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Interview Date: Monday October 21, 1991
Interview Location: Phoenix, AZ
Interviewer: E. Stratford Smith
Collection: Penn State Collection
Note: Audio Only
SMITH: This is October 21, 1991. We're about to commence an oral history interview with Mr. Bruce Merrill, a member of the original chapter of the Cable Television Pioneers established in 1966 and for many years very active in many phases of the industry which we will develop in this interview. The interview is part of the Oral Histories Program of the National Cable Television Center and Museum at The Pennsylvania State University. We are in Mr. Merrill's home at 6330 East Mockingbird Lane in Phoenix, Arizona.
Bruce, the first question is usually the easiest one. Would you tell us where and when you were born?
MERRILL: I was born in Globe, Arizona, on December 12, 1918. My family really lived in Pima, Arizona, which is a very small town in the eastern part of the state. The only reason I was born in Globe was because my mother's sister was married to a doctor. While my mother had ten children, with me, her eighth, for some reason or another she figured she needed a doctor's help. Most of them were done with midwives. That's a long time ago. That's where my life started.
SMITH: Could you tell us something about your parents' background?
MERRILL: My parents were Mormon pioneers. My mother, Pearl E. Merrill was born in the state, in Pima, Arizona, in 1880. Her parents had come to that spot in 1875 to start a settlement. My father, Philemon Christopher Merrill III, was born in Paris, Idaho, in 1870. He came to Arizona in 1878 where his father founded a settlement which is now called St. David, Arizona. He later moved to the Gila Valley. That is a large agricultural valley north of the Graham Mountains which is a major range in Arizona through which the Gila River flows. My mother was raised there and they got together and were married in Pima in 1898. He was a farmer, a rancher, a politician and very active in the organizations of the Mormon church. He moved to Phoenix in 1932 when he was appointed by Franklin Delano Roosevelt to be the U.S. Director of Internal Revenue for the State. So my roots in Pima were uprooted in 1932 and since then I have lived here in the Valley of the Sun. But I was born and raised in Pima until I was fourteen years old.
SMITH: Was your mother a native of the United States? Was she born here?
MERRILL: My mother was born in Pima, Arizona. Her parents were English. They left England in 1847 and came to Salt Lake and settled in the little community of Goshen, Utah. Being somewhat familiar with Utah yourself, you may know where it is. Kind of a God-forbidden kind of a place right now. They didn't like that place too well and about 1870 my grandfather on my mother's side, with his brother, scouted around all over the southwestern part of the United States--in Utah, New Mexico, Arizona, California--and found this little spot down on the Gila River where there was really very little civilization at all. There was one trading post run by a man named Solomon about fifteen or twenty miles east of where my maternal grandparents settled on the Gila River. The Army had a base at Fort Thomas at that time. The fort was about 20 miles northwest of where my grandparents staked their claim. The Indian wars were still going on. That's where my mother was born. Both her parents were born in Herefordshire, England. My father's progenitors go back in United States history to about 1500-something. They immigrated to the New England area. There are lots of Merrill's in the country, particularly in the New England states. They all, so far as I have ever been able to find out, came from one family that migrated from England to the United States around 1570.
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SMITH: You mentioned Goshen, Utah, as being a somewhat out-of-the-way place and that reminded me you mentioned Paris, Idaho. I believe that's somewhere near Grace, Idaho.
MERRILL: I don't remember that city. Paris is on Big Bear Lake, just up in the hills above Big Bear Lake, if you're familiar with that. Just across the Utah border just east of Logan. Beautiful country but very cold. They left there because of the bitter winters, my father always said.
SMITH: Now, I was thinking about Grace because that's where I lived the first six years of my life and I have a vague recollection of hearing of Paris as being not too far from Grace. You said you were one of ten children.
MERRILL: My parents had ten children and I was the third from the youngest--seven boys and three girls. The only survivors are myself and two sisters. We were a large family with all of the problems and opportunities that go with large families. I expect it was really my oldest brother who got me into the cable television business.
SMITH: What was his name, Bruce?
MERRILL: His name was Paul and he was a radio engineer. He ran a group of small town radio stations in Arizona. When I came back from World War II and got into business, I did a lot of business with him. We got into discussions back in the late 1940s about where this amazing medium called television, that allowed you to send pictures over the air, was going to go. He predicted that it would never be a small town medium. The only way they were going to get it into small towns was with the kind of services that later developed into the cable television business.
SMITH: Before we get too far into that, I'd like to finish with some of the personal background. Of course, I have met your wife, Virginia, a very lovely lady. I wonder if you could give us similar background with respect to her.
MERRILL: Sure. Virginia's folks came from Arkansas. They moved to Arizona because her father was advised to do so for medical reasons back before she was born. She was born in a little town near Phoenix called Liberty. She also comes from a large family. Her father's father--her grandfather--was in the mercantile business in Arkansas. He owned a general store. If it hadn't been for his health I'm sure Virginia's father would have inherited that business because it was just him and his sister--the only two children his father had. But he developed this health problem and came to Arizona to try to arrest it but it didn't work out. He died quite young. He died, I think, when Virginia was three years old.
Virginia's mother came from the same small town in Arkansas. I think they had lived there in that place for several generations. Virginia also comes from a large family. She had nine brothers and sisters. There were ten in the family. So we come from similar backgrounds. Our lives crossed because I finally got out of Pima and got to Phoenix back in 1932 although we didn't meet until 1942.
SMITH: How did you meet and where?
MERRILL: We met on a blind date like so many people. We had a mutual friend with whom Virginia worked. They worked for Barry Goldwater in the Goldwater stores. This mutual friend, a young lady of whom I was very fond who later married one of my best friends, kept telling me about Virginia and Virginia about me. That went on for a year or so, I guess. Both of us, somewhat leery of blind dates, didn't respond to her suggestions. Virginia used to model some, and one day she was modeling for some promotion for something that the Chamber of Commerce was doing and they had a picture in the paper with her name. Of course, I looked at that and wondered if that was the same Virginia Walters that I had been told about. So I just picked up the phone and called her. I already had her number but had never used it before. So that's how we met.
SMITH: You should be so lucky in the lottery as you were with that blind date. Did you mention when you and Virginia were married? Did you say 1942?
MERRILL: We were married in 1942.
SMITH: Was that here in Phoenix?
MERRILL: Yes.
SMITH: Would you tell us about your children for the record.
MERRILL: They didn't come along right away because we were married not long after December 7, 1941. The world was in kind of a mess at that time, if you'll recall. You're old enough to remember that.
SMITH: Yes, I'm old enough. I'm two years older than you are.
MERRILL: I had already been given a draft classification that was 3-A because my father died several years before that and left my mother and the two younger children with very little means of support. So I had been supporting them since 1936. So I was classified as head of the household and figured I was doing my duty to my country because I had gone to work for Goodyear Aircraft and was building airplanes out in Goodyear, Arizona. In fact, I was really running their IBM inventory control system. When I got married I reported that to the draft board and the draft board took the position that I was no longer 3-A but I was now 1-A and they drafted me immediately. So right after we were married, I was drafted and shortly thereafter went overseas for three years. Our boys didn't come along until after I got back. I did not get a "Dear John" letter in that long absence like so many soldiers did. I finally got back home around the first of the year in 1946 and our first son, Phil, was born in January 1947. Then we had twin sons in December 1948. That's the extent of our family--the three boys.
SMITH: What were the names of the twins for the record.
MERRILL: The twins were named Stephen and Walter. The oldest boy is named Philip.
SMITH: Before we go into your military career, did you go to school as a boy in Pima? Is that where you attended grade school and high school?
MERRILL: I attended grammar school in Pima. Pima didn't have a high school. The high school was in the neighboring village, Thatcher, where there was also a junior college which is now called Eastern Arizona College. So I attended grammar school in Pima and then high school in Thatcher and the first year of college in Thatcher. I went through school rather rapidly. I was just finishing up my first year of college when we moved to Phoenix. I stayed over and finished that year and then attended the second year of college at Phoenix Junior College and then spent a year and a half over at what was then Arizona State College. I wasn't able to finish my senior year because of my father's death. I had to drop out and go to work. I continued going to night classes and changed my major from pre-law to accounting which meant I had to repeat a lot of work. I still had a semester to clean up when I got back from the Army to get my degree. Then I took the CPA examination and opened a public accounting office with a partner of mine by the name of Ted Lawrence. That was my initial venture into the business world. Before the war I had worked extensively with IBM equipment both for the state of Arizona and for Goodyear.
SMITH: Can you date when you started up your accounting partnership?
MERRILL: I think I passed the CPA exam the year that Phil was born--that would have been 1947. It could have been in 1946, I'm not sure. We started business immediately so I'm sure we started the business in either late '46 or early '47.
SMITH: Going back to your military career for a minute. You mentioned that you were in the Army. Would you care to give us a little bit of background about when you got taken in, where they sent you and what training you went through.
MERRILL: In the Army they give one of two classifications. I think they give them to you when you register for the draft. One is called your Main Civilian Occupation. Then after you're drafted they give you your Military Occupation Specialty--MCO and MOS. I think I was called up primarily because of my MCO. I had had quite a bit of experience working with IBM equipment and with Remington Rand, a competitor of IBMs in the punch card field which was a precursor to the computer field. The Army had converted all their records to punch card accounting and they had what they called Machine Records Units. I was called up and assigned to a unit that went to the South Pacific while the Guadalcanal Campaign was still going on. I stayed in the South Pacific with that Machine Records Unit which handled all of the records in the field for the service during that campaign. So I never got shot at. I got close enough once in a while to hear them shooting but my job was to sit in those trailers and keep track of everything they were doing and make sure that the command had all the reports they needed. Primarily the strength reports because every day we were supposed to be able to tell those in command how many people were in the field in each unit, what MOSs were filled, which were vacant, who was in the hospitals, who had been killed, who had come in and was in the replacement depots. It was a pretty complex job and a lot of hard work that went on until the Japanese surrendered in 1945.
I was literally chained to those machines for three years. When I came back the last thing I wanted to see was an IBM machine. So I decided I was going to be a certified public accountant. That's what I started out as.
SMITH: Did those years at all, not just the military but at that time, allow you to go on an LDS mission?
MERRILL: No. I was slated to go on an LDS mission at the time my father died. In those days, you paid your own way. Now the church supplements some of that expense but in those days you paid your own way. He left my mother relatively destitute so that canceled those plans. I never did serve a mission.
SMITH: I wanted to get your grandchildren on the record. How many do you have now?
MERRILL: We have nineteen grandchildren. That includes three adopted ones. Two marriages for one of the boys and he picked up a couple of children through his second marriage. Phil had four children and he adopted one so he has raised five children. The youngest one is now twenty-one. Walter has nine. He had four children by his first wife and divorced and married a woman with two children. They adopted one and then she recently had another two so he has eleven mouths to feed. He's a lawyer in Ogden, Utah, now. I hope he's in the right profession. Steve has five children. He lives in Salt Lake City, Utah. The youngest one of Steve's children is just twelve.
SMITH: You mentioned your older brother as being the person who was responsible for getting you into cable. Now I know in those days we didn't call it cable--it was CATV.
MERRILL: Community Antenna Television.
SMITH: Yes. Community Antenna Television. That was right back at the beginning. What brought this about?
MERRILL: Paul and I had a lot of discussions about television because being in the radio business in five communities in Arizona he was very interested in whether or not television had any application to his operations. As it developed, the first station that went on the air in Arizona was Channel 5-KPHO from the top of the Westward Ho (a hotel) and, of course, that was the only station in the state for a long time because the freeze came right after it went on the air. I forget how long that freeze lasted.
SMITH: From 1948 to '52.
