In Memoriam
Robert Hughes, the former CEO of Prime Cable and a pioneer in the cable television industry, died Feb. 28, 2017. He was 81 years old. Read More at Multichannel News
Interview Date: January 21, 2000
Interviewer: Jim Keller
Abstract
Robert Hughes discusses his involvement with cable working for a venture capital company. He describes his move with Jack Crosby to form Communications Properties (CPI), financial challenges, mergers and franchising. He talks about the economic and other changes for cable after satellite transmission became possible. He explores the sale of CPI to the Times Mirror and, during his chairmanship of NCTA, the FCC’s decision about pole attachment agreements. Hughes chronicles the lobbying of Congress. He names Burt Harris as his mentor. He describes the creation of Prime Cable and the company’s unique niche buying “broken” systems. He concludes by discussing the Chicago property, consulting activities and the return to venture capital.
Interview Transcript
JIM KELLER: This is the oral history of Robert W. Hughes, founder of Prime Cable Corporation, chairman of Prime II Investments and Managing Director of Prime New Ventures. This oral history is being funded by a grant from The Gustave Hauser Foundation and is part of the oral history program of The Cable Television Center and Museum. We are doing this interview in the offices of Prime in Austin, Texas. The date is January 21, 2000. Your interviewer is Jim Keller. Bob, tell us a little bit about your history prior to the time that you got into cable television.
ROBERT HUGHES: Jim, I’m originally an Okie. I was born in a small town in Oklahoma and went to school at the University of Oklahoma. I played baseball while I was in college. In fact, I went to school on a baseball scholarship, which is part of how I ended up down here in Austin because I had pleasant memories of Austin from when we used to come down here and play baseball against the University of Texas.
KELLER: Second baseman?
HUGHES: Infield, you’re close. Shortstop. So I graduated from Oklahoma and worked three years for an oil company, Conoco, and I basically decided one thing during that three year tenure; that was that I did not want to work for a big company and that’s probably the motivation that sent me off to Harvard Business School to get a master’s in business administration. My degree from Oklahoma had been in chemical engineering. So having finished up at Harvard in 1962, I wanted to go with a small company; I decided I wanted to get into the financial side of business and wanted to get into something where I could use my technical background along with my MBA. I came down to Texas knocking on doors, and ended up by chance finding a venture capital company in Austin, Texas that was looking for somebody with just my background. They didn’t have to convince me to come to Austin because I still had those pleasant memories about coming down here and playing baseball.
KELLER: Was that the Texas Capital Corporation?
HUGHES: Yes. So I moved to Austin in 1962 and started learning the venture capital business. The second year that I was at Texas Capital, a couple of guys walked in named Jack Crosby and Fred Lieberman, whose biggest claims to fame at that point was that they had debt right here to their eyeballs like all the other guys in the cable business. They badly needed to refinance their debt as well as to get some additional money to build the rest of the properties, or franchises, that they’d picked up around the country. We’d never heard of cable TV at our venture capital company. The guy who was the head of our group, a gentleman named Grogan Lord said, “Hughes, I want you to become the expert on cable TV.” I literally went out and spent six months with Fred and Jack; I went out to all their cable properties, read everything I could about cable television. I came back and recommended that we should refinance all the debt that Crosby and Lieberman had, and provide additional money for expansion.
KELLER: How did you reach that conclusion? At that time, the banks and most of the venture capital companies didn’t want any part of cable.
HUGHES: Well, you’re right. The banks didn’t want anything to do with cable and there were very few venture firms that did. In fact, to my knowledge, the only other venture firm back at that time who was doing anything with cable was Narragansett Capital.
KELLER: Narragansett Capital. ATC?
HUGHES: Yes, in fact I remember, I did talk to somebody at Narragansett in the course of doing this research because they had already started doing a bit of cable investing.
KELLER: Probably Al Hartman, if I remember right.
HUGHES: That is correct, it was Hartman. So you’re right, there were no banks. Actually, somewhat miraculously, we put together a financing package for Crosby and Lieberman where we put up some venture capital and we got Chase Manhattan Bank to put up a little bit of bank money, but it wasn’t done easily. As you said, the banks were very skeptical about cable, but we put up enough money on the balance sheet subordinated to them whereby they felt somewhat comfortable.
KELLER: So you got a bit of mezzanine financing at one point?
HUGHES: Right, and that was actually consummated in ’63. One interesting side light there that kind of gave a little insight on the financing world in those days: I still remember when we went to the closing, Chase Manhattan Bank apologized to us because they were going to have to charge 6% interest. Keep in mind, the prime interest rate in those days was 3 ½, but I remember they changed the deal at the last minute and said, “We’re going to have to charge 6%; this is a risky loan.” So that shows you somewhat how things have changed. So that financing experience was my first introduction to cable.
KELLER: How long did it take then to get Chase Manhattan out of there, about two years?
HUGHES: I don’t remember.
KELLER: It probably wasn’t very long.
HUGHES: I don’t remember, but that started my knowledge curve in cable television. Two years later, Jack Crosby showed up at our doors once again and, we still had the other investment on the books; it was doing well.
KELLER: Did he find you because you both lived here in Austin?
HUGHES: No, Jack didn’t live in Austin in those days. He lived in Del Rio, Texas, and one of the systems that was in the package that he brought to us was Del Rio, Texas along with some other systems in Texas; Lieberman’s properties which were primarily in the East, which at that time included Burlington, Vermont and a couple of other towns up in the New England area; then the rest of the money went to give them money to build Macon and Warner Robbins in Georgia, Peru and Wabash, Indiana, Rutland, Vermont and North Adams and Williamstown in Massachusetts.
KELLER: After that then they kept selling them back and forth to each other for a while, didn’t they?
HUGHES: Well, Crosby holds the all time worlds’ record on Del Rio. I think he originally financed it with some goat ranchers out in Del Rio, Texas.
KELLER: I interviewed Jack.
HUGHES: Okay, then he probably told you that story. He bought out the goat ranchers, and that was the first transaction. Then he sold it in the deal when he Lieberman put all their systems together. Then, I’m going to lead into a story where we bought Del Rio back out of that deal two years later, in ’65. Crosby, who always was working on another deal, came in with a master plan that everybody in cable TV told him couldn’t be done; that was to consolidate the cable operations that were Jack’s personal deals, which were Del Rio, Ranger, Cisco, Eastland, and Eagle Pass – all in Texas. Then the plan was to get Gene Schneider’s properties in Casper, Gallup, and Moab; Glenn Flynn’s system in Tyler, and Ben Conroy’s system in Uvalde. Crosby said, “Look, we want to try to put all of these properties together in a new company, some of us want to draw some cash out, and then we want to merge all of these to form a new company.” You can imagine with all those strong personalities trying to form a company. We actually worked on that deal all of 1965 to put that company together, and it was called General Communications and Entertainment, i.e. Gen Coe.
