Continental Cablevision, Inc. was co-founded in 1963 by H. I. (“Irv”) Grousbeck and Amos B. Hostetter, Jr. From the first cable system the co-founders built in the northwest Ohio communities of Tiffin and Fostoria, the privately owned company grew over the next 33 years to become the third largest cable systems operator in the United States. During the latter part of this period, the company pursued investments that were complementary to its core business, including international broadband communications ventures, interests in telecommunications and technology businesses, and in programming services.
Though never becoming the largest company in size in the cable industry, Continental was widely regarded as the best managed cable operator of its day. “First rate, as good as it gets, impressive people, good local relations, cared about things other than just the bottom line—that’s what impressed people about Continental Cablevision,” said C-SPAN founder Brian Lamb.
At the time of its 1996 merger with US WEST—one of the Regional Bell Operating Companies–Continental’s systems and those of its U.S. affiliates passed approximately 7.2 million homes and provided service to approximately 4.2 million basic subscribers. The company had some 11,000 full-time employees in five operating regions, only 110 of whom were located at its home office in Boston. The company’s lean corporate staff reflected the co-founders steadfast belief in decentralized management. Broad operating authority was delegated to the senior vice president managing each region.
Hostetter and Grousbeck recognized that operating scale was critical to Continental’s ability to meet the growing capital and technical requirements that were vital to its long-term competitiveness. From its inception Continental concentrated its operations in regional clusters located primarily in suburban communities adjacent to major metropolitan markets, as well as mid-sized cities that generally had attractive demographics and were geographically diverse.
Large clusters enabled Continental to attract and retain high-quality management at the system level and to more effectively deploy new products and services. Continental believed that clustering created operating efficiencies through reduced personnel and marketing costs, and lower capital expenditures. Regional clusters were also attractive to advertisers in that they maximized the scope and effectiveness of advertising expenditures.
Continental strived to maintain the highest technological standards in the industry, constructing many of its systems, continually upgrading them with new technology, and later pioneering some of the industry’s first addressable and hybrid fiber-optic and coaxial cable (“HFC”) networks.
The company’s strategy in the United States was to attract and retain customers who would subscribe to an increasingly broad range of cable services. At first these services consisted of retransmitted over-the-air broadcast signals along with some locally produced programming. But as technology advanced and consumer demand grew, the company’s offerings expanded to include a broad range of video, high-speed data, telephony and other services. Execution of the company’s strategy involved deployment of technologically advanced broadband networks, dedication to locally responsive management, innovative marketing, commitment to superior customer service and excellent community relations, and industry leadership in regulatory and legislative matters.
Continental was repeatedly recognized by the cable industry for its effective marketing. Each year the Cable Television and Marketing Society (“CTAM”) presented “MARK” awards to companies with the best marketing programs. From 1990-95, Continental won significantly more MARK awards than any other cable company.
Continental was also an industry leader in addressing the needs of its customers. Using surveys, focus groups, and research tools, and by continually investing in information technology and training programs, Continental created one of the most extensive training programs in the industry. Continental received the “Bill Daniels Operator of the Year Award,” which rated it the “most admired company in the cable industry,” from Cablevision Magazine in which the award was based upon a poll of its readers (1988-90).
Continental was likewise an industry leader in public service programs. Continental was an initial supporter of C-SPAN and Amos Hostetter, Jr. has served as a C-SPAN director since C-SPAN’s founding. Along with Turner Broadcasting and Telecommunications, Inc. (“TCI”) Continental founded Cable in the Classroom, an industry-wide initiative providing 525 hours of commercial-free educational programs each month to thousands of public and private schools across the country. Hostetter served as the first chairman of Cable in the Classroom.
During the 1990’s, Continental participated in several broadband communications ventures outside the United States for Continental, principally in Latin America and the Pacific Rim. These investments represented opportunities for Continental to capitalize on its managerial, technical and marketing expertise in international markets. Continental acquired a 50% interest in Fintelco, S.A., the largest cable system operator in Latin America that as of June 1995 served over 620,000 subscribers in Argentina. Continental also formed a joint venture (“Optus Vision”) in Australia, in which it held a 46.5% equity interest, to provide local telephone, cable television and a variety of advanced services to business and residential customers. Additionally, Continental owned a 25% equity interest in and had management responsibility for Singapore Cablevision Pte Ltd., a broadband venture to provide cable television and a variety of interactive services to substantially all households in Singapore.
Continental also made investments in telecommunications and technology companies including a 20% interest in Teleport Communications Group, Inc., a provider of local telecommunications services to high-volume business customers in major metropolitan areas nationwide; controlling interests in two specialized carriers that provide local telecommunications services to business customers in Richmond, Va., and Jacksonville, Fla.; and a 10% interest in PrimeStar Partners, L.P., a provider of medium-powered direct broadcast satellite (“DBS”) service.
In addition, Continental made minority investments in programming services based upon its view that new programming was a means of generating additional interest in cable television. The company’s programming investments included interests in Turner Broadcasting System, E! Entertainment Television, New England Cable News, Home Shopping Network, Viewer’s Choice, Digital Cable Radio Associates (“Music Choice”), the Golf Channel and the Food Channel.
By the mid-1990’s Continental felt the need for access substantial new capital if it was to continue to upgrade its networks and attain the scale necessary to compete effectively in an increasingly robust and competitive telecommunications environment. After exploring a public stock offering but finding public market valuations unattractive, the company accepted a merger offer from US WEST for $5.3 billion in cash and stock, and the assumption of $5.6 billion in debt. The price US WEST paid, equaled roughly 12 times the traditional cable metric of EBITDA, setting a high water mark for major cable company transactions. Continental was renamed MediaOne, the name used by US WEST’s Atlanta cable systems.