MERRILL: So we were a one-station state those four years. And, of course, everybody who could receive Channel 5 here in the valley and out on the fringes was delighted. The people in the areas where he had radio stations were upset. They thought they were being discriminated against in some way and there was quite a demand there. We had heard about what Bob Tarlton and some of the others were doing back in Panther Valley and about the fellow in Astoria, Oregon.
SMITH: Ed Parsons.
MERRILL: Ed Parsons, yes. We'd heard about them. There had been some articles about them and we had some correspondence with them and others. Paul, being an engineer, understood what they were doing. So we formed a company in 1950 looking forward to doing this. He was my partner and he actually brought in several of his station managers as partners. The original company, which I called Antenna Vision, involved seven of us. I subsequently bought all the others out over the years. I was the acting manager of the venture. Paul literally talked me into going into business, which I did as a sideline to the accounting practice I had. It was so fascinating that by 1955 or '56 I got rid of the accounting practice and, as you know, spent a lot of time in a lot of different facets of the cable television business.
SMITH: Where did you put your first system?
MERRILL: Paul had a radio station in Globe, Arizona, which is my birthplace, and an area that we were both very familiar with. Globe is ninety miles from Phoenix but it was shielded from what was then Channel 5 by the Pinal Mountains. So we found a reception site on the Pinal Mountains, made a deal with the Forest Service to put an antenna and a small building there and bought some of this stuff they called coaxial cable. Nobody knew how to splice it together, there were no connectors for it or anything else. We were just kind of feeling our way along but we ran a line of coaxial cable. We had to bury it because they wouldn't let us put poles on the mountain and they wouldn't let us attach to trees. So we buried it down the side of the mountain not to Globe but really to the town right next to Globe called Miami which was the closest one to our tower site. We sold Community Antenna Television one-channel service for about a year before there were any other stations on the air. We just had Channel 5 out of Phoenix. We really had bad equipment. We had a hard time getting one channel through the system.
SMITH: And what did you use for amplifiers? Well, let's identify the year first. Was that 1950?
MERRILL: It was 1952. It was early 1952 when we finally got it in operation. We started out trying to use some amplifiers that were being sold by RCA but they just wouldn't work. So we switched to Spencer-Kennedy Labs which I don't believe is in existence any longer. They made an amplifier that consisted of a string of about twelve vacuum tubes. They worked fine as long as you changed the tubes out regularly. Our maintenance consisted primarily of starting a couple of guys out every day with a truck full of new vacuum tubes and checking all the amplifiers and replacing the weak tubes. That wasn't a very satisfactory system. So we started building our own equipment.
SMITH: Did your brother, Paul, do the engineering work with that?
MERRILL: He was involved in some of it but he had hired a young man who had just graduated from the University of Arizona School of Engineering named Earl Hickman. Earl was the one who was primarily responsible for the design of the original equipment that we built. That, of course, was the birth of AMECO, Antenna Vision Manufacturing and Engineering Company.
SMITH: Those early amplifiers you used from RCA, were they strip amplifiers or apartment house master antenna amplifiers?
MERRILL: They were SMATV [satellite master antenna television system] type amplifiers although they didn't call it that then. They were amplifiers that they had developed for apartment house use that we tried to adapt to what we wanted to do. You couldn't cascade them very far.
SMITH: From what you said, if I understood you correctly then, AMECO got started as a result of the lack of adequate equipment for your early systems and so you had to get busy and build it yourself.
MERRILL: That was one reason. The other reason was Milt Shapp and Jerrold. They were developing some pretty good equipment at that time. Their original sales technique was to try to tie a continuing royalty on to the purchase of the equipment. We decided we wouldn't buy that. I don't think very many other people did. I think they dropped the idea shortly thereafter but that's probably what pushed us over the brink to spending the time and the money to develop our own line of equipment. We might have used Jerrold equipment but we were not going to become partners with them just because they wanted to sell us equipment. That concept, plus the fact that at that time there was no other satisfactory equipment. I don't know just what the condition of Jerrold's equipment was at that time--we never did make a deal with them. We just simply turned Earl loose to design his own amplification system, which he did.
SMITH: How did you and Earl meet each other or get together in the first instance?
MERRILL: Paul had hired Earl as his chief engineer for the broadcast business. That was his function until we got into CATV and then we transferred him over. He was also a partner for awhile.
SMITH: You said Earl designed the amplification equipment. What did you use for passive hardware?
MERRILL: I think Earl designed those, too. I draw a blank as to what we used. I know Earl designed the original taps that we used which were the stinger-type taps, you know. Well, the first ones weren't either, but later on they developed the pressure tap. And then most everybody used the pressure tap for a long time.
SMITH: That tapped the trunkline directly.
MERRILL: Tapped right into the feederline. We made all that equipment ourselves.
SMITH: Can you fix a date when AMECO first became an operating company?
MERRILL: I can't with any real specificity. We had a small building in Safford, AZ, which was the headquarters for Paul's radio chain--his company called Radio Associates. Most of the initial work that was done by Earl was done there. Realizing that we had to have access to things that were not available in Safford in the way of machine tools and engineering assistance and materials, in 1955 I built a building here in Phoenix that became our headquarters for a long time. We opened up that building and I think actually announced our entry into the field as a source for cable television equipment under the name of AMECO in 1956.
SMITH: I want to go through the history of the expansion of AMECO into a national operation, however, I believe it might be helpful if we did the rest of the early franchising first. To what extent had you gotten into operations beyond Globe up to the time that you put AMECO into operation as a supplier?
MERRILL: Well, we got into the microwave business about that time, as you recall. In think we probably filed one of the first, if not the first, applications for the use of microwaves for cable television through another firm in Washington, D.C., that Paul used to use in the radio business. It was shortly thereafter that our paths crossed.
Our first application to use microwave was so we could build systems in Safford, Winslow, Holbrook and Clifton, Arizona. We filed first for an application to build a microwave system in the Clifton-Morenci, Arizona area. So we filed the first application to build a microwave system, I think in '54 or '55 sometime around there, to go from Mount Graham down to Safford and Clifton-Morenci. Then we filed to transmit from a spot called Hutch Mountain, located on the Mogollon Rim into Winslow and Holbrook, AZ. The development of those systems coincided with the development of microwave relay links that went with them. I think that most of that took place between 1954 and 1956. The other systems that we built at that time were in Safford and Clifton-Morenci, Holbrook and Winslow.
SMITH: Can you give the approximate populations of those communities? They were all small ones, weren't they?
MERRILL: They were small. The largest community we went into had a population of about 20,000. Safford at that time had a population of about 6,000. The Clifton-Morenci and Winslow areas about the same size. Holbrook was probably less than that--4,000 or 5,000. And shortly thereafter we also extended the microwave system on the Graham Mountain to serve Silver City, New Mexico. That was probably the fifth or sixth system that we built, also served by microwave.
SMITH: By that time how many channels were you bringing in? Were they all from Phoenix?
MERRILL: They were all from Phoenix and we were delivering probably five or six channels. The initial equipment back in those days had trouble ... while they were technically twelve channel systems, they had trouble handling more than five or six channels at a time until we improved it. And there weren't that many channels available. Well, I guess there really were because we soon started carrying the Tucson channels, too, about that time although there was a lot of duplication between Tucson and Phoenix because Tucson ... I forget when they developed an independent station--I don't remember the dates when Phoenix developed an independent station. With the early stations there was a lot of duplication between the two cities until the independents started broadcasting, which was probably '57 or '58. There wasn't much else to carry so I think we initially carried five or six Phoenix and Tucson channels. We also carried a weather channel. It was about that time people started making their own weather channel devices. We put one together early on, using the oscillating camera scanning about five weather instruments. We also carried a channel for a long time that consisted of a camera focused on an AP machine--one of those machines that printed out the news items as they come off the tape. That thing just sat there and clattered out and the camera looked at it so that anybody that wanted to take the time to read it could keep up with the late developments in the news. On those first five or six systems, that's about all we carried.
SMITH: Did you carry any radio?
MERRILL: We sat up a small studio in a couple of towns and did a little simulcasting with radio local news and events.
SMITH: I thought maybe with your brother, Paul, in the radio business he might have wanted to see if he couldn't carry his station. In those early franchising days, how did you go about financing your systems?
MERRILL: Well, that was always a problem. It was about this time that Bill Daniels started appearing on the scene and Carl Williams and some of the people who in the early days assisted in financing. I did most of my financing based on the fact that I was also a partner in a very successful business that had nothing to do with cable. We got financing based on the viability of that business guaranteeing what we were doing in cable.
SMITH: And was that your accounting practice?
MERRILL: No. That was a company we called Hall Process Company, which operated in Salt Lake City and Portland, Oregon. It processed steel pipe to make it impervious to erosion. The early gas lines were steel--this was before the development of suitable plastic pipes. Because of the rapid development of gas distribution systems throughout the west at least, and I think throughout the country at that time, there was a lot of steel pipe that had to go in the ground and that pipe had to be processed so that it was free of rust and the electrical problems that eat away at it if it's not neutralized. I had a partner by the name of Bill Hail that I worked with who had developed his own process for doing this. We got a major contract with Mountain Fuel Supply in Salt Lake and a company in Portland--developed a very profitable business processing all of their gas pipes.
SMITH: Did he join you in the cable business?
MERRILL: Initially he did. Eventually we split the blankets and I took the cable business and he took the processing business. But that's the strength on which we originally financed. We did most financing with the First Interstate Bank. The first financing we did outside that, and I think the first financing that anybody did, was done with Bill ... with the Economy Finance Company in Indianapolis. That's where I first met Jim Ackerman.
End of Tape 1, Side A
Start of Tape 1, Side B
SMITH: This is Tape 1, Side B of the oral history interview with Mr. Bruce Merrill. Bruce, when we finished the tape on the other side we had talked a little bit about the pipe processing business that you had been in and this subject came up because of my interest in how you might have financed those early systems. What I was looking for was any particular anecdotes that might be of special interest in how you went about securing financing. As you know, a lot of people financed their systems through connection charges and by guaranteeing connection charge loans at the bank for their subscribers. I wondered if you went through any of that process.
MERRILL: In the earlier days, you were able to get substantial connection charges which certainly alleviated the financing problem. It didn't solve it by any means. You still had a lot of up-front expenses before you could start collecting connection fees. I never heard of operators who collected them in advance. I never did that. We never collected connection fees until we were ready to provide service. So our source of financing primarily in the earlier days was based on personal guarantees of the loans that we needed with the banks. Those loans were really secured because of the strength of the personal guarantees. The banks didn't know what you were talking about when you explained what you were going to do with the money. They just said, "Come back and tell us how it works out." We looked to this other source of funds for payment. I always got a kick out of Bill in those days because he used to describe himself, if you remember, as the guy that had been kicked out of more banks in the United States than anybody in the world.
SMITH: Yes, he did.
MERRILL: It was hard to get the banks to go along with pure cable. That was another big problem and slowed everybody down, I'm sure. We could have done much more if we'd had the capital to do it.
SMITH: I have to ask you this question since you're a CPA and were at the time. Did you ever follow that contribution in aid of construction theory for treating your connection income?
MERRILL: We did at first, Strat. We borrowed that technique that the utility companies used to avoid taxes on that part of the income. But, if you recall, it was about this time that we locked horns with the utility regulators all over the country. We considered that to be a very dangerous thing to do--to say you're not a utility and still report your connections fees as contributions in aid of construction. So we didn't do it very long because we were always fearful of being classified as a utility subject to state and local regulation. Some of the more protracted and expensive battles we fought in the various states was to avoid being regulated as utilities.
SMITH: I think that accounting practice was more prevalent in the east than it was in the west, but it was followed heavily in the east until the Tax Court told the industry they couldn't do it. But that was about ten years from the time that it started so it didn't hurt too much.
MERRILL: It didn't have any effect really on our operation. We were able to rove from one operation into another and develop our own seal against taxes by simply moving forward so we had losses which offset. We always kept every operation in the corporate structure so that we could file consolidated returns so every new venture we started created a lot of tax shelter for earlier ventures that had become profitable.