KELLER: They sold that to an oil company in Tulsa, didn’t they?
HUGHES: Right. It went under the acronym of Gen Coe and Crosby was chairman. I can’t remember whether Gene Schneider or Ben Conroy was president at the time. Two years later, this would have been about 1967-68, Livingston Oil Company out of Tulsa showed up.
KELLER: Livingston, that was the name of the company?
HUGHES: Yes, Livingston Oil Company, a New York Stock Exchange Company, decided they wanted to get into cable TV and they came to Austin and negotiated a deal to merge, in a stock deal, Gen Coe into Livingston Oil. One little side story, I’ll back up for a second to reflect. When we put together the Gen Coe deal, of course I got to know all that cast of characters mentioned previously. I’d never met some of these people before and I remember one of the most memorable events. I was a thirty-year-old kid at the time, a few years out of graduate school, and we got into some very tense times during these negotiations because obviously there were evaluation issues, etc. I never will forget one incident involving one industry icon, who I’ll name in a minute. One very late night evening at a law firm, one block away from where we sit, the lawyer who was doing all the framing of this deal was a young man named Sander Shapiro, who did a lot of legal work for us in those days. In one of the very tense negotiations, Gene Schneider, who has a little bit of a temper, in one of these meetings resorted to a slide rule as a weapon. You remember, back in those days we had those 12-inch slide rules used for calculations – there weren’t any computers in those days. Gene got so mad that he was up out of his chair with this slide rule in his hand, and had it poised over this lawyer’s head. Of course, Gene is six inches taller than I am, and I still remember grabbing Gene’s arm and saying, “Gene, now wait a minute, settle down. We’re going to get this resolved.” But I thought he was going to crease this lawyer’s head with his 12-inch slide rule. I’ve kidded Gene about this several times over the years.
KELLER: This lawyer was representing you?
HUGHES: Well, he was representing the whole group and of course, I’m just there representing the venture group that’s going to put up a lot of money in the deal, so I was simply an intermediary trying to help make it happen. It was a tense moment which we got past and put the new company together.
KELLER: As an aside, Livingston Oil was one of the first, in fact it may have been the first, big public company to get into cable television. May have been, I’m not absolutely sure of that.
HUGHES: I think you’re right because there really weren’t any public cable companies at that point, and that was part of the motivation for them in doing this deal. They thought with Crosby and these other people involved they had the nucleus of a company that they could go out and acquire other cable properties with a publicly traded stock. Now it’s interesting what happened, and it happened very quickly – the best way I know to describe it is a clash of corporate cultures. It’s what led me ultimately to getting into cable TV. The Gen Coe division, operating within Livingston, got the franchise for Midland, Texas, which Jack Crosby had been working on for two years. They took the proposal to the board of Livingston, which was controlled by oil people, and the board sent it off to their analysts to analyze the rate of return on this investment. The analyst came back to the board after several weeks and said, “This doesn’t meet our criteria for rate of return.” Of course all these cable guys in Gen Coe looked at the board and said, “What does this mean?” The board said, “We’re sorry but we’re not going to build Midland, Texas.” Of course Crosby had been working for two years on Midland and Jack told the board very nicely, “I’m out of here if we can’t do Midland.” Keep in mind, that as part of the Gen Coe deal, Jack was chairman of the board.
KELLER: Of Livingston Oil?
HUGHES: Of Livingston, yes. Jack told them very nicely when they made that decision, “I’m out of here and I am going to resign as chairman of the board.” Jack did in early 1968, and that’s when he came to me. I was still in the venture capital company, and Jack said, “I’m going to go start a new cable company on my own. I have no people, and I’d like you to come with me and be the financial guy.” The other part of the deal he had struck with Livingston when he resigned as chairman was that they would let him have the Midland franchise to build since he was the guy who had worked on it for two years. So when Jack and I made the plans to formulate what became Communications Properties in early 1968, we had one asset and that was Midland. Ben Conroy, who of course had been with Gen Coe had also become a little disenchanted with the Livingston people, said, “Look, I’d like to come over and be with you guys and start this new company.” I knew Bill Arnold because Bill had been the chief financial officer for a little toy company that we had financed in the venture company I worked for. I said, “Hey, I know this guy that can be the chief financial officer.” I still remember the name of Bill’s company – it was Gulf Toy House and Bill Arnold was the financial guy. So we went and got Bill, and Jack and Ben came over from LVO. That’s how I got into cable, and was the start of Communications Properties, which Jack, Ben, Bill, and I built into the 7th largest company in cable over the next decade.
KELLER: But the Schneiders never did; they finally broke it off.
HUGHES: The Schneiders stayed, and that’s how Gene was elevated to be the president of the cable division of LVO. Then later, that was spun out to Livingston’s shareholders as LVO. LVO Cable was, in essence, the company Crosby put together as Gen Coe, which Gene Schneider got to take charge of.
KELLER: I don’t remember.
HUGHES: Gene got spun off into a separate company of his own, LVO Cable and that’s what later became United Cable. Most cable people don’t remember the origin of United. The sequence would be Jack Crosby – Gen Coe – Livingston Oil – LVO Cable – United Cable.
KELLER: So now you and Jack and Ben Conroy have Midland.
HUGHES: That’s right. That was our first asset.
KELLER: Your venture capital company had financed that?
HUGHES: Our venture capital company had financed the Gen Coe operation, so we had ended up with Livingston Oil stock. They weren’t in our new deal at all. We had to start from ground zero. Jack was the president, I was the vice-president of finance, Ben was the vice-president of operations and Bill Arnold was our treasurer. We were the four guys, and we had just the Midland franchise. Now that’s where we did the next Del Rio transaction.
KELLER: Tell us about that.
HUGHES: Of course, it was then still a Livingston Oil asset, so we went to LVO and negotiated a deal to buy back Del Rio and Uvalde, which of course had been Ben Conroy’s system. We named our new company Communications Properties. So at that point in time it was the third time that Crosby had bought back Del Rio, and this had all been done in a period of six years.
KELLER: Lieberman at this point was where?
HUGHES: Lieberman was not involved in that transaction. He still had, at that point, the properties that our venture capital company had helped Jack and him refinance back in 1963. Jack still had an equity interest in that company but Fred was running it. That was a company called Telesystems Corporation. So Jack still had his equity interest in that company when in August, 1968 we together our new company, Communications Properties.
KELLER: Now that you’ve got Communications Properties along with Jack and Ben and Bill Arnold, where did you go next?
HUGHES: Well, we went out to start to try to build a cable company.
KELLER: You had to go find financing then, didn’t you?
HUGHES: Those were tough days to get financing.
KELLER: Late ’60’s?
HUGHES: I’m sorry?
KELLER: Late ’60’s? Early ’70’s?
