Interview Date: July 28, 2014
Interviewer: Stewart Schley
Abstract
Bill Beaty describes his entry into the industry in 1974 in Rock Hill, South Carolina, joining the cable subsidiary of a local, well-established telephone company. He reports on how business was conducted at the time, names the channels offered to subscribers, bringing local news to the community, and mentions the transformation that occurred with the advent of satellite video. He recounts how the name “Comporium Communications” came about. He goes on to explain how the cable industry currently focuses on broadband as well as the company’s vision of cable’s future, involving data, switching, transport, intellectual property and storage. Beaty also clarifies the importance of original programming, as more consumers turn toward television news. He addresses getting into the security business, and speculates that many cable companies would decrease their emphasis on video, although at the time of the interview, consumers tended to watch more hours of video content than before. At the same time, he concludes with a description of public-private partnerships to create a “Knowledge Park” in Rock Hill.
Interview Transcript
STEWART SCHLEY: It’s Stewart Schley for the Cable Center’s Oral History Series. We’re on the 36th floor of the Sheraton Crown Center in Kansas City and coincident with the Independent Show, July 28, 2014. Joining us today is Bill Beaty, who’s the Executive Vice President of Cable TV for Comporium. Bill, thanks for joining us.
BILL BEATY: It’s a pleasure being here and we appreciate the Cable Center inviting us to be on and share some of our legacy of Comporium.
SCHLEY: It’s an interesting company story and I think yours is an interesting personal story, so I think we’ll dive right into it. For those who don’t know, who is Comporium and what is the legacy and history of the company?
BEATY: Comporium is 120 years old and we were founded in Rock Hill in 1894 as a telephone company. E. L. Barnes and his wife bought the company in 1912 and remarkably, the Barnes family has owned the company for nearly 100, I guess 102 years now. That in itself is just remarkable. Currently, our CEO is Bryant Barnes, and he is the great-grandson of E. L. Barnes. So he’s the fourth generation CEO in our company today, and we actually have some fifth-generation Barnes’s that have very responsible positions in the company today. So that really works well to keep the company moving forward.
There’s so many things to talk about, but we’re here talking for the Cable Center and the legacy of what we call cable TV, which today is more and more referred to as video. But we got into cable TV in the mid-Sixties and primarily there were three people who were really the force behind getting that cable TV subsidiary founded. That was Frank S. Barnes, Jr., John Barnes, Sr., and E. L. Barnes. Their dad, Frank S. Barnes, Sr., was surely one who helped them get it going and get started. The way we got into it, Fritz Hollings was governor of South Carolina in the early Sixties and the South Carolina ETV was being developed around the state so Governor Hollings was looking for some really good telephone people at the time that were very knowledgeable and were forethinking to help move this along. So as a company we got involved in that, helping to set up the infrastructure for ETV in South Carolina. Then, as cable TV began to rear its head around the country, we formed a company. I say “we”—it was Frank, John, Ed Barnes formed the company in 1965, and we had our first cable TV subscriber in 1967. We’ve sort of gone on from there.
SCHLEY: What’s ETV stand for?
BEATY: Educational Television. Even today, South Carolina has one of the most advanced educational television networks, so we take some pride in helping get that started, too.
SCHLEY: Familiarize me and our viewers, Bill, with the geography and topology of the South Carolina marketplace that you serve and why maybe cable TV made sense at that time.
BEATY: Way back, the Bell Company up in Charlotte would not come down into rural Rock Hill. So there were three local businessmen that actually started the company. But like I said, the Barnes’s bought the company in 1912 and have owned it continuously since. From what I understand, around the country the Bell Companies would go into the most dense areas, the cities, and build those out because that’s where the profit was. And it was up to these local entrepreneurs to put together what became known as the independent telephone companies. And today, we have independent cable operators. Sort of the same thing with the cable television. There was a company operating in Charlotte and they were not down in our territory. So forward-thinking folks, the Barnes’s—Frank S. Barnes was the first president of the cable subsidiary and then John, his brother, was the second president. And today Bryant is the president of the entire Comporium.