SMITH: What kinds of problems, if any, did you have with the telephone and power companies in getting access to their poles?
MERRILL: (Laughter) I think we had all the problems everybody else had with maybe a few of our own. The first couple systems that we built we built without pole attachment contracts. When they declined to give us the pole attachment contract we simply went out and attached to their poles and put customers on as rapidly as we could. When they protested, we said, "Well, if you want us to disassemble this, we'll do it but there's a couple thousand people who are really going to be up in arms." Fortunately utility companies and telephone companies reacted very slowly so we were able to pressure them through public opinion into really giving us the first pole attachment contracts, which they had refused to give us initially. I think in the first couple systems we built which were in Globe and Safford, if we'd waited until they gave us pole attachment contracts, we may never have built them.
SMITH: And you just went ahead and put them on. They didn't come out and physically try to stop you?
MERRILL: No. We knew the people very well. The local people couldn't understand why the corporate office wouldn't let us do it. The decision whether or not to do it was being made not locally but in Phoenix or Denver, I forget which. I think the local people really shielded us to some extent. They understood what we were doing and they had no objection. They were friends. They were people we had grown up with. So that's the kind of pressure it took from us to actually get the concept of pole attachment agreements established here in Arizona. It was different, I think, in every state. But in Arizona that's the only way we solved the problem.
SMITH: How did you go about your early franchising? What sort of authority did you seek from these Arizona communities?
MERRILL: Initially we just got business permits for something like fifteen dollars. So they let us start up the business and they said, "Go ahead." Franchising of cable television systems, as you're aware of, is something that became increasingly difficult, slower and more expensive year by year. In the early stages it was not a very big problem. By the time we had built three or four systems and went to Silver City, New Mexico--that's the first place I can remember where we had a hearing--there were other people wanting to do the same thing that we were doing.
SMITH: You had sort of comparative hearings?
MERRILL: And they voted on whose proposal they were going to accept. I don't think we promised much of anything. I don't think there were more than three or four applicants. The next area we moved into was in Yuma, Arizona, in the Imperial Valley.
SMITH: Would you elaborate on those.
MERRILL: Down there it got much more complicated.
SMITH: When was it you went into Yuma?
MERRILL: We started looking at Yuma as soon as we were sure we could get microwave. We figured Yuma and the Imperial Valley were ideal locations because we could take signals both out of Phoenix and out of Los Angeles into them. But the person that stood in our way down there was a man who later became quite deeply involved in the cable business--Harry Butcher. I think you knew Harry.
SMITH: Yes, I did know Harry.
MERRILL: Harry had taken over the television station in Yuma and El Centro. Harry didn't know anything about cable television except he was bound and determined it wasn't going to hurt his television stations which were marginal. It was a marginal television market at the time. One station cherry picking programming from all three networks. So we had quite a political battle. I spoke at the Rotary Club, visited with the mayors and the city managers and everything over a period of months--the things you have to do to get acquainted in the community--had a lot of acquaintances in the community. We had an impasse. Harry had enough influence because of his television stations that nobody was going to get anything in those towns. The ones we were after were Yuma, El Centro, Brawley, Calexico, and Mexicali. Nobody was going to get anything in those towns. He didn't want it. He just wanted to stop it. He didn't really understand much about it. His partner was Floyd Odlum who was a pretty heavy hitter back on Wall Street. So finally I went back to New York and set up a meeting with Mr. Odlum. I spent about half a day explaining to him what cable television was; why it was going to come into the area sooner or later; that we had this impasse down there; that he had this television station which was very marginal, I think it was losing money, as a matter of fact. I was able to negotiate a deal with him to buy his station. So the way we got into that market was to buy the opposition.
SMITH: Now is this the Valley Telecasting story?
MERRILL: That's the company that we formed to do this under. And so we not only had cable systems to build down there but we had a television station—in effect two television stations. We operated the station for Yuma and microwaved it to El Centro where we then transmitted it to the El Centro and Imperial Valley markets.
SMITH: What were the call letters in the Imperial Valley?
MERRILL: KIVA.
SMITH: And Yuma was?
MERRILL: The call letters in Yuma were KIVA. I don't remember what we used in the Imperial Valley.
You know that was an interesting operation. Those turned out to be very well accepted and profitable systems because we did have a wide variety of programming to put on them. We were limited to twelve channel systems at the time. We didn't have the equipment that would carry more than twelve channels, although by that time we had more than twelve channels available.
SMITH: Then you were bringing signals from the coast?
MERRILL: By that time we were bringing four stations out of Phoenix and probably six out of the L.A. market plus the local stations plus the weather channel ... so we had twelve channels.
SMITH: How were the television stations in terms of profitability. Were they a burden or did you make them handle themselves?
MERRILL: We were able to turn the television operation into a fairly profitable operation. But for my own purposes it disproved this myth that you couldn't have broadcast television and cable television coincidental. We took a station operation over that was losing money. We got hurt when I proved the market. There was another frequency that had been allocated to this market. As soon as we proved the market could be profitable, someone came in--using the call letters KBLU--and built another station. The market was not big enough for two stations. When that happened, I sold the station to Carl Eller who later became part of a group of stations that he eventually used in his rise to fame in the broadcasting business. As long as there had been the one station competing with cable, we had a very profitable station operation.
SMITH: Earlier you mentioned Harry Butcher's name. Harry was an aide or he was on the staff of General Eisenhower, was he not?
MERRILL: He never let you forget that.
SMITH: I guess that's why I remembered it.
MERRILL: He was also a CBS top man in Washington, D.C., for many years.
SMITH: That I had forgotten. You and Harry became good friends as a result of that?
MERRILL: We worked very closely together. Part of the deal when Harry didn't block the deal I had negotiated with Mr. Odlum, was to help Harry get into Santa Barbara and show him what to do to build the system in Santa Barbara, which we ultimately built for him. I think that really helped his fortunes considerably.
SMITH: I remember him in some early NCTA board meetings. Not too early, I guess maybe late around the time the copyright litigation was going. I believe he was either on the board or at least he was attending meetings.
MERRILL: I don't recall whether he was ever on the board. I know he was active. He was very active in the California association. I know he was on that board. They gave him some kind of special honor.
SMITH: I have a clear recollection of him.
MERRILL: It was a very pleasant association. Harry and his wife, Molly ... they're nice people.
SMITH: In due course, Bruce, you expanded your franchising activities and your cable operations on a much broader basis than just the Arizona-California systems. Could you describe a little bit of the ... with respect to the places you went to.
MERRILL: About that time we started looking nationally. We got several franchises in Texas. We got the franchise in Lakeland, Killeen, and a couple of other places – Waco and Pecos. We at one time had five or six systems going in Texas. I also had connections in Kentucky and Tennessee and we got the franchises in several small towns in Kentucky and Tennessee--Greenville and others. We also bought the system that was being built in Savannah, Georgia. I got involved in a partnership in Connecticut with George Reynolds and his company. We built a couple systems in New York. One in, what's the name the of city where IBM had its headquarters, Endicott?
SMITH: Yes.
MERRILL: And a couple of other smaller places. There may have been some others. We got pretty active in the franchising business at one time and had about fifty of them. Most of them in small cities.
SMITH: Do you recall any particular experiences that stand out because of their unusual nature or problems that you were associated with?
MERRILL: Well, the problem that really hurt us in most of these cities was the microwave freeze. When did that come along--1968?
SMITH: Yes. Just about '68. As a matter of fact, I think it was concurrent with your term in the NCTA.
MERRILL: It was on my watch, that's why it was a miserable experience. You see, prior to that time, Irving Kahn and I and the fellow in Oklahoma that got killed in the airplane crash ... Henry Griffin ... it seemed like there were one or two others involved, had several meetings and had actually embarked on a project to build our own terrestrial microwave system to cover the entire United States for cable. A lot of these areas that I went into--which included cities like Panama City, Florida, and Savannah, Georgia, and other places--were really dependent on getting microwave, and when the microwave freeze came along those systems became very marginal because there simply was no source of programming. That was a big problem. That's what really stopped our expansion cold in major cities. We also had very detailed plans to build Phoenix at that time. First the threat of the freeze came along, you know, and you were afraid to do anything because it looked like they were going to freeze it. Then the actual freeze happened and we went into that dormant stage from 1968 to about 1975, when nobody really did much of anything in the way of new construction.
SMITH: I believe the freeze started near the end of your term in early '68.
MERRILL: They stopped making any grants long before that.
MERRILL: Then they actually came down with the freeze later on. I'm sure we had applications in around 1961 and '62 that were simply held and we couldn't get any action on them. That's my recollection.
SMITH: Yes, and it's correct.
MERRILL: The formal freeze ... the order came out in probably '68.
SMITH: They stopped granting applications.
MERRILL: They stopped granting applications two or three years before that.
SMITH: That's correct. While we were going through the time of the Carter Mountain case and the private microwave service, the FCC was trying to regulate through the microwave usage. Until the Commission established that right in the Carter Mountain case, they just quit granting applications. You are correct.
SMITH: Could we turn back to AMECO at this stage. The last we discussed about AMECO was simply the fact that you had built a plant here in the Phoenix area in order to facilitate your manufacturing business.
MERRILL: Earl was the chief engineer of that venture and we moved Earl to Phoenix ... we persuaded him to move to Phoenix. I hired a young man by the name of Roy Goodman who became our sales manager and we started out to be a supplier nationally of cable television equipment. The equipment being built at that time was vacuum tubes. I didn't like it and nobody else did. I knew some people at Motorola who had several large plants in the Phoenix area who were working on solid state technology. The transistor had come along. Everybody knew what the transistor potentially was capable of doing. It was kind of like the cable business. The concepts of what you could use transistors to do were way ahead of what had actually been developed in the growing of these miraculous devices. They were really the key to revolutionizing the communications business. And so we started working with some engineers out of Motorola on how they could be used to provide the basic amplification that we needed in our equipment. Finally they came up with a transistor that would do that. It was a kind of strange thing. They would bring over several thousand units for us to test to see what they would do. We'd sit there and go through them to see what their gain was and what their bandwidth was and so forth. Every once in a while we'd find one that would work. They couldn't tell us why but they kept working on it in the inner recesses of their plant ... they were working at the plant that's out on McDowell Road. And they kept getting more and more and finally it got to where if they'd bring us a thousand units we could find maybe thirty or forty of those that would work. So we figured even though they couldn't produce these consistently if they had to do it, if they'd keep working on the project that we would start to design equipment around this particular breed of transistors. Transistor technology is over my head. While I'm not an engineer, I got to understand a lot of stuff but I still don't understand how transistors work. So we came out with a line of transistorized amplifiers which immediately got everybody's attention. That was really what put AMECO on the map.
SMITH: Can you date that approximately?
MERRILL: That was ... we opened this plant over here in '56. That was probably around 1959 or '60. We'd been working on the project for a couple years.
SMITH: Are you of the opinion that you were probably the first to produce transistorized amplifiers for cable use?
MERRILL: Well, I've never seen any that were produced as early as the first ones we produced. Unfortunately, we didn't have the facilities and Motorola didn't go down that road and some other people like TRW took the concept and came up with the chip which was what was really needed. We were having to use transistors and work them into circuits ourselves. That's the way we built the first transistorized equipment. I'm quite sure it was the first on the market. But when TRW came out with the chips, they had solved some of the problems that Motorola never solved. So, AMECO had a few years of very high recognition but we did not get on the chip bandwagon when we should have. We stayed with the technology we developed with Motorola too long. That lead to the eventual demise of AMECO.
SMITH: I'm going to show my ignorance. The chip that technology ... am I correct that transistors were mounted on the chips ... were part of the chips?
