Interview Date: May 5,1999
Interviewer: Joel Fleming
Abstract
Joseph Collins describes the start of his cable career with ATC. He comments on his various positions; company mergers; eventual move to Time Warner Cable; and levels of penetration in geographic areas. He chronicles the history and expansion of HBO and its effect on the industry. He explains the corporate structure of Time Warner Cable; remarks on innovation, and the architecture of cable transmission. Collins extensively discusses AT&T’s evolution. He concludes with remarks about Roadrunner and predictions for the future of the industry.
Interview Transcript
JOEL FLEMING: My name’s Joel Fleming and I’m at 75 Rockefeller Plaza. I’m seated in the office of Joe Collins, Joseph J. Collins, Chairman and CEO of Time Warner Cable. The reason for my visit is to interview Joe for The Cable Center soon to be constructed in Denver, Colorado. The date of our conversation is May 5, 1999. Both Joe and I got in the business of cable almost 30 years ago. Cable, for definition, is picking up signals either off-the-air or by microwave or satellite and transferring those pictures through coaxial cable into the homes of the subscribers and over the past 30 years cable television has changed considerably. The purpose of the interview is not only to review those 30 years but also try to take a look at what might be in the future as the world plunges into the new millennium. Joe, I’d like to ask you a few questions about your own background. First of all, where were you born, or where did you grow up?
JOSEPH COLLINS: I was born in Troy, New York and I grew up in upstate New York, in the Albany area, and in Boston.
FLEMING: Where did you go to school?
COLLINS: I went to Brown University and when I got out of Brown, I went in the Navy and I was a naval officer for a little over four years and then I went to Harvard, to the business school, to get an MBA.
FLEMING: What was your undergraduate major?
COLLINS: International relations.
FLEMING: And Harvard was business?
COLLINS: Yes.
FLEMING: And when you were in the Navy where were you assigned? Where did you work out of?
COLLINS: Well, I spent two years as a gunnery officer on a destroyer, mostly in the Pacific and around Vietnam and then I spent two years as an Admiral’s aid, mostly in the East Coast Navy and we spent a year in the Mediterranean, so that was pretty good duty.
FLEMING: So you went to college, then the Navy, then back to Harvard Business School.
COLLINS: Right.
FLEMING: And then after that?
COLLINS: Well, my first real job, getting out of business school, was with the American Television and Communications Corporation, and I started in Orlando, Florida as the marketing director of their new system in Orlando. When I got there we had three hundred customers.
FLEMING: They have more down there now.
COLLINS: Quite a few more, thank goodness.
FLEMING: Track for us the successive jobs you’ve held in your rise to the position of CEO.
COLLINS: Well, I was the marketing director in Orlando and then I became the manager of all of our construction projects in central Florida, so that was the new build in Orlando and the surrounding area. Then I went to Denver and I was a division manager, which meant that I had several of the regions of the company, mostly in the East, that I managed and then I became a Vice-President of Operations, we had two of them.
FLEMING: This was for ATC.
COLLINS: For ATC. Then I had some other operations executive jobs and then, in 1981, I became the President of ATC.
FLEMING: Who did you succeed? I forget.
COLLINS: Monty Rifkin retired and when Monty retired to actually start another new company, Trygve Myhren became the Chairman and I became the President.
FLEMING: And looking back, I’m sure the job you hold now is the best job you’ve ever had, but what was the most fun job you ever had?
COLLINS: I think they’ve all been fun. This has been a wonderful business to be in for all that period of time. It’s been a growing business and as Dick Munro used to say, “We don’t make sparkplugs.” We do interesting things and it’s been a great business to be in.
FLEMING: That’s great to hear. Now, about the company itself, Time Warner Cable is a division of Time Warner, the media conglomerate, in fact, the world’s leading media and entertainment company – that’s correct isn’t it?
COLLINS: That is.
FLEMING: How large is Time Warner Cable, or what are the divisions of Time Warner Cable?
COLLINS: Well, I guess we ought to talk a little bit about how Time Warner Cable sort of came together.
FLEMING: Oh, okay.