The way I got involved with it was my dad owned the local radio station in Rock Hill. So the Barnes’s were, I think, naturally looking for someone with some media experience on the broadcast side and fortunately for myself and my family, he was invited to invest in the company, which he did. So the company grew. I came to Comporium in 1974. I think we had around 400 customers, we had nine channels, and there were three NBC’s, two CBS’s, three ABC’s, ETV, PBS station. We had our own weather channel and really the broadcast reception was fairly good—it was excellent from Charlotte. So naturally cable television was a tough go for many, many years, and I’ll give credit again to the Barnes’s because they hung in there with it, brought it along, stood behind it, and then I was fortunate enough to become employed by the company. I will just say this: getting into the cable business the way I did was the way just so many people did back then. We knocked on doors, door to door, selling cable TV. We’d go out and get the camera, tape the city council meeting and by then it was Senator Hollings, when he came to Rock Hill, Senator Thurmond, we’d get our camera out and tape it. It was fun, really the go-go days.
SCHLEY: First of all I want to ask you what kind of radio station your father ran.
BEATY: It was an AM radio station.
SCHLEY: News, mostly news?
BEATY: Still there, WRHI, and the two principal owners do a tremendous job. And it’s local, and I’m really proud of those guys for the way they’re doing it. Allan Miller and Manning Kimmel, they do a wonderful job in Rock Hill. We can get into it later, but I’ll just try to move it along here. We got our first satellite in 1980 and that just changed everything. We had the Christian Broadcasting Network, we had WTCG—which has really changed to WTBS and now it’s TBS. And then about a year later we brought in HBO. And then really everything changed.
SCHLEY: Because before that, because you alluded to this, you were in a market where TV was pretty good.
BEATY: You could really get good reception.
SCHLEY: When you knocked on doors, what were you selling?
BEATY: We were selling the fact you didn’t need an antenna, you didn’t need a rotor antenna, and all those sort of things. And that was $5.95 and we’d sell, I think it was like $1.00 for an extension. It wasn’t easy to sell. But you just kept after it and kept after it and we’d tape a Christmas parade or tape something interesting in the community and then we started doing city council meetings. In fact, the mayor at the time—very strong mayor and the main artery through Rock Hill is called Dave Lyle Boulevard—but even that show became known as the “Gong Show,” because he controlled city council meetings and he just “Gonged.”
SCHLEY: Time’s up.
BEATY: Time’s up. So we worked on that but again everything changed when we started bringing in satellite television.
SCHLEY: When that happened, when that programming transformation occurred, what were you doing? What was your job then?
BEATY: At that time I had become general manager of the company. We set up the company a little differently than a lot of folks did. We were operating on waivers, rural waivers, because at the time, telephone companies couldn’t get into cable, cable couldn’t get into telephone. But we were successful getting waivers because of the rural area we served, primarily York and Lancaster Counties, some parts of Chester County. So we tried to operate the two companies separately. I was the general manager. It was a real growth period because people wanted cable TV. They wanted those lines extended. So then we were in a situation where it became even more capital-intensive because it was a matter of getting the cable TV out.
John Barnes, Jr., a close associate of mine and he’s a cousin of Bryant Barnes—he is an EVP of the company and a very forward-thinking person. Bryant is too. In fact, Bryant—just to include this—he was able to bring a network of companies together into a holding company. Our name was Rock Hill Telephone Company, Rock Hill Cable TV, Lancaster Telephone and all. We came up with a name (I didn’t, some smart folks did): “Communications Emporium.”
SCHLEY: “Comporium.”
