“Work is love made visible.”
Kahil Gibran, poet
Below, I neither brag nor complain; I simply recite a career-summary, which, like the section For Family Only, will likely be of interest solely to family members and may serve to sedate most others; so, proceed at your own peril.
Having waited tables for six years during high school and college, I was used to juggling school and work, and, of course, I needed to work fulltime in law school, with a wife and two kids. My dad helped me get my first “white collar” job, i.e., on “The Hill” (the U.S. Capitol), specifically, in the U.S. Senate, where I was the Page Dispatcher at the switchboard in the Senate Republican Cloakroom, which opens onto the Senate Floor, which is where I personally met all Republican and most Democratic Senators of the day – and obtained cordially engraved photos from most. Working fulltime, I had to attend night school twelve months of the year; but, by the end of three years, I had made friends with many Senators and learned about the mechanics of legislation and the sometimes unseemly business of politics. Senators Bricker (OH), Payne (ME) and Goldwater (AZ) were among my favorites. Initially, I had dreams of being in politics, but, after observing The Hill in action, I eschewed it. Even so, in 1958, when my first post-law school job offer came from Senator Thomas Kuchel (CA, 1910-1994), who asked me to be his Legal Assistant, I accepted with relish as the pay was half-again more than starting lawyers were then being paid, and there were many “benies” to working on The Hill.
Unbelievably, a few weeks after accepting Senator Kuchel’s kind offer, good fortune smiled again, as I received “an offer I couldn’t refuse” — 25% higher than Senator Kuchel’s, and nearly twice the then starting wage of a novice lawyer, from a client of my dad’s, the then promising American Radiotelephone Corporation (Amrad), to become Sales Manager of its new Mid-Atlantic Office. It was to do unglamorous door-to-door selling, but, for Amrad’s offered pay, I would have cleaned sewers (as I had done one summer); so I grabbed it in a heartbeat. Knowing nothing about sales, I read dozens of books about selling as rapidly as possible and promptly commenced selling door-to-door to industrial plants. Amrad’s equipment (a simple switch that integrated paging systems with phone systems by the push of pedal or button, then a surprisingly significant feat) was incredibly easy to sell, and, after two years, I became National Sales Manager with a 50% increase in pay, presiding over Amrad’s sales’ offices in 14 States, requiring me to travel often from office-to-office to train and monitor salesmen; these endless trips strained my marriage to the snapping point (and eventually led to its demise), but I loved the job, because, at 26, I was making roughly three times what I would have been as a cub-lawyer. I felt “rich”, and we bought our first and very diminutive house (for $11,000 in humble “Twinbrook”, Rockville, MD, and, three or so years later, our second home, for $28,000, in the quite pleasant Montgomery Square, Potomac, MD.). Some said that I was “a great salesman”, but, in truth, to this day, I’ve never “sold” anything in my life; all that I’ve ever done is explain things in which I believe. As a congenital, enthusiastic optimist, my conviction in things has generally seemed persuasive. At 28, I was given the additional jobs of General Counsel and a Director of Amrad, and flew monthly on a private, prop-plane, from D.C. to Boston to Amrad’s monthly Board Meetings. These heady times were to prove short-lived.
Unfortunately, all of this came to a screeching halt. Amrad’s sales force was selling its devices in large volume, but AT&T wasn’t filling the orders. Since the telephone “tariffs” prevented non-AT&T (aka non-“Bell Telephone”) companies from attaching anything to any phone, Amrad couldn’t sell and install its devices for customers; Amrad could only give its sales orders to Western Electric to fill; W.E. was then the subsidiary of, and sole equipment supplier for, AT&T; sadly, Western Electric/AT&T did not fill Amrad’s sales’ orders; it shipped all of Amrad’s devices to an AT&T warehouse “for temporary storage” in New Jersey. Whatever Western Electric’s and AT&T’s then motives were, Amrad was soon to collapse. My salary was halved, but I was given the latitude to practice law “on the side”, which I began to do with my father, the much esteemed Eliot C. Lovett, among the nation’s then best known electronic communications attorneys, whose clients then included Walt Disney, Gene Autry, Motorola, Stromberg Carlson, The Los Angeles Times and many other prestigious entities.
First Client: A Boxing Champion
Amrad was owned and operated primarily by Boston-area Italians (George DiMatteo, Al Pelligrino, Frank Saccone, with investors like “Hi-Ho D’Addario”, a renowned Boston builder, et al) and, quite naturally, many of their friends were Italians, and one of these was none other than the blithe-spirited and gregariously irresistible Rocky Marciano, who had recently retired as World Boxing Heavyweight Champion (the only one to ever retire undefeated, 49-0, including 43 knock outs). Rocky (who was the coveted guest of everyone, especially restaurants, on the planet and who could even “call”, unannounced, at The White House), took a shine to me and asked me to do his endorsement contracts and to help manage some of his investments, which led me on a series of colorful forays, fraternizing with many luminaries, but neither time, space nor good grace allows me to detail here. In addition to aiding Rocky (a sometimes full time endeavor), my father assigned me to handle some carefully-monitored work for his clients. While Rocky paid my bills with travel vouchers from his travel agency (redeemable slowly over time), my dad’s clients paid cash to supplement my waning Amrad income. Rocky’s most cherished payment to me was his photo, taken in the ring in his Championship Belt, autographed with words that fell spontaneously from his pen: “To Lee, My Mouthpiece, the Brain-Lovett, You’re a Champ, Rocky.” See Rocky Marciano Tragically, Rocky (1923-1969), who became Champ at 26 and who retired (for want of competiton) undefeated at 29, was killed in a private airplane crash, at age 46, while on his way to a surprise birthday party in his honor. Rocky had become a good friend, and I missed him sorely. In the late 1990’s, when one of the TV networks did a biography on Rocky, they asked to interview me for it, but conflicts and logistics prevented me from accepting.
In a surreal series of events, by assuming its debts, Rocky’s CPA (Frank Saccone, a dear friend) and I fell heir to a rather large restaurant in Annapolis, Maryland, the then well renowned Red Coach Inn. Rocky owned it, and he was being bled dry by the Manager, whose pockets contained all the profits. Being a beloved Pisano, Rocky could not bring himself to terminate this Manager; he preferred to sell the restaurant. When Rocky’s accountant and I could find no buyers, Rocky asked us to “buy” the restaurant by simply assuming the then daunting debts, which the Manager kept dogging Rocky to pay. After Rocky agreed to visit the restaurant frequently with his prestigious friends, the accountant and I agreed and took over the restaurant, paying no cash. It had an exciting ambience, with live entertainment (with whom I occasionally sung), numerous prominent clientele, a great Italian chef who loved Rocky, and some 150 “tops” or seats. Rocky continued to be a frequent guest, bringing with him a host of glitterati and their usual entourage of lovely femmes fatale. Our restaurant had more than fine food and live entertainment, it was intriguing and “hot”. We replaced the manager and spent our spare time (four nights a week for me) watching the bartenders and husbanding the profits to retire the debts, after some two years, we sold it for a tidy profit, enough for me for to pay off my home and pocket a few pennies. It was more luck and sweat than skill that saved us from a blundering disaster.
