The Baby Bells Grow Up

September 04, 1993

There's about as much ferment in the legal and strategic planning offices of communications companies these days as in their historically productive research labs. As quickly as the engineers come up with technological breakthroughs, the marketers think up ways to convert them into products and the lawyers figure out how to avoid legal obstacles.

A federal court in Alexandria, Va., has raised the stakes considerably for regional telephone companies and local cable TV systems. In a case brought by Bell Atlantic, which owns C&P Telephone Co., the court ruled the phone companies had a First Amendment right to sell their own programs over their networks. If the ruling stands, phone companies could compete directly with cable TV systems in their own operating areas.

At the same time, some cable systems are anxious to convert their networks, which often have much greater transmission capacity than they are using, into facilities that would compete directly with the telephone companies. Initially, at least, the telephone companies would not be able to provide the variety of channels cable systems can with their more modern wiring. But TV service, augmented by two-way communications, would be a lucrative market for the telephone companies.

The Alexandria decision is being hailed as a victory for competition, but that is by no means a sure thing. Even if the ruling is sustained, it could be overturned in Congress. Increasingly the giants of electronic transmission are adopting the old adage, "If you can't lick 'em, join 'em." Some Baby Bells are acquiring cable systems in other areas; a few are exploring cooperative enterprises with one another or with one-time competitors.

Thus, the regulatory ferment could transform the individual monopolies of the telephone and cable companies into a single gigantic monopoly. Cooperation between them makes some economic sense. New transmission systems are expensive; one shared by both obviously is cheaper than two. Telephone companies are not known for artistic sensitivity; cable companies could use more of the efficiency, technical skill and user-friendliness of the telephone companies.

The old rules that protected the consumer in the days of rotary phones and rabbit-ear antennas don't apply as well in the era of digital transmission. Government regulators need to be as innovative as the industries' engineers and marketers.

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