BEATY: You put it together and you get Comporium. But John came in and started working with me in the cable TV, and we worked together for fifteen years and that was really the tremendous growth period. Very capital-intensive, getting our lines out and then a lot of boxes, a lot of set-top boxes. We were early into pay-per-view, two-way, as it was. One of the things we did that I think is significant: we did start a program called CN2. We still do it today; it’s a 30-minute newscast. And it’s significant because Rock Hill is in South Carolina, even though we’re twenty miles below Charlotte. If you’re in Charlotte, North Carolina, you say “Carolina,” you’re talking about Chapel Hill. If you’re in Rock Hill and you say Carolina, you’re talking about South Carolina. A lot of Clemson people don’t even want to know about South Carolina in that respect…
So we built this 30-minute show and we did it the Ted Turner way, like headline news, thirty minutes and it worked. It brought the community closer together, it helped to bring local news to the community because in Charlotte it was always shoot-em-up. That along with the satellite television gave us the ability to sell cable television. And we did. And we got that penetration up pretty high. In the early Nineties, by the mid-Nineties, I guess is when the Direct TV and the Dish started rearing their head. They were all digital.
Sometime I think in 2005 or 2006, our penetration numbers of homes passed peaked. But then as we got into the early 2000’s, like January, 2000, we introduced our first two-way high speed Internet customer.
SCHLEY: Let me take you back for a moment. So, I understand the company relations because you talked about getting these waivers that allowed a telephone company to offer cable TV service. Were you delivering the signals for cable off a different set of plant entirely than the telephone network?
BEATY: It was totally different because the telephone company operates on twisted pair. And we had coaxial cable from day one. It’s not just moving the cables out and burying them under the ground, you had upgrades like with the bandwidth capacities you get from 330 to 450 to 550 to 750. Today, we have most of our system built to one Gigahertz. Which is what you need. But that was a tremendous growth area. Of course in 1996, with the Communications Act, that put down all the barriers where the cable people could go into. Voice and the telephone companies could get into cable. So things really started to change then and like I said, our company is essentially a broadband company today.
We still have a real solid voice base but it’s not highly penetrated as it once was. But our Internet service—we keep thinking maybe it’s going to start peaking—but it hasn’t. I think what we’re finding is that as people use more data, they want more speed. Then, as they get more speed, they use more data and so then you can begin to sell them up to a higher speed at a higher price. So that business we believe still has a lot of really true growth potential.
SCHLEY: Where did you start with Internet? When you guys first introduced high speed Internet service, what was high speed? Do you remember? It wasn’t what it is today.
BEATY: No, no, no. Now we’re talking about 300 megabits, 500 megabits. It was 15K, something like that. Just dial-up. Tremendously slow but at the time that was a good thing because that’s what we knew.
SCHLEY: If I can fast forward, you guys put out a press release recently, maybe last month or this month, about the introduction of Gigabit per second Internet service.
BEATY: Gigabit service; we call it Zipstream. It’s introduced today. Here we are in the summer of 2014 and five business parks this September are going to be initiated and 125 residential developments around Rock Hill, Fort Mill and Tega Cay. This is a major, major milestone for not just Comporium, certainly Comporium, but really the industry. And people say, “Why would you need that much bandwidth?” We think the amount of bandwidth that is going to be needed in the future is almost insatiable. Let me see if I can explain it this way. There are certain things we really believe in the future. Data, switching, transport, intellectual property and storage. You take those five things. You bring them together and what you’re talking about is a connected world. We call it the Internet of Things. If you talk to Cisco or any of these companies, they are predicting that there are going to be billions and billions of these connected devices. Monitors in your heart, your blood pressure, on your refrigerator. And today, just to tell you how much we’ve invested in this thinking—because we do believe this is the future—we’ve invested in a company called iControl. iControl is a software platform that powers the Comcast Xfinity Home, the Time Warner Intelligent Home, Cox, Rogers, Brighthouse.
We as a company have been in security for twenty years in traditional, but one of our engineers back in 2008 came across a company and it was originally UControl and they merged with iControl and today it’s iControl but we got real interested in that because that was operating on the broadband network, not twisted pair. You can push so much information. This thing has just come together so fast because you think about it—the iPhone came out around 2008. The iPad came around five years ago. So you take this increased bandwidth and speed and you combine that with the mobility of these smart devices. Then it’s with you all the time.