COLLINS: I left ATC in 1984 and I came to New York and I became the President of HBO and I was the president of HBO for about four years and then I went back to the cable company in 1988 and Time, Inc., which had then owned ATC, decided to move ATC back to the East Coast from Denver, which had been the headquarters. So when they did that, I became the Chairman of the company and then in 1989, Time and Warner merged into Time Warner and each company had a cable company – there was ATC, which was the Time, Inc. cable company and there was Warner Communications cable company. So we put the two of them together and I became the CEO of that operation and it was called Time Warner Cable and then eventually we dissolved ATC and it became a part of Time Warner Cable and then over the years we have had a series of transactions that have added to that company. So, the Advanced Newhouse Company became a partner. Alan Gerry sold Cablevision Industries and merged it into Time Warner and that became a part of it, so all those together have gotten us to the point where we are today, where we have about 13 million customers around the country.
FLEMING: When Time Warner merged, how many customers were there at that point?
COLLINS: When Time and Warner merged, there were together about 6 million customers.
FLEMING: So you’ve more than doubled in size since ’89?
COLLINS: In the last ten years, yes.
FLEMING: What percentage of the homes that you pass subscribe to cable?
COLLINS: We have about 20 million homes passed, so it’s a little under 65% penetration.
FLEMING: And of those numbers, what percentage of your customers have at least one pay service?
COLLINS: Probably about 30%, but the numbers vary widely depending on where you are in the country. We have systems where we have over 90% of the homes who are customers and we have systems where we have only a third of the people are customers. So depending on the history of the system, where it is, how much off-the-air television there is, it can vary pretty widely.
FLEMING: Do you get more penetration in metropolitan areas?
COLLINS: Well, the very, very highly penetrated systems tend to be the ones that were built back in the ’50s and ’60s where there is an off-the-air television signal missing. We have a system in Franklin, Pennsylvania that was built originally in 1950 and even today, if you go stand on the main street of Franklin, Pennsylvania and you put up an antenna, you will get nothing. There are no television signals that go down into the valley. So, 95% of the people in Franklin buy cable from us.
FLEMING: Those are the some of the pioneer systems, so to speak; Astoria, Oregon; Lansford, Pennsylvania, where they couldn’t get any pictures.
COLLINS: And in many cases, even today, that’s still the case.
FLEMING: How many systems does Time Warner Cable have?
COLLINS: Well, we have hundreds of systems but the business has grown to the point where we’re not organized by systems any more. We’re essentially organized by divisions and by and large a division is the cable systems in a particular market. So we have an Albany, New York division and it’s the systems in the Albany ADI, so it includes Albany and Troy and Green Island, but then it also includes Pittsfield, Mass and a fairly wide geographical area all in the Albany ADI. We call that the Albany division and by and large the systems are all interconnected and it is essentially one big cable system and we have about 46 of those divisions around the country.
FLEMING: In all states?
COLLINS: No, we operate pretty generally, with the exception of Hawaii, Texas and southern California, almost all of our operations are east of the Mississippi River.
FLEMING: What is your largest division?
COLLINS: Our largest division is right here in New York City.
FLEMING: And the smallest?
COLLINS: Our smallest division is Portland, Maine, which is about 70,000 customers.
FLEMING: Are you involved with HBO, as Time Warner Cable controls HBO?
COLLINS: Well, the HBO guys would disagree with that. We’re all part of the same company. They are a division of Time Warner as well.
FLEMING: I see. A separate division.
COLLINS: Yes.
FLEMING: HBO is sort of the grandfather of all pay services and what a revolutionary concept. You get pictures without censorship, without commercials. Whose idea was it?
