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FRIDAY, MAT 11,19S5 FACTS LE TV Statement Concerning the Comparative Merits of the Applicants Statement Concerning Rates and Charges (1) H & B will charge its -subscribers a non-recurring initial hook-up or connection charge of $19.95 and a monthly service charge of $5.00. (2) Subscribers will not be required to enter into a contract for service and will be free to discontinue service without further, liability as of the end of any month. (3) Potential subscribers will be offered a no-cost free trial of ten days duration upon payment of a nominal deposit which will be fully refunded if at the end of the trial period the potential subscriber determines that he does not wish to continue the service. (4) An antenna trade-in allowance will be made to all subscribers, the amount of which will depend on the true salvage value of the individual antenna. H & B deplores a ficti- 'tious high apparent "list price" for a hookup and what amounts to a discount for antennas irrespective of condition. We propose to deal honorably with the public; and will not induce then) to remove their antennas if they desire to retain them. (5) Rates will not be increased without prior approval by the City Council. Direct Benefits to Be Derived by Logansport From H & B Commuriications Corporation Community Television System In addition to the obvious benefits to be enjoyed by subscribers who will for the first time have available at nominal cost the nation's greatest diversity and the widest possible choice of television programs the City will enjoy these additional income and service benefits: (1) Income from Pole Rentals H & B offers to pay the sum of $3.25 per annum per utility pole contacted by iis distribution system. It is estimated that this will represent $13,000 per annum net income to the City. (2) Income from Franchise Tax H & B offers to pay to the city 2% of its annual gross receipts. This ia estimated to amount to $5,000 based on monthly service income from 4,000 subscribers. An additional estimated sum of $2,000 will be paid to the City in consideration of connection income from subscribers. (3) Income from Property Taxes H & B anticipates that its investment in physical plant facilities in Logansport will amount to at least $300J)00 on which, like all other business establishments, it will pay customary taxes based on assessed valuations. (4) Service to Educational Institutions All schools, public and parochial, located within the city limits will be given at least one 1 free television connection. If school authorities determine that they desire to pipe educational TV programs directly into the classrooms, H & B will install such additional outlets (without limitation as to number) at its actual cost for labor, materials, and overhead. The educational 'programs may be those originated in the community (See Exhibit 2 "Specialized Interest Program Channel") or ETV programs from channels 72 or 76 which are the Midwest Program for Airborne Television Instruction (MPATI) channels. (5) Local Payroll At toe time approximately 4,000 subscribers are served, H & B will pay out in wage s lo local residents an estimated annual sum of $43,500. (6) Otbfir Contributions to the Local Economy All supplies, physical facilities, professional services, automotive equipment, utility services, personal services, etc., will be purchased locally. Specialized electronic apparatus not manufactured, or available in the city . will of necessity be purchased from other available sources. II & B estimates that its total annual cash operating expenses will amount to $3.00 per month per subscriber. Out of svery $5.00 monthly service charge received from a subscriber the bulk of it will flow back into the local economy, the balance will go to retire the investment of $300,000 or more, for State and Federal Taxes, for depreciation and amortization reserves, and for profit to the company. H & B will do its banking locally. (7) Modernization, of Electric Power Distribution Plant As is true of many American cities the Logansport power distribution plant is in constant need of improvement and modernization insofar as its pole-line and external distribution facility is concerned. In placing its cable and amplifiers on these poles H & B must of necessity rebuild, improve, and replace many of them. This will call for new poles to replace old ones, new guys and anchors to strengthen and straighten poles, tree trimming, and general cleanup and- rearrangement of existing wires and cables to put them into top-notch condition. Prior experience in numerous similar communities leads us to believe that benefits valued at about $10,000 will thereby accrue to the city. (8) Service to Municipal Buildings H & B will furnish without charge to the city, service to any six (8) locations in t;ty buildings as designated by the city. (9) Cash Payments to TV Dealers and Service Men It is customary for H & B lo pay a commission to dealers and service men who cooperate wilh the company in gaining new subscribers to the service. We estimate that these cash benefits will total $10,000. Jerrold Offers— 1 . $50.00 hook-up charge and $5.00 monthly service 2. iNof disclosed. 3. Not offered. 4. $25.00 trade in 5. Same Jerrold Offers — 1. $3.00 par pole $12,000 annually 2. None 3. Same) 4, No service to parochial schools Special Occasional Programming Services to Be Afforded to H & B Subscribers -..i J h f, Ff T g f" e a , n ?. s ™ pe P l , the c <« nn ™'uty Antenna Industry which now serves approximately- 3 millio,. viewers through- m, -.--£,..„ ~ r v~,>»..»