Interview Date: May 25, 1999
Interviewer: Jim Keller
Abstract
Henry Goldstein describes his start in cable with TransVideo, his move from law to management, and his involvement in building a system in San Diego. He recalls opposition from a local broadcaster, the fear that cable TV would take over, and a subsequent FCC injunction and litigation against his company, Mission Cable, in a famous case, the United States vs. Southwestern Cable. He talks about how the case was argued at the Supreme Court, the decision to allow the injunction to stand, and the eventual sale of TransVideo to Cox Communications. He goes on to discuss local origination programming, expanding during the time of the non-duplication rules, and names a strategy to determine where to build. Goldstein comments on franchises awarded, such as Bakersfield, where a parabolic antenna was designed to capture signals. He discusses his involvement in the California Cable Television Association, Walter Kaitz’ work on behalf of CCTA, and the threat of Public Utilities Commission (PUC) jurisdiction. He reviews the Carter Mountain case, FCC’s regulations regarding microwave licensing, and the creation of Century Cable with Lee Druckman. He explains in detail the process of getting a franchise in the days before consultants represented by the Cable Television Information Center (CTIC). He compares the cost of wiring underground as opposed to overhead. He reflects on going to work for Daniels and Associates in the paging business, explains why cable television had a difficult time getting a foothold in Asia, and concludes with remarks about convergence in telecommunications.
Interview Transcript
JIM KELLER: The oral history today is of Henry R. “Hank” Goldstein; attorney, cable television pioneer and one of the very early major city market cable television operators. The interview today is a part of the oral history and video history project of The Hauser Foundation for The National Cable Television Center and Museum. We are at the studios of TCI/AT&T in Denver, Colorado. The interviewer is Jim Keller. Hank, give us a little bit of your background prior to getting into the cable television business.
HENRY GOLDSTEIN: Well, my entry into cable television came through my practice in law. I was with the Fletcher-Heald law firm in Washington. Actually, it started when I was in law school and I wanted a job as a clerk. A friend of mine at that time was clerking for Dow-Lohnes and he said that there was a firm on the 10th floor in the old Munsey building that was looking for a clerk and I said, “What do they do?” He said, “Well, they do FCC law.” I said, “What’s the FCC?” It didn’t matter, I went and I interviewed and I got the job. I was there as a clerk and practicing law for a total of five years. When I decided to leave, I just felt that I’d rather be on the management side of the business than the legal side and I had an opportunity to join TransVideo in San Diego.
KELLER: TransVideo was what?
GOLDSTEIN: TransVideo was a holding company for several cable TV companies, one in Chanute, Kansas and one, at that time, in El Cajon, California, which is east of San Diego. They wanted to expand where they were and also get franchises in other parts of the country. So I called Jack Cole, who I’m sure you know, because there weren’t very many people in Washington in those days who knew what cable TV was about.
KELLER: What year was this?
GOLDSTEIN: That was 1964. It may have been the end of ’63, but early ’64 anyhow. Jack was at that time practicing law with Strat Smith and Strat Smith was the founder of NCTA, if I recall properly.
KELLER: One of the founders and he was the first general counsel of the NCTA.
GOLDSTEIN: Right. So I had lunch with Jack. Jack had been in law school a couple of years ahead of me and I described this opportunity to get in the cable television business and also live in San Diego. He thought the cable television business came first, San Diego second. He said, “Go back and resign and go on out there,” which I did. I arrived in San Diego after five years in Washington with a very narrow tie and a rolled up umbrella and all these guys are, as everybody is today, in shirtsleeves. The first job I had was to go out and walk with one of those mile measurers to measure the miles of cable we were putting down.
KELLER: So you started right from the bottom?
GOLDSTEIN: Started right from the bottom. Lee Druckman was the president and that’s the way Lee did things and I said to myself, “What have I done?” But in a couple of months, I realized that Jack was right. I made the right decision and after I’d spent about six months doing that sort of thing, then I got into…
KELLER: Did you climb poles, too?
GOLDSTEIN: No, I didn’t climb any, no.
KELLER: String cable?
GOLDSTEIN: Strung cable, and just did a lot of different things.
KELLER: This is an attorney talking.
GOLDSTEIN: Well, in those days, we only had seven-channel amplifiers. They were tube amplifiers and we were all excited when they went to twelve-channel. So, I got involved in some management and also in getting some new franchises. We went after the franchise for Bakersfield, California and Porterville, California.
KELLER: Let’s make that a separate portion of this oral history. Let’s stay in San Diego, the early days of San Diego.
GOLDSTEIN: Okay, right. So, in San Diego – of course, we started in El Cajon, which in Spanish means “the box” and if you’ve ever been there, it literally is a box. They got little or no television, and then the rest of San Diego, because of the canyons, most people off the air only got two channels. Some people, fortunately, if they had a high enough antenna or were properly placed, they got all three networks. We found a mountaintop where we could pick up nine channels from Los Angeles. So we put the nine channels from Los Angeles and the three local channels and we were delivering twelve channels of cable TV for $5.95 and it was $14.95 for installation. But we always had some sort of marketing gimmick that you could get the installation free. At Thanksgiving you could even get a free turkey!
KELLER: You couldn’t even trade in your antenna for that.
GOLDSTEIN: Oh yeah, we gave turkeys and we gave cases of Coca-Cola, we did anything we could to get subscribers and really the system got started. Lee had been a Jerrold salesman and that was his area and the guy in El Cajon couldn’t pay his bills. That guy was building the network by charging high installation charges per block and then he’d get some money together and build another block. So Lee went to Milt Shapp and said, “I’ll pay…
KELLER: Milt Shapp was the president of Jerrold Corporation at that time?
GOLDSTEIN: That’s right.
