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By the middle of 1953, Daniels' company was stringing wire and signing up its first subscribers, at a hefty $150 installation fee and $7.50 per month for eight hours a day of single channel, black-and-white television service. That was a pretty sizable chunk of change for most people in those days. But, as Schneider later recalled, "They really didn't care what it cost. They just wanted it... We were just signing up people to subscribe like crazy."

The company held a grand opening in the Casper Armory and attracted about 12,000 people in a town of just over 20,000.

It was a smashing success. One year after launching, the system had 4,000 subscribers. It had already invested some $600,000 in plant and equipment. Most of that money, Daniels told the local paper, remained in Casper. It was an example of an instinct for public relations that was to serve him well throughout his career.

The system was also a huge financial success. "I wouldn't want to say it too loud right now," Schneider later remembered, "but it paid for everything the first year. To the oil men it as like hitting an oil well."

Bill Daniels didn't invent cable television. In fact, many years later, after making hundreds of millions of dollars in the business, he would be hard pressed to explain in any detail how cable worked. Nor did he ever really run a cable system for any length of time. He had no patience for operations and left that to others better suited to such an activity. He didn't even build the first system in the country.

But Daniels was the Billy Graham of the cable business. He was a tireless evangelist and passionate pitchman who won thousands of converts. On the strength of his sermons about the potential of cable, hundreds of individuals and dozens of corporations set aside other businesses and priorities and invested billions of dollars and people hours into a business some had never even heard of before meeting him.

In a nation of salesmen, he was one of the greatest. He was also one of the few of the early cable entrepreneurs to remain centrally involved in the business throughout its first five decades.

After building Casper, Daniels and his cohorts went on to wire Rawlins, Wyo., and Farmington, N.M. And pretty soon Daniels got to know every other cable operator in the country. His contacts and his endless boosterism led in 1956 to a stint as head of the newly formed National Cable Television Association trade organization.

As head of the trade organization, Daniels fielded countless calls from cable system buyers seeking sellers, from sellers seeking buyers and from operators seeking funding. He would always try to help and in the process found his niche in the business. In 1958 he formed Daniels & Associates with a partner, Denver lawyer Carl Williams. For decades to come Daniels would be at the center of many of the biggest cable deals.

It's easy to see why Daniels built a reputation as the "father" of the cable television business. But it's a title he felt should belong to those who built cable systems before he did. Still, he was the ultimate matchmaker, and most of the matches he made wound up in financial heaven. Among the companies and individuals Daniels helped bring to the altar were:

Teleprompter Corp. CEO Irving Kahn built a business bringing closed circuit telecasts of sporting events to arenas around the country. In 1959 he sent his top associate, Monroe Rifkin, out to Denver to talk with Daniels about how cable might be used to deliver closed-circuit sporting events. Rifkin urged Kahn to get into the business. In a few years Teleprompter was the nation's largest cable operator, buying most of its systems through Daniels.

Time Warner Cable. Rifkin eventually left Teleprompter to work for Daniels. They and a group of investors founded American Television & Communications Inc., later sold to Time Inc. By 1997 it had become the largest cable company in the world.

Cox Communications. J. Leonard Reinsch, then head of the Atlanta-based publishing and broadcasting empire, was introduced to cable by Daniels and bought his first system from Bill, forming the basis for what was to become the nation's third largest cable system operator by the early 1990s.

Tele-Communications Inc. Texas cable operator Bob Magness purchased the system in Bozeman, Mont., from Daniels, laying the foundation of TCI, which reigned as the largest cable operator from 1981 through 1997. Magness was its chairman.

Sammons Communications. Daniels met Texas businessman C.A. Sammons at a dinner and, after hearing Daniels' pitch, Sammons agreed to buy the cable system in Bradford, Pa., the first acquisition for what would become Sammons Communications, later one of the nation's largest cable companies. "I remember my commission was $50,000 for about six weeks' work. I thought: 'That's all right'," Daniels said later.

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Daniels wasn't averse to owning cable systems himself. In fact, he entered and exited the cable operating business almost as many times as he did the institution of marriage. (He was married and divorced four times. "They have a bumper sticker in Denver," he once joked. "Honk if you haven't been married to Bill Daniels.")

In 1960 he sold his interest in Community Cable Systems to the Schneiders but then turned around and began buying systems again. By 1980 he had sold out again, this time to Newhouse Corp., for $100 million--115,000 subscribers at $870 per sub. Then he went out and did it again, selling all but two systems to United Artists Cable in 1988 for almost $200 million--88,000 subscribers at $2,216 per sub.

What made Bill Daniels a success was his uncanny instinct for people. He would study the biographies of people he was about to meet. He bought the first Lear Jet in Denver and used it to fly to meet with folks within hours after they had called to inquire about buying or selling a system. He remembered the names and the birthdays of children and spouses. He worked seven days a week and 24 hours a day and would have worked more had he found a way.

