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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Bob Sadowski has the round ivory face of a cherub and a résumé nine pages long. His oversized steel-rim glasses suggest a faint resemblance to Clark Kent, and except for a tendency to speak too fast and pepper his sentences with words like “gee” and “wow,” he might be thought timid. People instinctively like Bob Sadowski—or Dr. Robert Sadowski, as he is known in the academic world—although they don’t always remember his name.
For a period of about four weeks Bob Sadowski was the one and only expert on cable television employed by the City of Houston. He retains that distinction to this day. At the time he was hired, in the fall of 1978, the Houston City Council was on the verge of handing out cable TV franchises that will in fifteen years be worth at least $200 million in profits to cable operators—perhaps more if cable TV becomes widely popular. You would think the City of Houston would have needed at least one person who could evaluate cable TV proposals, one person who could talk about satellite transmission, earth stations, utility rights-of-way, local-origination programming, and the myriad other issues connected with this complex and flexible communications system.
The City of Houston didn’t. The process by which Houston created an electronic communications system for 1.5 million people—the first new regulated utility since the advent of the phone company—is still shrouded in secrecy. Bob Sadowski doesn’t know any more about how it was done than the average Houston citizen. For reasons Sadowski never quite understood, he was unceremoniously fired. His research—even his handwritten notes—were swept into oblivion. His conclusions were never considered by the council.
Later, when things started to look ominous, a few curious city employees tried to find out what had happened to him.
“Who was this guy Sandusky anyway?” they asked. No one knew, Sadowski had been forgotten again.
The wiring of urban America for cable TV has proceeded at breakneck speed for the past two years, and yet it is still little understood by the public. To say that cable TV is the wave of the future is both to overestimate and underestimate its impact. There are really two kinds of cable TV, and few people—few city councils, for that matter—have been able to distinguish between them. The first kind, celebrated by visionaries and promoted by journalists, is a revolutionary two-way communications system that will radically change our way of interacting with government, business, and media. It is also the system that promises noncommercial programming, free of the quotidian standards of the broadcast networks.
The second kind of cable TV, the kind many cities are likely to get, is no different from the television we receive today. Not specialized in any way, it relies on the profit-oriented programming endorsed by the networks: movies (albeit recently released), sports, sitcoms, news. This is what most people think of as cable TV. This is what most cable TV companies think of as cable TV. That’s because this is the only type that insures maximum profit with minimum investment.
In the best of all possible worlds, there would be no need to distinguish between cable for people and cable for profit. But Houston is not the best of all possible worlds. The cities of Dallas, Fort Worth, and Austin are all preparing to award or renew cable franchises. But in Houston the story is complete. When the Houston City Council awarded cable television franchises last winter, the decision had nothing to do with the quality of service the applicants could deliver, but everything to do with the power and influence they had behind them. The city handed the franchises over to political and business insiders. Then some of the lucky insiders cashed in their chips by reselling their franchises for millions of dollars. No one at city hall seemed to mind.
In late 1977 or early 1978, Clive Runnells and Bill Chamberlain began planning the future of cable television in Houston. Neither name was a household word, although both men had done their part to bring about the marriage of business and government that lies at the heart of Houston politics. Runnells, 53, is a fourth-generation cattleman who owns the AP Ranch near Bay City. A genuine River Oaks blueblood, Runnells made his fortune through mutual-fund management, reared eight children, and as early as 1954 ventured into small-town cable operations in Pennsylvania and Missouri.
Runnells had hungered to wire Houston for over a decade. He had applied for a franchise to serve the entire city in 1973 but didn’t get it. Since then, Gulf Coast Cable Television, the company he had formed for the 1973 fight, had been busily snapping up towns and hamlets all around Southwest Houston.
Chamberlain listed his occupation as media consultant, but his value to Runnells was purely political. At the time of their meeting, Chamberlain had just improved his political stock by running Jim McConn’s mayoral race. Chamberlain could neither build, operate, nor manage a cable system, but he had the more important skills: he knew McConn, he knew how to pull strings at city hall, and he had run successful franchise campaigns in Pasadena, Kingwood, and the Rio Grande Valley. Chamberlain was also acquainted with every politician or businessman who could conceivable get in the way of a franchise application. He had managed all five of Louie Welch’s mayoral campaigns, and in 1973 he had won a cable franchise for Greater Houston CATV.
That 1973 campaign was one thing that worried Runnells. The city council had awarded Chamberlain’s clients, led by Lester Kamin, the franchise for all of Houston, but it had been revoked in a citywide referendum after bitter charges of influence peddling and restraint of trade. Kathy Whitmire, a political activist who is now controller for the city, was outraged that Greater Houston was required to satisfy only the minimum standards set by the FCC and that Kamin was a former business partner of Mayor Louie Welch’s. She organized an ad hoc protest group, got the five hundred signatures required to force a referendum, and, with money from black politicians and some of the losing companies (including Runnells’s Gulf Coast), engineered a campaign based on the slogan “We don’t need any monopolies in Houston.” The franchise was turned down by better than two to one.