COLLINS: Back in the early ’70s and in the late ’60s, there were a fair number of people who thought that showing people movies and doing so on a non-commercial basis for a subscription or in some cases on a pay-per-view basis was going to be a business that you could conduct on cable systems and people tried a lot of different things and nothing sort of hit the right cord with the consumer. Then Chuck Dolan, here in New York, started a channel, I think it was called the Green Channel – he was trying to sell service to people here in Manhattan and there was a lot of off-the-air television for free, so he needed something different to sell them so he put together the Green Channel and that later became Home Box Office. It started here in New York and originally was distributed to microwave to systems in the immediate vicinity. I think there was one microwave link that went to Allentown, Pennsylvania, but it was pretty much a microwave distributed signal and then Jerry Levin was the Chairman of the company and he went to the management of Time, Inc. and convinced them that there was a great market opportunity by taking HBO and putting it on the satellite. So, the signal went on the satellite and all of the sudden all over America, cable systems that had been in kind of the position of New York that had nothing to sell really beyond the local television signals, which people could get for free, now had a very attractive new product to sell and it really lit a fire under the cable business and so HBO then expanded itself, it eventually went to 24 hours a day, it’s now six or seven different services and so on, but that initial spark, back in 1975 when they went on the satellite, is what really became the locomotive that pulled the cable train for really the whole last portion of the ’70s into that growth period and it really created a situation where – cable had never taken off in the major cities, almost every major city that didn’t have sort of weird reception problems like Pittsburgh or somewhere like that cable was not doing well economically. After HBO there was an engine to pull the train and cable could be successful anywhere.
FLEMING: So in many ways, HBO immeasurable helped the growth of cable.
COLLINS: Oh, very much so. Now right behind that came Ted Turner, who said, “Gee, if you can use the satellites to distribute HBO, how about my channel here in Atlanta, Georgia?” And so he, again, against the advice of a lot of critics, put his channel up on the satellite and now the cable operators had even more to sell so now they had a basic product to go along with HBO that they could add on to their systems and that was really the beginning of the formula of how cable grew and became successful.
FLEMING: That’s an amazing story that in the short period – less than 20 years – things began to explode.
COLLINS: It’s even more amazing when you think about it. The average American television set today is on 7 hours a day. That’s kind of a frightening number that it’s that big, but 20 years ago, with that usage, 95% of the viewing was to the three networks, so all that time that America spent, they watched ABC, NBC, CBS. Today, in most parts of the country, the three networks don’t even get half of the audience. So for three and a half hours a day, people are watching products and programs and shows that didn’t exist 20 years ago and that’s pretty remarkable. Where we’ve gone from a few million customers, who were basically being helped by the cable industry to watch those three television stations, or those three networks, that now we have this tremendous cornucopia of programs that they can watch and they do watch them.
FLEMING: Yes.
COLLINS: And that’s literally three and a half hours a day Americans are watching programming that was created by the cable industry.
FLEMING: Do you happen to recall what was the first program broadcast over the microwave system by HBO?
COLLINS: It was a movie.
FLEMING: And then shortly thereafter, there was a polka party or something from Pennsylvania?
COLLINS: They did have some polka show that they did for the people in Allentown, which was one of the remote markets for HBO.
FLEMING: That would not necessarily draw today, would it?
COLLINS: It might still draw in Allentown.
FLEMING: Joe, I realize that some of the questions I ask are rather basic and primitive, but in the future, perhaps 20 years from now, some college person trying to write his thesis on cable is going to plug in through the Internet to The Cable Center out in Denver and would find an interview such as this very instructive and very educational. So, back to business, give me a round down on the organization of Time Warner Cable. How is it set up? You talked about the divisions, but beyond that, from top down.
COLLINS: Well, there are two answers to the question. The first answer is that the corporate entity is really very complicated and I think that’s very typical of cable companies, that because they have predictable cash flows and the financial nature of the business, you wind up with a lot of different financial structures underneath the company. So in the case of Time Warner Cable, we have cable systems that are owned by Time Warner Inc., we have cable systems that are owned by a partnership called Time Warner Entertainment, we have systems that are owned by a partnership called TWEAN, which is our partnership with Advanced Newhouse, so the ownerships can be very different, depending on where the systems have come from and how they’re financed. Managerially, they’re operated all within the same structure and the basic unit of operation is the division and our divisions tend to be large and urban in nature. Most of them are over 100,000 customers and they average 250,000 customers each. There is a team that runs the division and the head of the team is the division president and he’s really the guy that we charge with running that business in that community. We think it’s really important that if you’re in the cable business in Syracuse, New York that the person running it literally be the person who’s empowered to make the decisions as to what hours the customer service staff is going to be operational and what neighborhoods get what product and what the pricing is and what channels are the most important to people and whether you ought to have a local news show or not. Those are the kinds of decisions we think that are really importantly made at the level that the business is done. In each division then, you’d have your accounting department, marketing department, engineering department…
COLLINS: Yes, if a neutron bomb hit Stamford, where our corporate offices are, and we all disappeared, the divisions would continue to do the business everyday and continue to provide good customer service, continue to answer the phones; basically they’re doing the business everyday.