We think that is the future. The video business is changing. That’s almost an understatement. Linear video will be here for a long time. And HD particularly, for a lot of sports people are going to want that. But you can get all sorts of videos stream today over that same broadband pipe. It’s data, it’s all data, whether it’s voice or video or email or whatever it is—it’s all data delivered over that pipe. And the consumers want choice. The model we have is essentially broken because you’ve got nine companies that control 95% of all the programming in the country and the price of all that bundled programming is becoming unaffordable. Why I’m saying this is the importance of the infrastructure for the cable TV industry—that we call the cable TV industry—is really more of a broadband industry today. This Internet offering is the future. Then what operates off of it—I think cable operators are going to have a tremendous future, not just with the transport, but you’re going to have the customer relationship—for example, selling security, monitoring and automation in the home. You can get your iPhone out, look at cameras in your house, turn the temperature up and down, put the security on and off, turn lights on and off. That’s just the very beginning.
On the other hand, we’ve invested in a company called Immedion. We’re the primary owners of Immedion. We’ve got today four data centers. One in North Carolina, and three in South Carolina. That’s storage. The Cloud. You combine all that together. The infrastructure that all these cable companies have around the country is just going to be very, very valuable and more and more valuable.
SCHLEY: You’ve talked about it, I think, almost as analogous to the building of the railway system.
BEATY: Early on the rivers were the mode of commerce and the railroads—Rock Hill was founded in 1852 when the railroad came through and there was a big old rock. One of the folks said, “That’s a big rock.” So they put up the post office there and they called it Rock Hill.
SCHLEY: Why not?
BEATY: So the railroads did everything, but today this infrastructure that is being built out by cable companies—not just in big cities, but even in rural areas all across the country. I read the other day where, I think it was Mediacom or one of the companies was doing a deal with John Deere. No, it wasn’t Mediacom, it was a small company, it was Eagle. One of our independent cable operators is Eagle. They’re doing a deal with John Deere. And John Deere is a tractor company. But why they want to do a deal to transport data—because they want to tie together all these farmers in the Midwest that they service tractors for, that they sell tractors to, and all that sort of thing. But it’s all that coming together.
We’re real bullish about our future. Now the margin—talking about video again here—the margin on video today is not very much. I mean…it’s almost like we’re a tax collector. We’re collecting the tax and sending it to the programmers who are the collectors. We get a little margin on it. We’re making some money on our equipment…we’re using the Moxi gateway and that’s a leap forward. But the margin on the video business is not what it was. Now the question will be what’s the future for that? I don’t know that anybody really knows. But we do know and we’re really strong believers in the fact that this infrastructure we built—and they were moving up to 1 Gigabit—is the future. All that connectedness is going to make life easier. Because you’re going to be connected. And when you’re talking about M2M, it’s like machine-to-machine and what that means is you’re not manually doing something to make something happen. It’s just a lot of it’s programmed to tell one machine what to do based on—say the temperature outside. The humidity would dictate what the temperature is set on inside your house. I know that sounds really out there but that’s where we are today.
SCHLEY: You talk about these futuristic—I shouldn’t even call them futuristic applications. But the things you can do now and it’s such a contrast to where the business was when you and the Barnes family made those original investments. I want to break down a couple of subjects with you. One is the launch of the original programming and news channel. I don’t want to obscure that because that was, I think, a bold and creative thing for you guys to do. To me it speaks to what cable uniquely could do at that time. What was the thinking behind that?
BEATY: I mentioned this earlier. Living in South Carolina, we gravitate toward Columbia, because that’s the state capitol. Charlotte, the TV stations up there, they’re all first-class TV stations but what you get at night would be the shoot-em-ups and a lot of what’s happening with the high schools in Charlotte. What you find is that you really are watching for the live weather. Back twenty years ago, I remember there was a survey taken in some of the upper part of South Carolina, and a lot of people said, “Who is your U.S Senator?” As many people at least in the upper counties thought that a couple of North Carolina senators were our senators.