HUGHES: Well, it was ’68, and as we moved into ’69, I’ll tell you an interesting story that involved an individual that you know. We started out and picked up a few systems; we bought Kerrville, Texas and we bought some other little properties out in west Texas. But we wanted to do something bigger in another state. Our first major acquisition was the system in Springfield, Illinois, which we bought from Dick Leghorn in 1969. This is where there is an interesting story involving another individual in our industry who you once worked for. I’d gone down and spent three days with Dick Leghorn negotiating the acquisition of Springfield, and we shook hands late one night on a deal. Of course, we didn’t have a clue as to how we were going to finance it. We were like all the others; we were going to figure that out later but somehow we convinced Leghorn that we could handle it. The next day, we had a meeting that had been scheduled for many months with one Mr. Monty Rifkin. Monty was coming to Austin, and of course, we wanted to talk to Monte about putting our two companies together because Monty was starting to grow his new company by acquisition just as we were. This was late ’69, after we had become a public company in May ’69.
KELLER: ATC was just starting to roll then, yes.
HUGHES: We thought we’d have a visit with Monty, and see if maybe there was some way we could put the two companies together. The funny incident occurred when I met Monty at the Austin airport. We’re walking through the airport just kind of having a general conversation; what are you doing, what are you working on, etc. and I just kind of casually mentioned to Monty, “We just did another acquisition last night. We shook hands to buy the cable system in Springfield, Illinois.” Monty stopped dead in his tracks, wheeled around at me, and said, “That is impossible. I’ve been working on that deal for six months.” I didn’t know what to say! I said, “Monty, I didn’t know you’d been working on it. There was no mention of that. Dick Leghorn and I shook hands on a deal last night.” Monte did not say a word. He turned around, went to the bank of pay telephones at the Austin airport, and he was on the phone for probably 45 minutes. He came back, didn’t say a word, but I can tell you he was not in a good mood the rest of the day. He had called his lawyers in Boston, I believe it was Ropes and Gray.
KELLER: In Boston was it, or Providence?
HUGHES: I don’t know.
KELLER: Maybe, because it was Narragansett I think, wasn’t it?
HUGHES: I never have forgotten that incident, because I had no idea Monty was working on this property, and when I told him that, I can still see him stopping dead in his tracks, looking at me and saying, “No way.”
KELLER: You had met Monty through your work with Bill Daniels or with the Daniels organization?
HUGHES: I think I’d only met Monty once and that was at a cable convention. I had started going to cable conventions in the mid-’60’s when I was in venture capital. In fact, I don’t remember exactly which convention, the Denver convention maybe in the ’60’s…
KELLER: ’66, I believe.
HUGHES: That was my first convention.
KELLER: No, ’65. I’m sorry, ’65.
HUGHES: Somewhere along in there I had met Monty. So I only knew him in that context. So anyway, in answer to your story, we started building a major company when we financed Springfield and got it bought.
KELLER: Where did you go for the financing? Now you had both Midland – or Midland was already done, so Midland was throwing out cash at that point.
HUGHES: Yes, it was tough. I remember we ended up getting some financing from Teachers Life Insurance, which was one of the few lenders back at that point in time. There was a gentleman named Jim Straley, who did some cable deals back then in the late ’60’s, and on into the early ’70’s and he was a visionary. Probably a lot of people at his old insurance company thought he was crazy, but he made us a couple of loans that made him look like a genius with the equity incentives he was able to negotiate. We had gone public in the spring of 1969, taken public by a small company called New York Securities. That is where we got the equity money to finalize not only the Kerrville transaction but also Springfield.
KELLER: There were three companies, I think, that went public in ’69. CPI was one of them, I know.
HUGHES: ATC. Didn’t ATC…?
KELLER: ATC was either ’69 or ’70 and then the company out of LA that bought the Jerrold properties, I can’t remember the name of it, I should.
HUGHES: You mean Burt Harris’ company, Cypress?
KELLER: No, before that. I just can’t remember. At that time, Jerrold was required to divest. They had to sell their properties. As you remember, the Justice Department walked in on them at that point. They sold it to…
HUGHES: Was that H & B?
KELLER: H & B American, yes.
HUGHES: I think that’s right. I think the only three public companies were CPI, ATC, and H & B.
HUGHES: It was a struggle building companies in those days, and that sort of led us to the next plateau, or hurdle. We figured out we couldn’t really put together any more cash acquisitions because none of the banks wanted to lend much money to cable. Jack and I, jokingly, back in those days talked about how we probably had more free lunches on Wall Street than anybody in the industry, and gotten thrown out on the streets immediately thereafter because Wall Street did not think cable was an industry that was going to be around very long. We had no net income, which they didn’t understand. So, in the 1970-71 timeframe, we merged the properties that Claude Stevanus had up in Ohio called Tower Antennas into Communications Properties, which roughly doubled our size, made us the largest cable operator in Ohio. Claude had a very nice package of subscribers, and that all of a sudden enabled us to become a more major player in the industry. We thought that deal would open up some more avenues of finance, but it didn’t. You remember those days in cable; they were tough years. Again, because we couldn’t really raise any money to buy anything, we did another merger, and that was to merge Fred Lieberman’s Telesystems package into CPI in 1973. Those were the properties that Crosby and Lieberman had put together in the early ’60’s, which had grown very nicely. All those new systems they had built a decade earlier had matured into properties with significant cash flow.
KELLER: Just as an aside here, so that people put this in perspective, these were virtually what we now call classic systems, where you needed additional television signals to be able to make a system function and pay out.
HUGHES: Absolutely.
KELLER: It was not any of the big size markets at this time in the development of the industry. That came at a later time.
HUGHES: Right. Well, our first introduction to that was when we merged Fred Lieberman’s package into CPI. He already had picked up the first franchise in Philadelphia, which was to build the area in South Philadelphia, south of Center City, all the way down to where the airport is now. He had started construction on that in 1974, so that was our first step into a major market property. Meanwhile, Fred was continuing to do franchise work and picked up probably half a dozen other suburban Philadelphia franchises as well as probably another half a dozen over on the New Jersey side of the river. As a side note, with the tight money crunch of 1974-76, we never could put together the money to build those systems. The New Jersey properties later became the nucleus of the New York Times cable package that Irving Kahn, at one time owned. But they were the original franchises that were picked up in the Philly area by Fred Lieberman back in the very early ’70’s.
KELLER: Was the South Philadelphia area sheltered from the television transmitters at all?
HUGHES: Not really, but if you recall there were a few microwave systems around in those days and we could microwave in some signals from New York, which gave them some New York programming, but it was a tough, tough road. I think we only got 35% penetration. Fortunately the density was huge at over 200 homes per mile of plant. These were some of the row house areas in South Philly, and it did manage to get into a cash flow positive situation, but it was not a great property.
KELLER: That has always been my contention, at least in the major markets. It’s not how many homes or what percentage of those homes you have per mile, but how many customers you have per mile that makes a system go.
