November 4, 2015 • 32 mins
Comcast is a powerful player in the cable and Internet space. How did the company get its start? And how did cable television take off in the first place?
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Episode Transcript
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Speaker 1 (00:04):
Get in tech with technology with Text Stuff from Stuff
technolog Hey there, and welcome to Text Stuff. I am
your host, Jonathan Strickland, and today I wanted to take
a look at a company that has become an enormous
(00:24):
powerhouse both on and offline, Comcast. Anyone who has listened
to me on various shows knows that I have some
pretty strong opinions, but I am going to do my
best to be as unbiased as possible. I do not
promise that snark will be completely kept out of my
voice through the entirety of this episode, but I will
(00:46):
do my best. Um, And also just know that this
is a huge topic, so I am already going to
tell you it will be a two parter. Otherwise it
would be an epically long podcast, So we're gonna split
this up at a two parts. So the reason why
I wanted to look at this, the thing that that
kind of spurred me into talking about Comcast, actually comes
(01:09):
from a recent experience I had. So I'm recording this
on Thursday, the twenty two of October two thousand fifteen.
But on Monday, October nineteen, something special happened and I
wanted to take part in it. That's something special. Was
that Star Wars episode seven, the Force Awaitkens the the
(01:31):
advanced tickets went on sale, and it was announced that
they went on sale a little earlier than what people
had originally anticipated. So I rushed to try and buy tickets,
and uh. One of the many things I tried to
do was use Fandango. But it was very clear that
there was an amazingly huge rush on tickets for the
(01:54):
Fandango servers, as well as all the other services out there,
and you could say that the servers for Fantango weren't
fully operational in the parlance of Star Wars, and I
started getting irritated. But then I remembered that Fandango is
owned by Comcast, and then I thought, anger leads to hate.
(02:17):
Hate leads to podcasts. But I promise I will do
my best to remain objective and dispassionate as we look
at the company, its history and the role it plays
in their entertainment. And it's a really long history too.
So before I talk about Comcast in particular, let me
set the stage with some history about cable television. Now.
(02:38):
Cable tv got its start back in the nineteen forties
in the United States, and there was a need for
an alternative to over the air broadcasts because some people
lived in remote locations that were too far away for
over the air air waves to make it to their
homes with any sort of fidelity, or they might live
in areas where radio waves had trouble reaching, like in
(02:59):
mountainous areas where a mountain might be blocking the radio waves.
So cable TV was the solution, and the basic model
was pretty simple in its design. In fact, the earliest
models just involved people setting up an antenna on a
really tall structure or a mountain or something like that,
and then physically running a cable from the antenna to
(03:21):
their television sets. But beyond that you started to get
actual organized businesses that would do this on behalf of customers. You,
as a customer, would pay the business for the access
to these over the air broadcast that otherwise you would
not be able to reach. So you would have a
broadcast station that would send out television along a certain
channel or frequency of radio waves, and your cable station
(03:45):
would essentially just be a set of receivers antenna in
other words, which would pick up these broadcasts and then
feed them through physical cables to their destinations, So early
cable was still very much reliant on over the air broadcast.
It was just an alternative way to get that that content,
and channels don't take up much bandwidth on a physical cable.
(04:07):
Each channel is six mega hurts, and a cable is
capable of holding hundreds of mega hurts of signals, and
using compression, you can even send multiple stations down a
single six mega hurts channel, So you can blast a
huge amount of channels through a single cable, and the
cable box or television at the other end of that
cable can tune into specific channels and block all the
(04:29):
others out. So, in other words, imagine that you are
in a room and there's every actor you've ever known
about in that room, and they're all acting their hearts
out at you at the same time, but you have
the ability to tune into a specific actor and tune
out everybody else. That's basically what's going on with cable
on a technological level. And when you opt into a
(04:53):
cable bundle often that means that you're also getting the
cable company to decrypt information. So what's happening on the
cable side, the cable operator side, is that they will
encrypt certain channels, like pay channels that otherwise you would
get for free. If you didn't have that encryption, then you,
(05:16):
as a customer would be able to access everything a
cable channel operator had to offer. But by encrypting it,
then the cable company can control which channels you can
actually view and which ones are off limits. When you
opt in to a cable bundle, like you you subscribe
to a specific cable service, they essentially send a message
(05:36):
to your television or a cable box and that allows
you to decrypt the signal on your end so that
you can actually watch it. And the United States, communities
in Pennsylvania, Oregon, and Arkansas were among the first to
receive cable service, and by that I mean people were
actually going out and setting up these antenna. By n two,
(05:57):
there are about seventy actual cable systems in the entire country.
So these were actual companies that had taken the same
sort of model that these enterprising individuals had followed and
actually made a business out of it. They only had
about fourteen thousand customers back in nineteen fifty two, but
cable television had a big advantage over home antennas in
(06:20):
that if you use a sophisticate antenna and you were
able to put it on a really tall building or
a mountain or some other really tall structure, you could
pick up signals from much further away than folks who
are just using regular rabbit ears on their televisions, Which
meant that cable customers sometimes could pick up signals from
(06:40):
other broadcast regions, so you might be able to get
content from multiple large cities. If you lived kind of
in between two big cities and you had this cable,
it might mean that you were able to double your
programming options. At least it may be that, you know,
the two elliots of of a major broadcast station are
(07:02):
showing more or less the same thing, but throughout the
day you would have some different options available to you,
which made cable fairly attractive. It was sort of the
beginning of cable's advantage over over the air broadcast, although
as we'll talk about a little bit later, over the
air still had a lot of other advantages. So interesting
(07:24):
cable TV began to grow, particularly among people who just
couldn't get over the air easily. By nineteen sixty two,
the number of customers had grown to more than eight
hundred thousand people in the United States, So in ten
years it went from fourteen thousand customers to eight hundred
thousand in the US. Cable TV was becoming a viable alternative,
(07:46):
even in communities that didn't have problems accessing over the
air signals. But it was also one of those things
that cities were starting to look into because if you
lived in a city with lots of high rise buildings,
sometimes that would block radio signals too. So it was
one of those things that that you could see the
the benefit, the potential application, but it was still going
(08:07):
to be really expensive to roll out the infrastructure. All right, Well,
that that sets the groundwork for what the cable industry
was like in the early sixties. Let's take a look
at Comcast specifically. The company actually traces its history back
to nineteen sixty three. That's when Ralph J. Roberts, Daniel
(08:27):
Aaron and Julian A. Broad Ski purchased a small cable
TV operator called American Cable Systems, which was in Tupelo, Mississippi,
and that service had just one thousand, two hundred subscribers
and that was it. The three businessmen spent five hundred
thousand dollars on that purchase. So who were these guys? Well,
(08:50):
Ralph J. Roberts grew up in New York and in Philadelphia.
