Telesphere Communications Inc. of Rockville, the nation's second-largest purveyor of adult and other 900-line services, said yesterday that it has filed for Chapter 11 bankruptcy protection from creditors.
The announcement came one day after Telesphere said it was getting out of the 900-line business because of problems in collecting charges for services, effectively eliminating one of four major players in the $1 billion-a-year market.
Telesphere is the only top player in the market that accepted adult programming, a factor that might have contributed to the company's downfall. The reason: While adult programming is lucrative -- charges for adult lines can run $10 or more a minute -- the uncollectible rate tends to be higher than for other types of 900 lines.
Telesphere's decision to withdraw from the market could wind up putting some 900-line providers out of business. Especially affectedwould be providers of adult services, who now must find other collection and administrative services, said Jack Schember, editor of InfoText magazine, a trade publication that tracks the 900 industry.
He estimated Telesphere had about 800 information providers on its network. Given Telesphere's problems in recent months, he said, some of those providers had started making plans to switch to other carriers.
American Telephone & Telegraph Co. dominates the 900 market with a 40 percent share. Telesphere, with a 27 percent share, is the No. 2 player, followed by US Sprint with 16 percent and MCI with 11 percent.
AT&T, MCI and Sprint do not handle billing and administrative services for adult or sex lines, limiting their services to providers of shopping, sports, financial and other general information lines.
Telesphere's mix of 900-line services, by comparison, was supposedly weighted with adult programming.
Telesphere cited growing dissatisfaction among consumers with 900-line services, and an unwillingness to pay for them, as factors in its decision to withdraw from the market.
State regulations can compound such collection problems. Many states, including Maryland, prohibit phone companies from turning off a customer's phone service for non-payment of a 900-line bill. That forces companies like Telesphere to initiate court proceedings against delinquent accounts, a process that can be time-consuming and costly. Telesphere, which also offers operator services and other telecommunications services, said in a statement that it intends to file a reorganization plan with the U.S. Bankruptcy Court within 120 days.
Katherine Clifford, a Telesphere spokeswoman, did not return calls. Telesphere's two principal subsidiaries, Telesphere Network Inc. and Telesphere Limited Inc., also filed for bankruptcy protection yesterday under Chapter 11.
Yesterday's filing converts a pending involuntary bankruptcy proceeding under Chapter 7 into a voluntary action. Ten providers of 900-line services filed the Chapter 7 bankruptcy petition against Telesphere last month.