THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, September 30, 1994 TAG: 9409300491
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Medium: 83 lines
Bell Atlantic Corp. conceded this week that its highly trumpeted plan to deliver movies on demand, home shopping and other video services to customers' homes is going to take longer than initially projected. It blamed federal regulatory hurdles for the delay.
But industry analysts said the phone company's aggressive rollout was bound to be drawn out anyway because of technical glitches and unproven customer demand for such services.
The death in Congress of a sweeping telecommunications reform bill last week added, at least temporarily, to the cloud over the video plans of Bell Atlantic and other regional phone companies, analysts said.
``It's going to take the telcos longer to develop this business than than they initially led people to believe,'' said John Mansell, a senior analyst with Paul Kagan Associates Inc., a Carmel, Calif.-based research company.
Bell Atlantic announced in May that by the end of 1995 it planned to offer as many as 675 channels of video programming to 1.25 million homes in the mid-Atlantic, including Hampton Roads. It said it intended to expand the offering to 8.5 million customers' homes by the turn of the century.
``At this point, it doesn't look like we'll reach those levels,'' spokesman Paul Miller said Tuesday. The reason: It's taking Bell Atlantic longer than it had hoped to win approval from the Federal Communications Commission for its plan, which the company projects will cost $1.5 billion by 1997.
Intense opposition from cable-TV operators has caused the FCC to take longer to act on video dial-tone applications than many phone executives expected. So far, the FCC has approved a commercial rollout by Bell Atlantic of video dial-tone services in only one community: Dover Township, N.J.
Once Bell Atlantic gets the FCC's approval for the rest of its plan, Miller said, it will take four or five months for the company to hit full stride in installing the fiber-optic and coaxial cable required for its video services.
Miller said the company still plans to initially provide services in Hampton Roads, Baltimore, Washington, Pittsburgh, Philadelphia and northern New Jersey sometime next year. But he was unable to detail how many homes in each of the metro areas are expected to be offered the services by the end of 1995.
Bell Atlantic's video plans also are being complicated by squabbling with its intended main equipment supplier, AT&T Corp.
The New York Times reported earlier this month that AT&T and its partner, General Instrument Corp., had not finished a number of key components for the Bell Atlantic video network. The Times said Bell Atlantic executives were displeased with AT&T's performance, while AT&T was asking for more money.
Miller conceded that the two companies still have not finalized a contract, but he said prospects for a resolution of their disagreements are improving. ``We give that an 80 percent chance of working itself out,'' he said.
Industry analyst Mark Stahlman, president of New Media Associates Inc. of New York, said he is not surprised about Bell Atlantic's stumbling blocks. He said the company expected such problems, but talked aggressively about its plans to impress potential business partners, investors and regulators.
``Any schedule which you are given by them will not be met,'' Stahlman said, ``because there still is no business case for video on demand . . . We are in the midst of what will be many, many years of trials.''
Mansell, the Paul Kagan Associates analyst, added that there are still crucial legal questions about Bell Atlantic's right to offer video services.
An Alexandria federal judge's 1992 ruling in favor of the company's entry into cable TV is under appeal. Mansell said there is an outside chance that the U.S. 4th Circuit Court of Appeals in Richmond will overturn the judge's decision.
Mansell said he thought it would be unwise for Bell Atlantic ``to go full bore without a ruling.''
Until last week, it looked like any appeals court decision would have been irrelevant because a telecommunications reform bill in Congress would have cleared Bell Atlantic's plan. The legislation would have all but eliminated barriers to competition in telecommunications.
But chances for a bill's passage apparently died last week when the chief Senate sponsors said they'd given up their effort to bring the reform measure to a floor vote this year.
In spite of the rough spots, Bell Atlantic's Miller said the company will prove the naysayers wrong.
``We are still very positive, very upbeat about video dial tone,'' he said. ``This is a critical part of our overall business plan.'' by CNB