KELLER: The former governor of Pennsylvania, too.
GOLDSTEIN: Right. And Lee said, “I’ll pay the guy’s bills and let me buy him out and I’ll get into this business.” And that’s what Lee did and he came to me and hired me after he was able to put together a fairly good amount of money to expand into San Diego proper. So we came up out of the canyon over the hills and began building in San Diego. One of the local television stations was owned by Augie Meyer, who I guess goes down in cable TV infamy . He was the CBS network operator – he was from Illinois, I think – in San Diego and he challenged our right to build cable television in the San Diego market on the basis, which we heard all the time around the country, that cable television was going to destroy the local channels. There would be no local broadcasting, advertisers would have to go to LA if they wanted to advertise to the local populace and there’d be no local programming. It was a tune that we had heard for a long time in lots of cities. Augie had the ear of the local newspaper and finally after several attempts – he was an attorney as well – after several attempts at the FCC, he got the FCC to agree to issue an injunction against us to prohibit us from building any more plant. At that time, we had close to 30,000 subscribers, which was the largest cable television system in the United States. That was in 1965 or so, ’66 maybe, that Augie got the injunction against us.
KELLER: The case became known as The United States vs. Southwestern Cable, is that correct?
GOLDSTEIN: Yes, that’s right. It was The United States vs. Southwestern Cable. Southwestern Cable also had a franchise for the San Diego area north of what was the San Diego River, which was a dry bed. It’s basically Pacific Beach, which is the northern part, and then west of Pacific Beach. Our company was Mission Cable TV and we had south of the river, which included all of metropolitan San Diego and Chula Vista and National City and some other cities around – La Mesa, other cities. So when the FCC filed the injunction, we said that we were bringing these channels from Los Angeles without any FCC licenses. No microwave, no other licenses were required for what we were doing and we went to the U.S. Circuit Court of Appeals, the ninth circuit, in Los Angeles and made the case that the FCC had no jurisdiction because there were no FCC licenses involved. We had franchises from the various cities and that’s all we needed and the ninth Circuit Court of Appeals agreed with us. But it didn’t take the FCC long after that to go to the United States Supreme Court and of course, somehow Southwestern’s name got in first and Mission Cable was in second because they were all so enjoined – Southwestern was all so enjoined. Our case was argued at the Supreme Court. At the same time, the very first copyright case which was brought against the cable TV industry was brought…
KELLER: That would have been the Fortnightly case.
GOLDSTEIN: The Fortnightly case, right. The decisions were handed down about the same time as well. I always think that it would make a good law journal article for some law student who’s interested in communications because it was clear that the court didn’t feel comfortable ruling against the cable TV industry in the copyright case and basically it was clear to them that cable television was going to have an impact on the nation eventually and that since the FCC is really an arm of the Congress, they asked Congress to give the FCC some direction in regulating this industry. So they allowed the injunction to stand. Now we were allowed to add subscribers wherever we had plant but we weren’t allowed to add additional plant. At that time, Cox Broadcasting…
KELLER: Excuse me, just a minute, but was there anything set at that point about providing only local signals as opposed to providing the signals coming in from LA in the areas that you currently had set up?
GOLDSTEIN: No, we could provide all twelve channels.
KELLER: But you weren’t allowed to build any farther than that?
GOLDSTEIN: We couldn’t build any new – not one more new street.
KELLER: Even if you were only going to provide the local channels?
GOLDSTEIN: I don’t think we ever got to that issue. There were some areas that we probably could have gotten subscribers because they didn’t get all three networks, but we just didn’t pursue that. So anyhow, Cox Broadcasting had, prior to the whole case, had bought, my recollection is, 24-25% of TransVideo.
KELLER: That was the company you were with?
GOLDSTEIN: Yes, TransVideo was the holding company that owned 100% of Mission Cable TV and Mission Cable was the company that served the San Diego area. The major investors, or the other investors, were really Wall Street bankers – the old Drexel-Burnham company – and they felt, their investment turned out alright, that it was going to be a long time before these issues were resolved with the FCC and so they agreed to sell the remaining shares to Cox. Some of us, Lee and some of us, had a small amount of interest in the company but the major shareholders were Cox and the Burnham people. So that’s when it was sold to Cox and then Cox in turn created Cox Cable. It was put under Cox Cable and I stayed on until 1972. That happened in 1967, I stayed on until 1972 as Cox’s western regional manager because as I said, we had other properties.
KELLER: Without being able to build any further than you were at the time of Fortnightly.
GOLDSTEIN: Correct.
KELLER: And so the FCC, as I recall, and correct me if I’m wrong, the Southwestern case was the case that finally developed into allowing the FCC to exert certain jurisdiction over cable television. Is that correct?
GOLDSTEIN: That’s correct. That’s right, and that’s where the non-duplication rules evolved and other…
KELLER: The importation non-duplication rules and how they affected you in San Diego?
GOLDSTEIN: Well actually, they didn’t really affect us in terms of getting on new subscribers. The equipment wasn’t very sophisticated so equipment had to be developed to black out the networks in LA when the networks in San Diego were carrying the same programming. And what we did was actually put the San Diego channels eventually on both cable channels.
KELLER: Non-duplication protection.
GOLDSTEIN: Yes, non-duplication protection.
KELLER: For network programming only, is that correct?
GOLDSTEIN: For network programming only, right. And we, in San Diego, actually had I believe, well I think the first actual origination channel as well. We set up a studio that didn’t look anything like this.
KELLER: How did it look?
GOLDSTEIN: It was much smaller, there was a small hand-held video camera. We hired a guy out of San Diego State who just wanted to do programming. One of our most famous interviews that we did – we didn’t have much audience, we were sure of that – but we got Lionel Van Deerlin, who was a Congressman and actually, at that time, Chairman of the House Interstate & Foreign Commerce Committee, which regulated the FCC. Lionel was a pretty good friend of ours and so I did an interview with him and we did a few other things.