SCHLEY: That’s probably all they heard about.
BEATY: That’s what they heard. So there was no Internet in 1992. Ted Turner had really come on strong with CNN and he started Headline News, which is thirty minutes. So the board felt like this was something we could do that would be of benefit to the community; really and truly give back to the community. I mean, it’s not all altruistic here, but the point is, it was something you couldn’t get off a TV station. But it did enrich the lives of our folks and the citizenry because they were getting information that they wouldn’t get off television. You have to understand at that time radio is good and all, and newspapers are newspapers. But even in the early Nineties, more and more and more people were getting their news via television. So that’s what we did.
What that meant was you begin to develop a staff, you begin to sell more advertising, you do these things and one thing leads to another. We still do it today. Obviously leaps and bounds, quality-wise, compared to what it was then.
SCHLEY: But you did, even from day one, a half hour a day news show?
BEATY: We do a half hour. And it wasn’t easy.
SCHLEY: No.
BEATY: I’ll give John Barnes, Jr., credit. He was the one that really threw his heart and soul into getting this thing going. He’d be down there—in fact, sometimes he’d be down there 6:30 in the morning. We tried a morning show one time and different things. What we found out though was if you want to do something really good, you need to focus on that one thing. So we threw all our resources into that thirty-minute program. But you’d have ten minutes, nine minutes of commercials. And you do different things like that.
SCHLEY: But it’s a testament, Bill, to the localism, right? To the local aspect of cable, which really continues to influence how the industry—you know there’s a lot of telecommunications providers. Not that many have the localism and the footprint and the service staff cable has.
BEATY: I think it speaks to Comporium because the Barnes’s have always given back to the community and Bryant and John today are doing the same thing. We’ll talk about the Knowledge Park in just a minute. So that in a sense is a way of giving back again to the community because it was giving them something they just didn’t have. But again we wanted that as a way for people to sign up for cable. Because once you put your children on TV, playing Little League baseball or something, they do want to watch it.
SCHLEY: It’s community programming in a sense. Can you give us an idea in any metric that’s comfortable for you of the size of Comporium? I mean, how many communities or customers?
BEATY: Without just getting into all the numbers, we serve primarily two counties below Charlotte, York and Lancaster. Then we serve an area of North Carolina outside of Asheville called Brevard and we serve about five or six counties outside of Columbia. Then we have a company that we’re part owners in down around the coast in Charleston outside of Berkeley County, in Moncks Corner. I think the genesis of these were …a lot like telephone companies, primarily owned by families, and when the Comporium/Barnes family saw an opportunity to come in and assist somebody—if the family wanted to exit the business—you know, if everything worked out, then that’s the way we got into these areas.
Just to be clear, we are a very much diversified company today. We partner with AT&T in our area up around Rock Hill, we partner with Verizon in Charleston to provide wireless service. We own an Immedion Data Center. We’ve invested in, I mentioned iControl; there’s another company we’ve invested in called Zubie. And there are other companies that we’ve invested in that look to the future with this Internet of Things that we so strongly believe in. I believe that’s what differentiates companies that are successful and move ahead from those that frankly don’t.
SCHLEY: I was going to say, and I don’t know your company well, don’t get me wrong, but the multigenerational story seems to be one in which there was a willingness to take risks and to continue investing as the world around you changed. That’s exemplified—I want to talk about iControl for little bit because you guys are uniquely positioned to talk about security and cable’s progression in that. You used to offer—or maybe you still do—residential security service that I will call—this is not meant to be disparaging—the old school style of security.
BEATY: You’re right, you’re right.
SCHLEY: So where did you start and where have you come to now with security?
BEATY: I think I mentioned this briefly. We got in the security business, maybe it was 20-25 years ago. We did a good job.
SCHLEY: Alarm service?