FLEMING: And payroll would go down.
(LAUGHTER)
COLLINS: Well, we do the payroll centrally out of Denver so it would get missed too.
FLEMING: In 1998, that was the most profitable year in the company’s history, Time Warner, itself. Why was that?
COLLINS: Well, I think in the case of Time Warner, we really had all of the divisions; their businesses were doing very well. It was a record year for the cable business and we had record profits and record revenues and our business is really very, very good. We continue to grow subscribers and we have several new businesses that are coming along now that are really going to be additive to traditional business of cable, which is selling people more channels and better channels. To that business, we’re now adding the business of selling people high-speed access to the Internet over our lines and we’re just now beginning to sell people digital television through the new generation of digital set top boxes and we’ve just concluded a deal with AT&T that next year, you’re actually – we think – to a large extent going to be getting telephone service over the cable, so that infrastructure that we’ve put in place to deliver more television is capable of delivering even more things and as the world goes to digital the list of things that can be delivered over cable becomes unlimited from a communication standpoint.
FLEMING: I’m going to get into that a little deeper later on, but I should note at this point, not only the company did well, but your stock price doubled in 1998. Not bad! Good for the investor.
COLLINS: Good for the investor. Many, many of our employees are participants in stock plans and so on and are very happy with that result.
FLEMING: Now, in the annual report of Time Warner, the Chairman, Jerry Levin, who you mentioned as one of the presidents of HBO in the past, said, and I quote, “Our commitment will always be to generate sustainable growth and accelerate a return on invested capital.” That’s not a bad idea. He also said, “What sets Time Warner apart isn’t merely size, but its entrepreneurial inventiveness.” Now, I’m sure you agree with that, although I’m not quite sure what it means. Now if inventiveness is your goal, what new inventions will Time Warner Cable introduce in the next decade, for instance?
COLLINS: Well, I guess, we were the folks that put HBO on the satellite, we now have the Turner Company as a part of our organization and Ted is our Vice-Chairman and again, Ted has been one of the most inventive people in the history of the cable business, not only way back in ’76 putting TBS on the satellite, but coming up with CNN and a 24 hour news channel concept, TNT and investing in original cable basic product and what that’s brought about, the Cartoon Channel, the list is pretty long of the kinds of things that have grown out of that shot. In the case of the cable company, we actually won the Emmy a couple of years ago for having our engineering department actually design the hybrid fiber coax architecture that every cable system in America is being rebuilt to. So, I think that what Jerry was referring to there, was that in the right atmosphere, you can have a very big corporation, which we certainly are, that is still innovative and inventive.
FLEMING: You mentioned infrastructure. What does that mean?
COLLINS: Well, for most of the history of the cable business, so from the 1950’s until up to about five years ago, the architecture of cable was like a giant water system. You had the headend where you put all of the signals together and then you build a tree and branch architecture and you put the signals in at the top and everybody got the same product throughout the system and that architecture served us very well. It had a lot of drawbacks. You wound up with a lot of amplifiers and cascade; you built up a lot of noise and it limited how many channels you could carry, it limited how much total traffic you could carry and frankly, it made the two-way operation of the plants difficult. We’d always talked about it over the years but it was hard to make it really work because the reverse of the water system was that you had all the noise buildup across the whole plant and it made the return path very difficult to use. So what has changed is that we’ve introduced fiber into the systems and so what happens is that a separate fiber is taken out into a neighborhood, and the neighborhoods are in our design about 500 homes. So you’re essentially taking and changing the infrastructure of the system, so rather than a tree and branch where as you look down each branch there were 10,000 homes on that cable, now you’re looking down a fiber and the system is broken up into these 500 home neighborhoods with a separate fiber to each one, so as you look down that fiber, you’re only looking at 500 homes.