KELLER: What did you talk about?
GOLDSTEIN: I don’t remember, Jim. That was a long time ago. I didn’t want to put him on the spot when it came to cable television, so we probably talked about local issues. We also did a couple of football games, remote.
KELLER: High school football?
GOLDSTEIN: High school football games. We had these big dreams we were going to sell advertising around it and it was going to be the new cable television. We figured if Augie Meyer said we were going to compete with him, we might as well compete. But, when you only had 30,000 customers and twelve channels, in those days of pretty good television, it was hard to compete with that.
KELLER: As I recall, Augie Meyer was also a very close friend of Van Deerlin’s, wasn’t he?
GOLDSTEIN: I’m sure he was. He sure was a big contributor, a bigger contributor than we were but Lionel was always very good to us and always gave us his ear.
KELLER: He always was good to the industry.
GOLDSTEIN: Yes, he was. He was very sympathetic to the industry. I think he understood that it was going to grow and have the impact on society that it’s had. So he was a good guy.
KELLER: When did you finally start to build farther on out from the original point in San Diego?
GOLDSTEIN: You know, I don’t remember exactly the year, but it probably started when the non-duplication rules were put into effect.
KELLER: After the FCC took over jurisdiction?
GOLDSTEIN: Yes. Then with the non-duplication rules, the FCC was able to say to the local television stations, okay, we’ve given you protection and these guys can go ahead. I just don’t remember what year that was. It wasn’t too long. There was a year or two maybe, that we…
KELLER: It was prior to the satellite?
GOLDSTEIN: Oh, yes.
KELLER: So it had to be in the early ’70’s, then.
GOLDSTEIN: Yes, probably even before, maybe ’69, ’70, sometime in there. We were building, certainly before I left the company in 1972.
KELLER: Were you able to discern a difference between the new area you were building and the numbers of subscribers in the original area?
GOLDSTEIN: No. We used to pretty much get 40% saturation with a little good marketing and it didn’t make much difference. As I looked around for other cities to obtain franchises in, the first thing you always looked for was how tall were the antennas on everybody’s roof. San Diego had some of those 300-foot poles, so those are the streets you built first and they were pretty good customers. It was interesting during times of recession, which we were in the business long enough to see, people would actually disconnect their phone before they’d disconnect the cable.
KELLER: Oh, yes, I remember that very well.
GOLDSTEIN: You remember that?
KELLER: Yes. So then, you continued to develop in San Diego and eventually San Diego was built and Cox eventually took most of the area?
GOLDSTEIN: Yes. We don’t even want to hear what the numbers are today.
KELLER: They’re staggering.
GOLDSTEIN: I’m sure they are.
KELLER: They’re one of the largest systems in the world.
GOLDSTEIN: Well, Lee has nerve enough to live there. I don’t think I could do that.
KELLER: Lee is still living in San Diego?
GOLDSTEIN: Yes, he lives in San Diego.
KELLER: Well, you were also franchising, or trying to obtain franchises elsewhere?
GOLDSTEIN: Yes. One of the larger ones we got was in Bakersfield, which was an interesting story. I know that you were a franchise getter as well. We were an applicant, well there were three applicants basically. The people that had Southwestern Cable, they were a third competitor in Bakersfield and then the other competition was a consortium of the three local television stations and 27 local business people. The night that it came time to decide who was going to get the franchise, all those people sat right in front of the city council and when the vote came, we won. A guy that we all know in the cable industry, Burt Harris, owned one of those television stations and it took a couple of weeks before Burt could call Lee and say, “You know, I couldn’t even speak to you guys that night. All I could do was think about if I was going to throw up, because I couldn’t believe that you guys won that franchise in Bakersfield.” But Lee and I worked very hard on that. It’s a rough and tumble town. There was a time toward the end when the only place we’d stay was the airport motel; we wouldn’t even go into town.
KELLER: Get out of town, huh?
GOLDSTEIN: Right. We were asked by a few people not to come back, but we persisted and we won. Then we went on and got Porterville, which is about 20 miles away.
KELLER: How large a system did that become?
GOLDSTEIN: My recollection was, well when we sold it, it had 10 or 12 thousand customers.
KELLER: A reasonably good sized system at that time.
GOLDSTEIN: Yes, it still was a good size because Bakersfield, again, those people had a sense of Los Angeles, so we again were able to bring nine channels from Los Angeles and we did an interesting thing there as well. Because you have to go over that pass and we didn’t have microwave, our chief engineer, a guy named Jack Long, who’s also an old pioneer in this business from the technical side, built a parabolic antenna out on a farm. If you can visualize this, it looked like a big radar screen and he was absolutely sure that he could capture those signals and sure enough, he did. Because, he said, the mountain range created a scatter effect and so when the signals came over the mountain range, he was able to get them on this parabolic antenna and that’s how we delivered our nine LA channels in Bakersfield.
KELLER: So you were delivering the nine plus the three.
GOLDSTEIN: The three locals, right.
KELLER: Were you doing any origination then?
GOLDSTEIN: No, we didn’t do any origination.
KELLER: Earlier, when we were having lunch, you mentioned the story about hiring the law firm that you clerked in early on.
GOLDSTEIN: Fletcher-Heald represented us at the Supreme Court and I always jokingly said that I paid them more in legal fees than they paid me in salary in five years, but it was not a joke. It was actually true. But Bob Heald, who was one of the senior partners, argued the case and did a great job, but unfortunately a lot of it had to do with timing in the industry.
KELLER: You then became a western regional manager for Cox?