By 1978, though, everything had changed. The FCC had ceased to strictly regulate cable companies, making the business much more lucrative and easier to manage. And in 1975 RCA had launched the first Satcom satellite. This technological breakthrough made services like Home Box Office available to every TV set in the nation at an insignificant cost. It also created the so-called superstations, the first and most famous being Ted Turner’s WTCG in Atlanta, which laid to ret forever the dream that cable TV would elevate the taste of America.
The time was ripe for cable in Houston. Runnells knew that, and he knew that other cable companies were watching Houston too. He wanted to be the first one out of the chute. He had encircled his target with small cable companies, including one in the island city of Bellaire, in Southwest Houston. And he had put together a roster of rich, mostly Republican investors that no politician would oppose. They included two relatives of George Brown, the co-founder of Brown & Root and once one of the most powerful men in Texas; real estate developers Morton Cohn and the late R.E. “Bob” Smith; John H. Duncan, founder of Gulf and Western and brother of Secretary of Energy Charles Duncan; investment banker Edward Randall III, scion of old-money Houston millionaires; Randall’s mother, Katherine Risher Randall; and J.T. Trotter, an influential political fundraiser.
All Runnells needed now was the cooperation of city hall. He wanted assurance from Chamberlain that McConn was ready to move on the cable issue again. Having waited five years, he wanted to be sure this time. Chamberlain agreed to talk to McConn to find out when the race could start.
Bob Sadowski had just spent a frustrating September morning filling out personnel forms at the University of Houston. He was anxious to get the red tape over with and report for his first day of work. Still, he felt a little proud—after only three weeks in Houston, he had landed a job. He had been nervous about making the move, not least because a month earlier, in August 1978, he had given up an $18,000-a-year assistant professorship at the University of Maryland. But after five years of teaching and a year spent working for a Senate subcommittee and the Library of Congress, he could afford to do it. He was only 32. His wife, Barbara, had just finished her doctorate and had accepted a position in the education department of the University of Houston. She needed experience; he already had it. So he had decided to resign.
As luck would have it, KUHT-TV, the public television station operated by the university, was looking for a new assistant producer. Sadowski saw their ad in a national media newsletter, hustled over to the studios, and, after a series of interviews, was hired to produce a weekly community affairs program called Friday Local. The pay was terrible–$10,000 a year—but he was excited anyway. “It was a chance to get some real-world experience,” he said.
But he didn’t go directly to the studio from the personnel office. Instead he called home to tell Barbara that so far everything was working out. She then mentioned that he had had a phone call from Karen Possner, an old friend of his on the House Subcommittee on Communications—something about doing some consulting work on cable TV for the City of Houston.
As soon as he got home that evening, he called Possner. Yes, she said, Houston was looking for a cable TV consultant, and she had recommended Sadowski. The city seemed interested in getting some help, she said, and so he should call as soon as he could. A week later Sadowski called William Earle, director of Houston’s Public Service Department.
When Sadowski walked into Earle’s office the following week, there were two other people waiting to meet him—Jerlyn Mardis, Earle’s top assistant, and Adrian “Ardie” Baer, an assistant city attorney assigned by the Legal Department to draft the franchise ordinance. Earle, Mardis, and Baer presented Sadowski with their dilemma—namely, that none of them knew the first thing about cable TV. They had been reading as much as they could, but now that most of the applications were on file, they were going to be hard pressed to come up with any recommendations to the city council by the December deadline. They needed an expert to sort out the important issues, and they needed him quick.
Sadowski was flattered and intrigued. He was familiar with cable, having prepared a report on the subject for Philip Hart’s Senate Antitrust Subcommittee; he loved research; and he wanted to please his friends at the Communications Subcommittee. The only problem was that Earle seemed to want only a very limited study—to be done in perhaps 150 hours—and Sadowski had just started a new job. “But then I thought, wow, this is the nation’s fifth-largest city about to make this very important decision,” he said later, “and I didn’t see how I could turn them down.”
Before accepting, Sadowski tried to work something out with KUHT, but the management was adamant: Sadowski had to choose between the city and KUHT. If he chose the city, there was no guarantee he would have a job when he finished the 150 hours. Sadowski thought about it for several days, figured he could still make $4500 in two or three months if he took the consulting job, and reluctantly submitted his resignation to KUHT. The decision made his wife nervous, but Sadowski placated her. “This city deserves the best cable TV system in the nation,” he said. “I think Houston will be a model for the rest of the country.”