A Hero Lost
When Amrad failed, I, then 28, joined my dad full-time to practice law, but he died within a year. My above-mentioned, part-time restaurant interlude occurred shortly after Dad died. (As explained in For Family Only, Ancestors, Eliot C. Lovett, my dad had been a prominent pioneer in radio and TV law, practicing primarily before the Federal Communications Commission, aka “FCC” or “Commission”.) He had several heart attacks in rapid succession, putting him permanently in bed, and he was taken to a Christian Science Nursing Home in Boston by my mother, my aunt (Aunta) and my brother, Bob. “I’ll not be a guinea pig for any doctor,” Dad barked as he was wheeled away. (Our family went to dentists but not to doctors.) A week or two of agonizing silence hung like a pall in our eerily silent three-room office, interrupted only by my breathing. Trying to work, accomplishing nothing, waiting, hoping, I lied to myself about my dad’s reality. Then came the fateful ring of the black-rotary-dial phone on my neat but empty desk; it was Aunta, Dad’s sister. My father was gone, gone! The call was brief; her words were meaningless and escaped me; my chest convulsed; I sat, sobbing, with only the ghost of my father and one, empty secretarial chair, his office, his desk, the ubiquitous pictures of my grandfather, the beloved Judge Lovett, and Mom-Mom (our endearing Grandmother Lovett) and my mother, were all that were left, all of which face me on my desk to this day, mementoes of everything wonderful that they did for me. The vacuous offices suddenly gave me a chill; they simulated a shadowy, somber mausoleum; it seemed I could hear the tears that burned furrows in my torpid face. It was over. He was only 67; how could be gone? We know that our parents will surely predecease us, but, somehow, it’s always a shock, especially when we are “in business” with them and dependent upon their sagacity; then, suddenly, they ascend into the morning mist, forever gone.
I sat alone in my office, and alone in recently separated-marriage and alone in my career, without a job and with no reliable clients, not really — alone in my life. The diminutive but close family in which I was raised would soon scatter to the winds, brother-Bob 3000 miles away, sister-Loyce retreated to solitude to struggle with the loss of a father she loved above all others, a mother in silence. Worst of all, I would never again have the refined, gentle, erudite, profound and loving Eliot to lean upon, nor again hear or read his syntactical tweaks and scholarly critiques of my halting prose or again absorb the sagacity of his advice or imbibe into my pores the unspoken love that flowed so effortlessly from his tender glances and the infinite, spontaneous and thoughtful deeds, the demonstrative, daily proof of this innately saintly man’s limitless capacity to love – and forgive.
I was 29, with fast dwindling savings, lonely and as discombobulated as a diaphanous windswept cloud — and very afraid. Being then separated from my wife and dating no one, to save dwindling resources, I was living with an amusing, if hedonistic, 24-7 partying-bachelor, at a time at which I had zero interest in anything but survival-thoughts, and, still a devout Christian Scientist, I didn’t drink at all; I just worked uncontrollably into the wee hours. Why not; I had no where to go, nothing else to do, and I felt desperate. I was able to live on almost nothing, but could I provide for my estranged wife and two kids? Nonetheless, as the unforgettably poetic Boris Pasternak poignantly observed at a time of tragic loss in his epic masterpiece (Dr. Zhivago), the salient point was, “The candle burned.” My candle still burned. I began feverishly making survival plans.
What saves us from such malaise? The exigencies of life! The insatiable needs of those who depend on us, and the crises that must be solved, all of these compel action, no matter how great the loss. Fear forced my eyes dry, but the stifled tears of one family member or another filled the corners of every room at my mother’s house, constant reminders of our terminally missing icon. The funeral brought a form of cloture, with its attendance by hundreds of mourners, but the service still seemed antiseptic and impersonal; all the words were about the Bible rather than about Dad. I knew those Biblical words, having been raised in study of them; but I wanted to hear about my dad, but that was not the way of my family’s memorial services. I was disappointed, and my turbid mind had yet to regain its functions and dissolve the melange of turgid emotions. Life’s pace continued unabated. The next day, my brother, then 36, had no choice but to return swiftly to his job and family in California, 3000 miles distant, making me feel all the more alone, as I embarked on a new “career” doing whatever I could create for myself. My sister vaporized into a sea of tears. Within a year, I reconciled with my then wife, Phyllis, and we remained together for another eight years, before our earlier schisms, pubescent immaturity, our enigmatic estrangements, our antipodal growth patterns, our reciprocal agreement to see others, and, above all, my business-travels, brought us to amicable parting. She remarried within weeks and I within a year.
Mercifully, after Amrad had collapsed due to Western Electdric’s failure to fill thousands of orders for Amrad’s products, Amrad (with my urging) had initiated an anti-trust lawsuit against AT&T and W.E., on which I served as co-counsel and, shortly after my dad died, the case ended successfully. It didn’t save Amrad, but it did salve the wounds of its investors somewhat, and, as a post script, it provided funding for my nascent law practice. Concurrently, I became engaged in my above-described restaurant adventure. This, too, was soon to add to my modest but improving coffers.
Practicing Law Solo
When one suffers a potentially terminal loss, one must attack, before one’s position is weakened further – or such is an apothegm of Chess Masters, to which I subscribe. Although the proceeds of the Amrad settlement and the sale of the restaurant were to provide help, waning resources and time, always our enemy, commanded that I move swiftly, lest I be swept into the swirling, magnetic tempest of the unemployed and its attendant abject privation. I had no safety net. “Necessity,” the clichéd “Mother of Invention” kicked-in. Survival’s exigencies quelled, or at least suppressed, my remorse. I had to start from scratch — and quickly.
Before Dad had left for Boston on his last trip, he had counseled me, at the peril of stating the obvious, “Lee, you’re too young to take over my law practice; besides, no one can inherit a law practice; it’s a personal business. You’ll need to begin afresh and build your own niche somehow. You’ll be fine; I’ll never worry about you.” I couldn’t believe his confidence in me. “Were I you,” he continued, “I’d go into community antenna TV”, as cable TV was then known and was more commonly called simply “CATV”. Dad would “never worry” about me! How ludicrous; how could he possibly have such confidence in me? I felt like I was in free fall from the roof of ten story building, and his well-intentioned words did not abate my unbridled panic.
First, I had to mail notices of my dad’s passing to his clients, and, as he had predicted, virtually by return mail, 90% of them notified me that they were moving to other law firms, some not paying large bills that were now owed to my mother, and leaving only those very small AM radio clients behind, about thirty of them (who needed infrequent legal assistance), and they paid very little, just enough to cover my office rent. For a time, I could live off the proceeds of the Amrad antitrust case settlement and then the restaurant-sale, allowing me to devote my time to servicing my AM radio clients, making up reasons to send them data, to call them, to send them monthly memos recapping the activities of the FCC, and otherwise showering them with TLC. These overtures were well received and enabled me to practice my Amrad-honed sales skills, which amounted to little more than explaining what one truly believes.