HUGHES: Exactly, exactly.
KELLER: It was better than 80% in some of the other systems.
HUGHES: Right. So it did work.
KELLER: CPI had just merged, or bought, the Fred Lieberman properties including South Philadelphia, which was your first inroads into a major market. How long did it take that to get off the ground? You gave some interesting statistics just before we started again. You had 250 homes per mile of cable, so you had a 35% saturation?
HUGHES: Yes.
KELLER: The measure used to be, if you had 100 homes per mile and you got 60% penetration, you were in pretty good shape. Well, here with 250, if you got 30% penetration, you have the same thing.
HUGHES: That’s right, and that’s why I say it became cash flow positive. Now the problem was we didn’t really have the money to go wire the rest of Philadelphia.
KELLER: Was that all overhead construction or was part of that underground?
HUGHES: It was all overhead. It was attached on those buildings.
KELLER: On the buildings but not on the poles, great.
HUGHES: Well, most of it was on the buildings. If you go back to that old South Philly area today, it still looks about the same, there aren’t many poles. So it was kind of a unique area.
KELLER: Like London. So then your construction costs weren’t that much greater than building in, say, Midland, Texas?
HUGHES: You know I can’t remember exactly.
KELLER: Well, I’m just saying, if that was the case and you didn’t have a lot of underground or urban area underground construction.
HUGHES: Not at that point, no.
KELLER: So what happened after you got Philadelphia going?
HUGHES: Probably the next significant thing in my career was after we put the Telesystems package together with Prime, our Board chose me, in 1974, to take over as president of Communications Properties. Things were still tough on the financial side of cable. You remember those days, and I can give an illustration as to how tough things were. I remember this one very well, and Bill Arnold and I still laugh about this one today, although we didn’t laugh about it at the time, I became president in April of ’74, and it was nine days later that Bill walked in my office one Friday afternoon and said, “Bob, we cannot meet the payroll next week.” That was my introduction to being president and I said, “Bill, what happened?” He said, “I don’t know what happened. I’m just telling you a week and a half from now we can’t meet the payroll.”
KELLER: How many employees did you have then?
HUGHES: Oh golly, I don’t know.
KELLER: Roughly.
HUGHES: I don’t know, we must have had 150 or so. What happened in the next week is that Crosby and I had to scramble to one of the local banks here in Austin, Texas, in fact it’s a block away from where we sit, and we both had to sign some notes and borrow the money to meet the payroll. That will show you how dark things were in the early ’70’s. So I became president of CPI at that point. That’s also the same year I went on the NCTA board for the first time.
KELLER: In ’72?
HUGHES: It was ’74.
KELLER: Just prior to the satellite transmission era?
HUGHES: Probably two years prior to that. We continued to build CPI as best we could, and moved more into franchising. You recall those days, we were all a little more adept at picking up franchises in those days than we were building systems. I remember in that timeframe, ’74-’76, we got the franchise for Louisville. Again, we didn’t have a clue as to how we were going to finance it, but we got the franchise. We then spent several years trying to hang onto it, which we did. We picked up several other franchises. We managed to pick up the franchises in Hartford, Connecticut and Meriden, Connecticut with the Rubicoff brothers as our partners. They had been involved politically in getting those franchises, and they owned 20% of it. We owned the other 80%, and again we had the challenge there as to how do you come up with the money to do it.
KELLER: Hartford was one of those difficult cross signal markets between Boston and New York and all the signals coming in at one time.
HUGHES: Right.
KELLER: As I recall, and I’m a little vague on it, was a specific case that the FCC looked at in trying to determine what signals any system could use, as I remember.
HUGHES: That’s right. Up and down that eastern seaboard they had that problem, and I really can’t remember now exactly how the FCC resolved it. I do remember back in 1975, Fred Lieberman and I had a meeting with Henry Harris, who was then President of Cox Cable. We were getting concerned that we would not be able to come up with the money to build the Hartford area – we had the entire Hartford metro area, Hartford, East Hartford, and all the suburban areas adjacent thereto, so it was a big market. We offered Henry the chance to buy our 80% piece of the unbuilt franchise. As I recall, the number we threw out to him was $300 a home for the franchise, and Henry absolutely almost had apoplexy to think that we could have the gall to ask for that price. He turned it down! Of course, a few years later that would have looked like a gift from us to Cox, but at that time it was unheard of to pay $300 per home passed just to get a franchise. Henry and I both remember that meeting.
KELLER: How did you finance Hartford?
HUGHES: We ended up somehow massaging it – that is the only word I know to use – until roughly the ’76 timeframe after the satellites had been launched. You will recall at that point in time the banks all of the sudden started looking at cable a little more kindly. It wasn’t anything overnight. But we ended up doing Hartford with some kind of a combination bank and insurance company financing. I think we got John Hancock and Connecticut Mutual Life Insurance, who of course were up in that geographical area, to fund a loan that enabled us to get those properties built. In fact, as a sidelight, at Connecticut Mutual one day I remember an interesting experience where one of the guys in the lending group was quite negative about our project. I remember him telling me, “Well, I know you guys are talking about taking some of this money and building West Hartford,” which of course is where all the insurance companies are located, and he said, “but I can tell you, I’m totally satisfied with my television. I can pick up the Boston signals, and I can pick up some New York signals.” He let me know in no uncertain terms not to count on him as a customer.
KELLER: I don’t know how many times I heard that over the years.
HUGHES: Well, you can imagine who the first phone call was from when we became operational. When we got it down his street, I get a phone call here in Austin, Texas from this guy saying, “I’ve got to get hooked up to cable.” I said, “Wait a minute, you told me in your office not to count on you being a subscriber, and now you’re begging me to be one of the first subscribers.” He said, “Well, I’ve changed my mind.” I thought to myself – isn’t cable TV a great business!
KELLER: Bob, I want you to recall, right about this period when we were starting to put pay television on the systems and we were starting to incorporate it into our pro formas into our financial statements or pro formas for the banks, do you remember any of the banks that said initially we won’t permit you to use the income from pay television and then eventually then they allowed you to use a quarter of it and then a half of it. Is my memory correct on that?