In March 1978, a full seven months before Sadowski was hired, Chamberlain returned to Runnells’s office with great news. He had been to see McConn, and the mayor couldn’t have been in a better mood. Not only was he willing to consider Gulf Coast’s cable application, said Chamberlain, but he wanted to actively encourage cable TV during his first term. They had the green light. Chamberlain said he would manage Gulf Coast’s cable campaign, provided Runnells would defer to him on political strategy. Runnells was more than willing.
Chamberlain’s first step was to get some legal muscle. He advised Runnells to hire Bill Olson, a former city attorney now in private practice. (The best reason for becoming a city attorney in Houston is to become a former city attorney, thereby attracting clients who want to get things done at city hall.) Olson was the best candidate for yet another reason.
During the ill-fated franchising process of 1973, Olson had written the recommendations the city council eventually accepted, and he had taken good care of the local interests. Of the five companies that applied, three were among the largest in the country: Time Inc., Teleprompter, and Cable Vision of Houston (owned by investors with extensive holdings in Pennsylvania). All three were rejected. The two hometown companies with only minimal experience—Greater Houston and Gulf Coast—received a favorable recommendation from Olson.
Once Olson was on board, Runnells and crew designed a campaign based on three principles: (1) avoid another referendum by getting the council to approve at least two companies, (2) don’t leave out anybody who could hurt us, and (3) pursue a doctrine of “manifest destiny” for Southwest Houston. This last principle derived from the logic that since Gulf Coast already had franchises in Bellaire and Memorial Villages, a major trunk line would eventually have to be routed from the Bellaire base through a large portion of Southwest Houston.
Southwest Houston is the kind of area cable entrepreneurs dream about, a fact not lost on the triumvirate of Runnells, Chamberlain, and Olson. Southwest Houston would probably become one of the nation’s most lucrative areas for cable TV properties—first, because it is densely populated and therefore less expensive to wire; second, because it is still being developed; and third, because most of its residents, especially the thousands of apartment dwellers, are between 18 and 35, the prime viewing ages.
Plans were made, meetings held, engineers hired, and maps drawn. The first proposal, never actually presented to the council, asked for the sun and the moon. Gulf Coast wanted all of western Houston, encompassing about 700,000 people who live on the boom side of Interstate 45. “We never expected to get it all,” said Chamberlain later, “but we knew that people were going to start chopping us back. I wish now that we had asked for even more, because it turned out, we got chopped back too much.”
In late spring Gulf Coast requested a hearing before the council, asking for the right to start building the connecting trunk line across Southwest Houston. Everything was happening on schedule.
Bob Sadowski reported to work on October 20, 1978, still flushed with civic pride and anxious to impress his new boss, William Earle. He went first to the Public Service library, pulled several bulky proposals out of the file, and took them home for three long nights of reading. “I was thinking, ‘Gee, these are real live proposals for a big American city,’” he said, “and I’m going to have an impact on what happens to them.”
The first proposal he noticed was an expensively bound, two-volume tome inscribed with the logo of Cablecom-General, a Colorado firm owned by RKO General, which in turn is a division of General Tire. Even though Cablecom doesn’t win many franchises, it invariably impresses consultants hired by city councils because of its commitment to services like local programming, public-access channels, and first-class studios. Because of its bulk, Sadowski decided to read Cablecom’s proposal first.
It took him most of the night, but the more Sadowski read, the more impressed he became. Especially helpful was Cablecom’s extensive market survey of the Houston area, which set out the preference of viewers, the special needs of certain civic organizations, and the clear demand for strong local programming. The proposal backed up the survey with some attractive promises: several access channels, a $200,000 studio staffed by nine professionals, and a more than reasonable subscriber rate of only $6.95 per month for basic service.
The next day Sadowski returned to city hall, brimming with enthusiasm. He saw Bill Earle in the hall and casually mentioned the proposal. “If all of these proposals are as good as Cablecom’s,” he said, “then this city is going to have a first-class system that will serve as a model for the nation.
“So you like Cablecom?” Earle said.
“Don’t you?” replied Sadowski.
Earle mumbled something and walked away.
Later Sadowski ran into Ardie Baer and repeated his opinion of Cablecom’s proposal. Baer didn’t appear to be interested.
On June 14, 1978, still four months before Sadowski launched into his research, the city council met to consider cable TV for the first time in five years, and Clive Runnells was ready. Standing before the council, he asked for the right to bring cable TV to all of Southwest Houston, as well as to parts of the northwestern and southeastern sections—in all, an area comprising about 43 per cent of the city. Runnells is a lean, handsome man with a tennis tan and a rapid, fluent manner of speaking, and his presentation was excellent. Olson and Chamberlain were both pleased. Now all they could do was wait for the expected flood of competing applications.
