Bell Atlantic to provide 'wireless cable' by '96

THE BALTIMORE SUN

"Wireless cable," a hybrid technology that combines features of broadcast and cable television, will go on the air in metropolitan Baltimore within a year with more than 100 channels of programs supplied by Bell Atlantic Corp., a phone company spokesman said yesterday.

The service, which will broadcast microwave signals to subscribers in a 35-mile radius around a central tower in Baltimore, will offer a selection of "the best of cable" plus broadcast stations and pay-per-view programming, said Bell Atlantic Video Services spokesman Larry Plumb. He said the service will offer digital-quality signals comparable to satellite television systems.

If Bell Atlantic's wireless cable service can deliver that combination of quantity and quality, the traditional cable monopolies in the area could be in for a rough ride. Because it doesn't require construction of an extensive land-based network, wireless cable can provide programs for about 25 percent less than the per-channel cost of traditional cable, industry analysts say.

The arrival of wireless cable will further intensify the level of telecommunications competition in Baltimore, which is rapidly becoming one of the most hotly contested markets in the country.

Local cable operators, including United Artists Cable of Baltimore and Comcast Corp., are already facing a land-based challenge from Bell Atlantic, which has announced plans to build an extensive "full service network" including cable-like "video dial tone" services.

Coles Ruff, general manager for United Artists, said his company welcomes the competition "because we'll do a better job." He said the industry's future lies in hard-wired, land-based systems because only they can deliver on the promise of interactive services such as movies on demand and home shopping.

Mr. Ruff said his system, which is owned by Tele-Communications Inc., will be upgraded to a digital network in 1996. Asked whether he thought Bell Atlantic's announcement would speed up the parent company's timetable, Mr. Ruff just said, "I hope so."

Comcast, which serves Baltimore, Howard and Harford counties, announced a $100 million network upgrade last week.

The license holder for the wireless cable venture will be Albany, N.Y.-based CAI Wireless Systems Inc., which announced yesterday that it has acquired rights to operate a wireless cable system in Baltimore for $16 million and a moribund system in Washington for $26 million from Eastern Cable Networks Inc.

The 2-year-old CAI also announced that Bell Atlantic and Nynex Corp. have agreed to make a joint investment of up to $100 million in the fledgling wireless cable company. In return they are receiving the right to supply the program ming on CAI's systems in their service regions.

Arthur Newman, wireless cable analyst for Gerard Klauer Mattison & Co. in New York, said the hefty investment by two Bell companies is a breakthrough for the wireless cable industry, which has slowly been gaining acceptance as an alternative to traditional cable.

"It's tremendous for wireless cable," he said. "This is really a seminal event in the evolution of the industry."

The stock market affirmed his view, as shares in wireless cable companies jumped in yesterday's trading, including a $1.50 gain for CAI, which closed at $14.50. CAI celebrated its new capital infusion by announcing a series of acquisitions that expanded its reach to Philadelphia, Pittsburgh and other markets in addition to Baltimore-Washington.

The oxymoronic name "wireless cable" is the industry's shorthand term for a service that is formally called multichannel multipoint distribution service, or MMDS. The technology emerged in the 1970s in rural areas where laying cable was believed to be uneconomical.

Advocates for wireless cable contend the industry is on the verge of a rapid expansion because of advances in a technology called digital compression, which lets operators cram more channels into a finite amount of spectrum. Andrew Kreig, vice president of the Wireless Cable Association, said breakthroughs in compression in the last few months have raised the prospect that wireless cable could eventually offer up to 300 channels.

Jared Abbruzzese, chief executive of CAI, said most of the details of the new Baltimore service have yet to be settled. The company still needs to locate a site for a broadcast tower, he said. Also unresolved is how the company will recover the estimated $600 cost of installing the system, which requires an antenna mounted on the subscriber's home.

Not every resident of the Baltimore area would be able to receive wireless cable service. In some cases, zoning laws and residential covenants forbid antennas. And some residents could find they can't receive signals because they lack a clear line of sight to the tower.

Nevertheless, the deal with CAI will give Bell Atlantic and Nynex line-of-sight access to about 12.8 million homes, said Bishop Cheen, senior analyst for Paul Kagan Associates in Carmel, Calif.

Mr. Cheen said the airborne venture will let Bell Atlantic and Nynex get into the video market far sooner than they would by sticking to the much-ballyhooed "information superhighway." But he said the companies also could be feeling nervous about the prospects for recovering the enormous costs of building a land-based fiber-optic network.

"It's called hedging your bets," he said.

Bell Atlantic spokesmen said the wireless deal would bring no changes in the timetable for building their fiber-optic "full service network."

One potential point of conflict for wireless cable systems is the touchy issue of the franchise fees traditional cable companies pay to their local communities for using public rights of way. These payments -- generally about 5 percent of a cable company's revenue -- would decline if traditional cable systems lose market share to their wireless competitors.

Mr. Abbruzzese said he sees no reason his company should pay a franchise fee.

"We cross no public rights of way with our plant," he said.

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