FLEMING: That’s fiber optics?
COLLINS: Yes, and you can send different things down different fibers. So, HBO would go down all the fibers because you’re hoping everybody would subscribe to that, but a particular program or Internet data or a telephone call could go separately down the fiber so it gives you a vastly greater capacity in the system to send individual traffic around. That truly transforms cable from sort of a broadcast type operation and infrastructure to a true telecommunications infrastructure.
FLEMING: And that’s what you mean by two-way, utilization of the two-way capability?
COLLINS: Right. So, you’re sending traffic both to the home and from the home.
FLEMING: I read something in the Wall Street Journal that said, quote, “Time Warner is searching for its corporate soul,” and that you’ve had meetings to disseminate its, quote, “core values and guiding principles.” What does all of that mean?
COLLINS: Well, Time Warner is not just a collection of really good assets. It’s tens of thousands of people who are in really interesting and in many cases, to the business of America, pretty important businesses: the news business, the information business, and so on. And I think it’s important that the employees share something besides just being interested in the same stock price because a lot of the businesses are very different. The motion picture business is very different from the magazine business and I think there are a lot of values that are shared across the company; values in promoting diversity, values in integrity, integrity in the news operation, integrity in what you do, a value for the customer and for the quality of the product that we deliver. I think those are all the kinds of values that it’s important that you be able to share across all the different businesses that we’re in.
FLEMING: Does that directly effect your operations and your running of the operations and divisions?
COLLINS: Well, I think we have, in many cases, especially in the cable part of the business, we have had a pretty common culture for a substantial period of time and for a fair amount of time a lot of those elements have been a pretty key part of that culture. For instance, the cable industry has had a commitment to diversity that goes back into the ’70s that includes the Kaitz Foundation and a lot of other things that we’ve done as an industry and as a company. Customer service – I think in the late’70s the cable industry said, you know, we’ve now become something that’s really important to everybody out there. We’re not just an extra appliance; we’re almost something that is such an important part of their lives that they’re real upset if it doesn’t work and they want it fixed right away and they want somebody to tell them how fast and how quickly and efficiently and to be nice to them. So, I think the company, and the industry as well, really dedicated itself to trying to clean up its act on customer service, which I think it’s very successfully done and today we pretty generally, I think, provide much better customer service than you get from the telephone company or the electric utilities.
FLEMING: When you and I got in the business some 30 years ago and said you were in cable, the first question they asked was, “When am I going to get it?” Today, when you mention cable they say, “Geez, I’ve had a problem” and they object to this or that, they aren’t satisfied with the service. The cable industry certainly has improved its position; still there is that undertow of dissatisfaction.
COLLINS: But I think if you go back to the last three or four years, the improvement to that has really been remarkable. The industry has had an initiative called the on-time guarantee. As the industry has tried to make it known we really have improved the customer service by effectively saying we’ll guarantee it, the marks we get – in fact, the NCTA does a survey once a year and then they try and keep it pretty much the same sorts of sample sizes and so on so that you get a continuity and for the last several years the general image of the cable industry has been getting steadily better, so I think the industry has worked on it and it’s starting to show.
FLEMING: Good. I think the undertow that I mentioned before, it’s sometimes a matter of as you get bigger you are more visible and can be criticized more. For instance, there were days not too long ago when people got three, then five, then twelve channels and now they can get 100, yet you’ll run into people and you’ll say something about television and they’ll say, “There’s nothing on,” or “There wasn’t anything on last night.” I mean, certainly there was something on.
COLLINS: Well, I think that’s in some respects a tribute to how high the expectation level has gotten, given the things that we now deliver.
FLEMING: You alluded to the networks, or what I consider their decline; Dan Rather said recently that he wouldn’t be the least bit surprised to see at least one network bail out of the news business all together, so it looks like the networks themselves, the four networks, are going to change somehow in the future. Do you think they have to?
