Electronic Marriage of the Century

October 15, 1993

The surprise in the proposed merger of Bell Atlantic Corp. and Tele-Communications Inc. is that the deal was reached between these two giants, not that a phone company and cable TV operator decided to join forces. There have already been smaller deals between regional telephone companies -- the so-called Baby Bells, offspring of the old Ma Bell national telephone system that was dismantled in 1984 -- and cable operators.

Increasingly the two sets of communications goliaths were looking to poach on each other's territory. Bell Atlantic, armed with a recent federal court decision, plans to offer entertainment over its lines in direct competition with cable TV. And the cable companies were eager to offer what amounted to telephone services over their networks.

There is economic logic in the huge merger. Truly interactive electronic services for home consumers will involve massive outlays of capital for the hardware to provide it, including the fiber optic lines that would carry enough channels to make these services profitable and the sophisticated switching systems necessary to deliver it.

Both TCI and Bell Atlantic are strong where the other is not: Phone companies have mastered the technology of two-way communications; cable firms have better wiring into homes. Cable firms have much of the information and entertainment viewers want; telephone companies generally get along better with their paying customers.

Still, there are many questions that need be answered before this merger can occur or pass the test of the marketplace. If the enlarged Bell Atlantic sells off TCI systems in its service area -- such as Baltimore City's United Artist cable -- as promised, concerns about monopolistic control still remain. If another cable operator buys a local system, dominance by giants like the new Bell Atlantic is bound to hamstring competition. How would states regulate local phone service if it became a tiny link in an interstate electronic highway? Are rapid advances in technology about to make our existing regulatory structure obsolete?

Just because a smorgasbord of entertainment and information options are offered doesn't mean customers will jump at them. Past attempts at interactive electronic services have proved to be technologies in search of markets they never find. Viewers who have been treated shabbily by their local cable system -- not an unfamiliar experience around here -- may be reluctant to see their always reliable telephone service coming out of the same black box as the evening's entertainment.

If anything is certain in the volatile world of electronic communications, it is that few developments ultimately turn out the way they initially were intended. Plainly Bell Atlantic and TCI have vaulted into the 21st century. Their competitors must follow. But will government regulators, the courts and, ultimately, the customers?

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