HUGHES: Oh, your memory is absolutely correct and a lot of the banks at that point in time, who had been long time supporters of cable became very squeamish about the whole industry. The most notable in my mind was the Bank of New York and they were one of our lead banks. They weren’t the only lead, thank goodness, or we might not even be sitting here today. We had a very infamous bank meeting in Pittsburgh, Pennsylvania in late ’75, as I recall, in which all our lenders called us together. Fred Lieberman and I both went, knowing it was going to be a critical meeting. It turned out to be much more critical than we thought it. All 5 of our banks were there and the Bank of New York opened the meeting by saying, we want to be taken out of this credit. I looked at them and said, “Guys, that’s wonderful that you want to be taken out, but we don’t have a clue as to how we’re going to take you out unless one of these other banks sitting around this table wants to take you out.” They said, “You’re not hearing us right. We want to be taken out, and we want to be taken out right away, no matter what it takes.” I did something that just was a spur of the moment decision. I literally had some keys in my pocket, which were my car keys, a key to the office, and probably a key to my house back here in Austin. We were sitting in their big conference room, and I just threw them in the middle of the table, and watched them slide all the way down to the end. I got up and started folding my papers, Lieberman started folding his and we said, “Guys, that’s the key to the door and if you want to go down and take over the company, you’ve got it.” As we started walking out we got to the door, and they said, “Wait a minute, we want you guys to sit outside in the lobby and we want to have a meeting of us banks.” Four and a half hours later, Lieberman and I were still sitting outside. By then it was 2:00 in the afternoon, and we sent word in via one of the secretaries to tell them that we’re leaving to go catch an airplane. She went in, and when she came back out, she said, “No, they need fifteen more minutes.” So in fifteen minutes one of them appeared and they said, “We want you to come back in the room.” It turned out that the other banks had all stepped up and agreed to take out Bank of New York. So it was not a friendly day, but it was a day I won’t ever forget because I didn’t know what was going to happen to our company, which we had spent 7 years building.
KELLER: They got back in, but I bet they regretted getting out of that deal.
HUGHES: Well, that was the interesting thing. Within a year, after the satellite launches, Bank of New York was on the phone first, and then followed it up with a trip to Austin begging to get back into our credit facility. We never let them in. By that time, Citicorp had emerged as being very interested in our credit, and came into our credit with the other banks. We just told Bank of New York very nicely, “Guys, you were in it once. You’re not going to get back in again.”
KELLER: Have you ever used any of their money since?
HUGHES: No, but it wasn’t out of spite, we just never did. Actually, Citicorp, before we sold the company in the later ’70’s, ended up becoming our lead bank and really was a great bank for us.
KELLER: Did you ever get any Canadian money in any of your operations?
HUGHES: Not in Communications Properties. In fact, at that point in my life, I never knew that Canadian banks were lenders.
KELLER: The Bank of Montreal was pretty big, at least in the Canadian operations. I just wondered whether you had or not. Any of your own money?
HUGHES: No. Our primary banks were First National of Dallas, Union Commerce Bank, Provident, and Pittsburgh National. Pittsburgh was our co-lead bank, thank goodness. If Bank of New York had been our lead, we’d have been in deep trouble. By the way, the Pittsburgh bank stuck with us and they were a major cable lender. They stuck with the cable industry through all the tough times and then when things got good, for whatever reason, their bank decided to get out of cable. It was one of the worst moves that any major bank ever made because they were could have made a fortunate over the next 5-8 years. They were one of the few banks that lent to cable in that ’72-’77 timeframe, and then they got out at just the wrong time.
KELLER: They had the opportunity after that to have gone in a big way.
HUGHES: Yes, they missed a lot.
KELLER: Then, after you’re developing these, were you building in South Philadelphia now too, at the same time?
HUGHES: Well, we were continuing to build, but not in South Philly. We’d really pretty well built that out. We then started an area called Upper Darby. It’s one of the western suburbs of Philly and along with Coshocton, we started building in a number of those western suburbs. We never did figure out how to put the money together to do those franchises on the east bank of the Delaware River, as mentioned we actually ended up giving those franchises back to the cities in the late ’70’s.
KELLER: Comcast got in it, and I think the Philadelphia Bulletin got in with Comcast, didn’t they, and did the rest of Philadelphia?
HUGHES: I can’t remember the different chain of events. Actually, many got refranchised. We literally gave them back.
KELLER: What induced the Times Mirror Company to get into cable television and specifically to buy your company?
HUGHES: I think the decision for them to get into cable was prompted by a new CEO, whose name was Bob Eburru, who took over the company, and decided that they needed to expand further into cable. They had some properties out on Long Island already, out in the Hamptons area.
HUGHES: Eburru saw cable as a way to further expand his company. Fred Lieberman was our largest shareholder in Communications Properties by that time. When he had merged Telesystems he had become the largest shareholder. As I recall, he owned about a third of the company, more than Crosby or any of the rest of us. By that time, cable was really starting to come out of the doldrums, thanks to the satellite, to Turner’s TNN channel, and the different programming offerings that we had. So Fred, in ’79, saw a chance to take, what in his mind, was a lot of money off the table. He decided he wanted to sell, and so it was sort of a confluence of events. Jack Crosby, who was our second largest shareholder was not opposed to it. Times Mirror came along, represented by a young broker named Rick Michaels, and they ended up making us a cash offer for the company that we accepted. At that point in time, we were the sixth largest cable company in the world and the transaction was the biggest transaction that had ever been done in cable, at that point. It wasn’t very big – $135 million as I recall.
KELLER: Not in today’s terms, but in those days.
HUGHES: It was big then.
KELLER: And then some of your employees or most of your employees went with Times Mirror, because they didn’t have any operating people, did they?
HUGHES: Well, that’s correct. Really all of the key management team that had been put together in the ’70’s with the exception of Ben Conroy, Bill Arnold, Jack Crosby, and me all went to Times Mirror.
KELLER: And then some of them came back after the turnover?
HUGHES: To a few of these guys, when they left, I said, “Guys, I’m going to start another cable company and if I can get it going I’m going to be back to try to get you in a few years.” That was Ron Dorchester, Dan Pike, and Jerry Lindauer.
KELLER: Now, at the time that you sold to Times Mirror, it was ’78, you were chairman.
HUGHES: ’79.
KELLER: ’79. You were chairman of the NCTA at that time, weren’t you?
HUGHES: Yes, so it was kind of an awkward situation for me, but I was not one of the major shareholders. I was president of CPI from ’74 until the time of its sale. I was really the professional management guy, and I had enough stock whereby I made my first real money of my life when we sold it. But if it had been my vote, I wouldn’t have voted to sell it because I could see a great future for cable. I really saw the future just opening up because it looked like we were going to be able to finance new builds and acquisitions for the first time in history.
KELLER: Here you’d gone through all the tough times and now better times were coming.
HUGHES: One thing I’d like to back up to just a moment if I could, just to make sure we get it on tape, are a couple of things during the time I was chairman.
KELLER: Good, I was going to ask that next.
HUGHES: Okay. Let’s focus on that. During the year that I was chairman, there were two principle issues – the negotiations at the FCC regarding pole attachment agreements where the phone companies and the power companies had been trying to raise our pole rental rates to exorbitant levels; and secondly, the attempts by some members of Congress to initiate a re-write of the Communications Act of 1934.
KELLER: Or not let us on the poles at all.