Expansion via Merger
Feeling the perils of practicing law alone with only one employee, and having about 30 small radio clients who paid the princely sums of zero to $50 a month each, I realized that I couldn’t make my “practice” attractive to new clients flying solo. I convinced my best law school bud, a lovable, cherubic if pedantic Greek, John Papajohn, to join me. (His knowledge of history and voluble expatiations on same rescued me from insanity.) With no secretary, he saved me from myself. However, a one-man or even two-man “firm” is too small to appear reliable. So, I sought a “merger” of some sort, and, mercifully, I found a man 23 years my senior, an excellent radio lawyer, Robert M. Booth, who, like my dad, had been President of the Federal Communications Bar Association – offering knowledge, gray hair and credibility! (Also, I was in search of a surrogate father, and Booth had the visage of that and the felicitous girth of two fathers, and, happily, he found my 30 small radio clients, and possibly me, of interest.). Although we signed a partnership agreement, it seemed more like an office-sharing arrangement, but it helped. We had agreed on a 50:50 partnership, but, at the hour of signing, I unilaterally gave him 1%, giving him 51:49 control, because, as I told him, he was 23 years my senior, and I didn’t want him to feel (among his friends) that he had accepted equality with a so much younger, cub-lawyer, more of a tyro than a real partner. He accepted gratefully, of course, and it never mattered, as we never fought, and I knew that, if we did, I would simply leave. (When we amicably parted ways years later, he had forgotten my gift of 1% and denied the event, but it didn’t matter. I didn’t care.) Anyway, for almost ten years, it worked well. Bob had a young lawyer with him and several secretaries; so, we were four lawyers and three secretaries; I was a part of something more significant; there were bodies and action in the office at last, and, if I left the office for lunch, the phone was still answered, and that calmed my nerves a great deal; plus, it gave me a much larger stable of clients (Booth’s) to whom I could offer my evolving, creatively-packaged, pioneering FM and cable TV services. At necessity’s bidding, I began “inventing” – inventing myself, above all.
Pioneering in FM Radio
Although FM radio offered much higher fidelity and infinitely more reliable signals than AM, at the time (early 1960’s), there were relatively few FM radio stations, for the simple reason that so few had FM radio receivers; I believed that this gap would close in a few years, and, when it did, FM radio licenses would be gold, but, at that time, most investors did not seem to believe that FM would succeed. The Federal Communications Commission (FCC or Commission), which licensed use of the airwaves, was doing its best to award FM licenses to most anyone who applied. Still financed by the success of the Amrad anti-trust law suit, it occurred to me that my AM radio clients should consider adding an FM station. AM radio was beginning to suffer some losses to TV, as shows like Jack Benny’s were switching to TV. So, I encouraged daring clients to seek FM radio licenses, which could often be obtained without competition, and, since FM radio manufacturers had few buyers, accommodating financing packages were available. To make it easier for clients (and to obtain some equity in the stations), I offered my services (to obtain the license from the FCC and the financing from manufacturers) in exchange for reduced cash fees and a small, equity interest in the FM stations.
My father had always worked solely for fees, and, basically, he, like his dad and granddad, died with very modest assets. The real value, I reasoned, was in owning the stations, not in representing them. Equity appreciates; cash doesn’t; this is increasingly so now with governments printing paper currency in undisclosed quantities. (99.9% of all inflation is caused by government’s manipulation of currency, as the wise libertarian and economist, Harry Browne, demonstrated in his brilliant How to Profit from the Coming Devaluation, 1969.) So, I always viewed equity interests as more valuable than cash fees, but, in those days, most lawyers frowned on taking equity interests, as they viewed it as a possible conflict of interest, even though it was quite legal and violated none of the Canons of Ethics. Conversely, logic averred that, if I had equity in the client’s company, I would work even harder to help the client, a concomitance (not a conflict) of interest. This proved to be true.
So, I obtained equity interests in most of my client’s companies. This approach gave the client an added bonus: I charged less in cash (both before and after the license was obtained); and it helped me, long term, as I acquired equity in the station, a win-win. While I was sometimes diluted to oblivion, by shrewd (if unscrupulous) clients, often I was not. Taking equity interests was “pioneering” then (by me and some other daring young lawyers) and was then the subject of invidious and querulous criticisms, but, over time, the entire bar has followed suit. Similarly, lawyers then also frowned on advertising, and I didn’t advertise until the early 1980’s, by which time others were doing so, and, of course, by 2000, advertising by lawyers was widespread. (I only advertised once in my legal career and for one purpose: to alert the lay-public to the fact that, under the FCC’s then just revised cellular-lottery-rules, the public (not just large corporations) had a chance to profit from cellular licensing; happily, close to 100% of those who responded to those ads made very large returns on their very small investments.) Back to FM radio, as an early founder of some dozens of FM stations, I became a Broadcast Pioneer, which expanded my circle of compatriots and “believers”. My FM equities appreciated, too, although very slowly, over the years. This was positive, but I saw something else much more interesting on the horizon. As more and more joined the FM Radio Hunt, the competition inspired me to change my focus from FM to something new and even more promising, which I had been researching since my father had suggested it to me: cable television.
Pioneering in Cable TV (aka CATV)
1948-1960: Cable TV, as noted above, was first known as “community antenna TV” or “CATV”. The first system was built circa 1948, in a town with no off-air TV. Unlike radio signals which follow the contours of the earth’s surface, TV signals shoot from their transmitter in a straight line, ignoring the earth’s curvature, taking the signals off into space, leaving towns in valleys with snowy to zero off-air TV signals. According to Wikipedia, our client and sometimes co-venturer, John Walson (1915-1993), a Polish immigrant with very limited education, “is recognized by the U.S. Congress and the National Cable TV Association as having invented cable television in the spring of 1948.” After becoming a client, friend and sometimes co-venturer, John Walson explained his invention of cable TV to me, and I paraphrased his success story to city officials in various franchise proceedings in which he joined us. John allowed me to explain his “invention” in words along these lines:
“John owned an appliance store in Mahanoy City, PA. It was 1948. TV was only a few years old, but no TV signals reached his town, because Mahonoy City was in a valley. John bought a few TV sets, which came with “rabbit ear” antennas, which didn’t help. He made larger antennas but that didn’t help either, until he decided to make much larger antennas and put them on top of the highest, nearby hill and run wires from the antenna down to his store. When he did this, his TV sets worked. He actually received viewable TV signals in his store. The signals were degraded by traveling the distance down the hill to his store, as the primitive copper cables weren’t shielded or amplified, but they were still viewable. So, he put the TV sets in his store windows, and the first passersby rushed in and bought those TV’s. When they took the TV’s home, they couldn’t see any pictures, because they weren’t connected to John’s cables that led to the antenna. So, they came back to his store and wanted their money back. John wanted to sell TV sets; so, since the first customers lived close to his store, he made them a deal: He ran his cables down to his customer’s house, at his cost. This led to stringing wires farther and farther around town. Soon, to make ends meet, he established flat fees of $295 for installation and $1.95 a month for service, and he fittingly called his company, “Service Electric”, as he was delivering TV service electrically. He used “nuts, bolts and bailing wire” to keep his system patched together enough to work. It was touch and go. A few years later, Jerrold Electronics was founded by Milton Shapp (1912-1994), who later became Governor of Pennsylvania, and began making much better equipment than John was using, and John expanded his system with better gear and went on to build cable TV systems in many towns, mainly in Pennsylvania, and John Walson(ovic) became the largest, non-public cable TV company in history — worth a purported $500 Million before there was a billionaire on the planet. According to Wikipedia, by 1952, there were only a handful of systems serving some 14,000 subscribers (led by John Walson). By the early 1960’s, cable TV service had been made available to some 850,000 subscribers, less than 1% of U.S. homes. I refer to this period (1948-1960) as embryonic or primitive cable TV, serving towns with no, or almost no, off-air TV, with jerry-rigged “head-ends” (housing receiving and distribution electronics) which were primitively placed in tree trunks or in rickety lean-to’s with cables that leaked signals and emitted spurious radiation, and often provided barely viewable signals, but it was a beginning, and it brought the first TV, however spotty, to millions of viewers. John Walson started it all; all of us emulated his success.”
