Invasion of the Cable Snatchers
While the mayor and city council sat by with a rubber stamp, Houston wheeler-dealers carved out their own electronic empires.
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IN LATE SPRING, 1979, a representative from Warner Communications, the big New York media conglomerate and one of the leading purveyors of cable television, arrived in Houston to make an announcement. Home Box Office, the popular premium cable TV service that offers commercial-free recently released movies, would be offered in Houston through its subsidiary, Warner Cable Corporation.
Warner had never applied for a cable TV franchise for Houston, and given the city council’s stated preference for local investors, Warner wouldn’t have had a ghost of a chance anyway. But it seemed that Warner did have a cable territory—Northwest Houston. Warner Cable Corporation had purchased 80 per cent of the stock in Houston Cable TV, for a price that neither Warner nor Houston Cable will reveal. Houston Cable TV filed no application to transfer ownership, and to this day Mayor Jim McConn says he knows none of the details of the deal.
Since neither company would reveal the purchase price, I asked a knowledgeable person in the cable industry to estimate the value of the Houston Cable franchise. It is safe to guess, he said, even assuming the liability of a major antitrust lawsuit, that the Mischer group’s franchise is worth about $20 million.
Bob Sadowski reread the last line of Bill Earle’s letter and chuckled. “I am sorry it took so long in getting back to you.” Earle always seemed to be apologizing, thought Sadowski. It was March 20,1979—four months after Sadowski’s last day on the job—and it was a little late to be sending the typed copy of Sadowski’s handwritten notes.
Sadowski turned to the first page of the summary. He had read only three paragraphs when he discovered the first distortion. The summary recommended to the council that it “conditionally approve” six of the seven applicants—the five companies that were subsequently approved and Cablecom, which Sadowski had ranked number one. Actually, Sadowski had recommended that only Cablecom be approved, and that it be approved unconditionally. He had tentatively approved three others—Gulf Coast, MECA, and Westland—provided they upgraded their service. And he had recommended that the rest be rejected.
The summary included a number of other things he had recommended that the city do—postpone the decision because its haste had resulted in mediocre proposals; advertise nationally; appoint a director of telecommunications to set strict guidelines for the proposals; and demand that the applicant cease “drawing franchise boundaries to suit themselves” and allow an expert to do it. Sadowski marveled that these suggestions had been left intact, but he noted all comments about the council—“What’s the rush?” he had written—had been neatly excised.
Sadowski was not pleased with summary, but he was not as angry as he had been. The city, at long last, was sending his money—at least $1100, which was all he expected to get at that point. It had required a personal visit to Kathy Whitmire, the city controller, who, once she understood the circumstances of his firing, had expedited his check. She had also advised him to tell his story to the FBI, and for a while there was talk of a Justice Department investigation. That possibility now appears to all but dead.
When the check came in thee mail, Sadowski was faced with a dilemma. He had $1000 from Bill Earle and a total of $2000 from the City of Houston. Should he keep Earle’s money as partial payment of the additional $2500 he felt he was owed? “After all,” said Sadowski, “this thing was getting too intricate to be believable. I felt like I was in the middle of Watergate.” No, he finally decided, maybe that was Earle’s personal money. He mailed Earle a check for $1000, but he also made a photocopy of it.
The final round in Sadowski’s bout with city hall occurred in May, when he received his copy of the trade journal Broadcasting. In it he found an interview with the City of Houston’s “cable TV consultant.” That man was Bill Chamberlain. And Chamberlain had openly described how he had put together “a friendly package” of franchise proposals that the city council had been happy to approve. Sadowski picked up the phone and, one last time, dialed Bill Earle.
“Who the hell is Bill Chamberlain?” demanded Sadowski.
“Never heard of him,” said Earle.
Sometime in the spring or summer of 1979, Storer Broadcasting of Miami Beach acquired a controlling interest in Houston Community Cablevison by purchasing 80 per cent of its stock and agreeing to give the black investors a 20 per cent interest in its subsidiary, MECA. The city was not informed of the purchase price. According to the authority I talked with, the property that Storer bought from Houston Community Cablevision could be worth about $8 million.