He loved to bet the ranch, and outside of cable, he lost more often than he won. He spent $425,000 on an unsuccessful run for Governor of Colorado in 1974. He blew $300,000 backing boxer Ron Lyle and another $200,000 on an attempt to win the Indianapolis 500 car race.

His biggest disaster was the American Basketball Association's Utah Stars, which cost him $5 million and drove him into bankruptcy. It provided his biggest disappointment and his greatest moment.

"I cried like a baby the night I had to fold the club," he told Channels magazine in 1985. "All my life I had said I would never declare bankruptcy, but I didn't have a choice."

Five years later, he was back in Utah, armed with $750,000 he used to provide refunds to all holders of Utah Stars season tickets, none of whom had ever expected to see their money again. It was something no professional sports owner had ever done. But for Daniels it was worth every penny: "In terms of pride and ego it was the high point of my life, without question."

There are hundreds of Bill Daniels stories. John Saeman, who served for many years as Daniels' top executive, tells of the time that Walt Disney Co. held a big party for the cable industry at Disneyland to launch the Disney Channel. As the party ended, guides began to shepherd the hundreds of cable operators down Main Street to the monorail train waiting to take them to their hotels. But Daniels was off in a corner talking about a possible deal.

When the last train was ready to leave, the ushers insisted the Daniels group move. As the train began to blow its whistle, the group started to run. Daniels, a heavy smoker, soon ran out of breath. The rest of the group reached the loading platform and shouted back to Daniels to hurry up or he would be left behind. He tried to break into another trot, but soon gave up.

Then he stopped, cupped his hands to his mouth and yelled at Saeman:

"John... buy the train!"

Up or down, in cable or out, Daniels loved the grand gesture and would never allow himself to be left behind. With an Old West sense of manners and generosity, he treated his customers, his clients, his employees and just about everybody he met as if they were royalty.

He routinely tipped bellboys and waiters $100. He made millionaires out of dozens of his associates, as he called those who worked for the companies he owned.

Every time Daniels made a deal that brought in a substantial profit, he would share it with his associates, all of them, down to the parking lot attendant. In 1984, for example, he sold his system in Anchorage, AK, for $11 million. He kept $5 million and shared $6 million with the rest of the Daniels associates.

(The windfall prompted one Daniels associate, when asked what she intended to do with her five-figure share, to reply "I plan to spend half on cowboys and whisky and the other half on frivolous things.").

This extraordinary generosity fostered extraordinary loyalty among the folks Daniels recruited into the business and those who worked for him. It made it much easier to put up with the long hours and other demands he made (including cleaning up one's desk each night before leaving the office.) And it put in place a network of former Daniels employees at most of the major cable operating companies all of which at one time or another needed the services of Daniels & Associates.

But Bill Daniels might still be in Casper selling insurance to oil companies had it not been for the people who invented cable television in the first place. Just who it was who strung the first wire is a matter of some dispute. The fact is that the first cable system ever built was probably in the United Kingdom where several companies constructed master antenna and single-channel community antenna systems prior to World War II to receive the newly launched TV signal of the British Broadcasting Corp.

In the United States several towns have a claim on the title of cable's birthplace. What seems most likely is that cable TV was invented independently by different people around the country at about the same time.

That, more than any final judgment about who was first, tells how hungry Americans were for television in the late 1940s and how simple cable's technology was.

What all the towns with a claim to be the birthplace of cable have in common is that they were located where TV signals could not be received with a regular, rooftop antenna. But they were close enough to broadcast stations so that some nearby location -- a tall tower or mountain top, for example -- was within range of at least a weak signal. And they all harbored an enterprising entrepreneur with some knowledge of electronics.

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The individual with the strongest claim to being the first to have built a cable system was Ed Parsons of Astoria, Ore.

Parsons owned a local radio station in Astoria, a town of 10,000 at the mouth of the Columbia River. He was an engineer by training and an inventor by instinct. As a boy in Portland, he had played in his father's garage and discovered electronics, to the dismay of some of his school mates.

"Another youngster and myself in the sixth grade, because I had access to spark coils, we made things a little bit difficult for the teacher, shocking kids and so forth," Parsons said years later. "And to divert us she presented us with a book, 'Marconi's Experiments in Wireless.' That changed our channels."

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The boys began to experiment. The father of Parsons' friend worked for the telephone company. Using old equipment they found in their fathers' garages, the two boys built a wireless set to communicate between their houses. By high school, Parsons was building radio receivers and selling them to a local radio store.

Parsons, a lanky six-footer whose unruly shock of hair turned prematurely white, worked as an engineer at Portland radio station KGW. He was also a pilot and operated a flying school. During World War II, he heard that the radio station in Astoria was about to shut down because of poor financial performance. He drove down and bought it from the owner, the local newspaper. In 30 days he had it in the black, mostly because he instituted live news broadcasts which attracted a much bigger local audience.