1960’s: “1st Generation Cable TV” is here defined as the embryonic systems if 1948-1959, which preceded my involvement, and “2nd Generation” as the 1960’s, when service was being extended to towns that had some limited off-air TV signals but was delivering more TV signals (as many as five) and was using much better equipment: cables were shielded to mitigate signal loss; amplifiers were placed along the cables every 1500 feet or so, boosting the signals and providing much higher quality signals; head-ends were housed in secure, if crude cinder-block, buildings. Indeed, TV signals over well-built cable TV systems began to look better than regular off-air signals in the same town. However, most people still believed that cable TV was economically viable only in towns where there was no TV or very little (one or two signals maximum) off-air TV. We were convinced of the opposite, and that gave us our opening to grab then unwanted cable TV licenses. We proved to be correct.
After spending months researching cable TV in the early 1960’s and attending the annual, national industry convention (with all of 50 attendees, versus 10,000 by the 1980’s) and meeting many cable TV owners and techs, cable TV seemed viable in any town where it could materially improve the marginal off-air TV signals and add even one TV signal (even a duplicate network, as they had different news, movies, etc.). As such, cable TV seemed like an exciting and very viable service-package and those relative few of us who believed this, wanted cable TV franchises in any town that didn’t have all three networks (ABC, NBC, CBS) available off-air (and it wasn’t long before we entered towns that had all major networks available off-air). Ninety-plus percent of the U.S. did not have cable TV, and, as one good client and cable TV partner and a bon vivant side-kick with whom I had much fun (and now a much esteemed, very wealthy, long-retired philanthropist and donor of multiple buildings to various universities, and still close friend, Charles F. Erickson of West Virginia) said, “Lee, all markets are good markets for cable TV; some are just a little better than others.” He was so right, and the more that I studied the numbers; the more that I agreed. (By 2010, while different sources give slightly different data, cable TV service was available to 80-90% of the 120+ million U.S. dwelling units, and approximately 48% of the total subscribed to cable TV service. In the 1960’s, few believed that Cable TV would ever provide service to more than 20% of U.S. dwelling units.) So, in the early 1960’s, we ignored the naysayers, and, as with FM radio when few wanted an FM licenses, we “went where they ain’t”; we began putting together groups to apply for these then, perceived “unviable” cable TV franchises.
I viewed my 30 or so radio clients (a number of whom I had already talked into adding FM radio to their AM), and my new partner’s (Bob Booth’s) radio clients as potential CATV/cable TV clients. When I called my and Bob’s radio clients, and told them that I believed that I knew a way to put a zero on their net worth with virtually no cash investment (due to manufacturer financing that we arranged), they were interested, of course, but, when I told them that the business was “community antenna TV” (i.e. now cable TV), 90% of them had never heard of it.
My partner, Bob Booth, although wise in many ways, didn’t like cable TV; he viewed it as unviable in markets that had decent off-air broadcast TV signals, and, besides, cable TV companies, unlike broadcasters, were not then regulated by the FCC or anyone and, therefore, there was no need for our legal services. He urged me not to waste my, and hence our firm’s, valuable time on it. Most communications attorneys agreed with him, and that was wonderful, as it eliminated nearly all of the competition. I saw cable TV as a source of cash fees and, much more importantly, as a source of equity interests in those businesses. When you’re the only one in the race, or even one of two or three, you have an excellent chance of winning something. Anyway, I firmly believed that our radio clients could have (and should have) the cable TV franchise in their town. While Booth continued to disagree, he didn’t object to my soliciting his clients with CATV proposals. We built a fine cable TV client base this way, which attracted many other cable TV clients, including six of the then ten largest multiple system owners. (Decades later, long after we had separated cordially, he visited me in my office and thanked me “for dragging him kicking and screaming” into cable TV, because, by then, he said, his cable TV equities comprised most of his net worth and had made fortunes for his radio clients. I much appreciated his comments and the kindness of his visit. Sadly, I never saw him again, as he passed away a few months later, almost immediately after his wife had passed, a not uncommon denouement for couples very close.)
Co-Founding Cable TV Systems. So, for some months after my father passed, while working on the Amrad antitrust case and doing night-shifts at our 90-minute-distant Annapolis, MD. restaurant, I had showered my dad’s small AM radio clients with service, monthly newsletters and a surfeit of TLC, building relationships and confidence to the max of my abilities, and I had enticed them into FM radio, which was beginning to work well for them. So, they were quite happy with me. I then suggested that they could “put a zero on their net worth by going into CATV/cable TV”. Most of them had never even heard of it, but, since FM, which I had suggested, was doing well, they listened. These radio clients needed two things: (1) cable TV expertise and (2) financing. We arranged both for our under-funded, tiny radio clients, and still enabled them to retain control of the system. I had built some credibility with those clients who had not knee-jerk jettisoned me after my dad’s passing, and our cable TV franchise practice was about to explode.
While zero bank financing was available for cable TV, there were cable TV manufacturers who would lend 100% (and shortly thereafter up to 150%) of construction costs (of course, at very high interest rates, 12-18%) to start-up systems. This financing covered all construction costs and operating losses until the system was in the black. (A swashbuckling broker and friend, Bill Daniels (1920-2000), the late, veritable King of Cable TV Pioneers (and ex-member of the Air Force’s most elite group, The Blue Angels and Libertarian devotee of Ayn Rand, had convinced Jerrold Electronics, the above-mentioned largest manufacturer, to provide those terms, and many of us followed his innovative lead.) With 150% of construction costs available to fund us, the risks of cable TV were well worth taking, even though it typically took about seven years to pay off the loans and show a profit in that capital-intensive business. Jerrold Electronics developed its then revolutionary “High Band Converter”, which gave us up to 12 channels (versus our original 5 via the Low Band Converter), we were able to increase our TV signals from several to six or even more, IF we could find them off-air or import them via microwave. Imagine that: six or more channels on cable TV plus less snowy pictures! Although Doubting Thomas’s abounded, this seemed manifestly salable to us.
So, I contacted the cable TV experts that I had met (the most frequently conscripted being the above-mentioned Hollywood-handsome cable TV whiz, Charles F. Erickson) and offered them a carried interest (with our firm and me) of 20% of the cable TV system, in exchange for their help in (i) preparing the data for the franchise application, (ii) for supervising the manufacturer’s construction of the system, and (iii) for hiring the initial staff to run the system for my radio clients, a complete package, “soup to nuts”, to be trite. (I and my law firm retained 25-50% of the 20% for planning the entire project, and we charged appealingly scaled-down fees for drafting applications, agreements, financing packages, etc., and, if we won, a monthly retainer “as long as the client owned the system”. Had we understood the tax-shelter value of all that debt, as did others (like the prescient and amiable Chuck Dolan, the multi-billionaire founder of Cablevision), we might well have retained a controlling interest in many of those systems, but we knew nothing about the tax laws.) Our radio clients (who were to be the controlling owner of the cable TV system in their respective towns) had almost no risk: i.e., the cash fee that we charged up front, which, in the greater scheme of things, was a pittance and posed no resistance. Our cable TV package was an offer that was difficult to refuse, and few refused. If you’re interested in seeing some of the markets in which we put cable TV systems, there’s a partial list of 80 or so (that we our fallible memories can now conjure) at Cable TV and Cellular Markets.