GOLDSTEIN: Yes, I was a western regional manager. We bought Lubbock, Texas and so I was responsible for Lubbock and San Diego and Porterville and Bakersfield. Prior to that, with Lee, we also had Chanute, Kansas and Pittsburgh, Kansas, which we sold to Monte Rifkin. We decided to concentrate more on the California area. I went to all those towns – Iola and Hannibal, Missouri and it was a great education but we just never were successful other than getting the Pittsburgh franchise so we decided to concentrate on the West.
KELLER: You were also partly instrumental in the formation of the California Cable Television Association, is that correct?
GOLDSTEIN: Yes, I was with Walter Kaitz. Of course, again, in a lot of states they wanted to put cable television under the public utilities commission, so Walter was hired by our group to represent us in Sacramento and Walter said, “Why don’t you form an association?” So, we formed the California Cable TV Association. We always had the meetings in San Diego in November and the first couple years we had about 40-50 people and then it started growing and we moved it to the Del Coronado. In November, everybody wanted to come, so people used to call and come from the West. One of my famous calls, I told you at lunch, annually I’d get from Bill Daniels, “Hank, make sure I get a good room.” Anybody that knows Bill can just hear that voice, and I always promised him a good room and it grew and grew. It really was the basis for the Western Show today.
KELLER: The second largest cable television conference in the country.
GOLDSTEIN: Right. And we had some good times. We had good speakers. One year, I remember, we had Jess Unruh, who was the speaker of the California legislature and then I decided to go after the Sacramento franchise and create a consortium with Jess. We lost to the McClatchy’s, who ran the newspaper. They were too strong, even for Jess.
KELLER: Even for Jess, and that’s powerful.
GOLDSTEIN: Right.
KELLER: At that time, Ronald Reagan was governor of California.
GOLDSTEIN: Ronald Reagan was governor, and we testified before Ronald Reagan and tried to make him understand what cable television was. Why it shouldn’t be under the PUC and maybe if we’d been talking about movies, he could have understood us. He sure didn’t understand what cable television was. But we were able to stay out from under the PUC. We had the usual battles with the phone company. On one hand, we were paying them rent to use their poles and paying them a lot of money to change the height of their lines. I think you had to be a foot above phone in pole clearance and two feet below power, or something like that. But then we’d fight them tooth and nail to keep them out of the industry and of course we know today that that’s changed. We want to get in their industry and they want to get into ours.
KELLER: It’s also ironic that when you went from there, you went into the phone business in Europe.
GOLDSTEIN: Yes.
KELLER: I’m going to get into that. Let’s stay right in this country right now. Any problems that you remember or that were notable in the Bakersfield system?
GOLDSTEIN: Only how we were going to get the signals without microwave, because we actually got that before the Supreme Court case as well and we just didn’t want to have to go to the FCC for anything.
KELLER: Now as I recall, the early stages of the regulation by the FCC were only on systems that received their signals from microwave, is that correct? That was their first regulation, the Carter Mountain Case?
GOLDSTEIN: Exactly. If you had an FCC license, basically what you had was microwave, then they could control you because they could say, you can’t use that license for that unless you do this. So we wanted to stay out from under the FCC and the real issue for us was how to get the signals from LA. Jack Long designed the parabolic antenna. Other than that, it was a bit slower moving market than San Diego because they really did get the three networks, where as I said, in San Diego, if you’ve ever been there, there are a lot of people that just couldn’t get all three networks. As a matter of fact, I think ABC or one of the networks changed to the Tijuana station, changed their affiliation, because they had a better coverage coming from the south into San Diego.
KELLER: We’re about ready to go into the second tape, so we’ll take a little break.
(BREAK)
As we ended that first videotape, we were talking, Hank, about your experiences in Bakersfield. How you’d built the parabolic antenna to bring in the LA signals to Bakersfield. Did you ever go to microwave in the Bakersfield system?
GOLDSTEIN: Not while we owned it. Now that you mention it, I think Cox finally did it after I left. I think they did.
KELLER: Now, when you were operating in San Diego, did you ever bring in the Mexican channels from below the border?
GOLDSTEIN: You know, the equipment only handled twelve channels. The amplifiers were only twelve channel amplifiers, so we didn’t. As long as I was there, they still were only twelve channel amplifiers.
KELLER: But one of the stations was not the Tijuana station?
GOLDSTEIN: No.
KELLER: That was added later. Of course there was a large Spanish population.
GOLDSTEIN: Right, yes. I think the next increment was going to 20-some channels and vaguely I remember that they started to build 20 channel portions of the network toward the end of my time there. So certainly they added the Mexican channel. But there was one very, I think it was XETV, one very popular channel in Mexico, in Tijuana.
KELLER: When did you leave Cox?
GOLDSTEIN: Well, I left in 1972. Lee thought we ought to try to do TransVideo again. It was actually when Dean Birch became chairman of the FCC. Dean was from Tucson; Lee was from Tucson. They had some conversations about allowing cable television to grow and I think unfortunately, Dean wasn’t able to accomplish as much for the cable TV industry as he would have liked. But we decided to do it again, so I moved to Tucson and we started a company called Century Cable. We got the franchise for Saginaw, Michigan and Owosso, Michigan.
KELLER: Quite a ways from Tucson!
GOLDSTEIN: Yes, well, cooler! I spent almost a year working to get the Grand Rapids franchise. That’s another one of those great franchise stories. There were ten applicants.
KELLER: What year was this?
GOLDSTEIN: That was 1972-1973.
KELLER: At the real height of the battle for cable television franchises.
GOLDSTEIN: Right.
KELLER: In mid-size markets, anyway.
GOLDSTEIN: Right. Grand Rapids was a great market. It was a good-sized market and it had very little television off the air. Nine of the applicants put together local groups, we were one of them, and the city council went through a two-stage process and they whittled it down to four. We were one of the four, Cox was one of the four and there were two others – General Electric and I can’t remember the fourth.