In the back room of the station he ran a radio repair shop, fixing radio receivers for folks in the town so they could tune in to his station. He also repaired all the other electronic equipment brought in by residents of the town, including the radar, depth finders, automatic pilots and other devices used by the local fishing fleet.

At a broadcasters' convention in Chicago in 1947, Parsons and his wife, Grace, first saw television. She wanted it in her home. At that time there was no broadcast station close to Astoria. Nevertheless, his wife insisted they buy a TV set.

Parsons ordered a nine-inch model from a firm in Chicago and had it flown to Astoria. It cost him, he later recalled, more than $1,000. "I told the wife we were wasting our money with the (set), but at least I would try to get her television." He thought she might end up using the set as a table.

But Parsons' wife had faith. "She figured I was an engineer, so there was no reason why she shouldn't have television."

In the spring of 1948 radio station KRSC in Seattle announced plans to launch a television station later that year. Over the summer it began to test its signal. Parsons knew the Seattle station manager and worked with him to find the signals.

"I took an FM receiver, changed its frequency range and put a meter on it and a pair of headphones so I could listen and tune by the video and the audio. You could hear the blanking bars (used to test the video signal). And you could hear audio in the earphones.

"I put a field strength meter across the discriminator to show how much signal was being received. I built a couple of these sets and put one in my car and a second unit in my own airplane." He drove and flew around town, looking for the best place to receive the signal from Seattle.

After some testing, Parsons discovered he could receive the Seattle signal from a location atop the Astoria Hotel, across the street from his apartment. Then he set about to build a receiver.

Working out of his radio repair shop, "I designed and built a two-stage I-F amplifier and converter to channel 2 and a three-stage amplifier on channel 2 as a signal receiving unit." This converted the signal from channel 5 to channel 2 (necessary to avoid interference), and transmitted it, via coaxial cable, across the street to Parson's TV set.

When KRSC began its first broadcast on Thanksgiving Day 1948, the Parsons were the only ones in Astoria with a working television set.

Their apartment was jammed.

"We literally lost our home. People would drive for hundreds of miles to see television. So I approached the hotel manager and suggested that it would be a simple matter to drop a cable down the elevator shaft and put a set in the lobby of his hotel. He thought that would be a wonderful idea. So we did."

But the hotel lobby got so crowded the manager asked Parsons to remove the set. Parsons then asked a local music store owner, Cliff Poole, if he would like to have a TV set in his store as a draw for customers. Poole agreed to buy a set and to pay Parsons to hook it up to the antenna atop the Astoria Hotel. "So Cliff Poole was really the first customer for cable TV," Parsons later recalled.

Pretty soon the police called to tell Parsons that the crowds outside Poole's store were becoming a public nuisance. The police chief suggested Parsons string wire to the local bars.

"Every bar owner was anxious to have a television set (and) would pay for the cable," Parsons said. "I designed additional amplifiers on channel 2 and put the signal down. Then people began to put pressure to have cables in their homes."

Pretty soon Parsons was stringing wire all over town. When the city council objected to wires hanging over the streets, Parsons devised a wireless system to transmit the signals from one amplifier to another across the streets and then hook up all the houses on a street via wire.

He charged people different prices, according to how much equipment he needed to use and how difficult the hookup was. An average hookup cost about $125. Customers provided their own power, and Parsons did not charge a monthly fee.

Soon entrepreneurs from other towns in Oregon and Washington began to show up in Astoria, asking Parsons how to build systems in their towns.

In Aberdeen, he ran into a problem with power. It was seven miles from the antenna site to the town, and he needed seven amplifiers. But there was no power available. "So I designed a system to put 220 volts AC up on the coaxial cable to power the amplifier plus the headend. And the system worked beautifully." It was one of the first uses of coaxial cable to transmit power as well as a television signal. The two operated on different frequencies and so did not interfere with each other.

Parsons' inventions attracted the attention of Popular Mechanics magazine, which printed the first major article on cable television in a national publication in its April 1950 issue. The story focused on how Parsons developed his system and particularly what kinds of antennas he used. It did not talk about the possibility that cable operators could actually charge customers for the service. It also stated that Parson's transmission system could deliver the signal only 2,000 feet. Finally, it reported that Parsons' next step would be to build a satellite broadcast station in Astoria that would receive the signal from Seattle and then rebroadcast it.

But the article did recognize that the Parsons system could be the beginning of something big. "Astoria is only one town -- the beginning," the story concluded. "But what works in Astoria may work all over the Northwest and the nation, too."

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There is little doubt that Parsons was the first to develop the basic structure of the modern cable system: use of coaxial cable, amplifiers and splitters to deliver a signal from a single antenna to multiple television sets.

But he never recognized that his invention could be used to launch a business based on a monthly fee for service. He did sell equipment to his customers and provided consulting services to other cable operators in the northwest region. By 1953 he was so burned out he moved to Alaska, first for a rest. But the move became permanent. He never really made any money from cable television.