Some ask, “Why do cable TV systems require franchises from the local government?” Historically, cable TV systems typically placed their cables 12” above the telephone cables and 40” below the electric cables and attached amplifiers to their own cable TV cables. Since the electric and telephone poles are in “public rights of way”, it is necessary to obtain permission to string those wires from the local government (city or county) as the government built and maintained the streets. Due to the large capital investment of cable TV, the systems needed long term permissions, and these came to be called “franchises”. The earlier franchises were for thirty to fifty years but, eventually, twenty years was the norm, with some for ten years. The term notwithstanding, cable TV systems are de facto monopolies, as there isn’t room on the utility poles or conduits for more than one, and it’s too expensive and disruptive to install poles or conduits just for cable TV, in most cases. (Going underground was generally too disruptive and too expensive, unless all utilities were doing so simultaneously.) Renewals of franchises were and remain virtually automatic, as no city government wants to close a cable TV system and have all of its customers calling City Hall for cable TV service, while a new system is franchised and then installed to replace the existing one.
Overcoming Now Ludicrous Objections: “You’ll go broke.” For years, we were generally the only applicant for the cable TV franchise. Our biggest problem was this: Convincing the City Fathers (the City Council) to allow us to install a cable TV system. They, like the bankers and many others, were convinced that no one would buy cable TV service, because “We already have TV here.” That is, they had one or maybe two off-air TV signals, and City Fathers protested, “We can only watch one station at a time; so, why should we want a system that gives us more TV signals? If you install a cable TV system, you’ll just go broke and leave ugly wires hanging from our utility [phone and electric] poles.” To overcome this irrational objection, we would post a bond of a few thousand dollars to cover removal of the first few blocks of our system; then, if no one wanted our service, the City would have the money to remove our ugly wires, but the public always wanted our service, when introduced to it; so, the City would let us keep building. We then installed our receiving antennas on the highest hill and ran cables from them to our head end, and, from there, ran cables to the closest residential area. We then offered free installation and service to the first homeowner who would accept our service and who would hold a tea party for their neighbors to show off our service. Then, 90% of the neighbors saw our “low band” (five-channel maximum) service, they loved it and signed to pay us $300 for installation and $1.95 per month to cover all of our TV signals (three to five stations)). After “high band” (12-channel capacity) systems emerged, we began lowering the installation fees (which slowed sales) and we began to increase monthly fees: Along the way, we lowered installation fees to $95 and then to $29.95 and then began to offer ongoing “Free Installation Specials”, while we increased the monthly fees to $2.95, $3,95 and $4.95, where it remained for some years. It took longer to retire debt, about 7-10 years, but interest rates were declining, and the systems had low-operating-costs, and offered recurring-revenue-stream gold mines! That was fledgling cable TV in the 1960’s.
Most of my radio clients, and a number of Bob Booth’s, accepted our urgings to become franchise applicants and, then, owners of the cable TV system in their home town. (Although we prepared elaborate written applications (following the criteria that the FCC used for comparative broadcast licensing, as our firm had become the first and most vocal proponents of “local programming” by cable TV systems). It was relatively easy to convince most local City Councils to award a cable TV franchise to their home-grown radio stars, especially since there were no, or very few, other competitors, as the big public Multiple System Owners were just emerging.) We, thus, co-founded many systems and created a vibrant stable of cable TV clients, while earning meaningful fees and amassing promising 20% equity interests. (I have always lived off the relative crumbs from others’ tables.) Being unopposed or having very few competitors for franchises, we won 90% of our cases in the 1960’s. To my knowledge, no one ever complained; every one of them made millions, and they, or their heirs, remain happy today. (A year ago, one called to thank me again for urging their parents and family to leap into cable TV and to advise that his family had recently sold their cable TV system for ten times the value of their string of 14 or so AM-FM radio stations (for all of which we obtained the licenses). They remain grateful, and they were kind enough to tell me so, again, after all these years, and that is my greatest reward.)
1970’s to Date: As the 1960’s came to an end, cable TV entered what I dub “3rd Generation”. Word of cable TV’s enhanced services had spread, and laymen (even banks, finally) began to see the value of cable TV franchise in urban markets with good off-air TV signals, and cable TV began to finally penetrate the largest U.S. cities; the majority finally accepted that cable TV’s better quality signals alone seemed able to make the service viable, but, with then only 10-12 “lit” channels on most systems in the early 1970’s, new cable TV-only networks (like CNN, HBO and ESPN) began to slowly emerge via satellite. So, many began to emulate our franchising efforts and even the specifics of our applications, especially the handful of multiple system owners (e.g., Teleprompter, then the largest one). So, cable TV franchise proceedings were no longer unopposed; there were multiple applicants – but still a far cry from FCC radio hearings where 10, 20 and even more applicants sometimes squabbled over the same radio or TV license, spending years in hearings and appeals. Meanwhile, our cable TV adventures continued unabated. At the urging of politically powerful broadcasters, in the mid-1960’s, the FCC had imposed various restrictions (“freezes”) on cable TV in the Top 100 Markets, but the public clamor for better TV prevailed, and those restrictions were finally lifted. As we entered larger and larger cities and counties, there was much more off-the-air TV (routinely including ABC, NBC, CBS, and even an independent, and/or one of those then limited-operating-hours public broadcasting stations. In addition, we often imported duplicate broadcast network stations, as they offered different news, sports, movies, etc. These were exciting times, as cable TV began to explode in all directions.
Local Programming Led by an Icon, Fred Ford. To my everlasting delight, Fred Ford (1909-1986, an ex-FCC Chairman (1960-1964) and then immediate Past President of National Cable TV Association (1964-1970)) shared my view that local programming or cable TV-only programming would become the sina qua non of cable TV. Fred joined our law firm in 1970. Having exhausted our radio clients, we were often retained by the ever increasing number of large cable TV companies to do their franchise applications. At that time, there were about ten, large “MSO’s” (multiple system owners). At one point, we were doing work for six of the ten MSO’s in different markets. Fred Ford, who was Best Man at my 1973 wedding to Lynda Faye Barnes (my wife ever since), had joined our law firm, because we shared a conviction that cable TV could provide a significant service by offering local programming and that local ownership would be of significant value in delivering good local programming, as it proved to be. We often presented cable TV franchise cases together; Fred, a tall, handsome, distinguished gentleman, was most persuasive. As a result, when we took a cable TV franchise case, we insisted that it (1) have some element of local ownership and (2) offer some local programming of value. For some time, we were the only cable franchise applicants offering these elements, and we explained same in long, very graphic and colorful applications, not to mention verbal histrionics, which proved very persuasive to local governments. These applications, which began at 10-20 pages grew to ponderous tomes over 1,000 pages each. We sold both by quality and by the pound. It worked.
In the larger cities, most local owners didn’t have the money to finance the systems; so, we brought in one of our MSO-clients, who would agree to provide all of the financing for 80% of the system, leaving a 20% “carried” (or free) equity interest for the locals. Most local governments loved this approach, and we continued to win franchises with it, easily defeating MSO’s without local owners. Within a few years, virtually all of our competitors had incorporated local ownership; and the practice became so commonplace that it began to be derisively called “rent a civic leader”; at that point, we no longer used it, unless the city officials said that wanted it. We substituted charitable gifts to local institutions, offered extensive local programming and raised our proposed annual franchise fees. Our MSO clients, of course, much preferred no local ownership as it avoided giving away the typical 20% of the equity of the system. As 20% carried local ownership had become de rigueur, we responded by reversing our approach.