It didn’t take long. Within two weeks, Chamberlain learned that a new company had entered the fray: Houston Cable TV. Despite its innocuous name this was no ordinary company. Chamberlain had never heard of Houston Cable, but he knew the man behind it very well: Walter Mischer, the Houston developer, banker, political fundraiser, and contributor to Jim McConn’s campaign (see Reporter: “The Kingmaker,” TM, February 1980). Mischer, too, knew something about getting the best legal talent. He had hired his own former city attorney, Jonathan Day, who now worked for Butler, Binion, Rice, Cook & Knapp. That firm had never been far from the political vortex, and as a matter of fact, one of its recent alumni had just gotten a new job with the city. His name was Bill Earle.
Actually, Chamberlain was relieved to get the news. Mischer’s group included a lot of conservative Democrats, who would have to be part of the final equation approved by the council. Work with Mischer, Chamberlain told Runnells. He represents a constituency we need in order to avoid another referendum.
Runnells worked with Mischer, but he was not exactly pleased about it. For one thing, Houston Cable TV’s application included about 30,000 homes that Gulf Coast wanted, and that area—between the Katy Freeway and the Hempstead Highway—was prime territory.
Mischer had more than Jonathan Day working for him. His list of stockholders read like a Who’s Who of Texas politics: Allan Shivers, former governor and chairman of the University of Texas Board of Regents; W.E. “Eddie” Dyche, a powerful political lawyer and contributor to conservative causes (who ended up with more stock than Mischer); Gerald H. Smith, president and chief executive of Allied Bancshares; Marvin Leggett, a real estate developer who had contributed more than $12,000 to Jim McConn’s campaign; Ralph Hull and his father, T.P. Hull, Jr., both wealthy attorneys; John T. Jones, nephew of the legendary “Mr. Houston,” Jesse Jones; and Tolbert Foster, then president of Austin’s KVUE-TV, which at that time was the highest-rated UHF station in any major VHF market. Foster, who had built systems in Center and San Augustine, was the only investor with any cable experience.
With two former city attorneys now carrying the ball for two potent groups of investors, there was a possibility of an embarrassing standoff. Chamberlain’s advice to Runnells: “Don’t force the city council to play Solomon. The last thing they want to do is thrash through a lot of thorny issues. Make it easy for them.” So Olson, representing the Runnells group, and Day, representing the Mischer group, set out to make it easy. More meetings were held, more maps drawn. Mischer’s group insisted that Runnells was asking for too much. The disputed area included only 30,000 homes. Runnells would still have 240,000 others. So Runnells finally capitulated. The map was redrawn, the applications amended. Gulf Coast would settle for a boundary at the Katy Freeway.
Bob Sadowski had been working only a week, but he already felt that the city was rushing things. Bill Earle had reminded him several times that the council needed the franchise recommendations within two months, but Sadowski was still hoping that the city would reconsider. There were too many unanswered questions. All he had to work with were two documents for each company: a proposal and a questionnaire. The proposals had no standard form, ranging in size and quality from a brief proposal full of painful syntax, hastily slapped together by a man in the East Texas town of Henderson, to the extensive text of Cablecom. His other source was a long but sketchy questionnaire that had been mailed to the companies before Sadowski was hired. Baer and Mardis told Sadowski that since they hadn’t known exactly what questions to ask, they had copied most of the questionnaire from a Harvard Law Review article.
Still, the answers to some of the questions were unsettling. One day Bill Earle sauntered over to Sadowski’s desk in the library and casually asked how he was doing. “This latest proposal,” said Sadowski, “is not going to make it in its present form. Many of the questions have not even been answered, and they apparently don’t even intend to offer local-origination programming. I don’t think I could recommend this company.”
“Which one is that?” asked Earle.
“It’s a company called Houston Cable TV,” said Sadowski. “Anyway, they want the same area that Cablecom wants, and Cablecom is far superior.”
Earle didn’t mention it, but he was well aware that Walter Mischer and his colleagues were behind Houston Cable TV and that his friend Jonathan Day was their attorney. He started taking notes. “Well, then,” he said, “could I say that we’ll favor Cablecom because it happens to be applying for the same area, but if Houston Cable applied for a different area, you might approve them?”
Sadowski was surprised. “They haven’t asked for another area,” he said. “And now that we’re talking about it, this is a heck of a way to solicit proposals. The companies are telling the city what areas they want, instead of the other way around. Why couldn’t we open up the process again, advertise nationally, and get a bunch of proposals in here for areas designated by us?”
“We don’t have time,” said Earle.
Sadowski didn’t consider that an answer, but he let it pass.