KELLER: That’s right, GE was in there, Frank Drendel.
GOLDSTEIN: Right. We decided to make our chances better, we got together with our old friends Cox and told the city we were going to put our two applications together. In the meantime, we had gotten Children’s Workshop, Sesame Street. We had offered them 20% of the deal and we figured nobody could beat us. I mean, how could you beat us with Sesame Street? We’re going to come to Grand Rapids and the Sesame Street people said to the city council, that they would do a lot of origination there, they’d do some creative new stuff. So we were really riding on a high and it came the night for the decision. The council decided to give it to General Electric, who had no local partners. Of course, when you think about it, it was probably the easy way out for the council. But I spent about a year, and you know how it goes…
KELLER: Tell us how you would go about getting a franchise. Especially when you had a local group.
GOLDSTEIN: Well, you just had to, at least we did, we spent a lot of time first of all, establishing our own creative credibility. There’s lobbying the city council and other people that work for the government, like the city attorney. Generally, city attorneys were pretty strong in these decisions – maybe the city planner, a couple of other people and telling them who we were, what our background was. The opposition, of course, said that these guys, meaning us, we were obviously franchise flippers, you know, we’d been in San Diego and sold it. All we’d come in there for was to do the same thing again. We’d then tell them the whole story about the Supreme Court and how it really wasn’t our decision to sell. So you’d build some credibility and then put together a local consortium of what you thought hopefully would be a strong group of people from different walks of life, different political persuasions.
KELLER: A politically strong group.
GOLDSTEIN: Yes, a politically strong group, vis-à-vis the city council.
KELLER: What would you offer them?
GOLDSTEIN: The group?
KELLER: Yes.
GOLDSTEIN: They would get shares in the company.
KELLER: Carried interest?
GOLDSTEIN: Carried interest.
KELLER: Isn’t there a name for that?
GOLDSTEIN: I don’t remember.
KELLER: Rent-a-citizen? Does that sound familiar or did that come later?
GOLDSTEIN: No. That must have come later. So that’s what we did in Grand Rapids, we did it in Saginaw. In Bakersfield we didn’t do it. We went in as TransVideo and we really convinced the city attorney and one councilman it was time to break the hold of the establishment, so to speak. That’s what we kept hammering away at in Bakersfield. Those guys had backbone enough to stand up and do it. In Grand Rapids, there were other good consortiums, there’s no question about it. It’s Gerry Ford’s hometown, his brother who is a dentist was in one group, a Democrat by the way, not a Republican like his brother. We had, I thought, a pretty well-rounded group. We did get in the finals out of the ten. I really do believe the city council took the easy way out.
KELLER: Was this in the days prior to the advent of the cable television consultants?
GOLDSTEIN: Yes. There were no consultants.
KELLER: CTIC, Cable Television Information Center, came on later?
GOLDSTEIN: Yes. The consultants turned out to be the guys like us who started the industry or came in later, actually.
KELLER: It did develop a whole industry of so-called experts of cable television.
GOLDSTEIN: A lot of what we did was winging it. You were selling yourself, you were selling your product, you were trying to convince them that you were the best bunch of guys to come to their city and for the most part we were all strangers. Bud Hostetter beat me out in Holland, Michigan. I told you the night the city council was to decide – there again, I thought I had a really strong group – Bud and his team showed up with their big mobile van from Ohio and showed the city council what they could do in providing remote programming. I turned to Lee and said, “We might as well leave right now.” Some guys were fun to compete with. I hated to lose, but Bud is a good guy and you don’t mind losing to a good guy.
KELLER: Do you remember some of the other people you competed against?
GOLDSTEIN: Well, the guys from Southwestern Cable who got the northern part of San Diego, Bud, and I can’t remember who else. Well, certainly in Grand Rapids, everybody was there. GE and I’m sure the other major players at the time. I’m having a senior moment.
KELLER: How long did you operate those properties?
GOLDSTEIN: We only kept Century for a couple of years. We also built one other network because we really thought that the major market rules would change, so we built a network, a cable TV system in Sun City, outside of Phoenix. Phoenix of course had plenty of local television, but we just felt we were going to be able to bring distant television. Of course that was our major mistake in this industry. Building it was sort of funny because it was all underground. The cost in those days, I don’t know what it is today, but I think it was $1,500 a mile overhead and $7,000 a mile underground. But it was an all retired community and some of our installers found themselves facing rifles when some of these retired people saw them coming to go through their backyard in Sun City, which is all laid out in stone. But we did build it and of course couldn’t get the distant channels. It sat fallow for quite a while until some rules changed and then we sold it a few years later.
KELLER: Did you do any programming in Sun City?
GOLDSTEIN: We tried, but it really wasn’t enough to sell many subscriptions. So in 1974, we sold Saginaw and Owosso to Cox, our good old pals at Cox. Henry Harris, who I’m sure you remember, was running Cox. So then I sort of disappeared out of the cable TV business.
KELLER: Then what?