MERRILL: Yes, the chip consisted of several transistors--sometimes hundreds of transistors--to do a specific job. These chips cost, in some cases, millions of dollars to develop. They took a real gamble when they developed the chip that was ultimately used in the cable television equipment business. By that time everybody was looking to this technology and everybody had abandoned using vacuum tubes. Several large companies had gotten into the equipment field by then. Of course, Jerrold was already big in it. Hughes got in it in a big way. Phillips got in it by buying Magnavox. It was a little bit before Scientific Atlanta. Entron was big. The boys that kicked their father out of the business ... what's that family's name? They got in it.
SMITH: It was the Baums, Viking that you're referring to.
MERRILL: So a number of major competitors had developed, and a price war came along. I don't think any of the people who were in the original group of cable television equipment manufacturers survived. Even Jerrold didn't survive--General Instruments bought it. There was a complete turnover. This all came about because of the development of the chip and the people who had the money to work the chip into their devices got the jump on the market.
SMITH: Then you say that it was the chip technology and your failure to move to it fast enough that resulted in the demise of AMECO?
MERRILL: I think that was the principal reason.
SMITH: Could you elaborate on it just a little bit?
MERRILL: Well, the devices that they put together using the chip technology were superior to what you could design using individual transistors in your circuitry. They had better gain, they had lower noise figures, they had better cross-modulation characteristics. All those things that determine what's a good amplifier and what isn't. They had a greater bandwidth. They just simply got ahead of us in the technology and we never were able to catch up.
SMITH: And Motorola really never went to that?
MERRILL: Motorola never went down that path. Motorola developed chips but not for our industry.
SMITH: Oh, I see. Did AMECO get into the turnkey construction business for cable systems?
MERRILL: Yes, through a subsidiary company. I can't even remember what the name of the company was now but it was essentially AMECO that did it. AMECO built a lot of systems around the country. Santa Barbara being one of the major ones. This was in the earlier days when the ... before the development of the ... what I have to admit was a superior amplifier to the one we originally developed. So I think most of those systems have since been rebuilt although I still talk to people who are using our original equipment.
SMITH: Do you remember the community of Othello, Washington?
MERRILL: Yes. Were you involved in that, Strat?
SMITH: Yes. I was involved in that with Pat Hughes and we used your equipment there.
MERRILL: Where is Pat now?
SMITH: The last time I heard of her she was still in Arizona.
MERRILL: She still has that development out east of Mesa?
SMITH: I think so but I really don't know. I haven't ...
MERRILL: I lost track of her. We used to visit once in a while but it's been ten years or more, I guess, since I've heard from her.
SMITH: It's been longer than that since I've heard from her.
MERRILL: She got a little upset with me. She wanted me to put some money into a venture and I didn't like it and I didn't. I don't think Pat ever forgave me. Othello is over there near Moses Lake.
SMITH: Yes, it's just down the road from Moses Lake. Bruce, that was one of those situations where ... and it will bring us back to one of your major microwave problems ... that was a situation where Pat got my partner Vince Pepper and me to build Moses Lake so that she could have another customer for Columbia Basin and Microwave so that she could be a common carrier. (Laughter) That's the story behind that.
MERRILL: That common carrier company was called Columbia Basin Microwave. My common carrier company was ...
SMITH: American Television Relay, wasn't it?
MERRILL: ATR. A lot of the sites that ATR developed are still being used. I eventually sold that to Bob Magness.
SMITH: You mentioned a few moments ago the fact that together with Irving Kahn and Henry Griffing you had gone to considerable efforts to plan what might have become a nationwide microwave system.
MERRILL: We were going to compete with AT&T.
SMITH: Well, that would have had to have been a nationwide microwave system all right. Was that when you became involved with Vuemore in the microwave services that went to hearing on your renewal applications, where I think an issue was whether you were a bona fide common carrier?
MERRILL: Yes, I think so. I sold a group of systems to Vuemore in Arizona. But I don't remember the details of the hearing on the renewal of the microwave. I became involved with Vuemore and got acquainted with Larry Boggs and Henry Griffing at the time I made the sale and they continued to use the microwave service of ATR. But I don't remember the details of that hearing.
SMITH: Well, eventually, if I'm correct, it got into a hearing but the hearing was adjourned while you and Vuemore rearranged your contractual relationships. I think they owned the microwave equipment that you operated as the common carrier. The hearing examiner had said, "That's too close an arrangement. The customer and the microwave are too much the same thing." As I recall, we were your law firm, SMITH: and Pepper, and we argued vehemently the other way but the easiest way to get out of it was, that you bought the equipment, I think, from Vuemore.
MERRILL: I think that I originally sold the equipment to Vuemore when I sold them the systems. I think they insisted on buying the equipment.
SMITH: I believe that's correct.
MERRILL: I believe we warned them at the time that it was going to be difficult to withstand any challenge by the FCC when they had to renew their licenses. And then when the renewal came up, sure enough they raised the question and I think we had to buy the equipment back.
SMITH: Yes, you did. And that was a proceeding that lasted a couple years before you got it straightened out.
MERRILL: It went on for quite a while. We got into another long one, I remember, over in California because some of my people fired up a system before we had the CP. Do you remember that?
SMITH: I remember that one, too.
MERRILL: That was a touchy one. I was afraid I was going to get disbarred, effectively, from using microwave.
SMITH: Well, those were the days, Bruce, when the Commission was being real tough on microwave grants and they were looking for every reason they could to slow it down. They were just jumping on everything. AMECO got listed on the American Stock Exchange, did it not? Do you recall when that happened?
MERRILL: Not with any particular accuracy. Sometime in the middle '60s. AMECO went public, if I remember correctly, in 1965. Whether or not we went on the exchange right after that or whether there was an interim period I ... it was sometime between '65 and '67.
SMITH: That was during your period of major expansion, wasn't it?
MERRILL: Well, actually it was right at the peak. We went public, went on the American Exchange, and shortly thereafter TRW came out with the chip and Jerrold and Magnavox and several others got about a year's jump on us because we were working with the wrong company--we were working with Motorola. The first thing I knew the parade had gone down another street. When we went public with AMECO and listed it on the exchange, that was about the peak of AMECO's business. There were one or two years that we were the largest distributor of equipment in the country. Then Jerrold recaptured that crown and I guess still holds it.
SMITH: I guess under their new ownership they do. Well, it's not new ownership now but it was about ...
MERRILL: It was shortly thereafter that Jerrold was purchased by General Instruments Company.
End of Tape 1, Side B
Start of Tape 2, Side A
SMITH: This is Tape 2, Side A of the oral history interview with Mr. Bruce Merrill. It is October 21, 1991, and the interview is being conducted at Mr. Merrill's home on Mockingbird Lane in Phoenix, Arizona.
Bruce, before we depart from the subject of AMECO, one of the technology developments that AMECO is known for was the Discade system. Is that right?
SMITH: I have a personal recollection of having had the pleasure of being picked up by you one day at Colorado Springs in your jet and flown to Daly City, San Francisco, to see it along with some other people. Could you, for the record, indicate the principle of Discade and how far that development went in terms of AMECO's activities?
MERRILL: Well, the Discade theory was that you can take ... that it would be economically effective and efficient and discourage piracy to take the signals to a central point which is surrounded by enough homes to justify it. Then from that point take a discrete wire into the home from which they could order anything they wanted from a central point. It's similar, to some extent, to the system that was also attempted by Texscan. It's all part of trying to control what people are watching from outside the house. People are still working on that you know. Now they call it an interdiction system. We also developed what they call smart taps, to try to do the same thing but the industry wouldn't buy it.
We only built one Discade system and that was in Daly City. I don't think there was anything wrong with the concept in theory but I think that it was somewhat ahead of its time. The problem developed in the technology that was needed to get a clean signal from the distribution point into the home. What we really needed was fiber optics. I think if there were a lot of fiber optics systems built you'd find somewhat the same principle being developed. But with coaxial cable being as bulky as it was and the drop wire at that time being as unreliable as it was, it just simply didn't work satisfactorily. It's one of those things that I think will be resurrected in a little bit of a different form eventually just like the smart tap is now being pushed by some people as being a way to get away from piracy.
I've always thought that piracy was one of the biggest problems that the cable business faces. They're losing billions of dollars because of piracy. In talking with the common man all over the country, you'll find out that most everywhere you go you can find people very easily who are getting something for nothing. Any technician can defeat the control systems they try to use in the homes now in the converters. They may be making headway with some of the techniques they have now to try to catch these people. But the industry will never know how much it's lost to piracy. The Discade system was an attempt to devise a system that would make piracy virtually impossible. It would move all of the control of what was being delivered to the house out of the house.
SMITH: Where was it located? In a switching system strategically located in the city?
MERRILL: Well, not in the city ... strategically located in neighborhoods throughout the city from which the individual cables went into the home.
SMITH: And those switching systems were connected to the headend through trunk lines, I assume.
MERRILL: Right.
SMITH: You mentioned a discrete line to the home. Was that the drop or was that a control line so that the customer activated the switching equipment or was it both?
MERRILL: Well, that was one of the problems. It had to be both. The drop wires that we were using at that time simply ... we couldn't keep the spurious signals out of them. A control device in the house would disrupt what we were trying to do. We needed better cable. In fact, we needed fiber optics to make it really work right.
SMITH: Discade, then, was a system that you built yourself. You owned it and franchised it or did you build it for somebody else?
MERRILL: The only one that was ever built was for the system in Daly City. It didn't work satisfactorily.
SMITH: And that was your own?
MERRILL: No. I don't remember who owned that system. I worked with a man whose last name escapes me. I knew him as Buzz. We didn't own the system. This was a contract job.
SMITH: Did Earl Hickman design this system or was it somebody else's.
MERRILL: I believe that was after Earl had left the company. I believe the basic design work was done by another group of engineers. It wasn't anybody in Daly City. The concept we wanted to try out and they were willing to experiment with in Daly City--it didn't work. We didn't have the resources to take it further.
SMITH: When, Bruce, did you finally decide to close AMECO down?
MERRILL: 1976.
SMITH: 1976. You remained in the microwave business--in the cable business--after that, didn't you?
MERRILL: I sold the microwave business to Bob Magness in, I believe, 1969 or 1970.
SMITH: The entire system?
MERRILL: The entire system. So after 1976 we were simply in the cable business. And most of our efforts from that point on were to build the Phoenix system which we did and subsequently sold it to Times Mirror. I sold off all the other cable properties to get the money to build the Phoenix system.
SMITH: I see. And during what period of time were you building Phoenix?
MERRILL: We started Phoenix in 1977-'78. This period of time in the cable business was a time of some disillusionment to me. The microwave problem was solved by satellites and so we had a gold rush for cable franchises. I had negotiated the franchise in Phoenix prior to that time but I had a lot of difficulty with people who wanted another franchise there. We had a knockdown, drag out battle in Phoenix over a period of years over a separate franchise, which was finally issued. During that period of time people who wanted franchises made lots of promises and gave a lot away in the way of channels, free services, free equipment and ran up some obligations that still haunt a lot of operators. I really didn't want to get involved in that sort of thing. I was not able to stop the issuance of a second franchise in Phoenix which was really what persuaded me to turn around and sell what I had built to Times Mirror.
SMITH: That period was referred to as a franchising frenzy.
MERRILL: Yes. It was not our finest hour.
SMITH: Who was the applicant and the grantee of the second franchise here?
MERRILL: Storer Cable.
SMITH: Storer.
MERRILL: Of course, they eventually got into a little bit of trouble themselves. They eventually sold their second franchise to Times Mirror and then they were bought out by Kohlberg and that bunch.
SMITH: What subscriber penetration had been reached when you sold out to Times Mirror?
MERRILL: I don't remember the percentage of penetration. We had about 100,000 subscribers.
SMITH: And remaining potential of how much would you have figured?
