Lines blur in cable, phone industries Changes herald trend toward merger

February 11, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Changes in the telephone and cable television industries are gaining a critical momentum that could soon see the two businesses offering consumers everything from ordinary telephone services to dial-up football games.

The rate of change quickened Tuesday when the Southwestern Bell Corp. announced it was buying two Washington-area cable television systems. For the first time, a telephone company will be operatinga television company, a move that analysts believe will hasten the union of industries.

"It was only a matter of time before a telephone company bought a cable television company," said Jay Grossman, a spokesman for the Bell Atlantic Corp., which owns Chesapeake and Potomac Telephone Co. of Maryland. "This isn't a cable or a telephone industry any longer. It's an information industry."

At the heart of the telephone-vs.-television fight is who will provide the increasing flow of information that consumers will increasingly receive via advanced transmission lines. While cable companies are able to decide what viewers watch, the telephone companies are eager to expand the use of their systems to break into this market.

Currently, the regional telephone companies are not allowed to own cable television systems in their area. That is why Southwestern Bell bought the cable television systems in the Washington area, which falls under Bell Atlantic's domain.

The real push has come as the well-financed telephone companies decided they no longer wanted just to rent their lines to individuals having conversations or cable companies sending their signal. Instead, they want to replace the cable companies entirely, said Paul Bortz of Bortz & Co. Inc., a Denver consulting company.

"There are much more profits in selling the services than selling the transport," Mr. Bortz said.

Cable officials, however, had only contempt for Southwestern Bell's move into their territory.

Until now, they said, telephone companies had concentrated on developing their own interactive technologies, allowing consumers to call up movies of their choice and, just like with a VCR, rewind or fast-forward through movies.

When introduced, the technology would bypass existing cable systems -- allowing viewers, for example, to call up a favorite horror flick rather than tuning to the Horror Channel and hoping that something good was on.

Now, however, the telephone companies are buying cable systems.

To the cable industry, the move seems a contradictory about-face, while to others it was a logical next step.

"It goes contrary to what the Bell systems have said they want to do. It undermines their view of the future," said Peggy Laramie of the National Cable Television Association in Washington.

Although Southwestern Bell officials refused to comment on their purchase, Les Brown, a senior fellow at Columbia University's FreedomForum Media Studies Center, said the purchase made sense because it furthered the move toward a union of the two industries.

"What we're seeing is a significant step in the emerging conflict between these two industries," he said.

While unwilling to say what Bell Atlantic's answer to Southwestern Bell's move into its territory would be, Mr. Grossman said his company would continue its pilot project to offer movies on demand in the Virginia-Washington area -- exactly where Southwestern Bell's new cable companies operate.

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