New Systems, Alliances to Transform Telecommunications

By Andrews, Edmund L. | THE JOURNAL RECORD, October 27, 1994 | Go to article overview

New Systems, Alliances to Transform Telecommunications


Andrews, Edmund L., THE JOURNAL RECORD


Telecommunications companies and their customers are on the verge of the most sweeping revision of the nation's communications landscape since the breakup of the Bell System in 1984.

In a frenzy of deal-making capped by Sprint Corp.'s announcement Tuesday of an alliance with three of the country's biggest cable television companies, the industry's biggest companies are forming partnerships that are likely to give consumers and businesses alike a broad new range of communications options during the next decade.

The trend is also playing out in Hollywood, where three of the regional Bell telephone companies are said to be near announcement of a video programming venture with Michael Ovitz, the most powerful talent agent in the entertainment industry.

Near term, the Sprint alliance and others like it are being driven by a deadline this week at the Federal Communications Commission. On Friday, companies intending to bid on licenses for a new generation of wireless "personal communications services" must disclose their partnerships.

These new wireless services are expected within a few years to link cellular telephones, portable computers and pagers and at prices far lower than those available today.

But ultimately, the new partnerships will affect much more than wireless communications. Each alliance, in its own way, is intended to further the goal of one-stop-shopping for many services _ local and long-distance phone calls, cable television and high-speed data communications _ that are not currently available from any single company.

"The timing for all this is wireless services," said Dennis H. Leibowitz, telecommunications analyst at Donaldson Lufkin Jenrette in New York. "The broader goal is forming alliances for national brandname services in telephony and entertainment."

For consumers and business customers, the coming changes could mean lower prices and a broader variety of services, as companies compete to attract subscribers.

But for the communications companies, the future is full of risk. They are about to place billion-dollar bets in a highly competitive game, in many cases through hastily arranged alliances.

As this process unfolds nationwide, the once-sacred distinction between local and long-distance telephone service is being obliterated. Local phone companies mean to branch out into cable television and long distance services, cable companies plan to offer phone service and long-distance carriers intend to invade the local markets now under the control of telephone and cable providers.

In all cases, wireless technology is seen as only one of several key elements in a package of communications services.

Nowhere is that more evident than in Tuesday's announcement by the nation's third-largest long-distance carrier, Sprint, based in Westwood, Kan., which teamed up with Tele-Communications Inc. of Denver, Comcast Corp. of Philadelphia and Cox Enterprises of Atlanta.

The three cable companies plan to upgrade their existing networks, which serve neighborhoods with a total of 30 million homes, in order to offer both wired and wireless telephone services.

The cable companies already control the Teleport Communications Group, an operator of fiber optic networks in 19 cities that compete against local telephone companies for specialized business services.

Sprint and its partners intend to compete in the FCC's coming auction for wireless licenses and to use the cable television systems to tie together both wireless and wired telephone services.

The new venture marks the most ambitious effort yet to act on the promised convergence between telephone and cable television networks.

Analysts said that Sprint and its cable partners could end up spending $2 billion or more to modernize their networks and buy the wireless licenses. …

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