He served in the United States Navy before going on
to work several different jobs. He gradually he earned enough
money to purchase a business of his own. He and
his brother went into a business. They invested in, a
company called Pioneer Suspender Company. It turns out there was
money in Suspenders because he and his brother decided to
(09:13):
sell the business off later on, and with that money
it allowed them to invest in other companies. So Ralph
Roberts ended up looking into the world of TV, and
it was reportedly Roberts who came up with a name
Comcast in nineteen sixty nine. So several years down the
road he would combine the words communications and broadcast together
(09:36):
to create the name Comcast, and he would serve as
Comcast Chief executive Officer for more than four decades. Uh.
Ralph J. Roberts passed away in June of two thousand
and fifteen, so very recently as of the recording of
this podcast now. Daniel Aharon was born in nineteen twenty
six in Giessen, Germany. His family escaped Germany during the
(09:58):
rise of the Nazi Party in World War Two, and
they settled in Queens, New York. Now Tragically, when he
was just thirteen years old, he lost his mother. She
committed suicide, and less than a month later, his father
also committed suicide. Daniel Aaron was orphaned and he was
not yet a citizen. He continued to live in New
York and eventually he would be drafted and sent to
(10:21):
Germany during World War Two. When he returned, he pursued
a career in journalism and public relations. Eventually he entered
the cable business and that's when he met Roberts and
agreed to co found Comcast. In his obituary, he was
referred to as the conscience of the company, famously even
(10:42):
buying coffee for picketing employees who were in a labor
dispute with Comcast. So he was sort of the working
man's representative among the three co founders of this company.
He passed away in two thousand three. Julian Brodsky grew
up in philade, Alphia. He had served in the United
States Army and he became an accountant after he left
(11:05):
the service. So Bronsky served as Robert's accountant, Ralph J. Roberts,
So he was actually the accountant for Ralph J. Roberts
and was approached by Roberts and by Aaron when they
were preparing to purchase this company, this little cable company
in Tiple of Mississippi, and Brodsky's main role was to
raise money for the company. In two thousand eleven, Brodsky
(11:28):
retired as the vice chairman of the company, and of
the three founders, he is the only one who is
still alive as of the recording of this podcast. Now.
Daniel Aaron is credited with having compared the three co
founders as three people trying to drive a single car,
and he said that Brodsky was the guy who had
his foot on the accelerator as he was raising capital
(11:50):
for the venture. Uh. Meanwhile, his own foot, Aaron, his
own foot was on the break to make sure the
company was a good corporate citizen, stepping on the brakes
to slow down the company if he thought that they
were about to do something reckless or damaging or or
just unethical. And meanwhile, we're alf Dave Roberts. His hands
were on the steering wheel, guiding the company along. In
(12:14):
those early days of cable the company faced some pretty
big challenges. According to the founders, they actually had to
act as door to door salespeople on occasion in an
effort to grow. So they were physically going out knocking
on people's doors and telling them about cable service in
an effort to get more customers. They came to the
(12:36):
conclusion that expansion would require purchasing other cable companies, and
this is a philosophy that Comcast has stuck with time
and time again over its long history. They have purchased
numerous companies that I will go into in some detail
throughout these two episodes. Now, originally they focused on other
(12:57):
cable services in the state of Mrs Sippy, So they
began to expand both in eastern and western Mississippi and
really focused on that state. But they were still finding
it difficult to get enough customers to make a profit
after going through the expense of setting up and maintaining
cable systems. So, in other words, they're operating expenses were
(13:18):
too close to the amount of money they were bringing in.
It wasn't really a fast growing company. It wasn't a
fast growing business, and they were trying to find new
ways to add to that as quickly as they possibly could.
In the company, which at that point was still known
as American Cable Systems, purchased another company called Storecast Corporation
(13:41):
of America. Here's the difference. Though Storecast was not a
cable service company, it was a marketing firm. And only
was it a marketing firm, it was a marketing firm
that had a very specific kind of clientele. They were
chiefly known for helping food companies work with supermarkets to
maximize sales prices are sales of the products, by placing
(14:04):
those products in prominent locations. In other words, they would
go into a supermarket on behalf of a client, Let's
say Wonderbread. I'm just taking that as a random example.
I don't know if Wonderbread was actually one of their clients.
But let's say they go into a supermarket they're representing Wonderbread,
and they go to the bread aisle and they look
(14:24):
around and they say, well, this is not great for
our client. We recommend you move this to this shelf.
If you're gonna move more product this way, you're gonna
increase your sales. Our client will be happy, You'll be
happy that's the kind of work they were mostly known
for doing, so a little odd that Comcast or at
that time, American Cable Systems would purchase this type of company.
(14:48):
Comcast continued to try and grow through acquisitions during this time,
and in nineteen sixty six, Ralph J. Roberts turned his
attention to Philadelphia. Keep in mind, that's one of the
cities he grew up in New York and Philadelphia is
where he spent his childhood, and he bought cable systems
that were serving the suburbs of Philadelphia, and later on
(15:10):
he would also purchase a few that we're serving Western Pennsylvania.
