Adult phone services lose major player in Telesphere

September 13, 1991|By Leslie Cauley

The future of the dial-a-porn industry looks shaky now that Telesphere Communications Inc., the nation's largest purveyor of adult programming, has decided to drop out of the $1 billion-a-year 900-services market.

That's the word from some industry experts. Telesphere, second only to American Telephone & Telegraph Co. in the 900 services market, was the only major player that accepted adult programming.

"The demise of Telesphere's 900 business suggests that we are also witnessing the demise of adult programming as a major component" of that market, said Mark Plakias, managing director of Strategic Telemedia Corp., a market research consultancy in New York.

Albert Angel, president of the National Association for Information Services, which represents the 900-services industry, said the outlook isn't good for businesses that specialize in adult programming. He said the withdrawal of Telesphere, coupled with a growing intolerance for dial-a-porn type services, might be the death knell for adult programmers.

And that might not be such a bad thing, Mr. Angel said.

"Many 900 service providers have been tarnished from scam operations and their association with adult services," said Mr. Angel, whose own association doesn't admit businesses that offer adult programming.

The 900-services industry has been under increasing pressure from Congress, regulators and consumer groups to crack down on adult programming, often cited for abusive advertising practices. As a result, regulations have been tightened and a number of safeguards aimed at shielding children from adult-type services have been instituted.

The crackdown has taken its toll on adult programming businesses.

According to Strategic Telemedia, adult programming as a share of the total market has dropped by half over the last year from a peak of about 30 percent during 1989-1990.

Mr. Plakias said the end of Telesphere's participation will probably push adult programming below its current 15 percent market share.

"They were a bellwether for the future of adult programming," Mr. Plakias said. "And the fact that they have gone down says something about thefuture of adult programming."

On Wednesday, Rockville-based Telesphere said it was filing 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.

The move effectively removes one of four major players in the 900-services market, which is dominated by AT&T with a 40 percent share. Telesphere, the No. 2 player, had a 27 percent share of the market, followed by US Sprint with 16 percent and MCI with 11 percent, according to InfoText, a trade magazine that tracks the 900-line market.

AT&T, Sprint and MCI have policies of not providing billing, collection and administrative services for providers of adult programming. Likewise, most of the regional Bell phone companies, including Bell Atlantic Corp., which services Maryland, have policies of not handling adult programmers.

Mr. Plakias estimates as much as half of Telesphere's 900 business was derived from adult programming, a factor that may have contributed to the company's downfall.

The reason: While dial-a-porn is lucrative -- charges can run $10 a minute or more -- the uncollectible rate also tends to be much higher than for other types of 900 lines.

State regulations can compound the collection problem. That's because many states, including Maryland, don't permit phone companies to turn off a customer's phone for non-payment of a 900-line bill.

OC Telesphere plans to file a reorganization plan within 120 days.

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