Later another thought occurred to Sadowski. “We did advertise nationally for proposals, didn’t we?” he asked.
“We may have,” said Earle. “I’m not sure.”
The real answer was “No.” The only out-of-state companies that had submitted proposals had heard about Houston through the grapevine, and at least one major cable company—American Television and Communications—had been furious when it realized that the deadline for proposals had passed, since it had been researching the Houston market for over a year.
Everyone—that is, the Runnells group, the Mischer group, the mayor, and the council—agreed on one thing. When it came time to give out franchises, one of them had to go to black businessmen. The blacks had been instrumental in defeating the franchise of 1973, and the city’s most influential minority law firm, Jefferson and Maley, had contacted the mayor in late summer, 1978, to make certain they would not be left out. That firm is headed by Andrew Jefferson, and old ally of Barbara Jordan’s and one of the first black judges to serve in Houston, but the job of securing the franchise fell to a younger partner named John Sherman. Sherman had set up a partnership of black investors—primarily doctors and hospital administrators—to seek a franchise. Yet none of the eleven owners of the company, named Houston Community Cablevision, had previous experience in any kind of medium, much less cable TV. They didn’t even know precisely what to ask for.
When the application from the blacks came in, though, it meshed nicely with the others. It included part of the Northeast Houston—the Third and Fifth wards—and the downtown area. It didn’t infringe on any territory that Runnells and Mischer wanted. Chamberlain said that he enjoyed working with Sherman and respected his opinions. Privately, he told Runnells that the franchise would never be built without outside help. And it would take a big company to help.
bob sadowski continued to read proposals, with growing disbelief. After Cablecom, it had been all downhill. In his mind, the single most important criterion for a franchise should be the company’s commitment to local programming. An expensive undertaking, local programming is generally the last thing a cable entrepreneur wants to spend money on. But it’s the one way a city council can insure that the community gets more out of cable than movies and sports. On this point most of the proposals failed miserably.
One company, Westland CATV, had made some effort to assess local programming needs, but its proposal was so small—it asked for a mere 20,000 homes—that Sadowski found it hard to take seriously. For the rest, local programming goals were either nonexistent or vaguely defined. Not one appeared to have a clear idea just what would happen once it got a franchise.
One company’s proposal stopped him dead in his tracks. The company appeared to be owned by blacks—which was good, because the FCC encourages minority participation—but judging from its brief proposal, it didn’t intend to do anything for blacks. He turned to the questionnaire. Amazingly, the company’s owners had no intention of even building a studio. They planned no local programming (usually what blacks want most in any franchise package). And they intended to use a “turkey” engineering system, meaning that their own staff engineers would not have access to the inner workings of the system. Sadowski made a few furious notes on a legal pad, wrote “reject” in the margin of his master list, and turned to the first page to get the company’s name: Houston Community Cablevision.
The news making its way to Clive Runnells’s Galleria office late in the summer of 1978 wasn’t pleasant. The give-and-take was not yet over, he was told by Olson and Chamberlain. Someone else wanted into the Houston cable business. The entry this time, they had heard, was a partnership called Westland CATV, controlled by a group of Jewish businessmen affiliated with Columbia Communication Corporation. Fortunately, they had not hired a former city attorney to represent them. Unfortunately, one of the partners was a man named Marvin Katz. He was Mayor McConn’s personal attorney.
Curiously, Westland didn’t want much at all—a rather thin slice of Southwest Houston in the Meyerland area east of Hillcroft, 20,000 homes at the most. The investors lived in that area; they had developed real estate there; and it was thought of as a Jewish area of town, even though its Jewish population was no more than 10 per cent. The Meyerland area wasn’t a large chunk, but still, Runnells didn’t want to give up 20,000 more homes. They were good homes, too—even more affluent than the Katy Freeway area he had lost to Mischer—but Chamberlain’s advice was to play along with Westland’s proposal. The deadline for proposals was approaching. Westland would undoubtedly be the last competitor. And, anyway, who was left at this point? The River Oaks gentry had a territory, the conservative Democrats had theirs, the blacks were in, and now the Jews. It was looking almost equitable.
storer broadcasting of miami beach is known in the cable industry for being one of the most aggressive franchise grabbers in the nation. Although it holds 170 cable TV properties in seventeen states, its performance rarely rises above mediocrity. Many of its cable TV companies offer no local-access programming. Others provide only one channel (Home Box Office) that can’t be received over the airwaves. Storer does know how to make money, though, and at its office in Clear Lake City, it has a large staff working primarily to acquire franchises, by whatever means, in the Dallas, Fort Worth, Houston, and Galveston metropolitan areas. So far it has 39 franchises in Texas, all acquired within the last two years.