... a <<cici.iuu.ci uiiiuiuwji (jms program service to certain strategically located subscribers. these are special, one-time-only television programs produced solely for closed circuit TV viewers. Included have been such significant events as world championship heavy-weight boxing matches and other sports and entertainment features available only to subscribers^ cable PV systems, or to persons who pay a considerable admission charge lo view the program on a large TV screen in a theatre. As such events have become available it has.been H & B's practice to buy the program rights from the producers and to feed the programs (sometimes originating thousands of miles away) directly into the homes of many of its subscribers. H & B stands in a unique position to deliver such events to Logansport. As the largest operating cable TV company in the U.S.A. it can negotiate the most favorable prices for such rights by yirUi 8 of "group buying" for its multiple systems. Further, by virtue of its operation of a subsidiary, H & B Microwave Corporation, which engages solely in the inter-city microwave relaying of TV programs, it is often able to bring such programs to its far flung subscribers at the lowest possible cost to H & B The result of these twin factors as it applies to Logansport is the increased possibility of the frequent exhibition of such programs in the community. ^ ' When such .programs are delivered to in Logansport. its subscribers, H & B makes no extra charge therefore nor 'does it intend to do so Jerrold Offers Nothing Who is H & B? H & B Communications Corporation 1 owns and operates Community Antenna Television Systems valued at an estimated 15 million dollars. It serves 75,000 TV sets in 67,700 homes and business places in 30 cities, 12 states, plus Canadian cities. It is the largest Cable TV operating company in the nation. H & B is wholly owned by the H & B American Corporation, which is owned by more than 7000 stockholders. : H & B's operating and management personnel do not engage in any other business (such as die-casting,- hi-fi manufacturing, etc). Our associates are not in go-karts or hamburger stand venture;. lw e do one thing — we serve more Cable TV subscribers than anybody else in the nation, more than 20 times as many as the high-priced firm! Several important industrialists and bankers serve on the Board of Directors of H & B. Our financial responsibility is unquestioned. H & p really can deliver what it herewith agrees to. Logansport will be-better served with H & B since in the long run the -operation of a system is much more important to the public interest than the initial construction. Thus you have seen beyond a shadow of doubt the clearcui superiority of * he H & B Communications Corporation plan for Logansport. . . . ERI SERVIC H & B respectfully submits to the City of Logansport the following irrefutable statements of fact coupled with expert opinion concerning the qualifications of the parties to construct (as differentiated from operate) a sound, well-engineered community tele- • vision system. There follow related statements concerning operational competency. (1) The construction of the proposed cable system to serve Logansport will in all probability be completed in three to sis months, the exact time depending on unpredictable factors such as weather, faithful performances by construction contractors, delays attributable to shipping, material shortages, faulty decisions, etc. (2) All of the applicants are equally well qualified to deal with these unpredictable factors and H & B knows of its own experience that each of them has the know-how and capacity to do the job well. (3) Thereafter the cable system has a lifetime of indeterminate duration . . . perhaps 20 to 30 years. We do not know how long, but we asc^t that operating competense is by far, more important to the City than is construction know-how if .only because it counts for decai'es rather than -for days. (4) H & B fre'ely acknowledges that it is not a manufacturer of cable television equipment:, nor it is a construction contractor, though it does substantial construction on its own account. H & B stipulates that Jerrold Electronics Corporation has greater resources to construct community antenna television systems. It denies that Telesystem Services Corporation has construction capabilities equalling either its qwn or Jerrold's. (5) H &"B knows Jerrold to be the nation's largest and foremost manufacturer of cable television apparatus just as it knows that H & B Communications Corporation is the nation's largest and foremost owner and operator of community antenna television systems. (8), H & B will willingly accept Jerrold's engineering proposals for the cable system after they have been reviewed and improved by our own engineering and operating personnel. Thereupon it will submit Jerrold's engineering and construction specifications (provided that they are not so formulated as to exclude Jerrold's manufacty-ing competitors) to at least two other mnnu- turers of unquestioned integrity, experience, and competence. H & B states that if it is the desire of the City of Logansport H & B will favor Jerrold zs the construction contractor and vendor of electronic equipment, provided its prices and terms arc competitive. (7) To this end H & B proposes a novel but simple arrangement for the establishment of a professional Engineering Standards and Construction Practices Committee, comprised as follows: Three members: (1) a representative of the City, If the City desires to engage a consulting electronic engineer, H & B will pay his fee. (2) a representative of H & B; and (3) a third member acceptable to both who shall represent r , manufacturer competitive with Jerrold. This Committee will be a ssigned the task of weigliing Jerrold's specifications and engineering proposals and appropriately amending them to preclude exclusivity and to permit competitive bidding by all on uniform specifications acceptable to the Committee. The C ommittee