HUGHES: Right, or not let us on at all. Negotiations with utility companies had already been ongoing in the first four or five months of my administration, and there was a lot of great work by our whole industry. It was one of the first times we got the cable industry to descend on Washington en masse, to lobby the FCC and that’s how we resolved the pole attachment agreement. The FCC asked us to devise a formula on very short notice. I recall it was delivered at midnight to the FCC. They accepted our formula, which was a big step forward, as you will recall, for our whole industry. It lifted a large dark cloud, which had been hanging over our industry.
KELLER: Very much so.
HUGHES: So that’s one thing that we’re proud we got done in that ’78-’79 timeframe of my administration.
KELLER: Was Ben Conroy your chairman of the utilities relations committee at that time?
HUGHES: You know, I think he might have been.
KELLER: I think he was, too.
HUGHES: And by the way, I’m glad you mentioned that, because there’s an interesting bit of trivia here. When I became chairman we had three guys in the same company, Communications Properties, that had all been chairman of NCTA: Jack Crosby, Ben Conroy and myself. That is the only time that had ever occurred.
KELLER: Then you had a fourth one come up after that.
HUGHES: That’s right. Later we had another one, a fourth one, Jerry Lindauer. But to go ahead and finish my chairman chores, the other significant occurring was the proposed rewrite of the 1934 Act. The reason I want to talk about this is because there’s a humorous story involved. Lionel Van Deerlin, was the head of the House Sub-Committee on Communications. You will remember, there were hearings that went on for months and months and months. A significant event for our industry occurred that displayed our entrepreneurship, but also showed our technological naiveté. The key hearing where cable was to have their day before Van Deerlin’s committee happened in July, 1978. In fact, in my office there’s a picture on my wall of me testifying on behalf of the industry. But the significant part about that day was that the highlight for our industry was going to be to demonstrate to Congress what this marvelous satellite technology could do. We had installed out in the front of the legislative halls this giant ten-foot diameter satellite dish, which you’ll recall we had to use in those days.
KELLER: A hundred thousand dollars worth, too.
HUGHES: Yes, a huge dish, and we had that thing pointed to the heavens to be able to display the programming we could deliver. Our technicians had been working for two days to get this all rigged up, and Bob Schmidt, who was then the president of NCTA, and I met Congressman Van Deerlin early that morning because we wanted to give him the tour and show him all the electronics in the satellite dish. This was set up where this was going to be integral part of our presentation to Congress. The script that had been put together for me to present to the committee was going to be tied in with this marvelous visual demonstration coming in off the satellite, bringing in Ted Turner’s signal from Atlanta, HBO, and other satellite channels. So we took Van Deerlin through his whole tour and went back into the hall for our presentation. I’m sitting there giving my spiel and we come to the crucial point where our wonderful video demonstration is going to occur, and you can guess what happened. There is no signal. Somebody’s kicked a wire on the floor and there is no picture on any of the many TV screens all around the room. Nothing but darkness.
KELLER: I’ve never heard that story before.
HUGHES: Well, it was not a happy moment and I’m up there on the podium, right? I’m giving the presentation. We had to just keep right on going. We didn’t even pause and fortunately before I finished, the TV’s all lit up and we had these pictures coming in. But it was a tense moment there for a while. In hindsight, it was funny but that this was going to be our glorious day when we showed Congress the technology. No one in Congress had ever seen pictures coming in from a satellite in those days, so that was big for all these Congressman. It was a significant event in which I had the honor to participate.
KELLER: I had never heard that. It is interesting. Anything else that you can remember as your term as chairman while you were on the board?
HUGHES: I guess the only other thing I remember from the board was my mentor. We all remember our mentors, and one of the guys who was always a mentor to me was Burt Harris. Burt had been on the board for a long time and was great for our fledgling industry.
KELLER: One of the great gentleman of the world.
HUGHES: A great gentleman, and he was always so nice to me. If I had a problem, I’d call Burt and bounce it off him. So that’s one of my fond memories and I’ll always be very indebted to Burt for his help.
KELLER: Any un-fond memories?
HUGHES: No, it was fun being on the board. I got to know Bill Bresnan a lot better because Bill and I had a few issues on which we disagreed, but we always disagreed agreeably and we’re still good friends today. I respect him tremendously. I have very pleasant memories of the board back in those days.
KELLER: You just did one more year after that when you stayed on the executive committee, is that correct?
HUGHES: That’s correct. I’m glad you brought that up because it sort of defines a turning point in my life. By that time I’d already founded Prime Cable. We’d started making some acquisitions, started growing, and when I set up Prime I decided I didn’t want to run a public company again. I had not liked being in a public company, which CPI was. So I decided to stay private and have an institutional group of financiers.
KELLER: Stay private.
HUGHES: Yes. Then the other thing I decided was that I really wanted to have a different lifestyle in that I wanted to have a professional management team, some really strong guys to surround myself with, and have really more of a team effort as opposed to a company that was say, Bob HUGHES:’ company. So it was a personal decision on my part and that’s really when I went out to Times Mirror Corp. and brought back Jerry Lindauer. Jerry had been a long time friend of mine going back to the ’60’s. I had convinced him to come with the cable industry when he retired from the Marines in ’77, when he had a lot of other good job opportunities on the table. So Jerry was a guy that I’d known for a long time, he’d gone with Times Mirror, and I got him to come back back with me in Prime. Shortly thereafter, I got Ron Dorchester to come back as our VP of operations, and I got Dan Pike to come back as our VP of engineering. I put together the team that was going to build Prime into the ’80’s, and made Jerry our “out front” guy. He took over all the political side of it, the NCTA board, which I never was that fond of, and Ron took over the management of our cable properties.
KELLER: How big did you build Prime into?
HUGHES: In Prime, by design we were a different type of cable operator in that we had a niche. I think it was a different approach than any of the other cable operators. We looked for properties that were somehow broken and needed fixing. I mean we literally went out and tried to find the cable systems that had been built incorrectly, marketed incorrectly, mismanaged in some way and that was our mission.
KELLER: Bob, you were just starting to put together your management team for Prime, which included Dorchester, Lindauer and Pike. Where did you go after that, after you put it together? You said you had a unique concept and that was to buy properties that were broken.
HUGHES: Right. So once we got our management team in place, we started down that path. Our first significant acquisition in that regard was Atlanta, Georgia.
KELLER: That was broken!
HUGHES: It was broken badly and that deal was brought to us by Drexel-Burnham who had helped the Canadian guys who owned the franchise finance that system and it was, as you said, a “broken” property. So working with Drexel, we engineered a deal where Drexel raised the equity money that was required and we bought Atlanta. It was done in a syndicated partnership transaction in ’84. We had previously, a couple of years before, bought all the Buffalo suburbs from Peter Gilbert and we had also bought all of Dick Loftus’s properties across the Hudson River from New York – all those beautiful towns, Hoboken, Weehawken, Union City, and West New York. But Atlanta was our first real move into the big leagues in a big market that had a lot of subscribers but no cash flow. So we were able to take that property, start it growing, and I give Ron Dorchester and his team a huge pat on the back for that. That was the first time that we could really show the financial community that we knew how to make major markets work. If you recall, in the early ’80’s, a lot of people were struggling with major markets and this was a case where we took over and within a year we had it cleaned up and flowing cash.
