Tele-Communications Inc.

~ the obit ~

American cable television was not built by broadcasters or by the phone company. It was built by people in small towns who put up a tall antenna and charged the neighbors for a picture they could not otherwise get. TCI is the largest thing that ever grew from that, and it grew from a cotton seed salesman in Texas who happened to give two strangers a ride.

Bob Magness heard from those strangers about a community antenna system going up in Paducah, sold his cattle, mortgaged his house, borrowed $2,500 from his father, and built one in Memphis, Texas in 1956. He sold it, moved the money to Bozeman, Montana, and in 1958 went in with partners on Community Television Inc. and Western Microwave Inc. The two merged in 1968, moved to Denver, and took the name Tele-Communications Inc. The company went public in 1970, ranked tenth in American cable.

It went out on 9 March 1999, when AT&T completed an all-stock merger that its own annual report valued at approximately $52 billion. The deal had been announced the previous June at a headline figure nearer $48 billion. TCI's cable systems became AT&T Broadband and Internet Services, which was for a short time AT&T's largest business unit, and which AT&T then sold to Comcast in a deal that closed in 2002.

~ the rap sheet ~

~ the cotton seed salesman ~

The detail worth keeping about Magness is that he stayed in Bozeman long after the business had outgrown it, and that his wife did the paperwork while he personally hung the wire. By 1962 he had bought Collier Electric and was serving 18,000 subscribers across three states. By 1972 there were 100,000 and he knew he was out of his depth on the financial side.

So he hired John Malone out of Jerrold Electronics, a General Instrument division, and the company changed character permanently. Malone's first job was stopping the banks from calling in loans that were about to end the company. He managed it. Magness made him CEO and stayed on as chairman, and by 1982 TCI was the largest cable operator in the United States.

~ malone's arithmetic ~

What Malone understood earlier than his competitors was that a cable company is a tax structure with a wire attached. Depreciation on plant and interest on acquisition debt made reported earnings look terrible, which was fine, because cash flow was the real measure and the tax bill stayed small. He borrowed against the cash flow, bought more systems, and repeated it for twenty years.

The result was a company that controlled the only connection into a very large number of American living rooms and negotiated with programmers accordingly. Senator Al Gore called Malone the Darth Vader of cable and the ringleader of what he termed the cable cosa nostra, and the nickname stuck for the rest of Malone's career. Subscribers had their own vocabulary for it, less inventive and more consistent, and the complaint was always the same one: the bill went up, the service did not, and there was nowhere else to go.

~ the deal that cratered ~

In October 1993 Bell Atlantic agreed to buy TCI and Liberty Media in a transaction valued around $33 billion, the largest ever agreed in American telecommunications to that point, putting one in four cable customers under a single roof on paper. It fell apart in February 1994, four months later.

Both sides pointed at the FCC, which had cut regulated cable rates by as much as 16 percent and cost TCI roughly $300 million over two years. That was real, and it was not the only thing. Bell Atlantic's stock had dropped below the $54 the exchange ratio assumed, Malone wanted more shares to compensate, Ray Smith refused because it would dilute existing holders, and underneath all of it sat two companies that did not resemble each other at all. One paid dividends and was comfortable being regulated. The other put every available dollar back into plant and had spent a decade fighting the people who set its prices.

~ what at&t bought ~

AT&T's thesis in 1998 was that the cable wire was the way back into the local loop it had been broken up out of in 1984, and that it could sell telephone service over it. In principle that held up. In practice it ran into the capital cost of upgrading plant that had been built for one-way television, and into a timetable nobody could meet. Three years later the whole thing went to Comcast.

Turkey never had this. Cable arrived here as a state project through Türk Telekom rather than as thousands of small-town entrepreneurs with ladders, and then satellite skipped past it entirely, so the figure of the cable baron simply does not exist in Turkish memory. Reading the TCI story from Ankara, the foreign part is not the scale of the company. It is that the wire into thirteen million homes was assembled piece by piece by private individuals buying each other out, and that this was considered normal.

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