Since Storer was an out-of-state company, and since the Houston City Council had made it quite clear that it did not favor “foreign” franchisees, it may have seemed odd that Storer might obtain a franchise in the southeast quadrant of Houston. But not to Bill Chamberlain. His advice to Runnells was that since Storer already had a franchise in Clear Lake City, it was only logical that they should receive an adjoining area in Houston. After all, he reminded him, the basis of our application is that we have Bellaire and the Memorial Villages. If manifest destiny works for us, it has to work for Storer as well. Everyone seemed to agree. MECA Corporation, Storer’s wholly owned subsidiary, was the only company to apply for the blue-collar territories of Southeast Houston.
Clive Runnell’s outfit was about to get its first, and probably last, inspection.
“One of these companies has an operating franchise right out in Bellaire,” Sadowski reminded Earle. “Gulf Coast Cable.”
“Right,” said Earle.
“Don’t you think we should visit their facilities?”
“Sure, Bob, you go ahead and set it up.”
Sadowski did set it up, for November 13. He also sent Earle a memo that included thirteen substantive issues he wanted to discuss with Gulf Coast’s general manager, Dick Barron. This time, he thought, we won’t have to depend on those sketchy questionnaires. We can find out what they really intend to do.
To Barron’s surprise, Sadowski arrived a half hour early for the Gulf Coast appointment and immediately launched into his list of prepared questions. He didn’t like all the answers. He thought Barron was a little evasive. And when he got to the one about public-access programming, he was, well, shocked. Barron’s public-access programming consisted of a set of three-by-five cards bearing messages like “Garage Sale Today at 2pm. Call 333-6678.” The cards were placed in a revolving file in front of a camera, and every fifteen seconds the machine would flip to the next one. Sadowski wanted to pursue the issue of public access, but he was interrupted by the arrival of Earle and Baer.
Sadowski continued to ask questions, but he was not able to follow up on them because of the interjections of his two colleagues. He learned very little that he didn’t know already. After a few minutes, Barron offered to show the trio around the facilities, and Earle enthusiastically accepted the invitation.
As they walked through the Gulf Coast plant, Sadowski was introduced to another Gulf Coast employee–a man whose name he can’t remember—and the two of them became separated from the rest of the party. Very politely, the man asked Sadowski who he was and just what he was doing for the City of Houston. As well he could, Sadowski explained his role as a part-time consultant.
Shortly thereafter, the fact-finding mission at Gulf Coast ended.
About the time Bob Sadowski was visiting Gulf Coast, Houston’s various cable entrepreneurs—whose numbers now were legion—were all thinking the same thing: this is getting ridiculous. Yet another cable applicant, who had formed a company within the last month, was knocking on the city council’s door, and the word from Jim McConn’s office was that the deadline would be extended long enough to allow him to file. The applicant was none other than Billy Goldberg, chairman of the state Democratic party, and he wanted part of what Clive Runnells had come to think of as his own territory.
Goldberg had an explanation for his tardiness. His company, Affiliated Capital Corporation, had long been interested in providing cable to the Alief area of far Southwest Houston, most of which had been developed by Goldberg before the city had annexed it in 1977. Affiliated Capital had handled all the other utilities in that area, but Goldberg was blocked by federal law from owning any media properties as long as he owned any savings and loan associations. He had been steadily divesting himself of the savings and loans, and he closed the final sale on September 16—two weeks after the original deadline for cable applications. He immediately formed a subsidiary called Southwest Houston Cable TV, hired engineers to do technical studies, and, of course, hired a former city attorney—Alan Levin.
At first Levin brought Goldberg bad news. “The pie has already been cut up,” he reported. But Goldberg met personally with McConn, received the mayor’s assurance that his application would be considered, and proceeded to submit a proposal. The fact that Goldberg had contributed $2000 to McConn’s campaign didn’t hurt his case a bit.
Chamberlain didn’t like it. Runnells didn’t like it. After all, the pie can be sliced only so many ways. Again, the application was small—only about 40,000 homes—but Gulf Coast had not been happy about losing 30,000 to the Mischer group and 20,000 to the Jewish group. Chamberlain advised Runnells to wait and see what happened. It wouldn’t be wise to rush into confrontation with the chairman of the state Democratic party.
On November 14, the day after the visit to Gulf Coast, Sadowski arrived at city hall around nine o’clock. He was immediately called to Bill Earle’s office.
“Bob,” said Earle, “I’m sorry about this, but I understand the mayor is not going to approve your consultant’s contract. Turn in the hours that you’ve worked so far, and we’ll pay you for those. But we no longer need your services.”
“I don’t believe this is happening,” Sadowski said. Bill you promised me a job here, and I quit a good job to take this. hat do you mean you’re sorry?”