Nor did Parsons receive any widespread publicity about what he had done beyond the articles in Popular Mechanics and a couple in trade journals (including an article in the Aug. 13, 1949, issue of Television Digest, most likely the first trade journal article about cable in the U.S.). But most of the articles about Parsons were focused on the technical aspects of his system and did not really raise the possibility that Parsons' inventions might lead to a business.

Years later the city of Astoria erected a plaque near the old hotel where Parsons built his first system and declared that it was there that the first cable television system in the U.S. was constructed.

Whether or not Parsons was the first to build a cable system, the first people actually to charge a monthly fee for cable service and to make any serious money from the business were in Pennsylvania. The Keystone State was the Mesopotamia of the cable industry. Its hilly terrain and proximity to major television markets such as Philadelphia, New York City and Pittsburgh made it a natural for cable. And the first to develop cable in Pennsylvania were television set retailers, seeking to extend the reach of broadcast signals to more homes so they could sell more television sets.

One of these was John Walson, who ran an appliance store in Mahanoy City, Pa., and worked on the side for the local electric utility. Mahanoy City was a community of 10,000 about 75 miles northwest of Philadelphia and beyond the reach of the city's broadcast television signals. When Walson began to sell TV sets in his store, he had to take customers to the top of a nearby hill to show how the sets worked. There he could get a decent signal.

Finally he decided just to string the twin lead antenna wire down to his store. He boosted the signal using "a small, top-of-the-set booster." This was in June 1948, Walson later recalled, about four months before Parsons hooked up his TV set in Astoria. Records documenting Walson's account were destroyed in a warehouse fire 30 years later.

(If Walson did indeed launch his system in June, 1948, he managed to keep it a pretty tight secret at the time. The launch of a cable system was regarded as big news in most towns in the U.S. But there are no newspaper accounts at all of Walson's cable system until the 1950s. Casting even more doubt on Walson's claim were the reports he himself filed for TV Digest from 1953-1966 in which he stated that his system started in 1950. It was not until 1967 that Walson began to list 1948 as the starting date in his reports to the Factbook).

Whenever he strung the first wire, soon thereafter his customers began asking if he could hook them up as well, and Walson began to string more and more wire around town, using the poles of his employer, Pennsylvania Power & Light Co. He found he could charge people $2 a month for the service.

It didn't take him long to discover the limits of twin lead wire, which would go out whenever it rained. "It wasn't very practical and the phone would almost ring off the hook every time it rained," Walson later recalled. Within a couple of years he had replaced the twin lead with coaxial cable and by 1957 he had one of the largest systems in the nation with some 14,250 subscribers.

Walson called his cable company Service Electric Company. It would enter the history books again 20 years later, in a better documented event,when it became the first cable system to make an affiliation agreement with Home Box Office.

Another Pennsylvanian who discovered cable television about this time was Martin Malarkey, a radio and television appliance store operator from Pottsville, 90 miles northwest of Philadelphia. In the spring of 1949 he visited New York City and stayed at the Waldorf Astoria Hotel. In his hotel room he found a 10-inch television set that delivered a picture far better than anything he had seen before. "I noticed that the wire coming out of the back of the set was a round, black vinyl covered wire. I had been used to seeing a flat twin lead coming out of the back of the set going up to the antenna. My curiosity was piqued."

He called down to the front desk and arranged to meet the hotel engineer who explained that he had just installed a master antenna system that linked all 500 rooms in the hotel to a single antenna on the hotel roof. The equipment was supplied by RCA Corp.

"This was just fascinating to me, and I went back to Pottsville and figured that if they could feed that many receivers from one antenna on a vertical plane, why couldn't you take an antenna and put it up on top of a mountain and run a line down and do the same thing on a horizontal plane?"

Malarkey, because he was a television set salesman, had a relationship with RCA. He called his local distributor. "They told me to go see RCA directly. So I went down to Camden, N. J., to talk to RCA. They were so intrigued by the idea they offered to send the engineers up to Pottsville to experiment at no cost to me, if I would buy the equipment to experiment with."

The engineers found they could pick up the signals from the Philadelphia broadcast stations, amplify them, and run it a couple of miles down the mountain. "The pictures were absolutely gorgeous," Malarkey remembered.

Initially he wanted to build the antenna in the hopes of selling more TV sets. But that quickly changed. "Word got around and people started coming in the store offering me money and asking: 'How much do you want to hook me up to this system that you have?' I realized it was a service that could be sold."

Malarkey priced his service based on what it cost people to get decent broadcast signals. "I concluded that the average (rooftop) antenna we were installing at the time cost between $150 and $200. Consider also that those antennas were so huge, so cumbersome and so high above the rooftop that they were a continuing maintenance problem and the average person was spending $40 to $50 a year to maintain those antennas.

"Not knowing how much it was going to cost to build this system -- I had nothing to guide me -- it appeared to me that a $150 connection fee was a reasonable fee and the $3.75 a month was a reasonable monthly charge for the service I was providing."