shall also make its independent recommendations of acceptable engineering standards and construction practices. (8) The City of Logansport can thus be afforded the opportunity to "have its cake and cat it". It can have a Jerrold eiigi- ' fleered and constructed system, (if that is the City's wish or if it is the recommendation of the Engineering Committee), owned and operated by H & B. Such an outcome will be assured by the award of the franchise to H & B, provided that the Jerrold specifications .do not exclude competitive bidding and provided that its prices and terms are fair. (9) The foregoing is precisely the arrangement under which Jerrold and H & B work together. H & B recently awarded to Jerrold a construction contract for an H & B cable TV system that will serve the mammoth Vandenberg Air Force Base in California. Interestingly, in this instance the on-the-job construction supervisor is an H & B employee whose services Jerrold has temporarily contracted for to assure the best possible supervision. The personnel of this "West Coast Cape Canaveral" will soon enjoy excellent cable TV reception on'a Jerrold constructed-H & B owned and operated system. H & B won the contract to install this system on the basis of sealed competitive bids to the Air Force. Similarly, Jerrold, together with oilier manufacturers, is bidding to H & B for the construction of still other new cable television systems in a number of communities throughout the nation. (10) By awarding an exclusive franchise to any major manufacturer of community antenna television equipment, Logansport deprives itself of the advantages derived from the free play of competitive forces among all such manufacturers. The manufacturer, perforce, gives preference solely to its own equipment, to the exclusion of superior ilems of equipment available from other sources. To the contrary, H & B will carefully select the best from all sources. (11) For example, it is well known among cable television engineers that "all-band" cable television amplifiers utilizing newly .developed transistors permit the installation of a system that is relatively maintenance free and has excellent performance capabilities. H & B understands that Jerrold does not have such amplifier available for sale, though one is reported to be in development. Certain engineering designs and manufactured items from other sources may well exceed Jerrold's engineering specifications for the Logansport job. (12) Similarly, to exclusively favor a single manufacturer over an operating company will of necessity result in higher construction costs of the completed system. Jerrold's construction and manufacturing divisions ars free to sell to its proposed operating company at prices in excess of fair market values as determined in a free, competitive market place. The higher resulting capitalization of the finished system may demand and ultimately justify rate increases to service the proportionately higher investment. (13) Two examples of comparative costs must suffice: In the open market and in spite of com$>etition, Jerrold offers to H & B coaxial cable of which we annually use hundreds of thousands of feet and 'tap-offs" which we use by the th ousands. JeiTold's prices to H & B are 148% and 123% higher than competitive items of identical specifications and perfornutnce, H & B has largely discontinued purchasing such items from Jerrold, though it continues to do a large volume with Jerrold irrespective of price on other items of superior performance. By so doing, H & B subscribers and its stockholders benefit because without compromising our high standards, more of our income is retained for reinvestment in our community systems and for the improvement of our service. (14) At the present time Jerrold's total slake in the ownership of cable television systems is a solitary fifty percent interest in one such company serving Ottawa, Illinois, where it is associated with Alliance Amusement Co., of Chicago, an owner of motion picture theatres, hamburger stands, and gc-kart tracks. Alliance is also believed to own the theatres in the Indiana cities in which Jerrold has elected to apply for cable TV franchises. (15) The sole cable TV system manager in Jerrold's employee who has on occasion appeared before the Logansport City Council was, in fact, hired and trained by personnel now employed by H & B. His offices and technical facilities in Ottawa which were recently visited by members of the Council were, in point of fact, selected, leased, and in considerable degree planned by persons now employed by H & B. (16) H & B owns and operates not 50% of a single cable sy stem but 100% of 21 such systems serving 75,000 TV receivers owned by 67,800 satisfied subscribers located in 12 slates and in Canada.' (17) H & B acknowledges that in terms of corporate existence Jerrold is "the originator of the first community antenna system and has continued in a pioneering role ..." However, we add that in terms of operating personnel, the pioneers have virtually all left to work for H & B. Further, the community antenna systems which it once owned are now operated by H & B, and under its ownership have materially improved the quality and diversity of services rendered 1o the subscribers. In excess of 90% of the persons employed by Jerrold in its Community Operations Division at September 1, I860 are now employees of H & B Communications Corporation. (18) H & B asserts that as is true of any complex and rapidly changing technology, neither Jerrold, nor H & B, nor any other firm has a monopoly on expertise. All manufacturers, including Jerrold, have had their share of towers (hat have fallen down, equipment that has failed in service or did not meet performance specifications, thereby affecting thousands of homes, inefficient or careless