Philadelphia is in the east part of Pennsylvania. He then
began to expand that service into neighboring communities and an
effort to scale up operations, so instead of just acquiring
cable businesses, he was actually trying to lay out the
infrastructure to connect these various areas and scale up the
(15:32):
entire operation, kind of consolidating them. In nineteen sixty eight,
they would make another slightly weird purchase. Comcast or or
American Cable system still at that time, bought a Musaic
franchise in Orlando, Florida. You're probably aware of music. Music
if you're if you never directly experienced it, you definitely
(15:54):
have a right. I'm guessing you've heard the term music
is a company that would create and distribute very soothing music,
sometimes very soothing versions of popular songs that would play
in the background of things like elevators and grocery stores
and you know other places, dentist office, that kind of
(16:14):
stuff where it's supposed to, you know, lull you and
relax you. And it often makes me angry because often
I can recognize the original song that the music is
doing and it doesn't necessarily make me happy to hear
it in a very laid back kind of approach. At
any rate, they wanted to purchase a franchise in Orlando, Florida.
(16:40):
And one of the reasons this might be the case
is because Ralph Roberts's brother, Joe, was an executive vice
president of the Music Corporation, which might raise a few
eyebrows today that two brothers are essentially doing business with
one another and doing acquisitions of companies, one selling to
the other, But at any rate, that's what happened. In
(17:02):
nine In n the company finally changed as changes its
name to Comcast and reincorporates, this time in Pennsylvania. In
nineteen seventy, the company reorganized so it sold off its
Florida operations, which had just bought two years earlier, to
another company called STORER Communications, which will come back into
(17:26):
play a little later in the episode. And Comcast began
to expand into other markets, primarily Maryland at that point,
and also explored options and limited partnerships rather than outright acquisitions,
which gave the company a bit of an advantage in
that through a limited partnership, Comcast could get access to
(17:48):
customers but not have to commit so much of its
operating funds to expand the company, and this way it
would allow the company to grow without having to spend
millions of dollars is acquiring other cable systems, although it's
still pursued that as well, and the music party continued.
At the same time, Comcast bought franchises and multiple cities
(18:10):
like Detroit, San Diego, and Hartford, Connecticut. By nine two,
Comcast was able to hold an initial public offering was
able to launch as a publicly traded company. Stocks were
traded on the Nasdaq stock market and the ticker symbol
was c M C s A, and it continued to grow.
(18:32):
It would acquire smaller cable companies and incorporate them into
its own service, and the company spread across the United
States using these sort of acquisitions, but it was still
finding it challenging to penetrate markets through other means. In
other words, they were having trouble selling the idea of
subscribing to Comcast. They found it easier to purchase the
(18:53):
cable systems people were already using and then lump them
under Comcast, and thus the people became Comcast customers by default.
It wasn't necessarily that they chose Comcast, but rather that
the company they had been a customer of before now
belonged to Comcast, and that also included expanding its hold
(19:14):
on music. By nineteen seventy three, Comcasts Music Network division
was the largest independent musach operator. So music operates under
a franchise system, which means that when Comcast would buy
up a franchise would buy up one region and other
franchises would remain independent of Comcast. But Comcast kept on
(19:35):
doing this and thus became the largest independent musaic operator.
So if you're a child of the early seventies and
wondered where that easy listening music came from. There are
good odds that Comcast was ultimately responsible. And also in
nineteen seventy four, Ralph Roberts's son Brian started working at
(19:55):
Comcast officially UH, specifically working for Storecast as an intern,
and by the following year he would start training as
a cable installer, which included home installations and climbing poles
to hook connections from drops to the home the home area,
and by three he would become the general manager of
(20:17):
the Trenton system for Comcast, and by four he would
become vice president of operations for the cable division. So
within a decade of starting to work for the company officially.
There are some reports that say that Brian Roberts was
working at Comcast when he was just seven years old,
which brings into questions some child labor laws, But at
(20:38):
any rate, he within a decade he would go from
intern to vice president of operations with a cable division.
And UH this also raised some questions because, I mean,
he's the son of one of the founders, so there's
a little bit of legacy issue going on here, But
he consistently showed that he was very dedicated to the company,
so I don't mean to suggest that he didn't deserve
(21:01):
this position. He certainly has been a great deal maker
for Comcast and has led the company to some massive,
massive business deals that we'll talk about in a second.
But uh, it's still raised some eyebrows in the community
of cable industry. In nineteen seventy six, the co founder,
Daniel Aharon would become the chairman of the National Cable
(21:24):
and Television Association, which is essentially a lobby group. It's
it's kind of an advocacy group for cable companies, cable industry,
cable service providers, and was really focused on helping shape
policy in the United States that would remove challenges, obstacles,
and restrictions facing the cable industry. And in some cases
(21:46):
these were restrictions that were entirely arbitrary and unfair. I
don't mean to suggest that they were working to completely
leverage everything so that cable companies could dominate all telecommunications industries,
but rather to try and address some problems that the
cable industry faced. Because it was brand new, this was
something I mean, even even by the seventies, this was
(22:09):
still relatively new and still UH something that had to
battle with much more entrenched systems like the telephone companies
and the over the year broadcast companies. Also in nineteen
seventy seven, Comcast would add HBO to twenty thousand customers
in Pennsylvania with a five night preview, so customers got
(22:32):
five nights free HBO, which was a fledgling company at
that point, and afterward Comcast received three thousand subscription orders
once the preview period ends, So it was a fairly
successful preview. And if you listen to the story of HBO,
which I believe was a three part episode that that
(22:54):
I did, it's at least two parts at any rate,
but I did that quite a while ago. If you
go and look at the Tech Stuff archives, you can
find the HBO story where we talk a little more
about how HBO also really shaped the cable industry as
it became more and more important. In Night, Daniel Aaron
(23:15):
would become UH. He would use his position as the
chairman of the National Cable Television Association or in c
t a UH and successfully lobby the United States government
to reduce restrictions on what cable operators could carry. So
up to that point, there had been some limitations on
some of the programming that cable operators could offer their customers,
(23:36):
and often this was programming that their customers actually wanted
access to, but the cable operators their hands were tied.