BEATY: Traditional security—alarm. To do that you really have to be sharp because you’ve got to have a monitoring station with people 24/7, monitoring any alerts that come in to be forwarded to the police station, the fire department, all those kind of things. And you gain an experience and a knowledge base that you grow. Now what happened, I guess, ten years ago, a lot of the primarily independent telephone companies in the Southeast and now really all over the country, came to Comporium and said, “Well, you’re in it. Can you help us get in it?” So we said, “That would be a good idea.” So we set up a wholesale company that would sell to small and midsize, mainly small, telephone companies in this traditional security.
And so we gained that expertise and built our monitoring stations up and all the things and the knowledge that goes with it. It was in the spring of 2008 that one of our engineers, maybe a couple of engineers, were out at the Cable Show in LA and that’s when they came across this company called UControl. UControl hit up our man named Jim Johnson; they were developing a technology, a security monitoring and automation platform that would operate on a broadband network because the broadband network would give you such an ability to deliver so much information where a twisted pair wouldn’t. Several of our folks were really interested in that. I know Bryant and John were real interested in that so we made some early investments in UControl. As it turned out, some of the larger cable companies, one or two large—one in particular, Comcast Ventures, they invested in iControl and also ADT invested in iControl. So without getting into too much detail, one technology—iControl used what they call a Z-Wave wireless technology and UControl used the ZigBee and I won’t get too deep in that. But the point was is that they were both sort of competing, possibly for the same market so some of the principals in these companies came together and the two companies merged in December of 2010. That was a great thing because what it did is it put the staff that took all the intellectual property and the patents and all and combined them together and then it enabled what we think is a better platform from the UControl side to be marketed to the broadband companies, the cable TV companies. It allowed the iControl to be monitored to serve all the security companies—one of the largest, of course, is ADT Pulse. But as you’ve mentioned, you’ve got Time Warner Intelligent Home, Comcast Xfinity. Of course, they’re merging. So that is the de facto platform for the broadband industry.
SCHLEY: In your company’s case, did security start as a telephone side product—
BEATY: Yes.
SCHLEY: Is it now a broadband side product?
BEATY: It started as a telephone side project because it uses twisted pair. But it was actually a separate company. I think at one time we had sixteen or seventeen separate companies and Bryant Barnes, our CEO, that was a huge major task that he accomplished over these last seven or eight years bringing these companies together. That was not an easy thing to do. But it has been completed and that has been a huge benefit from the standpoint of what we can do as far as investments.
So what we did is we saw that as a future of where we could grow our business. Then there’s another company called Zubie that’s headquartered in Charleston. That deals with a connected car. They’re developing the technology. Then there’s some other companies. I don’t want to go through the list of them but we are investing in a good many other companies that we feel like have a lot of potential. But they’re all in this neighborhood of what we call the Internet of Things.
SCHLEY: Connected world.
BEATY: Connected world. We really feel strongly about that.
SCHLEY: I wanted to talk to you about two other subjects in a little more detail. The first is video and it’s so interesting to me that today companies like yours started out—well, you didn’t start out but you became a cable TV company in the Sixties and now, as you talk about margins earlier and pressures on video, is the day going to come when Comporium and perhaps in terms of your outlook, the industry at large, no longer depends so much on video as a revenue source? Where’s that going?
BEATY: Not to be too bold, I would say today, our dependence on video is tremendously lessened from what it was five years ago, certainly ten years ago absolutely. Twenty years ago. I think the answer is yes. I believe a lot of companies—I say a lot of companies—there are about 900 independent cable TV operators in the country. There’s a good possibility that 300-400 of them may just get out of the video business and actually just get out of the video business and tell their customers to go to DirectTV or Dish and that gives them more bandwidth to use for high speed Internet and perhaps voice. What I’m trying to get at is there’s probably about a 14-15% margin on the video product.
SCHLEY: Today.