COLLINS: Sure. If you look at Fox, Fox doesn’t really even have a traditional… they never did a traditional network news operation like ABC or NBC. In fact, when they got in the news business, they did it by putting out a cable new channel; Fox News is a cable channel, it’s not a part of their regular network. ABC has already announced that – I think it was ABC –they’re thinking about changing the ground rules on compensation.
FLEMING: To their affiliates?
COLLINS: Yes, a lot of the traditional things that networks have done they have to re-evaluate in light of the fact that they don’t deliver 95% of the American households anymore.
FLEMING: Recently I saw a prediction by the Yankee Group, a research group, that within two years viewership of basic cable will exceed the combined audience of all four networks. Do you think that’s what’s going to happen?
COLLINS: Inevitably.
FLEMING: You mentioned before something about worldwide… is Time Warner Cable active elsewhere in the world?
COLLINS: We have some operations overseas but they’re not material. We’ve built cable in Hungary; we’ve built cable in France, but not big major products.
FLEMING: Who do you consider as your competitor in cable?
COLLINS: Well, I think we have lots of competitors. For openers, broadcast television is obviously a competitor and then if you add to that sort of the broadcast satellites. Those are competitors that if you don’t upgrade your system and you don’t pay attention and you don’t give good customer service you can really begin to lose a lot of subscribers.
FLEMING: So in other words, the dish customer can rob cable from its customer base.
COLLINS: Sure. There are lots of wireless over the air competitors. There are several here in New York City that are especially active in the multi-family dwelling unit market. We compete with whether you buy pay-per-view from us or whether you go buy a DVD or rather you go rent a tape. When you consider the American television set is on 7 hours a day, there’s lots and lots of competition for what lights up that set.
FLEMING: Have you noticed a decline in subscribers since the initiation of DBS service?
COLLINS: I think that where there are cable systems that are unimproved, where the system continues to be 30 channels or 35 channels, then the satellites are ferocious competitors; they’ll gobble your business right up. I think that where you rebuild to the state of the art to provide good value you can hang onto almost all of your customers, but again if you don’t do the customer service right, if you upset your customer, they have an alternative; they’ll simply put in a dish.
FLEMING: What’s the status of putting local or national networks on the satellite dish into the home? Where does the FCC and where do the courts stand on that?
COLLINS: Well, there have been some cases recently where under the Home Satellite Viewers Act, several of the networks, and I think CBS was one, complained that the signals that were being carried on the satellite, that were the national feeds of ABC, NBC and CBS, should not be carried in places or delivered to people who can get the signals over the air and in fact the courts enforced that. Now, having said that, there is a bill moving through Congress that would provide that in certain circumstances you can carry network signals on the satellite and deliver them into the markets that they’re appropriate for. So for instance, if you put WABC from New York on the satellite, and you had a customer in New York City, you could deliver him the signal that way. Now, that’s not yet the law but there is a bill that’s moving through Congress to do that.
FLEMING: And there would be some effect on cable if that were allowed.
COLLINS: I think there would clearly be some, but again I think it’s also a signal that we carry on the cable systems, so…
FLEMING: Sometimes some people want something different and we’ll try something new out. Recently, in this revolutionary business that has changed so dramatically over the past number of decades, an increasing publicity and awareness of the amalgamation of cable and telephone companies, more specifically AT&T. AT&T was and is the biggest long distance carrier, TCI the largest cable company. Consequently, AT&T becomes the largest cable operator in the country, in the world, and it all happened in less than one year. Is that good?
COLLINS: Yes, I think it’s good because I think that AT&T was a company that in the early ’80s was shorn of their local operations and when they did the break up of the Bell System, they created the regional Bell operating companies and then they took the long distance business and the research and development and the manufacturing arm away and made it a separate company. So, in effect, you had a long distance company that had no local infrastructure. They had not only no physical wires locally into homes and businesses, but they had not trucks, tools, test equipment, they had no local infrastructure. So that meant the only way to get telephone service in and out of the home was over the wires of the local Bell operating companies, so even though AT&T competed on a national basis with MCI and Sprint and the other carriers, there was no competition at the local level. Now, cable has had the technical ability on rebuilt plants to deliver telephone traffic for several years. We’ve been selling retail telephone service in Rochester, New York for the last three years, but you needed to be able to have the whole offering. You needed to be able to put together long distance wireless service, the local service, into a whole telecommunications package and that’s really what AT&T’s done, is embrace using cable as the local piece that they were shorn of in the ’80s and then to bring all of their marketing expertise, their wonderful brand name, into the program with the objective of basically competing in the local telephone business and that’s a 90 billion dollar a year business, it’s a huge business, and really it’s going to enable the cable companies to begin to participate in that competition. So I think it’s going to be a great development for the cable industry.