They were not allowed by law to carry that programming.
So the n c t A was able to argue
successfully on behalf of cable operators and even reach the
point where cable could offer up channels that weren't broadcast
over the air, meaning that cable companies could now create
(23:58):
or partner with creators to provide content that otherwise people
would never see because there'd be no other way of
getting it. That actually created a market advantage for cable
over classic over the year broadcasts, because now not only
could you get something that wasn't going to be affected
by radio transmissions, but you could see content that would
(24:20):
not be available to you otherwise. And by ninety eight,
Comcast earnings were an excess of three million dollars, which
is chicken feed compared to what they make today, but
still was impressive at the time, and Comcast made its
first international move in nineteen three, they expanded into the
United Kingdom. The company was finding it increasingly difficult to
(24:43):
acquire new operations. In the United States. At that time,
there were only a few major cable operators left that
had not been scooped up by one of the chief
competitors to Comcast, so that meant that there were only
a few limited service areas, meaning there was very little
potential for g oath if Comcast purchased those companies, and
they were pretty expensive, so it wasn't a very attractive
(25:06):
investment on the part of Comcast. But on the other hand,
in the United Kingdom was a totally different story. Cable
operators had barely touched the UK, so Comcast jumped on
that opportunity. Meanwhile, back in the States, Comcast caught a
lucky break when the United States government passed the Cable Act,
which prevented telephone companies from entering the cable business, which
(25:29):
was a stroke of luck for Comcast because the government
had just broken up the Bell system, which you can
hear about in our episodes on the History of A
T and T, another multi part series that explains why
the telephone system in the United States is the way
it is and how the telecommunications industry changed as a
result of it. In Comcast would purchase twenty six percent
(25:53):
interest in Group W Cable Incorporated. Now that investment more
than doubled the number of Comcast customers at that time,
adding one point two million people to Comcast services. And
Comcast also helped found a little shopping company called QVC
and they invested three d eighty million dollars in the
(26:14):
founding of that company. Now they did not own QVC,
they owned an interest in QVC. And another big buy
at that time was STORER Communications Incorporated. You may have
remembered that just a few minutes ago I talked about
STORER Communications where uh they there was the the buying
of Musach and the selling of Musach. Well, Comcast purchased
(26:38):
fifty interest in STORER Communications, in which propelled Comcast into
fifth place among the largest cable TV operators in the US.
The company now had two million subscribers, and that same
year Bran roberts was elected to the board of directors
of Comcast. So now Ralph J. Roberts Son is on
(26:59):
the board of directors. Comcast would celebrate its twenty five
years of business and also acquire the American Cellular Network Corporation,
or am Cell. This creates a new division in the
company called Comcast Cellular Communications. And over the years the
division grows as Comcast acquires more cellular companies. And now
(27:22):
we get to a complication, right because just a minute
ago I talked about the Cable Act. It was an
important point in the history of cable and telephone service.
The Cable Act prevented telephone companies from getting into the
cable business, and cable companies were likewise prevented into getting
into landline telephone business. But the blossoming cell phone service
(27:42):
industry was a different story. So Comcast could totally get
into cell phones and not violate this restriction on landlines.
So Comcast acquisition marked the first time people in the
United States could look to a non telephone company for phones.
Of this which was massively important. It's really hard to
(28:05):
actually express what that meant at the time, but keep
in mind, like you have telephone companies that have been told, hey,
you can't get into this other industry because it's blossoming,
it's just starting, and we don't want to kill it
before it gets a chance to establish itself. Meanwhile, the
other side is getting into a related business for the
(28:27):
telephone industry, and so you now have these massive companies
in the telephone industry kind of scared about what's going
to happen because they have limited options at their disposal. Now,
this is all pretty complex, but it's going to get
super crazy when I go on a little bit further.
(28:48):
This is kind of where I wanted to end part
one to talk about the possibilities that were ahead for Comcast. Now,
one of the things I want to really drive home,
and it's going to become more clear when you listen
to the next episode, is that Comcast continuously chose to
acquire other companies in an effort to grow as a
(29:10):
publicly traded company. One of the most important uh measures
of a company's success is how much did it grow
year over year. That that operating really well isn't enough.
A company has to grow to be considered valuable. And
the way Comcast largely drove its growth was through purchasing
(29:32):
other cable services. Again, it can be a challenge to
add customers otherwise, So if you want to add customers,
you've got a couple of different options ahead of you,
but one of them is that you just buy up
other systems and then automatically you have those customers added.
To you. Also, we're starting to see a world already
(29:53):
where major cable companies were essentially making agreements with one
another to layoff in certain regions. So you were starting
to see where one cable company would provide service to
an area and other cable companies would stay out of
that area. In return, that first cable company would stay
(30:14):
out of its competitors areas, which was great for the companies,
but not so great for consumers. This is why in
lots of different regions in the United States, you really
don't have many options as a customer. You may have
just a single major cable service provider in your area,
and you could look at something else like satellite service,
(30:36):
or you might be able to look at smaller cable
companies that are technically just piggybacking onto the larger cable
company in the first place. And that's one of the
big reasons why in Part two, we're going to explore
some of the controversies around Comcast. But there's tons of
stuff to talk about in Part two, including how Brian
(30:59):
Roberts continued his rise and in Comcast, how the founders
kind of stepped away, and some of the controversies that
have surrounded Comcast since it has been founded. So I
want you guys to send me messages let me know
what sort of topics would you like me to cover
in detail. Keep in mind Part two of the Comcast
(31:20):
story comes next week. But if you have any suggestions
for future episodes, whether it's a company or a technology
or personality and technology, or maybe it's just someone you
would like me to interview or have on as a
guest host, send me a message. I will try my
best to make it happen. The email to send it
to is tech Stuff at how stuff works dot com,
(31:41):
where you can drop me a line on Facebook, Twitter
or Tumbler at all three. I am tech Stuff H.