BEATY: Today. That’s all. And everyday that margin is shrinking. For example just this month we see where Fox, Rupert Murdoch, may make a play for Time Warner Media. You think about that—I was mentioning nine companies earlier that own 95% of the market—now you’d be taking about eight owning 95% of the market. There’s an unsettled feeling in the whole industry because you’ve got Comcast buying Time Warner; besides, you’ve got AT&T buying DirectTV—because AT&T with their U-verse, is tremendously capital-intensive. This would give them an ability to put a footprint across the whole United States for video and concentrate on their high speed Internet product. And then this thing with Fox and Time Warner Media to me, I mean a lot of the industry folks think that may be a sort of a kneejerk, maybe too hard, but a reaction to the fact that these other companies get so much bigger. So it’s all about leverage. It’s about leverage. And today the content owners have the leverage. The content has been king for a long time. The one area we do believe that there’s just got to be some changes in and that is the rules and regulations that govern how broadcast stations and cable companies negotiate for carriage. It’s called retransmission. That’s another whole story.
As I said earlier, a lot of us believe that the linear will be around for a long time in HD and what will drive it will be live sports. But the price of a bundle of services is getting today almost out of reach for a lot of Americans. And that’s a tragedy because these big media companies—they’re public companies on Wall Street and every quarter they kind of come out with these earnings and they’ve got to up their—and the key thing about this, overall the MVPD market is flat and slightly down as we’ve seen some cord-cutters. So if they have fewer paying subscribers, what are they going to do with the rate? Then if these bigger distributors get even bigger, where do you think they’re going to look for money? From the smaller cable operators. It’s going to be an interesting time.
SCHLEY: Your conversation about what’s going on in the video business and the marketplace as large—very telling. But as a cable guy, as a guy who’s grown up in cable, Is it dismaying, is it disheartening, is it ironic, what’s happening now, or is it just a progression…
BEATY: Stewart, that is a really good question. Bryant not long ago said, “Bill, you really love video,.” And I said, “That’s right.” Video is changing. Again, let me put it to you this way. Consumers today are watching more hours of video content than ever before. Many of the producers will tell you that people that own the content, they’ll say this is the golden age of television. You get AMC with “Mad Men.” You name all these networks that come out with big hits…
SCHLEY: Sure. “Walking Dead.”
BEATY: So video is not going to go away. How it’s distributed, priced, bundled—I’ll give you an example. We have eight contracts that represent 85 channels. The eight program companies that have 85 channels. That’s where things have really gotten off because the consumer, to pay $100 and they watch eight channels, what we believe is going to happen is that first off, the consumer is going to really ultimately decide how they get their television. You’ve heard this—it’s almost cliché. It’s going to be on-demand, anywhere, any device. How it’s priced, is it bundled, does that mean some a la carte—all those kind of things, and it’s going to be an evolution. I don’t think anybody right now really knows how it will evolve. In fact it may not ever really—I mean, nothing ever really stays the same. If there’s one thing that’s constant, that is change. And so it will probably keep changing.
SCHLEY: So video margins are declining and there’s pressure on that side of the business. And maybe the fundamental relationships may change with your company and programmers and others. But I’m so captivated by what you talked about: the Internet of Things market, from this standpoint. Because we read a lot, hear a lot about that, companies like Cisco are all over the Internet. How does a cable/broadband company participate in this growing sector of the economy, this Internet of Things environment?
BEATY: We spent billions of dollars building the infrastructure. Most of it that really is out there today that has the capacity, the speed, is fiber. And it has been built out to cross this entire country. It’s being upgraded all the time. All of that has to be transported. What we have as I said earlier is going to be extremely valuable. Even the mobility—there’s a lot of wireless out there. But even that has to come down and be in the fiber infrastructure and transported even before it maybe goes out in the area. So the demand and the capacity to transport all of that is going to just increase exponentially. Now at the same time you’re going to have to—I’ve heard that several cable companies even recently, just as we’ve done, who’ve gotten into the data center business because you’re going to have to store it. For example, the iControl platform software, we store that software at Immedion. We can leverage that and sell wholesale in security by iControl platform’s security monitoring automation to the rest of the industry. That’s revenue. Then these big wireless companies, they have to have backhaul to transport that and that takes capacity on this infrastructure. And it’s just on and on and on, but what I was trying to get at is this connectedness with all these devices being connected; all that information has to be moved around. And that’s where these—we call them cable operators, but really they’re broadband companies. We’re broadband companies. And that is really where our future is going to be. We think it’s going to be really good.