After a year he had a thousand customers and had begun to wire other Pennsylvania systems.

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Malarkey also decided he would need permission to cross the city streets and to put his wires on the poles owned by the local telephone company. He approached a lawyer in Pottsville whose father was on the city council and invited the attorney to join his company. He received the city's blessing.

He then paid a call on the vice president of the Pennsylvania Power & Light Co. and offered him a share in the enterprise. Pretty soon he had permission to use the utility poles. The regional vice president of the local phone company became a shareholder and Malarkey had the permission to use the telephone company poles.

"So after I got all of these people in bed with me and I got all of the permissions I needed, I went out and I started to hire people who had experience with the telephone company and power company in putting their lines up."

For initial financing Malarkey used his own money and his family's. "I gambled every last penny that I had at that point in time on getting the system started."

His brothers each kicked in a few thousand dollars, but his father resisted. "I don't think he had the grasp of the potential. But he did begin to realize what I had when I gave him back his entire investment that he'd made during the first year of operations. Every year after that, as long as he lived, he got dividends that were equal each year to five times what his original investment was. He got the message."

The system was a huge success. Customers were banging at his door demanding service. Would-be cable operators from around the nation were also asking him for advice. He started to charge consulting fees. One of his first clients was Bill Daniels, who flew in from Wyoming to get some tips on how to build a system. Daniels paid Malarkey $500 for a day's worth of instruction and would later remember that he had been "glad to do it."

Soon Malarkey also attracted the attention of Uncle Sam. The Federal Communications Commission dispatched a common carrier bureau lawyer, E. Stratford Smith, to Pottsville to find out as much as he could about this new business.

"I told him as much as I could," Malarkey said, "with the hope that he would... tell me where the FCC was coming from and whether I could anticipate any problems from the FCC."

Malarkey also received a visit from a representative of the Internal Revenue Service, which wanted to slap an 8% excise tax on the revenue from subscribers. Malarkey went to court to challenge the tax and eventually won.

These visits caused Malarkey to call the other cable operators he knew and invite them to join him at the Necho Allen Hotel in Pottsville in the fall of 1951 to form the industry's first trade association. They called it the National Community Television Council, the forerunner of the NCTA. Nine operators kicked in $1,000 each to get it going, and Malarkey was elected the first president.

"The first person I called was Strat Smith," who had left the FCC and started in private practice, Malarkey recalled. Smith signed on to handle the group's legal work. Initially he offered to work for only a token fee, betting that as the business expanded and more problems arose, he would be earning larger and larger fees. It was a wise gamble. Eventually Smith was persuaded to become the organization's first full-time paid employee.

Smith suggested that the group change its name to the National Community Television Association. Later it was changed again to the National Cable Television Association, which remained for the next five decades the leading industry trade group and lobbying organization.

Malarkey expanded his business to other towns in Pennsylvania, Virginia and Maryland. By the late 1950s he had one of the largest cable companies in the country.

Malarkey sold most of his systems in 1960. "Early on, after I graduated from college, I decided I was going to make a certain amount of money and retire. I'm essentially a very lazy individual, and I made up my mind that when I attained that goal I was going to relax and enjoy life." He was 41 years old.

But Malarkey didn't stay retired. Existing and prospective cable operators continued to call on him asking for advice. In 1963 he joined with engineer Archer Taylor to form Malarkey Taylor & Associates, which remained for many years the industry's premiere consulting group on engineering, franchising, construction, finance and operations.

Malarkey and Walson started their cable systems initially as a way to sell more television sets. Parsons just wanted to give his wife a present. The first cable system that was constructed with the express purpose of selling monthly service to customers was begun in Lansford, Pa. It was also the first system to receive widespread national publicity, setting off a nationwide cable construction mania. And it was the first system to use equipment sold by a new company that would play a pivotal role in the history of the business, Jerrold Electronics.

Lansford was a town of 2,300 homes about 70 miles from Philadelphia, and just down the road from Mahanoy City, where Walson had his business.

In 1950 Bob Tarlton, a 40- year-old veteran of World War II, was working in an appliance store he and his father owned in Lansford. The store had just begun to sell TV sets.

About the only place near Lansford that could receive the local Philadelphia broadcast signals was an adjacent town called Summit Hill, to the south of Lansford and about 500 feet higher. The Tarlton radio store was located in Lansford at the edge of Summit Hill.

The Tarltons wanted to demonstrate the best possible signal in their store. So they strung a dual-lead antenna wire from the store across a couple of streets up to an antenna in Summit Hill. The Tarltons soon were getting requests from customers for similar service.

Some of them couldn't be refused.

7

Tarlton remembered "a friend of my father's, named David John Stevens, came to see my father. He was quite a loud individual. He was an executive secretary of the United Mine Workers and he was on (UMW President) John L. Lewis' board in Washington, D.C."

Stevens was expecting a visit from Lewis for the weekend and wanted to make sure there was a working television set in his home so the union leader could watch. But Stevens lived in a valley near a river with no decent TV signals.