FLEMING: And you have associations with AT&T in some markets and are you currently providing telephone service in those markets through cable?
COLLINS: We’re still finalizing the transaction with AT&T but by next year we expect to be…
FLEMING: And the merger of TCI and AT&T certainly makes them the 800-pound gorilla. Does this give them an advantage in buying programming and equipment?
COLLINS: In fact today, actually, AT&T manages less cable subscribers than Time Warner does.
FLEMING: Interesting fact. So you may be second and like Avis trying harder you still could have an equal advantage…
COLLINS: Well, as of today we’re first!
FLEMING: That’s right, that’s right. Recently I read where one industry analyst said, “There’s more to come in the way of mergers.” Yet, Leo Hindery, the CEO of this merged company, said, “The wave of consolidation is over.” Do you have any comment on that?
COLLINS: Well, of course today there was even more deal news in the paper with the AT&T/Media One/Comcast adventure, so there’s still a lot of deal activity going on out there. I think what is still happening and it’s very positive for the industry is that through deals and most importantly of late, trades, we have a lot of rationalization going on of inventory, so that, as an example, we operated and have about 70% of the homes in the Albany, New York area. TCI has the system in Schenectady, New York, which is completely surrounded by the Albany system, so by the same token, we have the city of Portland, Oregon and TCI has all the county areas around Portland and there are all kinds of examples like this around the country and what we’re all in the process of doing now is trading pieces so that we’re rationalizing the inventory so that as we introduce telephone service in Albany and as we introduce digital services in Albany, the Schenectady system will be a part of all that and so it’s going to maximize how these new products are available across the country because we’re rationalizing the managements of these different markets.
FLEMING: Let me touch briefly on programming – I shouldn’t say briefly, because that’s the basis of everything in cable TV, but HBO has had tremendous success in original programming. I mean, with the sports, with shows like Larry Sanders, with series like Oz, The Sopranos, tremendous success, yet recently I read in the New York Times, an article that said, “Cable TV ups the ante on the outrageous.” It said, “How far over the top can you go in programming?” Is there a top?
COLLINS: I think if you look across all the different original programming efforts that are done across the industry, HBO I think has won the most Emmys and ACE awards in terms of their original programming efforts, and a program like The Sopranos, I don’t think you can call that over the top, it’s simply a program that everybody wanted to watch. It was a really neat and inventive program. A lot of the programming also is topic oriented. It sort of delves into the kinds of topics that broadcast television stays way away from and in many respects that’s a disservice. These are things that I think it’s good that they’re sort of out in the open and talked about and cable, I think, deserves a lot of credit for a lot of that. In terms of things like violence on television, in light of what’s happened in Littleton and so on, I think if you look at cable across the board with initiatives like the Cable Initiative on Violence and the educational programs that we do through Cable in the Classroom and so on, selective viewing programs and so forth, that the industry has done an enormous amount to try to give parents control of their television sets and an ability to know what’s on. On HBO you know, ever since the ’70s, has told the audience what the programming is going to be and not just whether it’s “R” or not, but if it has objectionable language or whatever so there is a guide there for you to control what you or the other people in your family watch.
FLEMING: Despite that, do you think there’s a drive for censorship, restrictions from either the courts or the public?
COLLINS: I don’t think there’s anything coming from the public. I think that there are certain politicians that are always opportunists in terms of wanting to blame the programming or whatever, but I think cable has been a good citizen relative to content.
FLEMING: Let me quickly go through a few technical questions. The Roadrunner Project – that’s up and running in how many systems or divisions?