As the 1970’s progressed, we reversed our position again by pushing locals back into the mix, but this time not in a minority-20% position but, rather, into a control position; we began by convincing the MSO to take the minority position without posting the financing to build the system. In other words, the MSO provided its expertise but not its money. Our locals became the majority owners, as a group, and (since cable TV was then finally viewed as viable in urban markets) our enterprising locals had the wherewithal to obtain millions in financing. There had then been four cycles in our franchising of cable TV ownership: (1) locals as owners (using manufacturer’s financing which we obtaine) with minority experts (us) to build and staff the system; (2) control by non-locals/MSO’s with locals having a carried/free interest (usually 20%, the “rent a local” approach); (3) MSO’s owning 100%; and, finally, coming full circle, (4) locals with majority-controlling interests with the MSO in the minority (“rent an MSO”). Most MSO’s would not relinquish control to locals, which gave us a material competitive advantage in the franchise proceedings, if we could persuade the city officials that our locals could obtain the requisite expertise from their minority-MSO partner. Baltimore County was a classic case on point; our client, John Walson (the earlier discussed inventor of cable TV) was our MSO and our dozens of local shareholders held control. After we won the franchise, our locals raised some $50M, as I recall, to fund the system; many years later, it was sold for several times that amount.
Only a few MSO’s would take a minority position, such as our client, John Walson (as above-discussed, held by many to be the “inventor” of cable TV), as above-noted, who had the largest complex of privately-owned cable TV systems (known as “Service Electric”) in the world (estimated, c. 1970, to be worth $500 Million – likely ten times that value by 2012). We weren’t “renting a civic leader”; we were “renting cable TV experts”, just as we had done in the early 1960’s by using our local radio clients as the controlling owners of the franchises and bringing in a handful of consultant-experts. We employed this “Rent a CATV MSO” approach in a number of larger markets, for example: Arlington County, VA., Alexandria, VA., Baltimore County, MD. and Jacksonville, FL., winning all those cases, and those systems were successfully financed and built by locals, who made fortunes.
By the early 1980’s, we choose not to compete in the franchising of the very largest cities, because the number of applicants was then rivaling FCC broadcast hearings, i.e., ten and more applicants, and we didn’t like the odds; and the process had changed to a bidding war based on highest fees promised to the local government; besides, we had discovered a new communications medium that looked even more promising.
From its inception in 1948, cable TV has grown from “low band” system (a maximum of five TV channels) to “high band” systems (maximum of 12 channels) to “dual cable plants” (24 channels), to systems that could set top box with 36 channels and, with Gargantuan leaps forward, to today’s multi-hundred channel systems with “addressable taps” (permitting purchases of pay-TV fare by subscribers) and high quality coaxial and fiber optic cables, with some programming delivered to the cable TV systems via satellites, now even including “high definition” signals that transcend the wildest dreams of 50 years ago, and cable TV systems continue to spawn many “networks” of their own (CNN, ESPN, HBO, Showtime, Disney, National Geographic, History, etc.) and countless unique programs, becoming more than anyone envisaged, much less predicted. Cable TV systems have historically been valued by a dollar-multiple of their subscribers. Circa 1960, systems typically sold around $50 per subscriber. Within a few years, subscriber-values had leaped to $150 and from there to $300. By the early 1970’s, their value had reached $800 then $1,000/sub, and $2,000/sub later in the 1970’s, and, finally, $3,000/sub in the 1980’s. According to the Stanford Law Review (2003 Stan. Tech. L. Rev 4), by 2000, systems were worth $6,000/subscriber (or six times their then estimated capital cost). Clearly, this increase is due to the addition of hundreds of channels, satellite-interfacing and many services, including broadband Internet access – and, of course, the government’s relentless and shameless debauchment of paper currencies.
Indeed, even the once dominant and much-feared broadcast networks (NBC, ABC, CBS and Fox) are slowly being rendered less and less important, as cable TV offers more and more programming options every year. TV viewers are being fractionalized into micro-niche audiences. Cable TV, like Apple’s iPad, has allowed many third parties to supply innovative new data to their respective customers. In addition, cable TV’s Internet broadband services are making cable TV a major player in computer communications.
As such, television via computer lurks as a sleeping giant that may well revolutionize all existing entertainment media, as computers can carry increasing data via higher broadband speeds, enabling them to put all manner of programming directly on consumer TV’s, even bypassing cable TV, all of which makes historical broadcast (off-air) networks look like dinosaurs, just as Jobs’ iTunes remade the music industry in a handful of years. The seas of change continue to entertain our bewildered eyes.
Anyway, by the early 1980’s, most local governments had awarded cable TV franchises to someone, and, over the prior two decades, we had co-founded roughly 75 cable TV systems, retaining equity in many. Over time, all of these systems were sold to one company or another and were then or later but long ago assimilated into public cable TV firms. It was a wonderful run, and, surprisingly, while always keeping one eye on our next step and the other on the horizon, we were then discovering something that seemed even more exciting.
Pioneering in Cellular Telephone
History does repeat itself, but not in exactly the same way. Cellular telephone’s evolution was to echo the early history of FM and cable TV but would eclipse their success-stories, in terms of saturation (public usage) and ROI (return on investment). The NCTA/National Cable TV Association (in 2010) advised that cable TV service is available to over 90% of U.S. homes, but that cable TV services are only provided to 48% of U.S. homes. (http://wiki.answers.com/) According to Steve Largent, President of the CTIA/Cellular Telephone Industry Association, 91% of Americans were using cell phones by March 2010 – roughly twice the saturation rate of cable TV. (See http://arstechnica.com/telecom/news/2010/03/wireless-survey.) Ironically, in our original projections for our neophyte cellular clients, although we expected over 20% saturation, we had predicted only 2% saturation, and we were still eviscerated and publicly impaled for “misleading” our clients by over-inflating cellular telephone’s potential. Cellular telephone was one of those rare business opportunities that actually exceeded all expectations by quantum leaps. Consider how it crept innocuously onto the scene, a seeming nothing, at first unnoticed and then (like its predecessors FM and cable TV) was still rejected by many before it exploded to fulfill its destiny — and, ultimately, to achieve its now unprecedented, ubiquitous usage.
Interestingly, when the Federal Communications Commission (FCC) first invited applications for cellular telephone licenses (in June 1982, for Markets 1-30), there were almost no believers; Doubting Thomas’s again ruled the day. Some of those Top 30 markets had only two applicants and the average was five applications per market! Cellular telephone posed an even greater conundrum than had either FM or cable TV in their respective infancies: Almost no one had ever heard of the badly mislabeled “cellular telephone”; the name “cellular” evoked snickers — “Service in cells, please!” Further, when told about it, most thought it a ridiculous idea, because “There were already two mobile phone licenses in all the major cities”. Many, including the same ilk of bankers who resolutely rejected FM and cable TV, flippantly and categorically warned, “There is no need for cellular telephone; cellular telephone will go broke.” Those were the reactions during the few years of “cellular” in the U.S., but I’m getting ahead of myself. Here’s how the story unfolded for us.
Cellular telephone reminded us of Russell Conwell’s lovely 1908 classic, “Acres of Diamonds”, the story of a young man who, in search of his fortune, left home and wandered the world for twenty years to no avail and, then, returned home to discover acres of diamonds in his own backyard. Indeed, the things that we seek are often literally under our proverbial noses, just as were Conwell’s acre of diamonds. As we were about to learn, the then much-maligned, humorously-dubed “cellular telephone” (like its predecessors, FM and cable TV) was directly under our noses.