The Tarltons said there was nothing they could do. But Stevens insisted they try to set up some sort of antenna. So they went down to the house and found a nearby hill where they constructed an antenna and wired up Stevens' home. The United Mine Workers president had his television.

The development opened the floodgates. People were demanding that they get the same type of service. But Tarlton knew the limits of twin-lead wire. It could not be allowed to touch anything, was highly susceptible to interference and could be very temperamental in the weather.

The Tarltons worried that if they sold TV sets and antennas to their customers and the wire went out in a few months it would leave a lot of angry customers. His concern was that "inside of six months to a year they'll no longer have television or it will be so poor they'll come back to us and demand their money back... that stuck in my mind as an important consideration." It made him think of using coaxial cable, which he had used extensively in the service during World War II.

Coaxial cable is a copper wire surrounded by insulation, wrapped in turn by a copper mesh. The entire structure is then encased in plastic. Because the various layers of the cable have the same axis, the package was called coaxial cable.

The wire mesh layer prevented signals from leaking out of the copper core and prevented interference from outside. Although the structure has been modified somewhat, with aluminum sheathing replacing the wire mesh, for example, the basic structure of coax has remained constant throughout the history of the cable industry.

"Coaxial cable is impervious to weather," Tarlton said. "It's impervious generally to outside interference. It's like a water pipe. What runs through is confined and delivered on the other end." Coax is also capable of carrying vast amounts of information, unlike twin lead or common twisted pair telephone wire. This would become enormously important in the 1970s and 80s when dozens of new program networks came on line.

The problem with coax was that it would impede the signal much more than a twin lead. After a mile or so the signal would begin to degrade and would need to be amplified.

Tarlton had heard about a company in Philadelphia called Jerrold Electronics that was making a system to provide television service to department stores and apartment houses. He got a couple of their amplifiers and began to play around with them. He liked the amplifiers because they were smaller than those manufactured by other companies.

"(Jerrold's) piece of equipment was unique to the extent that physically the size was manageable. RCA's was a huge monstrosity. I would say something about three feet high. (Jerrold's) equipment was no more than 12 inches by 12 inches or maybe 8 by 10 inches high."

But the Jerrold amplifiers had been designed to boost the signals only once. Tarlton needed equipment that would amplify and reamplify the signal several times. The problem was that the Jerrold equipment, if used in sequence, would degrade the signal, particularly the sound, so that it was unusable.

"With one amplification it was sufficient... but the minute you got to a second, third or fourth or fifth amplifier the sound kept sliding way down and you had no more sound," Tarlton recalled. "So I just fiddled with it a bit. Didn't do any redesigning. I just re-tuned them a bit and flattened them out a little bit and brought the sound up a little bit, enough so we could reamplify it."

"I had maybe half a dozen, and then I ran an experiment on it and lo and behold, it really worked."

By the spring of 1950 Tarlton figured he had a complete system that would work. He got together with all the other television set dealers in town -- Rudy Dubosky, Bill McDonald and George Bright -- and an attorney and state legislator named William Z. Scott.

"I wanted to have a combined effort," Tarlton said, "because I felt that the result would be a unified effort rather than everyone doing it his way."

The other dealers wanted to offer the system to customers for free, hoping to make money by selling more TV sets. But Tarlton persuaded them that it could be a business on its own and that they should charge for it from the beginning.

Each partner put in $500 and the group borrowed another $20,000 from the local bank. They decided to charge $100 for installation and a monthly fee of $3. These figures, Tarlton later said, were "picked out of the air."

The group built an 85-foot tower in Summit Hill and held the first demonstration of the new service in October 1950. Tarlton had hoped that the system would be able to attract 200 customers. The demonstration led him to believe he had underestimated the appeal of cable. One thousand people showed up in a town with only 2,300 homes.

The new company, Panther Valley Television, hired workers from the Lehigh Navigation Coal Co. to string the wire from poles they rented from the local utility for $1.50 per pole per year.

The relationship with the local phone company was critical. The manager of the company not only gave Panther permission to use the poles, but suggested how to string the coaxial cable, using a lashing machine that would attach the cable to a stainless steel wire that would prevent the cable from sagging.

One problem Panther had to solve from the outset was political. Without a decent signal from Philadelphia, most residents of Lansford who wanted to watch television did so in the bars in Summit Hill. That generated some good business for the bars.

"People traveled from all over to Summit Hill to watch television, sitting there having a beer or a drink and watching television. We sold them sets that were worth thousands of dollars," Tarlton recalled. With television signals available via cable in Lansford, the bars would see a drop in business.

"So in Summit Hill the pressure of trying to impede us came from the business community. And, of course, businesses in small communities can exert political pressure on the local governments."

At Scott's suggestion, the Panther group made the first move. They asked the Summit Hill city council for permission to build their tower and lay their wire, even though they did not have to cross any city streets. The council, fearful of the reaction from the bar owners, balked.