S W. And I'll talk to you again really soon
for more on this and bathens of other topics because
it has staff works dot com Litle Little w
Get in tech with technology with Text Stuff from Stuff
technolog Hey there, and welcome to Text Stuff. I am
your host, Jonathan Strickland, and today I wanted to take
a look at a company that has become an enormous
(00:24):
powerhouse both on and offline, Comcast. Anyone who has listened
to me on various shows knows that I have some
pretty strong opinions, but I am going to do my
best to be as unbiased as possible. I do not
promise that snark will be completely kept out of my
voice through the entirety of this episode, but I will
(00:46):
do my best. Um, And also just know that this
is a huge topic, so I am already going to
tell you it will be a two parter. Otherwise it
would be an epically long podcast, So we're gonna split
this up at a two parts. So the reason why
I wanted to look at this, the thing that that
kind of spurred me into talking about Comcast, actually comes
(01:09):
from a recent experience I had. So I'm recording this
on Thursday, the twenty two of October two thousand fifteen.
But on Monday, October nineteen, something special happened and I
wanted to take part in it. That's something special. Was
that Star Wars episode seven, the Force Awaitkens the the
(01:31):
advanced tickets went on sale, and it was announced that
they went on sale a little earlier than what people
had originally anticipated. So I rushed to try and buy tickets,
and uh. One of the many things I tried to
do was use Fandango. But it was very clear that
there was an amazingly huge rush on tickets for the
(01:54):
Fandango servers, as well as all the other services out there,
and you could say that the servers for Fantango weren't
fully operational in the parlance of Star Wars, and I
started getting irritated. But then I remembered that Fandango is
owned by Comcast, and then I thought, anger leads to hate.
(02:17):
Hate leads to podcasts. But I promise I will do
my best to remain objective and dispassionate as we look
at the company, its history and the role it plays
in their entertainment. And it's a really long history too.
So before I talk about Comcast in particular, let me
set the stage with some history about cable television. Now.
(02:38):
Cable tv got its start back in the nineteen forties
in the United States, and there was a need for
an alternative to over the air broadcasts because some people
lived in remote locations that were too far away for
over the air air waves to make it to their
homes with any sort of fidelity, or they might live
in areas where radio waves had trouble reaching, like in
(02:59):
mountainous areas where a mountain might be blocking the radio waves.
So cable TV was the solution, and the basic model
was pretty simple in its design. In fact, the earliest
models just involved people setting up an antenna on a
really tall structure or a mountain or something like that,
and then physically running a cable from the antenna to
(03:21):
their television sets. But beyond that you started to get
actual organized businesses that would do this on behalf of customers. You,
as a customer, would pay the business for the access
to these over the air broadcast that otherwise you would
not be able to reach. So you would have a
broadcast station that would send out television along a certain
channel or frequency of radio waves, and your cable station
(03:45):
would essentially just be a set of receivers antenna in
other words, which would pick up these broadcasts and then
feed them through physical cables to their destinations, So early
cable was still very much reliant on over the air broadcast.
It was just an alternative way to get that that content,
and channels don't take up much bandwidth on a physical cable.
(04:07):
Each channel is six mega hurts, and a cable is
capable of holding hundreds of mega hurts of signals, and
using compression, you can even send multiple stations down a
single six mega hurts channel, So you can blast a
huge amount of channels through a single cable, and the
cable box or television at the other end of that
cable can tune into specific channels and block all the
(04:29):
others out. So, in other words, imagine that you are
in a room and there's every actor you've ever known
about in that room, and they're all acting their hearts
out at you at the same time, but you have
the ability to tune into a specific actor and tune
out everybody else. That's basically what's going on with cable
on a technological level. And when you opt into a
(04:53):
cable bundle often that means that you're also getting the
cable company to decrypt information. So what's happening on the
cable side, the cable operator side, is that they will
encrypt certain channels, like pay channels that otherwise you would
get for free. If you didn't have that encryption, then you,
(05:16):
as a customer would be able to access everything a
cable channel operator had to offer. But by encrypting it,
then the cable company can control which channels you can
actually view and which ones are off limits. When you
opt in to a cable bundle, like you you subscribe
to a specific cable service, they essentially send a message
(05:36):
to your television or a cable box and that allows
you to decrypt the signal on your end so that
you can actually watch it. And the United States, communities
in Pennsylvania, Oregon, and Arkansas were among the first to
receive cable service, and by that I mean people were
actually going out and setting up these antenna. By n two,
(05:57):
there are about seventy actual cable systems in the entire country.
So these were actual companies that had taken the same
sort of model that these enterprising individuals had followed and
actually made a business out of it. They only had
about fourteen thousand customers back in nineteen fifty two, but
cable television had a big advantage over home antennas in
(06:20):
that if you use a sophisticate antenna and you were
able to put it on a really tall building or
a mountain or some other really tall structure, you could
pick up signals from much further away than folks who
are just using regular rabbit ears on their televisions, Which
meant that cable customers sometimes could pick up signals from
(06:40):
other broadcast regions, so you might be able to get
content from multiple large cities. If you lived kind of
in between two big cities and you had this cable,
it might mean that you were able to double your
programming options. At least it may be that, you know,
the two elliots of of a major broadcast station are
(07:02):
showing more or less the same thing, but throughout the
day you would have some different options available to you,
which made cable fairly attractive. It was sort of the
beginning of cable's advantage over over the air broadcast, although
as we'll talk about a little bit later, over the
air still had a lot of other advantages. So interesting
(07:24):
cable TV began to grow, particularly among people who just
couldn't get over the air easily. By nineteen sixty two,
the number of customers had grown to more than eight
hundred thousand people in the United States, So in ten
years it went from fourteen thousand customers to eight hundred
thousand in the US. Cable TV was becoming a viable alternative,
(07:46):
even in communities that didn't have problems accessing over the
air signals. But it was also one of those things
that cities were starting to look into because if you
lived in a city with lots of high rise buildings,
sometimes that would block radio signals too. So it was
one of those things that that you could see the
the benefit, the potential application, but it was still going
(08:07):
to be really expensive to roll out the infrastructure. All right, Well,
that that sets the groundwork for what the cable industry
was like in the early sixties. Let's take a look
at Comcast specifically. The company actually traces its history back
to nineteen sixty three. That's when Ralph J. Roberts, Daniel
(08:27):
Aaron and Julian A. Broad Ski purchased a small cable
TV operator called American Cable Systems, which was in Tupelo, Mississippi,
and that service had just one thousand, two hundred subscribers
and that was it. The three businessmen spent five hundred
thousand dollars on that purchase. So who were these guys? Well,
(08:50):
Ralph J. Roberts grew up in New York and in Philadelphia.