“I didn’t think there would be any problem,” aid Earle.
Sadowski did the only thing he could think of. He rushed over to the KUHT studios, only to learn that his job there had been filled. He spent the rest of the day trying to explain to his wife what had happened. She resisted the temptation to say, “I told you so.”
The next day Sadowski decided to go through the handwritten notes he had made on each of the cable companies in the hope of finding some clue’s as to why he had been fired. While he was working, the phone rang.
It was Bill Earle, he wanted Sadowski’s notes. That was no problem, Sadowski said, but first he wanted to sort them out, rank the seven companies, and get the notes typed at city hall.
Sadowski didn’t understand the rush—in fact, he had wanted to make a copy of the notes for his own reference—but Earle said he needed them right away. So Sadowski reluctantly assented. In an hour, a messenger knocked on the door. Sadowski handed over the notes—all of them—and he never saw them again.
On Novembver 28, Bill Earle drafted a long memo to his colleague Bob Collie, the city attorney. The language was polite and formal, but the underlying tone was peevish. The two of us, said Earle, are supposed to be working jointly on a cable TV franchise ordinance, but decisions are being made without my knowledge or approval. Earle had just learned that six franchise ordinances were due to be considered by the city council within the week, a fact he had been unaware of until he read the public agenda. Now he had virtually no time to review and comment on those franchises.
If Bill Earle didn’t know what was going on, who did? Bob Collie? He refused to discuss any aspect of this article. Jim McConn? He admitted to meeting with all the local companies during the franchise process but contends he favored none of them. The Houston City Council? The record here is sketchy because the council conducted virtually no public debate on substantive issues during the franchise hearings. Bob Sadowski? No.
“The world was caving in on me,” said Sadowski. He spent his mornings going from one personnel agency to the next, his afternoons waiting for the phone to ring. He kept running over the events of the past two months in his mind. What happened? he asked himself. What did I do wrong? How could three city officials—Earle, Baer, and Mardis—give me a job and then tell me they had no authority to hire me? The more he thought about it, the angrier he became. He had received only $900 from the city, and by his reckoning they owed him $1100 more for the time he had worked. In fact, morally they owed the full $4500 just to take the cast to trial. Finally he decided to pay Earle another visit.
In late November Sadowski walked into Earle’s office and found him jovial and apologetic. Again he promised that Sadowski would get $1100 more from the city. They talked for several minutes, and Sadowski’s harsh opinion of Earle began to mellow. Maybe he really believed I had a job, Sadowski thought. Perhaps he was ordered to fire me. As the conversation continued, Earle pulled out a franchise proposal for Southwest Houston Cable, a company Sadowski had not heard of before. Earle wanted Sadowski’s opinion—what did he think of this questionnaire?
Earle’s request sounded genuine enough, so Sadowski took a look at it. They went over the questions one by one, and Earle began to take notes on Sadowski’s comments. While they were talking, Ardie Baer happened by the office, and Earle waved him into the room. “Come on in, Ardie,” said Earle. “I want to get your opinion of this one, too.”
Baer came in and looked at the proposal. “I’m not supposed to tell anyone this,” he said, “but they’re not going to get one.”
Earle looked startled. “What do you mean?”
“They’re not going to get a franchise.”
Earle tossed the proposal onto his cluttered desk and pushed his chair away in disgust. “I give up,” he said. “Why am I wasting my time on this if Bob Collie already knows who’s going to get franchises?”
Baer shrugged. “That’s just what I hear.”
On November 16, Billy Goldberg’s Southwest Houston Cable TV had officially filed its application for a franchise. His attorney, Alan Levin, was busily meeting with engineering consultants to prepare a presentation to the city council. But on November 27—two days before the scheduled hearing—Levin got some jolting news. The city council intended to vote on six franchises—including those of Gulf Coast, Houston Cable TV, MECA, and Westland—on the same day that Goldberg had his hearing. If Gulf Coast’s franchise was approved, where did that leave Goldberg?
Levin tried to find out what was happening, and after a series of phone calls, a compromise was reached. On November 29, with no discussion at all, the council tabled all six requests. A new hearing for Goldberg was set for December 12.
SADOWSKI WAS BACK AT CITY hall on December 12. He asked Earle the same question as before: “Where is my money?” Earle didn’t know, but he assured him it was forthcoming. The city is a bureaucracy; approval takes time. “In the meantime,” suggested Earle, “you might want to go downstairs to the council chambers. Another company is making a presentation.”
When Sadowski got there, Billy Goldberg was already at the lectern, explaining his proposal to bring cable TV to the Alief area. After a while, Ardie Baer walked in and slid into a seat next to Sadowski. They made small talk for a moment, then Baer leaned over to whisper in Sadowski’s ear.