8

To start with, they dragged their feet," Tarlton remembered. "And then they finally said: 'Yes, we will give you permission, but we want a 15% gross receipts tax.' It was the first experience any cable operator had had with what would become known as a "franchise fee."

Panther fought the tax and the council agreed to drop the fee to 5%. Panther agreed to pay the tax but challenged it in court. The cable company eventually won in the state supreme court. But the notion that the Summit Hill council had about taxing cable was one that would occur to other city officials around the country.

The Lansford system was a huge hit. "You had to keep your door locked," Tarlton recalled. "The people were clamoring for service." Within a few months Tarlton was buying a lot of equipment, including a bunch of amplifiers from Jerrold.

Jerrold was founded in 1948 by Milton Jerrold Shapp, a 42-year-old sales rep for a group of electronics manufacturers. Shapp had come across a couple of engineers who had invented a "booster" designed to improve the signal reception of television sets. Shapp liked the device and wanted to sell it. But he couldn't find anybody interested in making it.

So Shapp decided to build and sell the product on his own. The Tarlton radio store in Lansford was one of the outlets for the boosters made by Shapp's new company.

A few months later the same engineers who had developed the booster invented a device that would allow a single antenna to serve several television sets. They planned to sell the device to appliance stores. Consumers looking to buy a television set could compare the picture quality of several models receiving the same signal from the same antenna at the same time.

As Shapp's first employee, Hank Arbeiter, later recalled: "In those days if you went to Gimbels or Sears or any of the stores that had some TV sets and you wanted to see how they worked they would have to plug in the antenna. You could only look at the sets one at a time. The need was there and this engineer came up with an amplifier that we could hook all the sets up at one time.

"One of our first installations was in Darby Mark Fine (department store) on 69th St. I think he had something like 30 or 40 sets on at one time after we got all this equipment. It was in the newspaper and everything. It was a great event.

"From that development we grew into apartment houses because it was a very similar set of conditions there. We started to get our feet wet in small apartment houses and worked our way up to fairly large ones."

The Jerrold developments generated a lot of publicity and attracted the attention of the group in Lansford. Tarlton became a big customer for the Jerrold amplifiers.

"I was buying so many I thought I would go to Philadelphia and buy them direct," he said. "Bud Green was the sales manager and chief foreman. I saw Bud and he said, 'Oh, sure, we'll sell you amplifiers.' One day, when I was down for another batch of amplifiers, he asked me: 'What are you doing with those things?' And I told him."

When Shapp heard what was going on he went out to Lansford, met with Tarlton on Thanksgiving weekend 1950 and offered to manufacture amplifiers that would meet the specific needs of cable systems.

"His comment was, 'This has tremendous potential,'" Tarlton recalled. "He said he was going back to the factory on Monday morning and get his entire engineering staff to design equipment for this type of operation."

The Lansford system was an immediate hit with consumers, even with he $100 installation fee and the $3 a month service charge. By January 1951, 100 homes had been wired and installs were adding 40 a week.

The event drew nationwide publicity. Stories ran in Newsweek, The New York Times and The Wall Street Journal. "Panther TV's system was not cheap," Newsweek noted. "Nonetheless, the company's chief difficulty is in meeting demand." The neighboring town of Coaldale, Newsweek added, was clamoring for service.

And the New York Times, in its issue of Dec. 22, 1950, declared, "The town of Lansford, which heretofore had been barred from television reception because it lies in a valley, is now receiving video programs regularly after erecting what is believed to be the country's first 'community antenna.'"

The Times article went on to quote Lansford mayor Evan Whilden who stated that the signals received were "just as good as you folks get up in New York." Ultimately, he suggested, the single aerial might serve 30,000 valley residents.

With the prices the Times reported the system was charging, readers didn't have to use a slide rule to see how much money could be made in cable.

But the most important statement in the Times article came from George Bright: "'There's nothing that can be patented,' he commented with a laugh. 'The system just uses standard equipment, and anybody can do it.'"

Parsons, Walson, Malarkey and Tarlton all said later that they had invented their cable systems independently. Each insisted he had never heard of the others when he began to construct his system.

Asked later about the dispute over who built the first cable system, Parsons said, "It's nothing to me if he (Walson) was first. Fine. I don't make any claim to being first because the technology was there for anybody to get it. I did it simply because of a demanding wife."

Regardless of who was first to build what could be called a true cable system, the idea spread like wildfire in the early 1950s, spurred by an unlikely ally, the federal government.

Relations between the cable industry and the government most nearly resemble the relations the ancient Greeks had with their gods. The Greek gods were enormously powerful and equally capricious. They could help a mortal one day and strike him down the next. One god could be on one side and another on the other side. They spoke in language difficult to understand, and mortals were required to pay to have the omens interpreted. The gods could be appeased through sacrifice but could just as easily be angered, sometimes for no apparent reason. The gods could never be ignored, but neither could they ever be fully understood.