COLLINS: We have it up and running in probably a little over 15 divisions. We currently have about 170,000 customers. Right now we’re adding them at almost 5,000 a week, so it’s selling very well. The consumers love it.
FLEMING: It’s best described as high-speed data transmission?
COLLINS: Where we’ve gone out and tried to really beef up the content that works really well at high-speeds, so that local websites, your local school sites and so on, have lots of graphic content and so forth and the consumers love it.
FLEMING: What do you see as the eventual possibilities with that line of cable, that fiber optic? Is there a limit to what might go on that cable?
COLLINS: I don’t think so. I think that as the world becomes digital, and it will be pretty quickly, any communications that you can think of, whether it’s sound or what is today print, video, all of that can go both ways on the cable system and the number of appliances that are going to be equipped with that ability to communicate is just going to keep multiplying and there’s no reason that all those appliances can’t be connected to the cable and therefore interconnected with each other, interconnected with computers that can do pretty remarkable things.
FLEMING: Turn on your dishwashing machine, read you meter for electricity.
COLLINS: Have it make your toaster work as you get out of bed in the morning and adjust how brown the toast is.
FLEMING: That is unlimited! Often some cable companies have had problems with municipalities. There have been lawsuits, there have been overbuilds by the municipalities themselves. You don’t seem, Time Warner, doesn’t seem to have that kind of extent of problems with the municipalities you serve. What’s the reason?
COLLINS: Every place we do business, we do business under a franchise agreement with whatever the appropriate local authority is, so we have thousands and thousands of these agreements and administering them is a very important part of the job of what our management does everyday: dealing with the municipal governments and in some cases, the state governments, renewing the franchises and so on. That’s a very big and very important part of the job. Our people are pretty good at it and have been over the years. We’ve never lost a municipal franchise in all the years that we’ve had one, but it requires a lot of work and it requires a lot of experience and understanding. I think it’s mostly a tribute to the people that run our systems out there.
FLEMING: Two personal questions: when you were out there on a destroyer or whatever on the South Pacific, did you ever think you’d be sitting in the chair of the Chairman and CEO of a big company like this?
COLLINS: No.
(LAUGHTER)
FLEMING: To what do you attribute your success?
COLLINS: I think that it’s been a wonderful business and I had the great fortune to get in it at the time it was really just starting to take off. In fact, I had a professor at business school who was a very popular professor, a lot of people liked to take his courses, and people often asked him, “Gee, what business would you recommend that we go into?” And he would always say, “Don’t go into a business which has a flat primary demand or one that’s going to go backwards, because then any opportunities are going to have to be at the expense of somebody else. But if you go into a business that’s expanding then there are more and more opportunities for everybody.” So I was lucky to be in one of those.
FLEMING: Would you advise any of your children to go into the cable TV business?
COLLINS: Sure. I think there’s lots of expansion left. The industry has become so multi-dimensional. It isn’t just the cable operations anymore. We have all the programming services that encompass every kind of interest you could imagine. The whole Internet aspect of the business is opening up and that’s all very new and very exciting and very different. So, I think for people that are getting ready to join the workforce today, there’s still a huge number of opportunities in the cable business.
FLEMING: What do you think is the most difficult problem now confronting the cable business?
COLLINS: I think the biggest challenge for the cable industry for the last several years, and I think it’s going to continue to be, is managing the expectations of the American public and dealing with the regulators and the legislators. Cable has become a very big business and a business that’s very important to a lot of segments of the economy and it’s become a very powerful business from the standpoint of its position politically, that we have the CNNs and the Fox News and the CNBCs. There’s a lot of opinion making and so on that’s now done by virtue of cable. So handling the expectations of all that and the challenge of dealing with all of the regulations, the regulators and the public officials that we have to deal with is challenging.
FLEMING: Joe, thank you very much. You’ve been a delightful guest and I think this will be a real contribution to the video/audio library at The Cable Center in Denver. We’ve been talking to Joe Collins, the current Chairman and CEO of Time Warner Cable, an industry leader and a man who should be very proud of all his accomplishments. Thanks, Joe.
COLLINS: Thank you.