He served in the United States Navy before going on
to work several different jobs. He gradually he earned enough
money to purchase a business of his own. He and
his brother went into a business. They invested in, a
company called Pioneer Suspender Company. It turns out there was
money in Suspenders because he and his brother decided to
(09:13):
sell the business off later on, and with that money
it allowed them to invest in other companies. So Ralph
Roberts ended up looking into the world of TV, and
it was reportedly Roberts who came up with a name
Comcast in nineteen sixty nine. So several years down the
road he would combine the words communications and broadcast together
(09:36):
to create the name Comcast, and he would serve as
Comcast Chief executive Officer for more than four decades. Uh.
Ralph J. Roberts passed away in June of two thousand
and fifteen, so very recently as of the recording of
this podcast now. Daniel Aharon was born in nineteen twenty
six in Giessen, Germany. His family escaped Germany during the
(09:58):
rise of the Nazi Party in World War Two, and
they settled in Queens, New York. Now Tragically, when he
was just thirteen years old, he lost his mother. She
committed suicide, and less than a month later, his father
also committed suicide. Daniel Aaron was orphaned and he was
not yet a citizen. He continued to live in New
York and eventually he would be drafted and sent to
(10:21):
Germany during World War Two. When he returned, he pursued
a career in journalism and public relations. Eventually he entered
the cable business and that's when he met Roberts and
agreed to co found Comcast. In his obituary, he was
referred to as the conscience of the company, famously even
(10:42):
buying coffee for picketing employees who were in a labor
dispute with Comcast. So he was sort of the working
man's representative among the three co founders of this company.
He passed away in two thousand three. Julian Brodsky grew
up in philade, Alphia. He had served in the United
States Army and he became an accountant after he left
(11:05):
the service. So Bronsky served as Robert's accountant, Ralph J. Roberts,
So he was actually the accountant for Ralph J. Roberts
and was approached by Roberts and by Aaron when they
were preparing to purchase this company, this little cable company
in Tiple of Mississippi, and Brodsky's main role was to
raise money for the company. In two thousand eleven, Brodsky
(11:28):
retired as the vice chairman of the company, and of
the three founders, he is the only one who is
still alive as of the recording of this podcast. Now.
Daniel Aaron is credited with having compared the three co
founders as three people trying to drive a single car,
and he said that Brodsky was the guy who had
his foot on the accelerator as he was raising capital
(11:50):
for the venture. Uh. Meanwhile, his own foot, Aaron, his
own foot was on the break to make sure the
company was a good corporate citizen, stepping on the brakes
to slow down the company if he thought that they
were about to do something reckless or damaging or or
just unethical. And meanwhile, we're alf Dave Roberts. His hands
were on the steering wheel, guiding the company along. In
(12:14):
those early days of cable the company faced some pretty
big challenges. According to the founders, they actually had to
act as door to door salespeople on occasion in an
effort to grow. So they were physically going out knocking
on people's doors and telling them about cable service in
an effort to get more customers. They came to the
(12:36):
conclusion that expansion would require purchasing other cable companies, and
this is a philosophy that Comcast has stuck with time
and time again over its long history. They have purchased
numerous companies that I will go into in some detail
throughout these two episodes. Now, originally they focused on other
(12:57):
cable services in the state of Mrs Sippy, So they
began to expand both in eastern and western Mississippi and
really focused on that state. But they were still finding
it difficult to get enough customers to make a profit
after going through the expense of setting up and maintaining
cable systems. So, in other words, they're operating expenses were
(13:18):
too close to the amount of money they were bringing in.
It wasn't really a fast growing company. It wasn't a
fast growing business, and they were trying to find new
ways to add to that as quickly as they possibly could.
In the company, which at that point was still known
as American Cable Systems, purchased another company called Storecast Corporation
(13:41):
of America. Here's the difference. Though Storecast was not a
cable service company, it was a marketing firm. And only
was it a marketing firm, it was a marketing firm
that had a very specific kind of clientele. They were
chiefly known for helping food companies work with supermarkets to
maximize sales prices are sales of the products, by placing
(14:04):
those products in prominent locations. In other words, they would
go into a supermarket on behalf of a client, Let's
say Wonderbread. I'm just taking that as a random example.
I don't know if Wonderbread was actually one of their clients.
But let's say they go into a supermarket they're representing Wonderbread,
and they go to the bread aisle and they look
(14:24):
around and they say, well, this is not great for
our client. We recommend you move this to this shelf.
If you're gonna move more product this way, you're gonna
increase your sales. Our client will be happy, You'll be
happy that's the kind of work they were mostly known
for doing, so a little odd that Comcast or at
that time, American Cable Systems would purchase this type of company.
(14:48):
Comcast continued to try and grow through acquisitions during this time,
and in nineteen sixty six, Ralph J. Roberts turned his
attention to Philadelphia. Keep in mind, that's one of the
cities he grew up in New York and Philadelphia is
where he spent his childhood, and he bought cable systems
that were serving the suburbs of Philadelphia, and later on
(15:10):
he would also purchase a few that we're serving Western Pennsylvania.