Salvation often emerges from the most improbable sources. In this case, an obscure suburban lawyer badgered me to meet one of his clients, a struggling ex-Army radio engineer, who was introducing an exciting new “radio communications technology which the FCC was about to open for licensing”. We met one evening at my home and began chatting at 6PM; his protracted tale transfixed me; we continued until 3AM, after which we adjourned until 9AM, when we reconvened at his client’s office, where I remained for a further six hour meeting. By the conclusion of this 20-hour-marathon, I had made prodigious notes and had experienced a communications’ epiphany of sorts: a veritable worm hole through which I could glimpse the physicists’ vibrating “strings of telephone-life”, a mobile-phone Elysium. The subject, of course, was that oddity now turned household term, cellular telephone, but I had never before heard that misleading appellation. In a nutshell, here’s what I had learned that long night and the ensuing day:
The client, an ex-Army radio-engineer, explained that the Army had developed a “cellular” radio technology, for battlefield communications (with AT&T’s help), that was akin to but vastly superior to WWII’s “Walkie Talkie’s”, and that this new technology was known by the esoteric moniker of “cellular telephone,” because it divided the service area into “cells” and placed a transmitter-receiver in the center of each cell, giving each cell an initial radius of roughly eight miles (based on assumed the number of channels and call-usage). As the number of users increased, the cell-sizes would be reduced by adding more transmitter-receiving stations. This cellular technology had already been successfully tested in Baltimore and Chicago and monitored by the FCC; this had led the FCC to open up the U.S. for cellular telephone applications. Only a few weeks prior, the FCC had announced that it would license cellular telephone systems for all markets in the U.S., and the first applications were due to be filed in June 1982, which was then a few weeks away! Yet, neither I nor anyone in our firm nor any of our peers had even noticed cellular telephone, much less the FCC’s commencement of the licensing process. A universally unexpected cellular-supernova was about to explode — and, unwittingly, I had been alerted just days prior.
The proverbial $64,000 question was: Since there were already two mobile phone licenses in all major U.S. systems, why would cellular telephone systems be economically viable there? The answer was compelling: Each of the existing systems had only five channels, which permitted ONLY two people to talk on each channel, just two people per channel, which meant that no more than twenty people could talk simultaneously in New York City on the existing car-telephone systems (5 channels x 2 people x 2 systems). A maximum of 20 simultaneous users in NYC? What a joke! I had personally experienced the issues of using the then existing mobile radios in cars in major cities. The mobile phone consoles (like their predecessors, Ham Radios) were huge; the fidelity of the signals was horrid, and, worst of all, you couldn’t get a free line to make a call. I recall driving two hours in a client’s car from NYC north, trying to place a call every few minutes with no luck. To us, there seemed to be an enormous need for an affordable mobile phone system that worked, but we were in a de minimus minority. As with the telephone itself and cable TV, cellular-telephone technology appeared uncomplicated and highly likely to work, as those at Motorola assured us, even though the first cell phones came in large consoles that occupied most of the space between passengers in most cars and the “portable” cell phones were the size of a shoe box and weighed some five pounds, but could be carried easily in an attaché case. We viewed both the in-car and the portable cell phones as readily marketable. Few agreed, which explains the paucity of applications for the Top 30 U.S. Markets (with some cities receiving only two applications)!
There were major issues to be resolved, of course: What would a cell phone cost to buy and operate? How many people might apply for these licenses? What criteria would the FCC use to award licenses? The preliminary answers of the ex-Army radio engineer and student of cellular telephone were: There is only one manufacturer of cell phones, Motorola; and its in-car console cell phone was huge and would cost some $2,000 and its shoe-box-sized portable cell phone would cost $7,500 each initially, but the size was expected to shrink materially over time, and the price was expected to drop by over 50% by the time the Top 30 U.S. Markets were operational (then projected to be in one year) – all of which we confirmed with Motorola. Cellular telephone seemed a better bet by the minute.
FCC licenses were to be awarded using the FCC’s tried-and-true “comparative criteria” in which our firm specialized and which the FCC had used for 50 years to award broadcast licenses. These criteria compared applicants on a host of factors including: financing, engineering design, best service, most localized service, local ownership, integration of ownership and management, etc.). It was “trial by fire…a trial to determine who had committed the least original sin” as once humorously characterized by William Henry, then FCC Chairman. We had successfully used these criteria in our FM radio and other broadcast cases for decades, and we (especially Fred Ford and I) had gratuitously and unilaterally applied them to cable TV franchise cases; even though cities did not formally use those criteria for cable TV, most had been very influenced by that criteria, and the fact that our applications most closely met that criteria generally led our clients victory. So, cellular licensing by comparative criteria sounded ideal to us. We drafted a summary of the cellular-license-availabilities with an explanatory memo that I wrote and forwarded same to those clients with likely interest, and they leaped at the opportunity, literally beating an expeditious path to our doors, jamming our waiting room.
In June 1982, no one had ever seen, much less written, a cellular application, much less one that was to be placed into a “comparative hearing”. So, we were creating those applications from whole cloth, innovating every step of the way. History in FM and cable TV cases suggested that our applications should offer quality and girth. We gave both. After first learning about cellular from my country-lawyer acquaintance in the wee hours of an inebriated morning, we had only a week or so before the Top 30 Market applications were due; so, we only had time to prepare and file about five applications, each requiring proof of substantial financing and several hundred pages of engineering and service proposals. Most other applicants had made no serious effort to comply with the comparative criteria; they either didn’t understand those rules or they didn’t have time to prepare a better case; so, by comparison, our applications seemed imposing and much more compelling; we loved our chances of prevailing in comparative hearings on the merits. The second thirty markets (Markets 31-60) were filed in November 1982. We filed in about twelve of them, and there were an average of eleven application per market (twice round one). Markets 61-90 were filed in March 1983; as I recall, there were an average of seventeen applications per market (still only three times round one’s average and a fraction of the 1,000-plus that would file in later rounds), and we had filed in half or so of them. Why didn’t more file? Cellular telephone remained an enigma.
In each of these three rounds, we believed that our clients had applications ideally tailored to meet the FCC’s comparative criteria, and we believed that we were “the favorite” to win most of those cases, although nothing is ever certain, particularly in licensing cases. Still, one has to assess the odds and act accordingly. Before the FCC commenced comparative hearings, which would have taken several years to resolve, most of the applicants seemed to be certain losers, and they wanted to settle, each receiving their pro rata share of the license. Since our clients’ applications were so strong on the comparative criteria, most received a “carried” (free) pro rata interest; that is, if there were five applicants, each received 20% of the system and 10% where there were ten applicants and so on. Our clients (and our firm, which, of course, had equity interests as well), were delighted to receive carried, pro rata interests in Markets 1-90.
The FCC (again, sometimes referred to as the “Commission”) then changed the filing rules for the remaining markets (91-305) from comparative hearings to lotteries. At that point, filings were due for Markets 91-120 in June 1983 (as I recall), and we had clients for each of those thirty markets. Each client was comprised of an investment group with numerous investors (five, 10, 20 or even many more). Each client had expected (as did we) to prepare and file a voluminous and costly comparative-criteria application. Under the lottery rules, the applications were infinitely simpler and less costly to prepare, but each applicant would have only one lottery-chance of winning. Thus, all of the effort to develop a strong local group, unique service proposals, integration of ownership and management, adequate financing, etc., was largely wasted. Our clients were justifiably concerned and didn’t wish to proceed with their applications, as their chances of winning would be from slim to none.