“They’re not going to get one,” he said.
“You mean this man talking right now?”
“It’s already been decided,” said Baer.
“Does he know that?”
“Then why was he asked to testify if the decision is already made?”
“Well he has the right to testify, so we’ve got to go through the motions.”
That council session ended on a curious note. After hearing Goldberg’s presentation, Mayor McConn asked a few perfunctory questions, and then Councilman Louis Macey moved that they approve Goldberg’s Southwest Houston Cable TV for a franchise. The motion was seconded but never voted on, because Councilman Frank Mann offered a substitute motion that quickly passed by a vote of 6-2. His motion was to refer Southwest’s application to the city attorney (Collie) and the director of public service (Earle) with the request “that other applicants be contacted to determine if something can be worked out for the adjustment of the boundaries of the areas to be served.”
Goldberg was incredulous: what boundaries? The council had never specified any boundaries, and yet seven members of the council voted for “the adjustments of the boundaries.” He learned soon enough what the boundaries were. He learned it not from city hall but form other cable companies. Three days later, presumably to comply with the wishes of the council, he met with Walter Mischer and Eddie Dyche, two of the principal investors in Houston Cable TV. They had an offer to make, according to a source who was at the meeting. Why not forget his application to serve the Alief area and invest in Houston Cable instead? There was still time to do that, and besides, their extensive territory in the northwest would be at least as lucrative as the area he wanted. In so many words, Goldberg told them that he wasn’t interested in any deals made outside the council chambers. He wanted the Alief area and nothing else, and he thought his engineering studies were as good as those of any other applicant. He would let the council decide.
The word spread that Billy Goldberg was causing trouble. Mischer had tried to work something out but had failed. But no one gave up right away. A few days later Goldberg received a call from a friend, who tried to persuade him to ask for areas in the northeast that could be detached from the application of Houston Community Cablevision. Goldberg refused, and then Mayor McConn suggested another scheme. Storer had the southeast, but they were from Florida. No one had any allegiances to them. Perhaps Goldberg would accept their entire territory, which included four times as many homes as he would have in Southwest Houston.
Goldberg finally blew up. “You don’t understand,” he told McConn. “I’m not in this just for the money. This is an area that I have built, it’s where I’ve spent millions of dollars over a number of years. I want to bring cable to this area, and only the council can decide whether I’m qualified to do it or not.” He also suggested that the other companies might be flirting with antitrust violations. When Olson set up a face-to-face meeting between Goldberg, Mischer, and Runnells, Goldberg agreed to attend on one condition: he would not discuss territories. The meeting was canceled.
Bob Sadowski was now forced to think about money almost all the time. He stopped going out for dinner. He didn’t dare spend money on movies. He thought seriously about moving to a less expensive apartment. Every day he noticed scores of jobs advertised in the paper, but his personnel agencies told him he was overqualified for all of them. Finally, he started asking around at advertising agencies, looking for anything that could get him and his wife through the winter. When that didn’t work, he wrote letters to the two universities where he had taught, asking them to cash in his retirement funds. The total haul: $1800.
ON JANUARY 10, 1979, the Houston City Council met in open session to vote, once and for all, on the cable TV companies that would serve the city. It took fifteen minutes to make the motions and count the votes. The winners: Gulf Coast, Houston Cable TV, Houston Community Cablevision, and Westland. The proposals submitted by MECA (the company owned by Storer) and Southwest Houston Cable were tabled—for reasons that no one could explain—until the following week. At the next meeting, MECA was approved as well. All areas of the city had been accounted for, and the council never had to set any service boundaries because, miraculously, the boundaries proposed by those five companies all fit together very nicely. Billy Goldberg got nothing.
Sadowski read in the next day’s Houston Chronicle that the franchises had been awarded. Incredibly, his capacity for surprise was still not exhausted. First he wondered what had happened to Cablecom. In the handwritten notes that Earle had been so anxious to get from him in November, Sadowski had clearly stated that Cablecom was the only applicant whose proposal was good enough to be approved without qualification.
Sadowski didn’t muse over the franchises for long, because he had something else on his mind: his money. Almost two months after his firing, he had been paid only $900, and he was just desperate enough to get angry at Earle once more. This time he took his wife with him to city hall. Earle listened to them politely—he had heard Sadowski’s complaint at least a dozen times—and finally stood up and motioned Sadowski to follow.
Earle and the Sadowskis left city hall, got into Sadowski’s car, and drove to a downtown bank. Then, while Sadowski and his wife waited outside, Earle went into the bank. He returned after a few minutes, and handed Sadowski $1000 in $100 bills. It was a loan, said Earle. Sadowski thanked him profusely.
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.