Philadelphia is in the east part of Pennsylvania. He then
began to expand that service into neighboring communities and an
effort to scale up operations, so instead of just acquiring
cable businesses, he was actually trying to lay out the
infrastructure to connect these various areas and scale up the
(15:32):
entire operation, kind of consolidating them. In nineteen sixty eight,
they would make another slightly weird purchase. Comcast or or
American Cable system still at that time, bought a Musaic
franchise in Orlando, Florida. You're probably aware of music. Music
if you're if you never directly experienced it, you definitely
(15:54):
have a right. I'm guessing you've heard the term music
is a company that would create and distribute very soothing music,
sometimes very soothing versions of popular songs that would play
in the background of things like elevators and grocery stores
and you know other places, dentist office, that kind of
(16:14):
stuff where it's supposed to, you know, lull you and
relax you. And it often makes me angry because often
I can recognize the original song that the music is
doing and it doesn't necessarily make me happy to hear
it in a very laid back kind of approach. At
any rate, they wanted to purchase a franchise in Orlando, Florida.
(16:40):
And one of the reasons this might be the case
is because Ralph Roberts's brother, Joe, was an executive vice
president of the Music Corporation, which might raise a few
eyebrows today that two brothers are essentially doing business with
one another and doing acquisitions of companies, one selling to
the other, But at any rate, that's what happened. In
(17:02):
nine In n the company finally changed as changes its
name to Comcast and reincorporates, this time in Pennsylvania. In
nineteen seventy, the company reorganized so it sold off its
Florida operations, which had just bought two years earlier, to
another company called STORER Communications, which will come back into
(17:26):
play a little later in the episode. And Comcast began
to expand into other markets, primarily Maryland at that point,
and also explored options and limited partnerships rather than outright acquisitions,
which gave the company a bit of an advantage in
that through a limited partnership, Comcast could get access to
(17:48):
customers but not have to commit so much of its
operating funds to expand the company, and this way it
would allow the company to grow without having to spend
millions of dollars is acquiring other cable systems, although it's
still pursued that as well, and the music party continued.
At the same time, Comcast bought franchises and multiple cities
(18:10):
like Detroit, San Diego, and Hartford, Connecticut. By nine two,
Comcast was able to hold an initial public offering was
able to launch as a publicly traded company. Stocks were
traded on the Nasdaq stock market and the ticker symbol
was c M C s A, and it continued to grow.
(18:32):
It would acquire smaller cable companies and incorporate them into
its own service, and the company spread across the United
States using these sort of acquisitions, but it was still
finding it challenging to penetrate markets through other means. In
other words, they were having trouble selling the idea of
subscribing to Comcast. They found it easier to purchase the
(18:53):
cable systems people were already using and then lump them
under Comcast, and thus the people became Comcast customers by default.
It wasn't necessarily that they chose Comcast, but rather that
the company they had been a customer of before now
belonged to Comcast, and that also included expanding its hold
(19:14):
on music. By nineteen seventy three, Comcasts Music Network division
was the largest independent musach operator. So music operates under
a franchise system, which means that when Comcast would buy
up a franchise would buy up one region and other
franchises would remain independent of Comcast. But Comcast kept on
(19:35):
doing this and thus became the largest independent musaic operator.
So if you're a child of the early seventies and
wondered where that easy listening music came from. There are
good odds that Comcast was ultimately responsible. And also in
nineteen seventy four, Ralph Roberts's son Brian started working at
(19:55):
Comcast officially UH, specifically working for Storecast as an intern,
and by the following year he would start training as
a cable installer, which included home installations and climbing poles
to hook connections from drops to the home the home area,
and by three he would become the general manager of
(20:17):
the Trenton system for Comcast, and by four he would
become vice president of operations for the cable division. So
within a decade of starting to work for the company officially.
There are some reports that say that Brian Roberts was
working at Comcast when he was just seven years old,
which brings into questions some child labor laws, But at
(20:38):
any rate, he within a decade he would go from
intern to vice president of operations with a cable division.
And UH this also raised some questions because, I mean,
he's the son of one of the founders, so there's
a little bit of legacy issue going on here, But
he consistently showed that he was very dedicated to the company,
so I don't mean to suggest that he didn't deserve
(21:01):
this position. He certainly has been a great deal maker
for Comcast and has led the company to some massive,
massive business deals that we'll talk about in a second.
But uh, it's still raised some eyebrows in the community
of cable industry. In nineteen seventy six, the co founder,
Daniel Aharon would become the chairman of the National Cable
(21:24):
and Television Association, which is essentially a lobby group. It's
it's kind of an advocacy group for cable companies, cable industry,
cable service providers, and was really focused on helping shape
policy in the United States that would remove challenges, obstacles,
and restrictions facing the cable industry. And in some cases
(21:46):
these were restrictions that were entirely arbitrary and unfair. I
don't mean to suggest that they were working to completely
leverage everything so that cable companies could dominate all telecommunications industries,
but rather to try and address some problems that the
cable industry faced. Because it was brand new, this was
something I mean, even even by the seventies, this was
(22:09):
still relatively new and still UH something that had to
battle with much more entrenched systems like the telephone companies
and the over the year broadcast companies. Also in nineteen
seventy seven, Comcast would add HBO to twenty thousand customers
in Pennsylvania with a five night preview, so customers got
(22:32):
five nights free HBO, which was a fledgling company at
that point, and afterward Comcast received three thousand subscription orders
once the preview period ends, So it was a fairly
successful preview. And if you listen to the story of HBO,
which I believe was a three part episode that that
(22:54):
I did, it's at least two parts at any rate,
but I did that quite a while ago. If you
go and look at the Tech Stuff archives, you can
find the HBO story where we talk a little more
about how HBO also really shaped the cable industry as
it became more and more important. In Night, Daniel Aaron
(23:15):
would become UH. He would use his position as the
chairman of the National Cable Television Association or in c
t a UH and successfully lobby the United States government
to reduce restrictions on what cable operators could carry. So
up to that point, there had been some limitations on
some of the programming that cable operators could offer their customers,
(23:36):
and often this was programming that their customers actually wanted
access to, but the cable operators their hands were tied.
They were not allowed by law to carry that programming.