In October of last year, Clive Runnells wrote a letter informing the city council that he intended to sell 76.5 per cent of the Gulf Coast partnership to Warner Communications. That deal has never been consummated, because in the meantime Billy Goldberg filed a $7.8 million federal lawsuit against the Houston City Council and Gulf Coast Cable, alleging a conspiracy to violate the Sherman Antitrust Act. Neither Gulf Coast nor Warner will reveal the discussed purchase price, but the same source estimates that the Gulf Coast franchise might be worth as much as $30 million.
Less than one year after the city council awarded the franchises, out-of-state companies owned controlling interests in the cable companies serving 70 per cent of the city. If the Gulf Coast sale goes through, Warner and Storer will control 98 per cent of Houston. Only Westland CATV, the Meyerland company, has done exactly what it promised to do. The company is not for sale. The principal investors—Dale Bennett, Alan Rudy, and Harold Goldstein—have done extensive market research and have already worked out programming agreements with area schools, and the Jewish Community Center. “To tell you the truth,” said Goldstein, “I feel a little foolish now that we’re liable to be the only local company in town. I had no idea any of this was going on. If I had, I probably would have asked for a bigger area.”
To this day, not an inch of cable has been laid. Mayor McConn is angry about that, he says, but there’s little he can do about it. “I’m sorry these sales took place,” he said. “We did want local companies in Houston. I wish it hadn’t happened. But right now I would approve anything that would get cable TV into the homes of the people of Houston.”
Bob Sadowski sat down at his type-writer and pecked out the date: October 7, 1979. His letter was directed to the city council of Dallas. “It is my understanding,” he began, “that the City of Dallas is presently considering the awarding of cable television franchises.”
Sadowski hoped, he said, that there were few honest men left in the world. “The city council of Houston had the opportunity to serve as a model for the country in how a big Southern city goes about the business of selecting cable television franchises,” wrote Sadowski. “Unfortunately, the city council of Houston made a mockery of the selection process. The City of Dallas now has the opportunity to set a national example in the area. Gentlemen, I strongly urge you to seize this opportunity now.”
For starters, Sadowski suggested that he be retained as a consultant. But the City of Dallas—which will be awarding a cable TV franchise this spring—had already employed a consultant.
The law appears to be clear. Section 30 of the cable TV franchise ordinance of Houston begins with this sentence: “The rights, privileges, and franchise granted hereunder may not be assigned, in whole or in part, with out the prior consent of city council expressed prior consent of city council expressed by resolution or ordinance, and then only under such conditions as may therein be prescribed.”
The key phrase is “in whole or in part.” A controlling interest in Houston Cable TV has been assigned to Warner Communications. A controlling interest in Houston Community Cablevison has been assigned to Storer Broadcasting. A minority interest in MECA has been assigned to the original owners of Houston Community Cablevision. Gulf Coast Cable has attempted to assign three quarters of its partnership to Warner Communications. None of these transactions received the “prior consent of city council.”
Mayor McConn told me that he is not sure they should be required to do so. “We expected some of this,” he said. “We expected some of these companies to go into joint ventures to acquire technical advice and expertise.” And he said any legal interpretations of the requirements of the ordinance will be addressed by the city attorney—Bob Collie. Collie has refused to talk to me. One of his assistants, Ed Cazares, told me that in his opinion only a sale of 100 per cent of the stock would require approval of the city council. “Read the ordinance,” he said. “It’s all in the ordinance.” The ordinance says no franchise may bee assigned “in whole or in part.”
BOB SADOWSKI HAS A NEW JOB, and he says his life is almost back to normal. After eight months of unemployment—the longest inactive period in his life—he got a job with Gulf Region Educational Television Affiliates. Then, in January, he left that position to join the Houston Independent School District’s Division of Instructional Media Services. He likes the job very much, but something his new boss said to him a few weeks ago has him worried.
The HISD official asked Sadowski to take a new assignment—on the Houston Cable TV Task Force.
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