Like the Greek Gods, the government sometimes took action without knowing what the consequences would be but which nevertheless had enormous impact on the cable business. The first example of this came before the cable industry had even been born.

9

In 1934 the Congress, spurred by the New Deal zest for regulation, created the Federal Communications Commission and established for the first time a nationwide federal policy to govern communications. The primary responsibility of the FCC was to allocate scarce spectrum to the new medium of radio. The goal was to bring some order in the skies so that rival radio stations would not be transmitting on the same or adjacent frequencies, causing interference with each other.

World War II brought a host of advances in communications. In 1945 the FCC found the need to revisit the spectrum allocation issue to take into account all the new over-the-air communications devices: mobile radios, railroad communications devices, walkie talkies and the newly invented medium of broadcast television.

When the FCC met, there were only six television stations in the entire nation, and all were broadcasting in black and white. The commission decided to allocate enough spectrum in the Very High Frequency (VHF) band which TV used to allow for 12 channels. It adopted a rule that required that all stations with the same channel number be at least 150 miles apart and stations with adjacent numbers be 75 miles apart.

The allocation ushered in a major spectrum land rush, not the last the United States would see. By 1948, 109 stations were operational or under construction.

But the FCC found its original allocation scheme wasn't working entirely as planned. There were two problems. The first was that the broadcast signals were proving to be very bouncy, ricocheting off the troposphere (that layer of the atmosphere between 300 feet and six miles above the earth) and bouncing back to earth often interfering with some station hundreds of miles away.

The second problem the FCC had not foreseen in 1945 was the advent of color. Color television signals could be transmitted in a variety of different ways, and the FCC was charged with deciding which would become the standard method of transmitting color signals.

Faced with these sticky problems, the commission decided on Sept. 30, 1948, to freeze the number of new television stations until it could resolve the thorny technical questions related to color and signal bouncing. The freeze remained in effect until 1952.

Suddenly, thousands of communities which had expected local broadcast television service were left out in the cold. Citizens in these communities were hopping mad. So were the businessmen who had planned to build TV stations in those communities. In 1950 FCC chairman Wayne Coy said that no decision in the history of his agency had caused more outrage than the broadcast station freeze.

But while the public was outraged and thousands of would-be broadcasters were frustrated, the decision provided an entirely unintended but extremely important boost for the newly hatched cable business.

In hundreds of communities around the country cable systems sprang up to slake the thirst of consumers for this new medium. By 1952, when the freeze ended, some 14,000 American homes were receiving their television signals through a coaxial cable hooked up to a community antenna.

A new species of business had been created.

Like the ancient Greeks, the early cable operators had to find a way to live and grow while dodging the thunderbolts from the gods of government and the floods, drought and pestilence sent their way by the such lesser dieties as the phone companies, broadcasters and theater owners.

But thrive they did. From such humble locations as Ed Parson's living room, Bob Tarlton's appliance store and Murphy's restaurant sprang an industry that grew to be far bigger than any of its various parents ever imagined.

10

Chapter 1: An Industry Is Born

The NCTA Through the Years

NCTA Presidents

Edward P. Whitney 1957-61

William Dalton 1961-63

Frederick W. Ford 1965-69

Donald V. Taverner 1970-71

David H. Foster 1972-75

Robert L. Schmidt 1975-79

Thomas E. Wheeler 1979-84

James P. Mooney 1984-93

Decker Anstrom 1993-present

NCTA Chairmen

Martin F. Malarkey 1950-56

Bill Daniels 1956-57

George J. Barco 1957-59

Lloyd A. Calhoun 1958-59

Albin J. Kozminski 1959-60

Sandford F. Randolph 1960-61

Glenn R. Flinn 1961-63

Fred J. Stevenson 1963-64

Bruce Merrill 1964-65

Benjamin J. Conroy Jr. 1965-66

Alfred R. Stern 1966-67

Jack R. Crosby 1967-68

Robert H. Beisswenger 1968-69

M. William Adler 1969-70

Ralph N. Demgen 1970-71

John P. Gwin 1971-72

William J. Bresnan 1972-73

Amos B. Hostetter Jr. 1973-74

Bruce E. Lovett 1974-75

Rex A. Bradley 1975-76

Burt I. Harris 1976-77

Daniel Aaron 1977-78

Robert W. Hughes 1978-79

Douglas H. Dittrick 1979-81

Allen H. Gilliland 1981-82

John V. Saeman 1982-83

Monroe M. Rifkin 1983-84

Edward W. Allen 1984-86

Trygve E. Myhren 1986-87

James S. Cownie 1987-88

John W. Goddard 1988-89

Robert Miron 1989-90

Jerry D. Lindauer 1990-91

James O. Robbins 1991-92

Joseph J. Collins 1992-93

Ricahrd Roberts 1993-94

Larry Wangberg 1994-95

Brian Roberts 1995-96

Ted Turner 1996-97

Robert Miron 1997-98


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