So the n c t A was able to argue
successfully on behalf of cable operators and even reach the
point where cable could offer up channels that weren't broadcast
over the air, meaning that cable companies could now create
(23:58):
or partner with creators to provide content that otherwise people
would never see because there'd be no other way of
getting it. That actually created a market advantage for cable
over classic over the year broadcasts, because now not only
could you get something that wasn't going to be affected
by radio transmissions, but you could see content that would
(24:20):
not be available to you otherwise. And by ninety eight,
Comcast earnings were an excess of three million dollars, which
is chicken feed compared to what they make today, but
still was impressive at the time, and Comcast made its
first international move in nineteen three, they expanded into the
United Kingdom. The company was finding it increasingly difficult to
(24:43):
acquire new operations. In the United States. At that time,
there were only a few major cable operators left that
had not been scooped up by one of the chief
competitors to Comcast, so that meant that there were only
a few limited service areas, meaning there was very little
potential for g oath if Comcast purchased those companies, and
they were pretty expensive, so it wasn't a very attractive
(25:06):
investment on the part of Comcast. But on the other hand,
in the United Kingdom was a totally different story. Cable
operators had barely touched the UK, so Comcast jumped on
that opportunity. Meanwhile, back in the States, Comcast caught a
lucky break when the United States government passed the Cable Act,
which prevented telephone companies from entering the cable business, which
(25:29):
was a stroke of luck for Comcast because the government
had just broken up the Bell system, which you can
hear about in our episodes on the History of A
T and T, another multi part series that explains why
the telephone system in the United States is the way
it is and how the telecommunications industry changed as a
result of it. In Comcast would purchase twenty six percent
(25:53):
interest in Group W Cable Incorporated. Now that investment more
than doubled the number of Comcast customers at that time,
adding one point two million people to Comcast services. And
Comcast also helped found a little shopping company called QVC
and they invested three d eighty million dollars in the
(26:14):
founding of that company. Now they did not own QVC,
they owned an interest in QVC. And another big buy
at that time was STORER Communications Incorporated. You may have
remembered that just a few minutes ago I talked about
STORER Communications where uh they there was the the buying
of Musach and the selling of Musach. Well, Comcast purchased
(26:38):
fifty interest in STORER Communications, in which propelled Comcast into
fifth place among the largest cable TV operators in the US.
The company now had two million subscribers, and that same
year Bran roberts was elected to the board of directors
of Comcast. So now Ralph J. Roberts Son is on
(26:59):
the board of directors. Comcast would celebrate its twenty five
years of business and also acquire the American Cellular Network Corporation,
or am Cell. This creates a new division in the
company called Comcast Cellular Communications. And over the years the
division grows as Comcast acquires more cellular companies. And now
(27:22):
we get to a complication, right because just a minute
ago I talked about the Cable Act. It was an
important point in the history of cable and telephone service.
The Cable Act prevented telephone companies from getting into the
cable business, and cable companies were likewise prevented into getting
into landline telephone business. But the blossoming cell phone service
(27:42):
industry was a different story. So Comcast could totally get
into cell phones and not violate this restriction on landlines.
So Comcast acquisition marked the first time people in the
United States could look to a non telephone company for phones.
Of this which was massively important. It's really hard to
(28:05):
actually express what that meant at the time, but keep
in mind, like you have telephone companies that have been told, hey,
you can't get into this other industry because it's blossoming,
it's just starting, and we don't want to kill it
before it gets a chance to establish itself. Meanwhile, the
other side is getting into a related business for the
(28:27):
telephone industry, and so you now have these massive companies
in the telephone industry kind of scared about what's going
to happen because they have limited options at their disposal. Now,
this is all pretty complex, but it's going to get
super crazy when I go on a little bit further.
(28:48):
This is kind of where I wanted to end part
one to talk about the possibilities that were ahead for Comcast. Now,
one of the things I want to really drive home,
and it's going to become more clear when you listen
to the next episode, is that Comcast continuously chose to
acquire other companies in an effort to grow as a
(29:10):
publicly traded company. One of the most important uh measures
of a company's success is how much did it grow
year over year. That that operating really well isn't enough.
A company has to grow to be considered valuable. And
the way Comcast largely drove its growth was through purchasing
(29:32):
other cable services. Again, it can be a challenge to
add customers otherwise, So if you want to add customers,
you've got a couple of different options ahead of you,
but one of them is that you just buy up
other systems and then automatically you have those customers added.
To you. Also, we're starting to see a world already
(29:53):
where major cable companies were essentially making agreements with one
another to layoff in certain regions. So you were starting
to see where one cable company would provide service to
an area and other cable companies would stay out of
that area. In return, that first cable company would stay
(30:14):
out of its competitors areas, which was great for the companies,
but not so great for consumers. This is why in
lots of different regions in the United States, you really
don't have many options as a customer. You may have
just a single major cable service provider in your area,
and you could look at something else like satellite service,
(30:36):
or you might be able to look at smaller cable
companies that are technically just piggybacking onto the larger cable
company in the first place. And that's one of the
big reasons why in Part two, we're going to explore
some of the controversies around Comcast. But there's tons of
stuff to talk about in Part two, including how Brian
(30:59):
Roberts continued his rise and in Comcast, how the founders
kind of stepped away, and some of the controversies that
have surrounded Comcast since it has been founded. So I
want you guys to send me messages let me know
what sort of topics would you like me to cover
in detail. Keep in mind Part two of the Comcast
(31:20):
story comes next week. But if you have any suggestions
for future episodes, whether it's a company or a technology
or personality and technology, or maybe it's just someone you
would like me to interview or have on as a
guest host, send me a message. I will try my
best to make it happen. The email to send it
to is tech Stuff at how stuff works dot com,
(31:41):
where you can drop me a line on Facebook, Twitter
or Tumbler at all three. I am tech Stuff H.
S W. And I'll talk to you again really soon
for more on this and bathens of other topics because
it has staff works dot com Litle Little w
TechStuff News
Hosts And Creators
Oz Woloshyn
Karah Preiss
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