GOLDSTEIN: Well, then I went to Europe. A friend of mine, who had been with Drexel-Burnham, had been the deal guy who put the money together for TransVideo. He called me and said that he had an idea. Since 800 toll free dialing was doing so well in the United States, why don’t we take it to Europe where they didn’t even have the concept. So I said, sounds like a good idea to me. He also had interest from a man who had 40 years experience with AT&T and had really been the executive who, through AT&T, helped a lot of the European countries rebuild their telephone systems after World War II. In order to do what we wanted to do in Europe, we had to have the permission of all the PTT’s they were called – Post Telephone Telegraph companies – owned by the governments. We would arrive in Stockholm or Helsinki and people would roll out the red carpet for us. We were there to sell something. At that time, all the director generals still remembered him, what he had done when he was at AT&T, so we felt we had a good entrée and we did. But every director general said, “Well, you’ve got to take this switch that you have down tot the switching people and the transmission people.” So we went to all the western European countries to get permission to use our switch. I said I’d try it for a year, I was living in London. Well, two years went by and I started calling Walter Kaitz and said, “I think I’m ready to come back and look around.” At that time, NCTA was looking for a new president. Of course I was a good friend of Van Deerlin’s, who was the Chairman of the Interstate & Foreign Committee, so my name was thrown in the hat. Just about that time we did get approval in three countries that allowed us to put in our switch – France, Spain and Holland – and then the others came pretty quickly. I called Walter and said, “I think this thing is starting to snowball,” and I moved the company to Switzerland. The tax laws in England at that time were horrendous, so we moved to Switzerland near Geneva and started the business.
KELLER: Still with Drexel-Burnham backing?
GOLDSTEIN: Well, it wasn’t Drexel-Burnham. It was all private. My friend had been with Drexel and actually he had left and so this was all private. We all put in some money. It didn’t take a lot to fund it at that point. Finally, Continental Telephone, Charlie Wohlstetter’s group, came in and put some money into it when we really needed to spend some capital to buy the major amounts of equipment. The way it worked, like early cable TV, was pretty rudimentary. We had these small switches, to give you an example, VISA had no authorization center in Europe at that time. So, they put an authorization center in London and we were able to give them a telephone number in most of the major cities in Europe. If, in Milan, you went to buy a pair of shoes, the Milan shoe store owner could dial a Milan number, our switch would send the call to VISA in London and they could give him the authorization code. We paid the PTT for the phone call, the shop owners didn’t. Then we billed VISA for that plus a monthly fee for every line they had. Our major customers were credit card companies, hotel reservation services, a lot of Wall Street companies that either had good clients somewhere, like in the Middle East. I was really surprised. I figured, what does a sheik in Kuwait care about making a toll free call, but the fact is they loved it and a lot of the brokerage firms and big houses couldn’t get licenses to open offices in those countries. So we moved into the Middle East and then the Far East.
KELLER: Were you using an AT&T switch?
GOLDSTEIN: No. This little switch was built by a company in Portland, Oregon. Actually it was a call diverter and it really just diverted the call. You could have it for you home. It was almost too rudimentary to believe. Each country was different. The Germans wanted the switch to be within 500 meters of an exchange. Some countries allowed us into the exchange, which was very unusual. I think probably because of our former AT&T guy. Some countries, for example Sweden, tore the thing apart and I learned later that for the 747 to get approved in Sweden they were the most rigorous. I always thought he Germans would be the most rigorous in reviewing new equipment. Each country had its own hurdles but we finally got it all put together and as a business it was okay, but it wasn’t great because the biggest part of the toll free calling is really within a country, within Germany, within England. Because in Europe, as we learned, people in France don’t buy a Braun mixer, they buy a Mullinex. There wasn’t a lot of cross border trading. Our clientele was limited to the kind of people I mentioned. I did that for eleven years.
KELLER: Did you ever think during that period that you might want to provide cable service also in those areas?
GOLDSTEIN: Well, I looked into cable and actually, Freddy Lieberman owned the cable TV system in Switzerland at that time. I had some discussions with Freddy about going further into Europe and it never really went anywhere. Then when I decided to leave Europe, cable television was really just coming. Freddy was probably the first cable television operator in Europe. He’s an old Jerrold guy; I don’t know if you knew Freddy.
KELLER: Oh yes, Telesystems with Jack Crosby and Ben Conroy and that group.
GOLDSTEIN: Right. And so I went to a conference in Wembley which was about cable TV and John Saeman from the Daniels Group was there and we talked about cable and he said that they were applicants in England and they decided that there was enough to do here in the United States and they weren’t going to do anything in Europe. I thought, well, I wouldn’t mind staying in Europe, but it was time to change. I’m an advocate of change from time to time. John said that he and Bill would love it if I’d stop by in Denver sometime when I came back to the States. So I did that and they had the idea that there was an opportunity in the paging industry. This was in 1983, I guess, that larger companies were coming into the paging industry, a lot of the paging industry had grown up from answering services, Mom and Pop shops – some of them were very large – and those people had reached a point where they’d like to cash out. So I said, “Well, I didn’t want to go chasing licenses anymore, but if we could put a fund of money together for acquisitions, I’d be interested.” In early ’84, John called and said he felt the money could be put together and would I like to do it? In July of ’84, I moved to Denver and started acquiring paging companies around the country.
KELLER: This was your first go around with Daniels?
GOLDSTEIN: That’s right.
KELLER: I failed to mention earlier that you are currently the managing director international of Daniels & Associates. I should have mentioned that earlier. This was your first time at Daniels that we’re now talking about.
GOLDSTEIN: Right. But on the operating side, actually. So we got paging operations in six or seven states and had 75,000-80,000 customers. However, Bill decided that he was going to take his company back to its original roots of being investment bankers/brokers. As you know, they operated as a general partner in some other partnerships, a lot of cable TV systems and they sold them all to United Artists. At that point, the paging part was like the tail wagging the dog, so I turned around and sold the paging companies, some of them back to McCaw, some of them to US West and Arch mainly. I was on the board of Telocator at the time, I think it’s changed its name now to the PCIA Group. Telocator was the paging industry’s trade association. Anyhow, I said to a number of my friends on the board that I’d done cable TV, I’d done paging, I’d done some telephony, I’d like to get into cellular because it looked to me to be something pretty close to cable. What we were in cable was a monopoly. At least cellular was only a duopoly in most markets. So I just put the word out and I got a call for the first time in my life from a headhunter who said he had a client looking for an American with telecommunications experience who had lived abroad. I said, well, I think you’re speaking to him. One thing led to another and I ended up in Hong Kong with a company called First Pacific. They had a 50% interest in a cellular telephone license for Hong Kong. The other 50% was owned by Millicom. They had management control.