MERRILL: They now have about 300,000. There's been a lot of growth in the interim. And that's not the entire area. We had franchises in Phoenix, Tempe, and Paradise Valley, and Storer got a second franchise in Phoenix. United Cable got the franchise in Scottsdale. I think Storer also got the franchise in Glendale. But there were a number of franchises most of which have been consolidated now into Times Mirror operations. If I remember correctly, they had about 320,000 subscribers in total.
SMITH: Then the sale of Phoenix to Times Mirror marked your exit from the industry?
MERRILL: From the wired cable industry. I became active at that time in the activities to try to promote wireless cable, which has some advantages over wired cable. It has one disadvantage and that is channel capacity. I got into the MDS business in 1975, which was the precursor to the wireless cable industry. I built MDS systems in several cities including Phoenix and Tucson. We had about fifty-five thousand MDS subscribers at the time we started to build the Phoenix cable system. We used that as a precursor for cable. We had one channel and we sold HBO on it and called it Super Channel. Found it to be a very reliable and efficient method of signal delivery. We became aware at the time that all of the frequencies in the 2 gigahertz range were largely under-used and joined a group in an attempt to get the FCC to allow us to use those frequencies for expanded wireless operations. Actually the wiring at the house is the same as cable. Just taking the signal to the house is done over these low microwave frequencies. Except for being line of sight which means you really have to use reflectors or repeaters to get into some areas, and except for being limited to the number of channels, it was a very efficient and effective method of delivering video.
SMITH: How do you handle security? The same way you would with the cable?
MERRILL: Same way as cable encryption. One of the things has ... (pause for a phone call)
SMITH: We're back in business.
MERRILL: The wireless concept was very slow developing because it lacked the basic equipment that was necessary--two pieces of basic equipment. The first pieces of equipment were the transmitters you have to use. In the early days when we were building the single channel MDS systems those transmitters cost an astronomical amount--I forget how much. And they were not that good. In the meantime, there have been three or four companies who have developed a very sound, reliable, solid transmitter--low power--it will transmit 10 watts to 100 watts of power. That is all you transmit. So that's now available and has been for about the last two years. The other device that was necessary was the device that needs to go in the home that can both encode the signals and then decode them at the home in a reliable manner. Ironically, that device was developed by Jerrold. So Jerrold now has ... They did it through the ... you know John Campbell ... John Campbell's company Tocom. John was also kind of a visionary and a pioneer in trying to develop new ways of doing things. In Tocom he had done a lot with what you call a baseband system which is different from the kind of system that cable generally uses to control its signals through the converters that most people use.
SMITH: I have in my notes a reference to the National Association of Microwave Common Carriers, which I believe was an organization that you put together back in the mid '60s. Do you recall that?
MERRILL: Yes, and the NAB and the AMST. When Doug Anello and Company decided they were going to kill us, a lot of cable operators didn't understand the seriousness of what they were trying to do. A lot of the major systems around the country did not depend on microwave at that time. We were not getting as much support out of NCTA as we thought we needed. So we organized the National Association of Microwave Common Carriers, something like that, to try to get another entity into the fight, to see if we couldn't hang on to our rights to use terrestrial microwave to transport signals around. That was the purpose of the organization. I don't know how big it got or who joined, or anything else. As you know, we lost the fight.
SMITH: It had completely gone from my memory until I saw it in the notes the other day. I believe that you organized it in Chicago. Do you recall who were other principals in it with you?
MERRILL: I think we had several microwave operators but I don't remember who they were. I remember that I was somewhat disappointed with the participation we had. There were a number of microwave operators at that time. Magness had a fairly large system. There were a couple of them up in the New York-New England area. I don't know. But we did get enough of a budget put together. We had a little war chest. Did some things at the FCC to try to combat the oncoming freeze.
SMITH: I saw that I filed a couple of pleadings but I don't have an extensive file on it and had, frankly, completely forgotten it.
MERRILL: Well, I think that the battle had pretty much been lost by the time we organized it. That's my recollection. And I was very disappointed that the industry as a whole didn't seem to realize how important ... I didn't feel that the industry as a whole got into that microwave fight like they should have.
SMITH: When did you first become active with the NCTA?
MERRILL: My recollection is that1956 was the first time I went to the annual convention.
SMITH: Which convention was that, do you recall?
MERRILL: I may not remember the year but I know it was in Pittsburgh.
SMITH: It was around the fifth then, I think--fifth or sixth. We had two in Pittsburgh.
MERRILL: Well, it was the first one. When did you become involved in the NCTA?
SMITH: In 1952.
MERRILL: Marty was still running the show at that time and they elected me to the board of directors at the first meeting I went to, which kind of surprised me.
SMITH: That was going to be my next question.
MERRILL: But I was impressed with the other fellows who were in the business. This was the first time I had had a chance to talk to them and get to know them. I guess they were looking for more strength in the west. They asked me if I wanted to be on the board. I agreed and that began the association whatever year that was. That lasted until ... I think the last time I was on the board was around 1972 or '73. I think I was on the board continually during that period of time.
SMITH: In those days I think that was pretty much allowed.
MERRILL: Oh yes, you always had a lot of tenure.
SMITH: Yes. I guess it's that way today, too. If you're one of the bigger operators you automatically have a position.
MERRILL: Well, you're really entitled to it. I ran for the board again a couple years later and didn't make it so ... At that time we were getting into this battle in Phoenix and things were a little bit muddied up. I was looking for a larger forum to get some help in this second franchise concept that was being promoted here and in other places. But I don't believe there was much support for the NCTA taking a stand against that, which I had hoped they would.
SMITH: You were active on the board then, I believe, at the time of S.2653.
MERRILL: Oh, yes. Very much so.
SMITH: That was before your time as chairman, though.
MERRILL: What did S.2653 do? I remember the battle.
SMITH: It was CATV legislation that was put together essentially by the Senate Interstate and Foreign Commerce Committees. Senator Pastore of Rhode Island, if you will recall, conducted a series of hearings all around the western states, where the Western States Broadcasters and other opponents of cable could come in conveniently and state their opposition to the industry. That was legislation that gave the Commission some licensing authority over the cable industry but limited its applications substantially to communities which had one television station. The idea was to protect the television station. If the community had more than one television station, the rules didn't apply--couldn't apply--unless the FCC went through some hearing procedures and found that public interest required some additional restrictions and they were talking about carriage of local stations and a degree of nonduplication protection. You may recall that the NCTA supported that legislation up until two days before it came to a vote in the Senate. Then the industry did a flip-flop. I think Milton Shapp lead the opposition.
MERRILL: I can remember sitting out ... I was not in Washington at the time they had the vote. And I remember I was sitting out on my back porch over at the place I used to live--a couple blocks from here--and somebody called me and told me how the vote went. I was not very happy with it. I felt that we should have taken a different stand. But I don't remember the details now. All I remember now is that I didn't agree with Milt.
SMITH: It was a tie vote in the Senate and on a tie ... well it wasn't a tie vote because ... the tie could have been broken by the Vice President, so it was a one vote margin. It failed to pass by a one vote margin and then it was moved and recommitted--sent back to the Committee and it never came out. That was the occasion of a massive senatorial fight between Senator Kerr who managed the opposition to the bill and Senator Pastore who managed it ... he supported it on behalf of the cable television industry until they cut the ground out from under him.
MERRILL: I can just remember conceptually that I think we would have taken a much different course as an industry if the bill had passed.
SMITH: But five years later NCTA was back up on the Hill on the House side trying to get legislation. And Milt Shapp was up there testifying in favor of it, too.
MERRILL: I can't remember why Milt came out against it. In fact, all I can remember was that I disagreed with him.
I was on the board at that time and I think I came back to Washington. I was not there when they took the vote.
SMITH: Well, that's why I was wondering because I thought you made a statement in the early hearings. You came back and made a statement on the record, didn't you?
SMITH: It was that set of hearings that lead up to S.2653. NCTA, had introduced a bill itself to place the industry under regulation because it was apparent that the FCC intended to take jurisdiction and NCTA wanted to have some say about what form it would take.
MERRILL: They had control over us, it was just a matter of time. We were continuing to fight them, you know. We really needed to get in the tent with them.
SMITH: Sure. There were no standards, you see. And that's why we went after legislation which finally lead up to S.2653.
MERRILL: If you can't whip them, join them.
SMITH: Exactly, that's what the theory was. But it didn't work and I remember Pastore said, "Don't ever come back to me. You're not going to get any legislation as long as I'm around here." And the industry didn't get any until 1984.
MERRILL: Yes, that was a bad scene.
SMITH: Well, there's more important things to talk about. Do you recall the year you were elected as national chairman?
MERRILL: I think it was in 1964 clear through '65.
SMITH: That was at the Philadelphia convention, was it not?
MERRILL: I was elected at the Philadelphia convention and then I held the convention following that in Denver the year I went out. My swan song was in Denver.
SMITH: Do you recall what some of your major problems were during your term of office--major problems for the industry that you were active in?
MERRILL: The major problem for the industry was the ongoing copyright fight. I don't remember what the status of it was during that period of time. That went on for so long, I don't remember the chronology of it. The thing I was mostly concerned with ... that's when the Commission came down on the Report and Order that precluded our use of microwave to take television signals where we wanted to take them. We lost that battle ... we had been losing that for a long time but it became formalized during that period of time. If I remember correctly, as far as housekeeping was concerned, I was concerned about the office. I think it was either at the time I took office or shortly before, I know I had a lot to do with bringing Wally Briscoe in.
SMITH: Yes, you did.
MERRILL: And the fellow we hired as our controller who was there for so long. I don't know whether he's still there or not. He was a professional who kept our books in much better order than they had been kept before. And then we were working with Fred Ford.
SMITH: I was going to ask you if you weren't instrumental in Ford coming in.
MERRILL: I think I was. Fred came here to Phoenix to address the Arizona Broadcasting Association shortly before I was elected chairman. I persuaded him to come out and visit with me at my office and we spent several hours talking. I was a little surprised at how interested Fred was in the cable business and how much time he gave me. Then I started promoting him to bring him in as the president of the association. Of course, I had a lot of help. I thought that Fred would give us the entre and the stature in Washington that we hadn't had up until that time because of his personality and the high profile that he had. Those are the major things I was concerned with--getting the thing on a more businesslike basis, getting control of our records and books, getting control of our lobbying activities which is where Wally was such a big help, and getting somebody in there on a permanent basis who was a real professional as I thought Fred Ford was.
SMITH: My notes show that there was a major negotiation going on throughout your term between the NCTA and the NAB over legislation--an attempt to get together on legislation. I could, perhaps, refresh your memory with just the initial background. Of course, I would prefer to have your recollection of it. But, it was again a situation where it was perfectly apparent that the FCC was going to regulate us without any congressional policy at all. They were just going off on their own.
MERRILL: They weren't just going to regulate us. They were going to just cut us off at the pass.
SMITH: Exactly. Bob L'Heureux and I, I think almost on our own initiative, sat down with Henry Geller at the FCC. I believe Henry was general counsel by that time and a fellow by the name of Jim Sheridan, who was the Chief of the Broadcast Bureau. We started to talk about some structure of legislation that we could put together. They became serious and so immediately the NCTA board, and I think you were chairman, took it over and appointed a committee to negotiate it. The negotiations went through the entire year of 1964 into early '65. Do you have a recollection of that?
MERRILL: I remember that we had a number of meetings with Doug Anello and Vince Wasalewski. They had a committee--the fellow from Houston that had the television station in Houston ...
SMITH: Was that Bill Waldridge?
MERRILL: Yes, Bill Waldridge and a couple of other people.
SMITH: Dwight Martin was one of them. I have the advantage over you because I checked the files.
MERRILL: I know that you and Bob in conjunction with the fellows up at the FCC, had worked up a structure of what we thought might work. My recollection is that we had a number of meetings but we never worked it out.
SMITH: Well, that's correct.