SCHLEY: It’s funny because there’s this steady exorcism of the word “cable” in all the companies. You guys did it long ago. It’s not Comporium Cable necessarily. It’s just Comporium, right?
BEATY: Comporium Communications.
SCHLEY: You’re a broadband company. More data, more demand is good for you as long as you own the pipe.
BEATY: That’s it. We don’t have any intention of not continuing to upgrade our infrastructure.
SCHLEY: Understood.
BEATY: What I’m trying to get at is the business customers in our region, in Charlotte, we’re growing. Let me touch on this just to give you an example. The city of Rock Hill has been struggling with the redevelopment of our downtown. Five or six years ago, Bryant, John, some others from Comporium met with the mayor and some of the city officials, and started exploring ways we could help redevelop the central part of Rock Hill. As a consequence of that, we have in fact built a 50,000 square foot office building not too far from where our headquarters is. We can look at it. It was an old dilapidated terrible-looking parking lot near where our headquarters—in fact across the street from our headquarters building, we’re turning that into—working with the city—into a beautiful downtown park with a geyser of water scooting up in the air and everything. It’s going to be an attraction. We’re also working on a hotel. Now that’s strictly from a commercial standpoint and also maybe three or four or five years down the road, an arts center down there. That will transform that whole part of downtown in Rock Hill. That’s important but getting back to where this Gigabit, this Zipstream technology comes in, is we’re working with Winthrop University in Rock Hill, York Technical College, the city of Rock Hill and developing what we call a Knowledge Park. We had an old textile mill which at one time employed 5,000 people in Rock Hill, even as late as the mid-Sixties. The building’s been vacant for twenty years. It takes up all this acreage right adjacent to a beautiful college campus, Winthrop University. So that for the most part has been taken out. We’re going to be redeveloping that area but redeveloping with the idea that we want to bring in technology-based companies that would take advantage of Zipstream. And what we’re finding out is working with Clemson University, is that there is a real appetite for these type of companies to come in and they really sort of feed on themselves. It builds. We call it Knowledge Park. It’s been a beautiful thing because it’s just an amazing thing when you bring together the private sector with the public sector and they’re both working together and pulling together. It’s just terrific with what you can get done. Not that we didn’t work with our local cities and counties before but we did. But just in the last four or five years, Bryant Barnes working with our mayor, Doug Echols, working together to bring about Downtown East with our park, our office building, hotel. Then at the other end of Rock Hill, Knowledge Park.
We’ve also helped set up in a building called the Citizens’ Building, what we call the Incubator. Right now there are about ten companies are actually in there and they are just very much startups but two or three of them are getting ready to move out because they’ve grown. So we think that helps the community from an economic development standpoint. We know it does.
SCHLEY: And the Zipstream. The connectivity is very much a part of that development effort.
BEATY: Absolutely a part of that. And it’s only going to grow. I believe the cable industry today is more upbeat than really it was four, five, six years ago. The rates were going up five or six years—now, they’re just completely out of sight. Believe it or not as these major programs begin to see their numbers begin to drop subscriber-wise—we’re seeing it in video. But we’re growing the Internet business and as I said earlier, we think there’s really a future to not just grow it in terms of numbers of subscribers by selling higher speeds and more data—it kind of goes together. We haven’t gotten any usage-based pricing where it’s a meter like electricity, but it could be. One day we may be looking at it from the standpoint, “Well, if you buy a higher speed, you get more capacity.” You know what I’m saying? But that’s still out there.
SCHLEY: On that upbeat note about rising data demand and the ongoing modernization of like I said, a multigenerational family company. Bill, we really appreciate you taking time to talk to us. From Kansas City on behalf of the Cable Center, I’m Stewart Schley.