KELLER: Millicom had control?
GOLDSTEIN: No, First Pacific. So they were able to hire the president, CEO, which I was. We were actually the first company in the world, I believe, to be the third in the market in cellular telephone and I called that company Pacific Link.
End of Tape 1, Side A
Start of Tape 1, Side B
GOLDSTEIN: (cont) I named all my paging companies Interlink and other links and so I carried that name over there, then First Pacific, the parent company, liked the business so well that I moved over to the corporate side and we created a holding company called Asia Link. I put on my license getting hat again and we got franchises, or licenses, in China, in India, the Philippines, Taiwan and Indonesia. Actually, in Indonesia we made an acquisition. We built and operated cellular networks in all those countries and last year, 1998, I decided to come back to the United States. I had been coming back annually for the CTIA show, which is the cellular telephone industry show and always running into the Daniels guys – Brian Deevy and Brad Busse. They asked me when I came back if I’d be interested in helping them expand their international reach because I had experience in Europe and Asia and so I told them I’d consider it. Last year, we officially moved back in February but then I went back to Hong Kong to clean up some things. In June, I joined Daniels, again, but this time it’s an investment banking company. I had to take the Series 7 exam. I hadn’t studied like that since I took the bar exam. So I’m in the investment banking business on the other side of the table. I was always on the operating side up until now. Fred Vierra is doing the same thing with Daniels, but he’s concentrating on Latin America. So that’s what I’m doing. It’s great to be back in the United States, I’ll tell you that.
KELLER: While you were working, getting licenses in places like India and the Philippines, was cable developing in those countries?
GOLDSTEIN: Well, yes, there’s a lot of cable in Asia that’s sort of pirate cable and it competes with satellite. Satellite has done very well. Satellite was late to come. There was cable before satellite. In the Philippines, there was a lot of small cable operators, there are no big cable operators in Asia. There are a lot of small ones around in virtually every country and then satellite, AsiaSat and StarTV have done very well carrying mostly movies. For instance, in India, which is a movie crazy country, StarTV has a lot of viewers and so they sell a lot of advertising around there. You know there’s a cable system now in Hong Kong. Cable is having a tough time in Asia, I think for several reasons. One is the Asians are not big TV viewers like we are in the United States. Secondly, the general populace speaks the local language, so in order to have good programming that they’re going to want to watch, you either have to dub it or subtitle it. In Hong Kong, all the movies you go to are subtitled, even the theater movies. But even with that, the cable TV network has not done well. Hong Kong people are interested in CNN maybe, ESPN probably not. Those are available. CNCB is available on the satellite. The ex-patriate community in Hong Kong is only about 150,000 people at most out of 6 ½ million. The ex-patriate community probably subscribes pretty heavily to cable television but where I lived I know the habits. I mean, the Hong Kong people work late, husbands and wives. Everybody goes to their mother’s or mother-in-law’s for dinner. They get home to their own home around 10-10:30. They may watch a little television and then they go to sleep and they don’t go to work until 9:30 in the morning but they’ll work the other end in their offices until 7,8,9 o’clock in the evening and then go out to dinner. So there’s not a lot of television viewing time, except maybe on weekends. It’s pretty much that way in a lot of the countries. I mean, you’ll see television antennas in china and they do watch television but I really think the key to success there is going to be more good local programming. Programming that is in the local language, not necessarily local programming. They love American movies but it’s very expensive to dub them or subtitle them.
KELLER: Now, from the outlook of a telecommunications provider, have you seen a big difference or any difference at all between Hong Kong as a British protectorate and becoming part of China?
GOLDSTEIN: Not really. I was there through the handover. As a matter of fact, if you watch the handover, that rainy night when Prince Charles made his speech, I was sitting there soaking to the skin, but it was a big event. In truth, the real impact on Hong Kong over the last year since the handover has really been the overall Asian economic crisis. It hasn’t really been the Chinese takeover. The Chinese government, prior to the takeover, invested a lot of hard dollars in buying property in downtown Hong Kong. They bought 20% of the local telephone company, they bought 15% of the airline.
KELLER: That’s the Chinese government?
GOLDSTEIN: The Chinese government. So, they had a lot of hard dollars, or have a lot of hard dollars invested in Hong Kong. The noticeable difference, because I was just there three weeks ago, the noticeable differences are that you hear more Mandarin spoken. Hong Kong has always been a Cantonese speaking area. That’s really one of the biggest differences. You don’t see any difference; the police wear the same uniform, they don’t have the Queen’s picture on their buttons anymore, but there’s a faction in Hong Kong who say they should have a vote, an elected legislature. There are about fifteen people elected to the legislature and they really have no power. But the truth is, the British didn’t even allow elections of the first fifteen and the British legislature was entirely appointed, everybody was appointed. The British legislature was entirely appointed, everybody was appointed. The British ruled it much more like a colonial city-state than the Chinese and everybody that I spoke to – no one is complaining that things have gotten worse since China took over. The fact is that the Chinese government, although it’s nominally communist, really has an economic reform that’s been going on since the days of Deng Xao Peng who was a Mao follower, that has made Hong Kong and the coastal regions boom. Shanghai is booming, the city across the border from Hong Kong, Shenzen, is booming, Old Canton, which is called Guangzhou, is booming. So they may be nominally communist but they’re not in reality.
KELLER: This is a good point to change tapes.