MERRILL: We knew we couldn't do anything about it ourselves. They had this AMST. If we'd just been dealing with the NAB my impression was that we probably could have done something. But they had this sideboard organization that was diametrically opposed to anything for cable.
SMITH: I think there might have been a conspiracy going on underneath us there. When you formed the NCTA committee, Bruce, the committee had several negotiations with an NAB committee--the Future of Free TV Committee--or something like that, that the NAB appointed. A subcommittee of that committee met with your NCTA committee on several occasions. You may recall the two subcommittees got together ... agreed.
MERRILL: Yes. We agreed on something.
SMITH: You agreed on a bill and then you took it to the full NCTA board and they approved it. And the NAB subcommittee took it to the NAB board and they disapproved it. Do you recall you went at it again?
MERRILL: Well, wasn't the guy we had the biggest trouble with Anello?
SMITH: Anello was their general counsel at the time.
MERRILL: Wasn't he the one who persuaded the NAB to disapprove what we thought we had done.
SMITH: Could have been, Bruce. My impression is that it was one broadcaster that always kept it from getting into a majority vote position. Half the NAB board apparently wanted to support it.
It was about the time right after the first negotiations between FCC staff and your committee got some favorable publicity, that the NAB appointed its committee. The NAB appointed its committee and went to the FCC and asked to get into the act. Then the FCC said, in effect: Well, we'll get out of it. You two guys get together and see what you can put together. The NAB turned the proposed legislation down twice. The NCTA approved both times the NAB turned them down.
MERRILL: All I can remember is being very disappointed to spend all that time and getting nothing out of it and at the same time knowing that at the FCC we were dead if we didn't do something. If we didn't get legislation. I think historically that was correct. I don't remember the dates, but once they finalized that restriction on the use of microwave, it was obvious they didn't plan on us expanding.
SMITH: And that, of course, was the motivation for trying to get together on legislation. Then the NAB went up on the Hill and introduced a bill of their own and Congressman Oren Harris introduced a bill that, in general, was supported by the NCTA.
MERRILL: Uh huh. Yes, we have Wally to thank for that. The main thing I remember about the whole thing was it was a great disappointment.
SMITH: Well, there was a lot of effort went into that. The only thing we could say is that NCTA was willing and the broadcasters weren't.
MERRILL: Yes, they thought they had us. They thought they had us encircled. They were going to restrict us to the boondocks.
End of Tape 2, Side A.
SMITH: This is Tape 2, Side B of the oral history interview with Bruce Merrill. You mentioned earlier that copyright was one of the major issues that the industry was confronting during your term and, as I recall, that battle was being fought on two fronts at the time. One of them was the litigation in which United Artists had sued Fortnightly Corporation and the other was copyright revision legislation that had been introduced in the Congress that was intended to put cable directly under ... make it directly liable for copyright royalties. Do you have a recollection of the activities in connection with that legislation?
MERRILL: Only that there was a lot of activity in connection with it. We coined the argument that we were being asked to pay twice for one ticket to the show. That our cable customers were being asked to pay twice to get into the same show that they could get into with the broadcaster. That was the basic unfairness and what was proposed in the legislation. I'm trying to remember ... was it about that time that the Fortnightly case got all the way to the Supreme Court?
SMITH: Fortnightly didn't get into the Supreme Court until 1968. Fortnightly started in 1960. It was a full eight years in preparation and trial and going to the Supreme Court.
MERRILL: It seemed like we went through one major hurdle and I can't remember whether the results were good or bad. Maybe it was at the Court of Appeals that we had a decision during that period of time.
SMITH: Yes, the U.S. District Court in New York had ruled against us and the appeal was in the Circuit Court. I think it was the Third Circuit. It wouldn't have gotten to the Supreme Court because that had to be in late '67 ... in '68 because it was decided in June of '68. So we wouldn't have had the adverse decision in the Court of Appeals. But it was a very active time in the Copyright or Judiciary Committee of the House of Representatives where the legislation was being proposed.
MERRILL: I don't have any real recollection of the details of the legislation except that it was pretty frightening and that we had a lot of activity in opposition to it.
SMITH: You identified copyright as being one of the major problems of the industry at that time and the overall FCC regulatory picture was the other. During that period I noticed that there was some litigation that you were involved in--I think it was Panama City, Florida. Do you recall that case ... Herald Publishing Company against Antenna Vision of Florida?
MERRILL: Pretty murky. One of the keys to having a successful system in Panama City, Florida, was a microwave system that we applied for at the same time that we started the project. If there was a lawsuit, it must have had something to do with the microwave application or some of the sites that we were going to use for the microwave. I really don't remember the details.
SMITH: A publishing company was the plaintiff in the case. It must have had a television station because my notes show that it was an unfair competition case.
MERRILL: Yes, now I remember. But it did have to do with the microwave system.
SMITH: Was it based on microwave?
MERRILL: It was based on the microwave application, I'm quite sure. They filed this action to try to stop us from pursuing an application for the microwave on the grounds that that would create unfair competition.
SMITH: They did it in the federal courts. They didn't do it at the FCC.
MERRILL: That's right. I don't even remember the outcome of the case.
SMITH: You won that case?
MERRILL: We won the case but we never did get the license.
SMITH: No, you may not have gotten the license but you did get the court to say that your proposed operation in Panama City would not be unfair competition simply because you might bring signals of programs licensed to the local station.
MERRILL: It was a hollow victory. I think that's why I forgot the details.
SMITH: But it surprised me, Bruce, when I saw it because I didn't have any recollection of that case. We had had a similar case in Idaho, if you remember, that the NCTA backed. George Hatch was involved. And it involved George Hatch's Twin Falls, Idaho, and Salt Lake City television stations. The cable system in Twin Falls was receiving programs in Twin Falls from the Salt Lake City station that George had licensed to him both for the Twin Falls and Salt Lake City stations and the cable was bringing programs from Salt Lake City ahead of when George was broadcasting them in Twin Falls. Now would you call that unfair competition? (Laughter)
MERRILL: Well that's all part of that little mishmash that we were arguing about ... about how in the world could we go out and get copyright licenses for all of these syndicated shows that the broadcasters had tied up and were scheduling at all different times. Asking us to get a license to carry those on a cable system--they were simply asking us to do the impossible.
SMITH: Absolutely. There is no way that the community antenna operator could negotiate the rights for each individual program he was bringing in. And that was why everybody was just petrified at the prospect of having full copyright liability without some kind of machinery to take it under control. If I ever saw a case where I thought a broadcaster might have had at least an understandable complaint, if not legally sound, it was that Twin Falls situation. Because George owned both television stations and had the programs licensed for both cities. We lost that case in the Southern District of Idaho but in the Ninth Circuit on appeal the judge did what he simply had to do and that was recognize that the only rights in a copyrighted work are the copyrights. There is no right in those programs to protection against unfair competition. The copyright provisions in the Constitution make it clear that the only thing that you have to protect in copyrighted works are the copyright. As a result there could be no law of unfair competition based on those programs because there were no rights in the program other than the copyrights. And the broadcasters didn't own any of the copyrights.
MERRILL: So the broadcasters couldn't ... I remember now ... the broadcasters were not a party of interest in the suit in the situation because he didn't own the copyrights. He was talking about something he didn't own.
SMITH: And, the copyright owners were not parties.
MERRILL: George was suing over something that he didn't own.
SMITH: Yes, that's exactly right.
MERRILL: So that's my recollection.
SMITH: This was why everybody in cable was so afraid of retransmission consent. Because we knew that the broadcasters couldn't give retransmission permission because they didn't own the programs. No way they could do it.
MERRILL: That was sort of ironic. Was George involved with Magness at that time?
SMITH: I don't think he was but I'm not sure.
MERRILL: I don't think he was. I know that later on he became a principle in TCI.
SMITH: Off the recording, Mr. MERRILL: was alluding to some negotiations that he had with a Mr. George Hatch. Would you put them on the record.
MERRILL: Well, George had become involved with Bob Magness in TCI and that other ... spinoff microwave system that TCI had. They had been after me to either merge with them or sell out to them for sometime. We had had extensive negotiations for sometime and we finally made a deal. As with most complicated transactions like that, it had some specific things that had to be done within a specific time schedule. I went through everything I had to do. For some reason or another, I guess maybe it was because there was too much of a workload--I don't know what their problems were--George and Bob didn't do everything they were supposed to do in a timely fashion. And so we got to a cancellation point and I sent them a letter of cancellation. They were furious, of course, and they filed a suit against me. They came down to the district court here in Phoenix and the judge threw the suit out in about ten minutes. So we adjourned to a hotel room and in about a half a day, of course, we put the deal back together, but for quite a bit more than the original deal was made. My relationship with George and Bob since that time has been a little bit strained, but before that we had always been cordial. I really think they thought I took advantage of them, and I did. (Laughter)
SMITH: One of the irritants that industry was experiencing during that 1964-'65 period was an organization called TAME. Do you recall?
MERRILL: Yes, Television Antenna Manufacturers something. They were pretty mean.
SMITH: Television Antenna Manufacturers something.
MERRILL: I don't know what the "E" stood for. Yes, I remember TAME. They were anything but. They were more of an irritant than a real force as I recall. Constantly flooding the congressional representatives that we were trying to work with things that weren't exactly true.
SMITH: Do you recall any specific contacts that you might have had with the organization at the time?
MERRILL: I remember our relationship with them was much less than cordial because they were very loose with what I considered to be the truth about what cable television really was.
SMITH: Yes, they were. And one thing I remember about them was our mutual late friend Fred Stevenson who described them as people who, had they existed forty years earlier, would have been trying to prevent the development of the automobile because they would put the buggy whip manufacturers out of business.
MERRILL: I remember that simile he used. Too bad they didn't get one of these oral histories on Fred before he died. Maybe they did, I don't know.
SMITH: No, they didn't get one on Fred.
Pay TV had become quite a talking issue at that period of time which also was at the time that Pat Weaver tried to get a subscription television operation going state-wide in California. Do you remember that situation?
MERRILL: Was that during my term in office? I remember it very vividly.
SMITH: Yes. It was during your term in office.
MERRILL: That scheme he had was so outlandish, so unworkable it was almost laughable. He really pushed all the publicity buttons that you could push. Had people all over the country believing that it was for real. It never really made any sense.
SMITH: That was the one in which the state of California voted him out of existence in a referendum. Do you recall?
MERRILL: It wouldn't have worked anyhow.
SMITH: Well, I was just wondering if at that time you had had any occasion to meet Weaver.
MERRILL: I met him but I don't remember the circumstances. He was a very colorful individual. But being in the manufacturing business I understood a little bit about what he was trying to do. It was grandiose. It was a great concept but the equipment was not there to do it. It was a fantastic amount of money that he raised, as I recall. It was probably a blessing that they initiated the referendum. I think it was an initiative, wasn't it?
SMITH: Yes, it was.
MERRILL: ... competition. They got all the television stations in California whipped up into a frenzy about ...
SMITH: Television stations and the theaters.
MERRILL: They thought he was were going to take all their business away, I guess. This grandiose scheme. They voted it down so it probably was a good thing for him that they did because it never would have worked.
SMITH: And a year or so later the courts said the referendum was unconstitutional.
MERRILL: By that time all the money was gone.
SMITH: That's right. It was too late. Do you recall taking any positions with respect to the future of pay TV and CATV, or cable during that period of time?
MERRILL: I don't recall. It would have been logical to do so but I don't remember what they were. There were a lot of things that you could dream up--concepts--that you could dream up but the equipment wasn't there to do them. It really didn't become feasible until the satellite technology emerged.
SMITH: My notes show that you appeared at a seminar or a meeting of the Georgia Broadcasters Association as a representative of NCTA. Do you remember that?
MERRILL: Vaguely. It was at some fancy resort in Georgia.