KELLER: Most of it had been built, though, by that time?
HUGHES: A lot of it still had to be built.
KELLER: Would you say a lot of it was built or had to be built?
HUGHES: Probably three-fourths of it was built, the other fourth had to be built.
KELLER: As I remember, part of the problem was they’d spent so much more money in construction than probably should have been spent on it, as one of many problems it had.
HUGHES: Absolutely. Additionally, it had way too many people. It was just a poorly managed cable property, but our people were able to move quickly to repair the damage. Within 24 months there, ’84-’86, we had Atlanta growing both subscribers and cash flow at double-digit growth rates. It was a great success. It was at that point that the Times Mirror Corporation did us the biggest favor that anybody has ever done for anybody in the cable business because they woke up one morning and they decided that Las Vegas, in which they owned 60%, was not going to be a good cable market. What a break for us!
KELLER: There was a lot of infighting there, wasn’t there, between the various people?
HUGHES: I don’t know all the – you mean between the partners?
KELLER: Yes, Greenspan was involved in that wasn’t he?
HUGHES: The Greenspun family. They were the owners of the Las Vegas Sun and were partners with Times Mirror. There could have been some infighting there, but there were some basic engineering and equipment problems with the cable system. The picture quality was horrible in the subscribers’ homes, which obviously caused a lot of problems and because of that they couldn’t market it properly. They had a terrific churn going on. Times Mirror just decided that it wasn’t ever going to be a good system so the Greenspuns set out to find another partner. Fortunately for us, Jerry Lindauer had come back with us about two years before from Times Mirror. He found out what was happening and it really came down between TCI and Prime as to who was going to get this deal. The Greenspuns wanted it to be with the company they thought they could work with the easiest. I still remember meeting with Brian Greenspun and his father for the first time in Hawaii – that’s not a bad place to go. I met them during Christmas holidays where we met in the lobby of the hotel. We somehow hit it off immediately and in fact, to this day, Brian Greenspun and I are still very close friends. His father, Hank, a wonderful man, was the one who picked Prime as the guys that they wanted to do business with and then of course we had to negotiate with Times Mirror. We were able to buy Times Mirror out of Las Vegas in 1986 when it had 60,000 subscribers. When we sold it last year, in 1998, to Cox, it had 310,000. We paid $85 million for the property and sold it for $3.1 billion. Thank you, Times Mirror!
KELLER: The way that place is growing right now…
HUGHES: Well, it just turned out to be a fortunate event for us. It dropped in our lap just through a fortuitous set of circumstances.
KELLER: Prime still is private, though? You didn’t go public with it?
HUGHES: Still private. By 1986 we had enough partners – actually had a Belgian partner that had come in with us in ’85 that to this day are still partners with us in almost everything we do. They were just one of a group of investors that we could count on all the way from the mid-’80’s on through the mid-’90’s. Fortunately we were able to generate great returns on capital for our group of investors.
KELLER: So you go back to your venture capital experience again in putting these people together!
HUGHES: That’s right. That’s an area I’ve been comfortable with because that’s where I learned the industry – in the financial side. So by 1987, with Atlanta and with Las Vegas, we really had a great private company. We never aspired to be one of the big guys; we would fix the problems, get them to a certain point, and when we thought it was the opportune time to sell for the benefit of our investors, we would sell them at a premium. That’s what we did with Atlanta in 1989 when we sold to the Robert Bass Group. That’s probably where Prime was different from most other cable operators. Most other operators kept getting bigger and bigger and bigger. We never had that game plan and we would normally hold properties five to eight years. When we thought it had maximized the return for our equity holders we would sell it. Had we just kept growing the company as the public companies did, we would have grown to over 2 million subscribers by the early ’90’s.
KELLER: That sounds like the Crosby philosophy too.
HUGHES: Well, I guess maybe I learned that a little bit from Crosby.
KELLER: He emphasized that ability.
HUGHES: Crosby carries it to another level than I do. I kid Jack about that to this day. I stopped in his office two days ago and I said, “Jack, do you still have five new deals in your briefcase like you did in the ’60’s?” He said, “Yep.”
KELLER: That man’s amazing. So you’ve sold Atlanta, now you’re building Las Vegas and you’re building it up from 60,000 to 300,000.
HUGHES: Right, and then in 1989 we bought Anchorage, Alaska from Chris Cohen and so we continued to build Prime until the FCC changed the industry rules in 1992. Our last acquisition was in 1990 when we bought the Group W properties in Chicago. If you recall, TCI got half of Chicago, Group W got the other half. Group W had a tough time with theirs. Chicago is a tough market, but we turned it into a cash flow machine, which we still have today.
KELLER: You’re not operating it, though, are you? Or are you still operating it?
HUGHES: Yes, we’re still operating it. We still own and operate that half of Chicago, which is the northern half, and AT&T is the southern half.
KELLER: From where – Fullerton through Evanston? I’m familiar with Chicago, that’s why…
HUGHES: We go from the loop all the way west out to O’Hare airport and then we go a little bit south of O’Hare. The franchise area goes north until you run out of the city limits area. It’s a very heavy ethnic section.
KELLER: Very, with Rogers Park.
HUGHES: A lot of Italian, with also a very large Polish population.
KELLER: I lived in Rogers Park when I was going to school, that’s why I know it. So you’re still operating there.
HUGHES: Yes.
KELLER: I went to Loyola University and that was right in where you are.
HUGHES: Then you know that area. There are some tough demographics, but generally it’s a decent cable area. It was probably one of our tougher major markets to conquer.
KELLER: Just dealing with Chicago politicians would be enough. So you’re still operating that but you said right now you’re divesting Prime of all their cable properties.
HUGHES: That’s right. In fact, right now we have the Chicago property under contract to sell to Comcast along with one other property that I’d like to discuss. I mentioned the last property we bought was Chicago. There was, however, one exception, which fell in our lap several years later, which was a direct result of the FCC rule change of 1992. I want to tell you how that evolved. We made a decision, when cable got re-regulated in 1992, that set us apart from the other major cable operators. That decision was that we decided we were going to take an arm of our company and become a consulting group for other companies that might be looking to get into the video business. We set up an entity called Prime One. Some of our cable brethren started calling me on the phone – Jim Robbins, Brian Roberts, and others saying, “HUGHES:, you’ve become a turncoat. You’re consulting for these big phone companies.” And we were, but as I told Brian and Jim, “Look, guys, I know this looks a little strange, but others are going to get in the cable business and they’re going to turn to somebody for some help and we are a different company than the rest of you. You are all big public companies and we’re kind of a smaller, entrepreneurial group.” Honestly we thought that some crumbs might fall off the table from working with these big phone companies where we could have some real attractive investment opportunities. That crumb fell off the table in 1996 when Southwestern Bell, who had bought Gus Hauser’s Montgomery County, Maryland system in ’93, shortly after re-reg, and paid Gus a very large number, woke up one morning and decided they didn’t like the video business. We had been managing the system for them under a contract. I still remember the day the chairman of the board called me and said, “Bob, we’re going to get out of the video business. We want to sell Montgomery County, Maryland. We know you guys. Do you want to buy it?” And I said, “Yeah.” Because I figured that they would want to get out of it pretty quickly. We were right and although we paid a fair price, we liked the price. That’s the other property we’re now, three years later, selling to Comcast and making a lot of money for our partners. It certainly justified our 1993 decision to do some consulting work for the big RBOC’s.