Hank, when we left the second tape and took a little break, we’d just talked about the takeover by China of the British protectorate of Hong Kong. You were very active in the various trade associations and so on in Hong Kong. How did you get involved in those things, especially being an ex-patriate?
GOLDSTEIN: Well, Hong Kong is very open to ex-patriates and of course running the second largest cellular telephone network gave me the opportunity. Our company was invited to join the Hong Kong Telecom Association, which was an association of operators of cellular networks, paging operators, and even installers and vendors of fixed line switchboards and that sort of thing. So I was active virtually every year I was there in that organization which was very effective because while I was there, the government regulation of the telecom industry changed quite a bit. They, they being the British, brought in a guy from Australia and created, they called it OFTA, the office of something telecommunications, I can’t remember what the “F” was for. He had been in a similar capacity like the FCC in Australia and he was a cone-man FCC. He made a lot of changes, some of them good, some of them not so good. There were four cellular operators by the time he came and he issued six more licenses for a city of 6 ½ million people. Not so good. But the association, as most associations do, had some valid points and he listened and he spoke and he came to the luncheons, so it was an opportunity to get to know him quite well. As an interesting anecdote, I did get to know him quite well and when the government was changing, Governor Patton, Chris Patton, invited certain level executives to have lunch with him before they left, before the handover. Alex Arena was the name of the guy who was the one-man FCC. He was invited and Alex invited my wife and me along with two other couples to be his guests at Chris Patton’s lunch table before the handover. That was pretty exciting. Getting back to the association, it was very effective. This brings up something else which is not common at all in the United States. They have no anti-trust laws there, so when I first got out there, one of my competitors called me on the phone and asked if we could have lunch and I said, “Well I’m not sure that’s a good idea.” He’s a Canadian and he said, “This is not the United States, you can have lunch with me.” So we had lunch and we never discussed really how much we were going to charge for service fees, but we did discuss the price of phones. I had just come from the United States and what he was telling me was don’t do what they do in the United States. You don’t have to give away the phones here, people will buy them and he was right. Then, before Alex Arena arrived, with the government’s endorsement, the four cellular operators used to meet monthly. Now, it was understood that we wouldn’t discuss pricing but we discussed such things as the government housing authority making it difficult for us to get antennas on buildings and we kept a log or minutes, so it was pretty interesting to me. I got over it fairly quickly, but to sit down with your competitors once a month and sort of talk things out. That was another thing. It wasn’t truly an association, but… The trading association used to put on an annual telecommunications show, a small show, with vendors, so we did that. Then I also got involved with the Hong Kong Chamber of Commerce and they had a committee that was responsible for looking into telecommunications activities in Hong Kong. The last three years I was there, I think it was three years, I was the chairman of that committee.
KELLER: But they were not involved in cable?
GOLDSTEIN: Well, they weren’t involved in cable directly, but there was a cable TV… In the course of my time there, the government awarded a cable television franchise and the winners, two of the partners being two very strong Chinese companies, couldn’t get along and the thing never got done. Then the government awarded it again with a fixed wire telephony license and one of the partners who’d been in the first consortium won it this time. The second time they built the cable television system with a fiber optic telephone network on its back. We’re seeing convergence all over the world and that’s really what is happening there. Of course, that’s WHARF cable. WHARF was always active in the trade associations but the Chamber was more of a policy kind of thing and going to the government policy makers, the committee was maybe ten or twelve people from different aspects. The telephone company had a representative, the cable TV company had a representative, I was the cellular representative, well actually there were two cellular operators represented but we’d looked into all kinds of things, internet access and lots of other things. I was fortunate, since I was chairman at the time of the handover, I got invited to all of the festivities. That’s how I happened to be at the rainy night affair. It was quite interesting and Hon Kong being ruled by the British, to see ex-patriates in these jobs, or positions, not jobs, was not uncommon. There has been, and maybe this is something that’s changed since the Chinese takeover, but there has been more of a, call it a localization, of all of these kinds of things. Even at OFTA, the government FCC body, the headman is now a Hong Kong Chinese. The executive director of the Hong Kong Chamber of Commerce, who for years was a Brit, is now a Hong Kong Chinese. The guy who succeeded me as the chairman of that particular committee is a Hong Kong Chinese.
KELLER: You know, the viewer may wonder why we’re spending so much time on other than cable operations at this point and I think there are two very good reasons. Number one, Hank gives us an insight into the international telecommunications situation and also serves as a link between the cable television and telephone and the convergence of telecommunications as a single entity as we’re currently seeing both in this country an internationally. I think that for those two reasons, to spend the time going through both the international and the telephony aspect of this has been very profitable.
GOLDSTEIN: Well, as we said earlier, we used to fight with the telephone company to keep them out of our business and now they’re fighting us to keep us out of their business.
KELLER: At one time, the telephone companies were in until they were forced out by the Consent Decree and so it’s all coming back and when the break up of AT&T and of the Baby Bells occurred we knew at that time that sooner or later they were all going to be back together again.
GOLDSTEIN: And that’s what we’re seeing worldwide. Everybody’s looking for some broadband opportunity for video, data, internet, all in one box in the house.
KELLER: We’re finally fulfilling what we’ve been bragging about since the very early days, it’s only taken 30 years to be able to do it.
GOLDSTEIN: Right.
KELLER: Hank, I think this is a good point for us to break and end this thing. We’re very appreciative of you spending your time with us.
GOLDSTEIN: Thank you, Jim. For me it’s been fun to reminisce. I’d forgotten a lot of the things we talked about.
KELLER: It really is fun. As always, we’ll end with the commercial that this interview is part of the Oral and Video History Project of The Hauser Foundation for The National Cable Television Center and Museum. The interviewer was Jim Keller and again, we thank Henry R. “Hank” Goldstein.