SMITH: I think you and Fred Ford were both there. You took a position at that time on pay TV that I thought was kind of interesting. In effect, you said that most cable systems were opposed to pay TV and that if pay TV ever came, the broadcasters would bring it not the cable industry.
MERRILL: I think that's what happened with On-TV. I don't think that pay TV--as I understood they were talking about--ever developed on cable. But I think On-TV was really the first broadcast pay television that worked and was a single channel and we competed with MDS. Of course, when I talked to the people down in Georgia, I didn't know anything about MDS. And MDS, while it's typically a broadcast service, it's not really what people think of as broadcast frequencies. But pay television got its biggest boost from On-TV ... got more national publicity from On-TV than from any other place. Of course, HBO had had this tape system that they used where they'd bicycle several tapes around. I forget just how large they were. HBO didn't really take off until they got on the satellite.
SMITH: That's correct. At one time the FCC authorized a broadcast subscription television service.
MERRILL: Well, wasn't that On-TV?
SMITH: It might have been, Bruce. I'll have to ask you. This was a service that came right off an authorized licensed television broadcast station. Was that On-TV?
MERRILL: That's what On-TV was. Near Los Angeles is where it got started.
SMITH: RKO General, I think, had a station or two that did that.
MERRILL: Well, I think they were earlier. I don't think they were successful.
SMITH: No they weren't. They closed it down.
MERRILL: On-TV was very successful. I don't remember who the original promoters of On-TV were but they used broadcast licenses in the L.A. market and broadcast a pay channel. They were highly successful. Of course, like we were with our Superchannel, as we called it, it's not something that could compete with cable because cable came in with a diversity of channels ... the benefit of being able to pick all these things up with a satellite receiver ... and many of the earlier concepts were dead.
SMITH: That takes me back to a question that I was going to ask you awhile ago. In the MMDS that you're active in now, you commented that one of the limitations was the number of channels. Do you see the compression technique as having an application in MMDS and maybe overcoming that deficiency?
MERRILL: No question about it. The compression technique, of course, has been worked on for a long time. The first place that I was attracted to it was a project that General Electric had--it was what they called Comband. I understood that was a pet project of GE for a long time. They spent a fortune on that. They were going down the wrong track. They had the right concept but the wrong technology. But one of the things that attracted me to MMDS was the fact that I became convinced many years ago that there were going to be ways to carry more than one set of video signals in the bandwidth that we now take for one video signal. You could see that coming down the road a long time ago because analog television is a spectrum hog. All you need to do is get into digital television and you can conserve terrific amounts of spectrum, particularly with certain types of shows. Take a channel like C-SPAN where all you've got 90 percent of the time is a talking head, you can probably put twelve of those on a 6 megahertz channel using digital techniques. So when GE started putting all this money into Comband to try to find ways to put two channels on a 6 megahertz bandwidth, I figured well, if a company that size is convinced they can do this, then it's going to happen. And it's about ready to happen, I think, although they're using a completely different technique than GE started out trying to develop.
To answer your question, yes, there's no question in my mind that the thirty-three channels that are now available for MMDS to use will eventually be three or four times that many through the use of digital or video compression. It's not really compression, they just call it that. It's actually high-speed switching. There are two different systems they use. I don't know whether this has anything to do with what you're compiling here, but two different systems they've been working on for years. One relies on memory that stores all the constants and pulls them out ... just sends signals and says pull this out of your memory and put it on the screen. The other one relies on sending a constant picture down and only sending down the impulse as the channels change. They're similar but they're a little bit different in their techniques as I understand them. Both of them work. They've been displayed and they'll be used. There are still some problems to solve with them but cable operators and MMDS operators and maybe broadcasters eventually will use this technique to expand, assuming the FCC comes up with the rules that will allow them to do it ... will use this technique to expand the number of channels that they put over the same bandwidth.
SMITH: And go into high definition television, presumably.
MERRILL: It didn't apply too much to high definition television, I don't think, at this stage of the game because I think most of the techniques that are used for HDTV require major segments of bandwidth in order to get ... because for HDTV you've got to send down so much more information than you do with a standard picture. Maybe that's right. HDTV is obviously going to have a terrific impact on the business someday because it is so vastly superior in picture quality to what broadcasters put out, or what cable companies, wireless cable companies can present. HDTV is just like having a painting on the wall--a high-quality painting.
SMITH: How extensive are your holdings in the MMDS now?
MERRILL: I'm building a system in Las Vegas, Nevada. In my family we have several other permits but we're not constructing anything else. Our first system will be in Las Vegas and is operational now but doesn't have the full complement of channels.
SMITH: What would the full complement be?
MERRILL: In Las Vegas it would probably be twenty-seven channels. In areas like Las Vegas in MMDS you have an advantage over cable. That is you have grade A pictures broadcast by all the broadcasters all the time. So you don't have to carry those on your system. You simply multiplex in at the site. The signals go through the headend device and look like part of the system. So there are eight off-air channels in Las Vegas plus twenty-seven broadcast channels that we would broadcast so you have a thirty-five channel system.
SMITH: And they'll be fed from a satellite-like cable?
MERRILL: Most of the material comes via satellite just like a cable system. At the point where you accumulate all your signals and at the point where you display it on the customers' set, there's very little difference between a cable system and a wireless cable system. The major difference is between this place where you put all your signals together and this place where somebody sits down to their TV set to watch. So you don't have any distribution plant to maintain like cable has. You can build a wireless cable system for about 25 percent of what you can build a wired cable system. You don't have the channel capacity but what channel capacity you do have is, in my opinion, much more reliable and of much higher quality because it doesn't have to go through everything that a cable system has to go through. So your video is cleaner. That's why I like it. How big a niche it will eventually occupy--who knows.
SMITH: I think I've read recently that, I believe it's in Ireland, where they are relying on MMDS almost exclusively. Am I correct in that?
MERRILL: I've been told. I've not seen it and haven't been there but I've been told that in Ireland they simply divided the country up into sections and authorized a lot of systems in each section and gave them the frequencies to work with rather than go cable. So they get everything off the satellite or tape to put into their transmitters and then each transmitter will cover an area of about forty miles in radius. It has to be a line-of-sight but on the other hand they have very cheap repeaters, low power repeaters, that can cover a few miles where you have a shadowed area. So it's fairly easy to get almost 100 percent coverage. The foreign market is much bigger than the domestic market for this medium. There are extensive systems in Europe, including Ireland, and in Australia and in the Far East. Some of those countries in the Far East, not Japan and not Hong Kong yet, but some of the others have some fairly elaborate wireless systems. The international market is much bigger right now than the domestic market even though there are seventy-five systems either under construction or in operation in the United States now.
SMITH: Would the fact that the United States is not as extensively developed in MMDS be attributed in part to the fact that cable got here first?
MERRILL: I don't think that's really as big a factor as the fact that you're not allowed to use the frequencies that have been allotted to educators. That's been a real battle to get access to those frequencies even though educators will never use them. The FCC took a wide band of frequencies--about twenty-eight television channels back in 1961 or '62 and allocated them for what they call the ITFS Instructional Television Fixed Service.
SMITH: That's it.
MERRILL: And why anybody thought the educators would be able to use that much spectrum or needed it is beyond me. At the time we started pushing for these back in the late '70s, there were thirty-seven states that didn't have an ITFS license. But since that time, because of the rules, the FCC allows ... a large part of these still are only eligible to be licensed to nonprofit, education-oriented entities but they're allowing us to lease them. Kind of a bastard arrangement. It's the complex arrangement that the FCC set up to let you assemble all of the frequencies that you need to use in an operation of this kind. It's slow to grow. That plus the fact that there was some key technological devices that were only perfected a couple or three years ago.
SMITH: And the frequencies that are used ... assigned in this country for MMDS are not necessarily the same ones that are being used in other countries.
MERRILL: Pretty universally they are.
SMITH: Oh, are they?
MERRILL: The only equipment that's available to do it comes from the U.S. The equipment's all built to operate in the 2 gigahertz band. One of the largest systems in the country ... in the world ... is in Mexico City. Mexico City uses the same equipment that I used in Las Vegas, they just got those frequencies allocated to use.
SMITH: When did you get started in Las Vegas?
MERRILL: I got started putting it together about three or four years ago but we put it in operation last April.
SMITH: You have all twenty-seven channels operational or is that an optimum?
MERRILL: Well, we only have fifteen now. It will be thirty-five eventually. I have twenty channels yet to add. Most of those are under contract and I'm just waiting for CPs. But eight of them are still up in the air because they're still controlled by the Clark County School District with whom I haven't been able to make a deal yet. I may be out of it by that time. There will be five in this business but there's about ten channels that you really need to have to be competitive with cable. And since we've provided a big price advantage ... we can under price substantially any cable and it wouldn't cost us an arm and a leg. So there's a big price advantage to provide the major ten channels that people want to watch and then you're competitive. To what extent I don't know. You don't need to be very competitive because you don't need that much of the market to have a prosperous operation.
SMITH: Have you been encountering any trouble in trying to get contracts with the channels that you want to carry because of the competition of cable and their possible attempt to prevent you from getting them?
MERRILL: You probably haven't noticed but there's been a pretty highly visible battle going on about that.
SMITH: I've been following it.
MERRILL: Most of the program material cable uses is controlled by cable interests. Cable made an effort to tie up the rest of them. And for a period of time, non-availability of program material was a serious handicap. That broke down largely because cable's image in Congress is very low right now. They have an image--since the deregulation bills passed--they have an image of abusing those privileges that were given to them and charging exorbitant rates and not being responsive to the level of service with which they should comply. There have been a couple of very serious attempts made to re-regulate cable and part of that re-regulation bill has had tacked onto it compulsory availability of the program material to anybody that wants to use it. So most of those program suppliers have caved in. The only program that is not available to wireless cable is TNT.
SMITH: This is Tape 3, Side A of the oral history interview with Bruce Merrill. Bruce, I haven't yet gotten into the Arizona Cable Association and your background and activities in that organization. Could you tell us when that association was organized and whether or not you were active in that?
MERRILL: I think I'm the one that organized it. There were several operators in Arizona started out about the same time I did. I don't think we ever did agree on who was really first. The system in Prescott was built about the same time I built the one in Globe--in 1952. And Whitey Brayer built the system down in Douglas shortly after that. Those were the other two major operations in the state. Somewhat later there were systems built in nearly every city in the state. The biggest factor in Arizona was we had a legislator who spent one term as our representative in Congress from the District 2--Jim McNolte--who was bound and determined that we were a public utility. We had a lot of battles with Mr. McNolte before the Arizona state legislature. In order to have an impact in something like that you have to be organized. So many, many years ago, I don't remember an exact date, I called about five guys in the state into my office and we organized the Arizona Cable Television Association. It has been mainly active as a negotiating organization with the state legislature since then. It has become large enough and big enough that I hired Ivan Johnson many, many years ago, who is now one of the officials in the Dimension Cable Company here in the state, as a full-time director. Then when he left we hired another full-time person, Susan Bitter-SMITH:, a woman who is also on the city council in the city of Scottsdale. Our main thrust has been with the legislature. Coincidentally with that, we have had some success in pole attachment negotiations and that sort of thing that's been ongoing in the industry since the beginning. They were kind enough to organize the Pioneers' Association and gave me the number one plaque which you see up there on the wall ... ACTA.
SMITH: Yes. Is that a barometer?
MERRILL: It's a barometer and it works pretty well. It doesn't tell me anything about the political climate, which is the main thing they're concerned with. But these state associations, I think, have been very important to the industry. I've been involved in more than just Arizona. I was active in the California association and the Kentucky association. I formally built a number of those systems ... the Texas association, the New York association. I belonged to all of them. I've been to many of their meetings in years past.
SMITH: Do you remember my law partner and I being co-owners with you of a couple of systems in Kentucky?
MERRILL: Yes, which ones were those anyway? They were pretty small as I recall.