Happily, in its revised Rules, the Commission included a provision (Footnote 73) which invited applicants to settle before they filed their applications, which meant that, if ten applicants settled before filing, if any one of the ten won, all ten applicants would share the license equally, each receiving ten percent of that license. To be certain that the FCC meant precisely that, we dispatched several of our lawyers and clients to the FCC to inquire about this Rule and its efficacy. The FCC staff assured our representatives that Footnote 73 meant exactly what we understood it to mean. See Ambassador Thomas Siebert’s Letter.
We then returned to our clients and proposed as follows: Rather than file one application with 20 (or however many) investors, we would file one complete application in the name of each of the investors, and all of same would settle before filing, agreeing to take their pro rata share of the license, should any of them win. In that way, our clients received one lottery number for each investor. As such, if a client had twenty investors, we filed twenty applications, one for each investor, and, if one of them won, each investor had twenty chances to win a five percent-share of the license. This approach delighted our clients, and we filed accordingly. By using this strategy, our clients won roughly 60% of the nation’s licenses in that round, and the winners were what you might call “Average Joe’s”, not the usual mega rich corporate giants that have historically dominated electronic (and other forms of) communications and wielded strong influence with Congress and the White House; indeed, these mega-company-competitors were enraged. Many of those Establishment Giants inspired attacks on our firm for taking “unfair advantage” of the FCC’s “loophole” (the above-noted Footnote 73 that clearly invited applicants to “settle before filing”). That “loophole” was not a “loophole”; it was a very specific and quite legal exception, clearly articulated and confirmed verbally by FCC staff to a number of our witnesses. We had done nothing but capitalize on a settlement provision which the FCC had drafted. While a few others had done the same, we had used Fn. 73 on a much larger scale, but with the FCC staff’s specific blessings, which gave our clients a huge advantage in the lottery. Again, see Ambassador Thomas Siebert’s Letter.
We loved this approach and the results, as did our clients, because it enabled us to help spread the wealth (the cellular licenses) among many average folks and many, many new millionaires were created from scratch, as it were. Although many law firms were beginning to advertise by then (the early 1980’s), our firm had never advertised in any way. However, in the case of cellular-lottery-licensing, we believed that we should solicit clients, who could ban together in settlement groups and thus enjoy an above average chance of winning a share of a cellular license. Toward that end, we did advertise for clients for the ensuing rounds (Markets 121-305), and there were many respondents who chose to participate, paying very low license-application costs (much lower, due to our volume, than others could charge), as one application was able to tailored relatively easily to accommodate each individual. Our clients costs were stunningly low and half or more of them won license-interests for which they generally sold for once-in-a-lifetime profit multiples. Interestingly, the FCC did not revise its Rules as a result of our filing strategy, and our firm continued to make similar filings in the ensuing rounds. These strategies proved immensely profitable for our clients and equally offensive to Establishment Entities, who won virtually no further licenses. If you’re interested in seeing some of the markets in which we put cable TV systems, there’s a list of 80 or so at Cable TV and Cellular Markets. This resulted in extensive negative well-planted publicity and other attacks upon our firm and me, which are explained in some detail in the link on this website; go to About: Biography: Exonerations, and in the letters of various attorneys in that Section. See, in particular, Ambassador Thomas Siebert’s Letter, past-U.S. Ambassador to Sweden and one of my ex-partners, who wrote, “Lee’s biggest ‘offense’ was being too successful at what he did.” Suffice it to say, to quote renowned attorney, Plato Cacheris, “Mr. Lovett was exonerated of all guilt of any wrongdoing”. (See Letter of Attorney-Cacheris.) I would gratuitously, and factually, add that several hundred Average Joe’s became rich, by their definitions, as a result of joining our list of cellular clients, and I don’t believe that any of them lost money. That’s victory to me. Some referred to us as the “Robin Hoods of Cellular”. (See Ambassador Thomas Siebert’s Letter.)
While my communications-pioneering days, by my definition, were quite successful, the legal battles that they precipitated, forced me to walk away from a tidy nine figures of cellular equities. To exacerbate those Gothic losses, in years to follow, I had plenty of busts: a technology designed to remote-control most anything; a research firm to miniaturize cellular telephones; a broadband communications venture; a communications business in China; an importing business in China; in all of which I was a passive investor, not a prime mover. Still, a bust is a bust. Since then, I have “played” The Market, or, more aptly, it has played me, including hedge-funders, like Madoff, with whom I was invested, doing the most damage. To echo the sentiments of many others, Wall Street is a casino that works for middlemen and promoters or those with a multi-decade time-horizon and the patience of Job (or of The Oracle of Omaha, Warren Buffett). For most of us, we’ll fair better in our own enterprises, however humble and problematic.
After all of the hoopla, and with more than my share of grey hairs and still painful scars, since those halcyon days of waiting on tables, working on The Hill, selling door-to-door, representing the World Boxing Champ, running a restaurant, starting a law firm alone, building it into something, and pioneering FM, cable TV and cellular telephone, I have opted for quiet repose, helping with a few start-ups here and there, being “played” by The Market, but, mainly, skiing 75 days a year, fly-fishing, deep sea fishing, running, biking, doing my weights, and, above all, reading – and, of course, being with my four sons (Sons and Lee) and 13 grandkids. Best of all, my happiness requires nothing more than being with the woman whom I love more than life itself, Lynda Faye Barnes Lovett.
Looking back, I know many things that I could have done better, but I can honestly say that I couldn’t have tried harder to do my best, and I know that I helped some hundreds of people make their first millions, and, most important, I never broke my word or any rule or law or hurt a living soul intentionally. Even my 20 years of coaching boys’ baseball, producing some 15 teams of champions of one league, division, region or another, gave me endless indelibly sweet memories, including players whom I helped over the decades in myriad ways (co-signing for car loans, counseling drug problems, helping refinance a home, buying mitts for all the kids who couldn’t afford one, and helping them understand their parents and, sometimes, the reverse, as quite a few parents brought their boys to me for counseling). One example of those teams, and possibly the best team that I ever coached, is shown in Optimists ’73, a team on which my sons, Mark and Dean played, along with a host of exceptional athletes (the Manley brothers, Bobby Tolbert, Jimbo Smith, Jim Ganley, Ricky Michael, Manuel, and on and on). Those 20 years, and my opportunity to lend a hand to some 300 boys in all, constitutes “success” and salvation to me.
A final thought or two about my business life: A client of mine once put an interesting twist on my FM-cableTV-cellular adventures, when he colorfully observed, “Lee, you’re the only guy who took TV signals out of the air and put them in cables — and then took phone calls out of cables and put them in the air.” Of course, I was one of many, but it’s a good feeling to know that I helped, especially helping some hundreds of average folks leap into these new industries and profit from them, making us “Robin Hoods” of sorts, as Ambassador Siebert said (Ambassador Thomas Siebert’s Letter).
Still another client, who packaged a number of our cellular clients into one company and sold them for over $1 Billion said, “Lee, I don’t know what you made in cellular, but, whatever it was, you earned it.” In point of fact, all that I did was try to “go where they ain’t”. That is, find something that seemed great to me that wasn’t yet accepted as even viable and try to be among the very first to develop it. Such opportunities are hard to find, but they’re there, but one has to gather the courage to take the risks. So, I’ll end where I began. “If I had my life to live over again, I’d take more risks next time.” F. Stair, poet.