KELLER: Comcast bought Ann Arundle County from Jones so they’ve got that whole corridor now.
HUGHES: Yes, that’s a natural for them because Comcast now really has the whole area from Baltimore to Washington D.C. once they close on our Montgomery County property. They will close in the next six months. They’re buying that along with Chicago.
KELLER: They’ve also got the Jones properties in the northwest suburbs of Chicago, too. So that fits in also.
HUGHES: That’s correct and my guess is that somehow there’ll be something done with AT&T because AT&T, of course, now has the rest of Chicago. So there will probably be some kind of a swap that’ll take place there.
KELLER: You were using your management team then to consult for the telephone companies, is that correct?
HUGHES: Yes, we took three or four of our people who came out of the marketing and operations side of Prime since we weren’t really actively buying cable properties anymore. Mark Greenburg was the primary fellow who headed that up. Mark had been our VP of marketing for many years and he became President of that division of our company called Prime One. It became a very profitable entity for us.
KELLER: You didn’t have any investment, did you, really?
HUGHES: We had no investment. We were able to just take some of our people and do a lot of work for Bell South, SBC, Southern New England Tel, and other Bell companies as they looked at cable.
KELLER: Did you get involved with the TCI-Bell Atlantic potential merger?
HUGHES: No, we didn’t.
KELLER: There are a lot of stories of why that fell apart and I’m not sure anybody really knows except the two principles themselves.
HUGHES: That’s right. I don’t know all the nuances there.
KELLER: So you’re getting out of the cable business now with Chicago and Montgomery County on the table. Are you going to do anything in cable?
HUGHES: We don’t have any plans to do anything in cable. Again, being an entrepreneurial group that’s always tried to adjust to what’s going on, four years ago we decided to set up a telecommunications venture capital arm. I guess I wanted to go full circle. I started out in the venture business, got in the cable business for thirty years and now back in venture again. Our fund makes telecommunications related investments.
KELLER: Defined as?
HUGHES: Defined, very broadly, as anything in the telecommunications niche. Anything that’s occurring in the world of convergence between telephony, cable, and Internet. We do not intend to do any cable television deals. In fact, we made that commitment to our institutional investors who put up the money.
KELLER: Programming content?
HUGHES: Programming type content. Our primary investment in that regard being a company in the health business, a company called healthanswers.com that we think you’re going to hear a lot about in the next few years.
KELLER: Has it gone public yet?
HUGHES: Not yet.
KELLER: What is your reaction to the Time Warner-AOL merger?
HUGHES: Well, that’s a hard one to figure.
KELLER: This, of course, is going into the future from here.
HUGHES: I know Jerry Levin well and I’ve considered him to be one of the more creative guys in the media world. He was on one of my committees back when I was chairman in the ’70’s so I’ve known him a long time. I think there has to be some synergy between the delivery medium and the content side. AOL has over 20 million subscribers who want that content. Jerry and his people are looking at what is going to become a huge future business. It is what they call video streaming on the Internet and I don’t think anybody knows how this is going to play itself out. But it could be huge.
KELLER: You’re betting on health.com, aren’t you?
HUGHES: Well, that’s right. And I know Wall Street’s having a hard time figuring out that space.
KELLER: How about the AT&T-TCI deal?
HUGHES: I think AT&T is going to have more problems absorbing TCI than they thought they were going to have. The cost of the upgrade on the TCI plants is going to exceed what they thought it was going to be. And the deployment of telephony is going to be harder than what they think it’s going to be. Our engineers have always had great reservations about our ability to deploy telephony, especially because of a lot of the powering issues involved. I don’t know. It’s going to be an interesting next several years, Jim, to see where all this plays out.
KELLER: I think that’s probably true. It’s a different business than what we started out in, there’s no question in my mind about that.
HUGHES: Fortunately, you and I are both getting a little older. We’ll be able to sit on the sidelines and observe. We won’t have to worry about it.
KELLER: And say, I used to be… I don’t think I’d want to get back into it right now, quite frankly. You have already said that you’re Prime Venture Two, isn’t that what you’re calling your company now?
HUGHES: Prime New Ventures is what we call it.
KELLER: Prime New Ventures, is going to get into these esoteric, and that’s probably a bad word, but these different types of programming services, which would be carried on potentially more than one media. It could be either over telephony or it could be over a cable system or it could be satellite or whatever.
HUGHES: Exactly.
KELLER: That’s what you’re looking forward to in the future?
HUGHES: Right. We’re looking, we’re even involved in some wireless delivery to the home using some different kinds of technology just to kind of see how that plays out. We’re working with a little company here in Austin that’s hoping to deploy a high speed Internet access directly into the home and, we’re working with some different technologies. Some could be complementary to cable as we know it today, but in other cases they could be competitive to cable.
KELLER: There’s got to be a time, with even as little knowledge as I have of the technicalities, where one phone can have the same number in your home, in your car, in your pocket, wherever it may be.
HUGHES: Well, that’s definitely going to come.
KELLER: There will be no need to have these separate instruments and separate numbers and all this kind of stuff.
HUGHES: That’s right. If you look at the young people in America today, most of them do all their communications with a wireless phone.
KELLER: Including driving.
HUGHES: Yeah.
LAUGHTER
KELLER: Bob, I would like to wrap this up now because I think we’ve covered about everything that we could, unless you have anything you want to add.
HUGHES: Jim, the only thing I want to add is that I you and I and a lot of other friends have been very fortunate to be involved in one of the greatest industries of all time. We’ve had a lot of challenges, but it’s been a lot of fun and I think we’ve delivered a service that’s good for America. Along the way we’ve had our detractors, but I can’t imagine anybody today living in their home without having multiple video choices, we’ve had a role in making that happen.
KELLER: All I’m going to do is say amen to that. This oral history of Robert W. Hughes is part of the oral history program of The National Cable Television Center and Museum and thanks to The Gustave Hauser Foundation for providing the funds for doing it. Bob, thank you very much. It was really a pleasure.
HUGHES: Thank you.