SMITH: Yes, they were small ones.
MERRILL: Yes, I remember that we were associated for a brief period of time in a couple of small communities there.
MERRILL: Kentucky was a good cable state. Still is, I guess.
SMITH: Is the Arizona association active today on a continuing basis?
MERRILL: Very active. Very effective, I think.
SMITH: Is the public utility issue a continuing one here or is that pretty much put to rest?
MERRILL: I haven't heard much about it. Of course, I wouldn't be in a position to know the last few years. It was a hot issue up until the time I got out of the business. In fact I was held up substantially in the Phoenix area development by pole attachment problems with APS and Mountain Bell.
SMITH: APS is Arizona Power?
MERRILL: Arizona Public Service. A year or so before I decided to get out of it, I filed a $50 million lawsuit against them which I think had considerable merit. At that time they were terrible. They changed the rules on me in this project four or five times. We'd go out and engineer a section under the rules they'd given us as to what the clearances were from the ground, between wires, etc., etc., what kind of guying you had to do. All of those details. We'd go out and engineer a section, submit it to them, and they'd change the rules. Then we'd have to do it again. It seemed to me there was a conspiracy between the two at the time. I don't know what it was an attempt to prove but it became moot when I got out. Those battles were pretty vicious in many parts of the country, not only here. I think that the power companies and the telephone companies pretty well raped the cable television industry. If they hadn't gotten the legislation ... well maybe not the legislation but the rule making that they got out of the FCC, we would have really been in trouble.
SMITH: You got legislation out of Congress on it, too. Were you active in that?
MERRILL: That came later, didn't it?
SMITH: I guess it's relatively recent, maybe in the last fifteen years.
MERRILL: The FCC intervened in the pole attachment fight a long time ago, as you recall. Rather passively at first and then enough to give us some leverage with those thieves. That's one thing that I remember particularly about Ben Conroy. He's one of the guys who agreed with me wholeheartedly that maybe our biggest enemy in the country was the utilities--the telephone companies.
SMITH: He was the chairman of the pole attachment committee of the NCTA, I think, while you were the chairman. And then did Ben replace you as chairman?
MERRILL: No, it was Stevenson immediately before me. I believe it was Tubby Flinn and then Stevenson and then myself and then Ben. Tubby was in for two or three years.
SMITH: Yes. I think that was right. Tubby, other than Marty Malarkey, was the only one who did multiple terms, I think. Marty was president five years in a row.
MERRILL: During that freeze period nobody wanted the job. (Laughter) So, Tubby just inherited it from year to year.
SMITH: During your term the infamous leaseback service of the telephone companies was promoted quite highly. Did you become involved in that in any way?
MERRILL: Only in battling it. Fortunately they never did really foist it off on us. I've often wondered what would have happened to our industry if the Bell companies and the independents in the U.S. had done what they did in Canada which ultimately worked out quite well. They never did propose that here. Are you familiar with the system that they used in Canada?
SMITH: I ought to know but I'm not recalling it.
MERRILL: Well, that was a version of the leaseback. They actually put the wire up and charged ... not pole attachment agreement ... but a fee to use the wire and the operator put in his own equipment, as I recall. It was a kind of mixed bag. That's one of the things the telephone company threw at us to try to slow down our progress.
SMITH: I think they filed tariffs in, if the figure is correct, twenty-six states for the leaseback service.
MERRILL: Fortunately, very few people bought it.
SMITH: And fortunately the telephone company didn't know how to build the systems, either.
MERRILL: No, they didn't. They really didn't know what they were doing. I was involved in that through AMECO as much as anyplace else because when they filed their tariffs and said they were going to do this, of course, we were interested in selling them equipment.
SMITH: Sure.
MERRILL: And we were also manufacturing cable at that time. AMECO manufactured cable as well as amplification equipment and headend equipment. And so we had a package that we were interested in the telephone company taking a look at. In fact, that's a little incident that I don't think I've ever told anybody about. I had a man who worked for me by the name of John Buchanan. He was the sales manager for AMECO.
SMITH: I remember his name.
MERRILL: And when I made my going-away speech or some speech with regard to the office that I had held with the NCTA, I really came down hard on Ma Bell. I hadn't thought about this for a long time when you bring up the leaseback program that Ma Bell had tried to foist off on us. John Buchanan was the sales manager for AMECO. And sometime they must have started this process while I was in office because in one of my talks, and I forget which one, I had dug up a lot of what I considered to be extremely unfair things that the telephone company had done to us and I enunciated them and I kind of threw down the gauntlet to them that as big as they were they weren't going to stop the cable business. That even though it appeared that they were trying to either stop it or take it over by their tactics. Sometime later in attempting to get on their vendors list, John Buchanan went to their headquarters in New York City and got in touch with the vice president who was putting this program together for AT&T and their subsidiary companies and made his pitch. The fellow pulled out a copy of my talk and said, "As long as Bruce MERRILL:'s got anything to do with AMECO, AMECO will never sell any equipment to AT&T." So that ended our endeavor to try to get involved in their sale/leaseback program. They never got off the ground and how it would have worked ultimately, I don't know. It certainly, of course, seemed to me to be an attempt on their part to cut into a major part of the potential profits of cable television.
SMITH: Well, that statement was in your farewell speech and you said, in effect, that you mentioned the size of the cable television industry and you said, "It is not going to be put out of business by any ten billion dollar industry." Now I'm quoting that with a good deal of confidence because I read it yesterday. (Laughter)
MERRILL: Well, it cost me the opportunity to do any business with AT&T. Whether or not the pole attachment problems are still there or whether they have become somewhat dormant I wouldn't know because in wireless cable you don't have to attach to anybody's poles.
SMITH: They still exist. The way the stop was put to the leaseback tariffs, as I understand it, happened in two ways. One was that they did such a rotten job that people who might otherwise have been tempted to do business with them didn't. The other thing was that NCTA, and this was during Bruce Lovett's reign as general counsel, got the FCC to institute what was called the Section 214 hearing.
MERRILL: I remember that.
SMITH: The objective of which was to force the telephone companies to apply for certificates of public convenience and necessity for each leaseback system they built and the FCC went along with it.
MERRILL: Bruce's idea was one of the better ones.
SMITH: Well, I don't think that case actually started during your term as chairman because I didn't find a reference to it. But I know that's how the leaseback finally petered out.
MERRILL: Well, that was later. I don't think Bruce was on the scene during my term, was he?
SMITH: No, I don't think he was either.
MERRILL: He came shortly thereafter.
SMITH: Bob L'Heureux was your general counsel, wasn't he? And then Bruce Lovett came and then Gary Christianson after that.
MERRILL: Where's Gary now, do you know? I had a pretty close personal relationship with him for a long time and then all of a sudden we lost touch. I don't have any idea where he is.
SMITH: I haven't seen him in six or seven years. I understand he left the Hogan and Hartson law firm.
MERRILL: A long time ago.
SMITH: Yes. He was entitled to a sabbatical year off and told them that he'd take the year and he wasn't coming back.
MERRILL: Somebody said he was teaching.
SMITH: It would make sense. He's the type that would be a good teacher.
MERRILL: A very bright guy.
SMITH: You made an address to the Broadcast Engineering Consulting Engineers. This particular meeting was sponsored by Broadcast Engineering Magazine and you were talking about the fact that in order to provide adequate broadcast television service or even acceptable broadcast television service throughout the United States would require at least four times as many television stations as were in operation, and at the same time you were promoting cable as the answer to that problem. You said, "It is the complexity of the riddle and the simplicity of the solution that made inevitable the development of a nationwide CATV system." The solution of how to get more television stations was really extremely complex but how to get more television service was not so difficult. By hindsight it is easy now to say that with the adoption of the Sixth Report and Order allocating channels and assignments to the specific communities in fixed numbers that the future of cable television was assured. By allocating more channels to larger cities on the basis of population and effectively freezing the assignments, the plan made it inevitable that thousands of communities would have no or very limited service. I don't know how much the FCC is entitled to be criticized or deserves to be criticized for the allocation plan because it wasn't easy.
MERRILL: Still isn't.
SMITH: Yes, that's right. The fact is that the first CATV systems were in business the year the FCC imposed the television freeze in 1948 and the number jumped from one system to seventy systems during the course of the freeze and the FCC never saw them as in any way being the answer to the riddle. You knew Brian Lamb?
SMITH: Brian came up to Penn State and delivered a lecture in the School of Communications on cable and the cable satellite connection--the international connection--at my request. And in the course of his visit, I think it was on the way back to the airport, he said, "Strat, I wonder if this industry would exist the way it is today if the FCC had used a different allocations approach and had given less big city stations and lower power so they could put more stations around the country." Of course, that was the riddle at the time.
MERRILL: Well, they were getting pressured from all sides.
SMITH: Oh, every issue of Broadcasting Magazine during the freeze had references to pressures being brought on the Commission to lift the freeze and get the thing moving.
MERRILL: Well, the argument was made I am told, I never did research it, the argument was made to the Commission before they ever authorized the first television station that this medium belonged on wire instead of on the air. That it was obviously going to be a spectrum hog. That they shouldn't get into it. That they should say if you want television you're going to have to distribute by a wire.
SMITH: I wish I could track that down.
MERRILL: I've heard that but I don't know who made the argument. I was listening to somebody in some symposium someplace not too long ago. I don't remember who was talking but it was somebody whose opinion I respected and I thought, "Well, he's kind of slow in coming to what may be obvious." He was making the point that ultimately the only thing that belonged on the air were communications that had to go to things that moved and that all communications between ... fixed communications--news, entertainment, that sort of thing--should go by wire. Now I know that's pretty radical but that reminded me that somebody had told me way back in the '50s when they were having the fight over frequency allocation that somebody had made the argument with the FCC that television, as it was proposed back right after World War II, did not belong on the air because it took up to much spectrum space. It forced them to chop it up into UHF, VHF, and other things that have created so much problem as far as equity is concerned in the use of the spectrum for television. Of course, cable has leveled that off a lot but the fight ... (interruption for telephone call)
I was just going to point out that cable has done a lot to take the FCC off the hook. Cable has leveled the playing field between UHF and VHF to a very large extent. That problem doesn't really exist anymore. That probably has made VHF stations worth a little less and UHF stations worth a lot more. That was graphically displayed here in Phoenix. We've had a number of UHF stations go on the air just with the expectation of getting on cable. Those that have gone on cable have been very successful and become quite valuable. Those that didn't get on cable for one reason or another, and there are two or three, have languished. Cable has really been a boom to the UHF television business. Something we really don't get that much credit for.
SMITH: No, the industry doesn't and actually the reverse is true. The industry was accused of impeding the growth of UHF broadcasting. It was a major fear of the Federal Communications Commission at the time that Maximum Service Telecasters and Westinghouse and ABC all within a few weeks of each other filed extensive and highly coordinated petitions at the Commission asking that cable be kept out of the major cities ostensibly to preserve the markets for UHF.
You were talking about something else, Bruce, about the statement that all communications that are between fixed points ought to be on wire. We can speculate now as to whether the advent of fiber optics, which still is relatively new and just beginning to get into place, whether that might not ultimately bring the television distribution services back down onto wire or fiber optics. Can all of that spectrum for broadcast television be justified when it can be accommodated so readily with fiber optics?
MERRILL: There's no question where you've got enough concentration of population that over enough time it seems to me to be almost inevitable. The question is how you take care of the rural population and where do they get equal treatment because you can't build fiber systems into Elgin, Arizona, a population of fifty.
SMITH: No, you can't and perhaps we're still looking at the satellites for the answer to that problem.
MERRILL: Well, the FCC never solved any of those problems in a logical, comprehensible fashion and it probably never will. We'll just continue to muddle through.
SMITH: Because the established interests get in there and you just can't change them.
MERRILL: True.
SMITH: Bruce, I thank you very much for your time.