Cable firms gear up for phone service

August 09, 1994|By Bloomberg Business News

NEW YORK -- The nation's largest cable television operators will announce today that they intend to buy about $2 billion worth of equipment that will allow them to carry telephone service.

The companies, which include cable giants Tele-Communications Inc. and Cox Cable Communications, are expected to outline initial strategies for getting into the telephone business at the Plaza Hotel in New York, according to analysts. No further details have been made available. The move will change the way cable companies view the regional Bell operating companies -- as competitors, not as allies.

Last year, a wave of mergers among cable and phone companies seemed likely. Bell Atlantic Corp. and Tele-Communications announced plans for a $21.4 billion merger. Then Southwestern Bell Corp. and Cox Cable Communications Inc. announced a $4.9 billion joint venture. Both hook-ups disconnected when the Federal Communications Commission rolled back cable rates by 17 percent.

"This is a sign that the cable companies are aggressively making plans for themselves, and they aren't waiting for a knock on the door from the telecommunications companies," said Edward Hatch, an analyst with UBS Securities.

Cable Television Laboratories Inc., an industry-sponsored research and development group based in Louisville, Colo., has been selected to oversee a process in which telephone equipment manufacturers will submit bids to the cable companies for the necessary equipment.

A bidders' conference has been scheduled for Aug. 19 in Denver. Equipment manufacturers will have until Sept. 23 to submit final proposals, according to Mike Schwartz, spokesman for CableLabs.

In attendance at the press conference Today will be chief executives of Comcast Corp., Continental Cablevision Inc., Cox Cable, Tele-Communications, Time Warner Holdings Inc. and Viacom International Inc., Mr. Schwartz said.

New orders from cable companies will be a boon for phone equipment manufacturers like AT&T Corp., Ericsson Telephone Co., General Instrument Corp., DSC Communications Corp. and Scientific Atlanta Inc., according to Jim Kedersha, an analyst with Cowen & Co.

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