practices by employees, antenna sites without adequate signals, etc. At this very moment thousands of dollars of Jerrold equipment which failed to meet performance re quirements is being removed by H & B from one of iis cable systems. It was but recently installed on recommendation's of Jerrold's design engineers, concurred in mistakenly by our own, and witli the assistance of their field engineers. These facts are stated not with a view to discrediting a reputable manufacturing firm but only to bring its grandiose claim of total superiority and infallibility: in line with reality. (19) On balance, H & B freely acknowledges that for all of its well intentioned errors—eE.ch of which it'seeks conscientiously to remedy — Jerrold is one of the nation's most responsible manufacturers of cable television apparatus. But we quickly add that investigation will establish that H & B's independent and lowering position among professional cable television system operators is Logansport'g best guarantee of superior engineering, construction, and operation. Only H & B can bring into Logansport the skills and resources of the entire cable television manufacturing industry, plus its own. II & B plays no favorites; it is beholden to no single manufacturer. (20) Finally, some facts must be adduced concerning Jerrold's performance as an operator of community television systems. Again, that company can lay no legitimate claim to infallibility or to consistently high standards of community performance. All of the cable television systems formerly owned by Jerrold were acquired by purchase by H & B in the fall of 1960. Included among these are some that are technically obsolete, outmoded,- and incapable of rendering the high quality of service typically rendered by modern cable television systems. Further the systems became obsolete years before Jerrold disposed of them due to that company's unwillingness to make the necessary costly improvements. H & B being confronted by essentially the same set of business circumstances has effected some, but not all, of the necessary improvements and modernizations. Recommended Provisions to Be Inserted in Logansport Community Antenna Television Franchise Engineerhig Standard and Construction Practices • Plans and specifications to be submitted before construction commences for approval by a committee of three persons comprising (1) a representative of franchisee, (2) a representative of the City of Logansport, and (3) a third person acceptable to both who is a principal competitor of franchisee's favored equipment and construction contractor. The committee to adopt standards and specifications on which competitive bids can be received by franchisee from at least two manufacturers. Service to Municipal Buildings • • Six ((i) free service connections to any locations designated by the city. Bonding : • « $10,000 surety bond which shall be automatically reduced to $5,000 five years from date of franchise unless City finds -that franchisee has not conducted its business in a manner totally satisfactory to it. Bond to protect city from any loss arising from operations of system. • $10,000 surety bond to assure timely completion of construction, Completion Dale • Construction lo start within 90 days after completion of pole arrangements and final grant of any necessary FCC microwave authorizations. To be completed witliin 180 days from date of commencement. Insurance Property damage in the amounts of $5fl,000/$400,000. Personal Injury in the amounts of $150,000/$300,000. egative Covenants and Prohibitions Shall not engage in sale or servicing of television receivers. Shall not engage in Pay-TV without City consent. Shall not sell advertising.' Jerrold Offers — To bo unilaterally determined by Jorrotd. No provision for competitive proposals. No assurances thar any but Jerrold made equipment will be used-even whore othor is better. Same $5,000 Bond Nona Not Stated $25,000/$200,000 $100,000/4200,000 Same Same Not Stated Analysis of Factors Influencing the Ability of the Applicants to Fulfill Their Commitments It is a matter of public record that in Indiana H & B has applied for cable TV 'franchises only in Logansport, Wubash, and Peru. It is likewise a matter of record that Jerrold .Electronics Corporation and Telesystems Service have filed applications in those cities and also in Lafayette, and in Marion. '» WFAM-TV, a local TV station, is licensed to and operating in Lafayette. A UHF TV channel is allocated lo Marion for which an application for a. television station construction permit was recently Pled with the FCC. H v & B asserts on the basis of information and belief that bo th WFAM-TV and the proposed Marion station will vigorously protest the construction of the Jerrold or Telesystem cable TV systems in Lafayette and Marion and will address said protests to tha Federal Communications Commission, alleging economic injury. It is further a matter of public record that upon the receipt of such protests, no matter how trivial or capricious they be it is lha current practice of the FCC to withhold and deny: the permits for the microwave system required to serve the proposed cable TV system. .'-,-•• H & B states that it is virtually assured that Jerrold will be unable to complete its construction plans for Logansport if it persists in its application for Lafayette and/or Marion. „. H ^ B . has avoided such potential connict and long-term delay by carefully avoiding the Lafayette and Marion communities. H & B submits that Jerrold-and Telesystem be required to furnish either the consent of WFAM-TV and the Marion station applicant to the proposed microwave, or failing that, that they be required to dismiss their Lafayette and Marion applications before they are accorded further consideration by the City of Logansport.