THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: TUESDAY, June 21, 1994 TAG: 9406210354
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
DATELINE: 940621 LENGTH: Medium
The company predicts that its new network, which it says will be available to 169,000 Hampton Roads business and residential customers by 1997, will make a small pre-tax profit on operations by 1998. By 2004, Bell Atlantic predicts more than $68 million a year in operating profits from the Hampton Roads network.
{REST} The financial projections are included in an application for video dial tone that Bell Atlantic filed last week with the Federal Communications Commission. For the entire $1.5 billion network serving 3 million customers that Bell Atlantic says it plans by 1997, the company predicts revenues of more than $1 billion a decade from now.
Bell Atlantic executives said the take would go far higher as the company expands the network throughout its mid-Atlantic service territory. The company's goal is to reach nearly 10 million homes and businesses with video services by 2000.
But some industry analysts said Bell Atlantic's figuring looks too optimistic - on both the cost and revenue sides.
Among other things, Bell Atlantic predicts that as many as 40 percent of the initial homes and businesses that have access to its new video network will plug in by 2000. The company says ``proprietary market studies and internal evaluations'' led it to that conclusion.
``I'd like to see that proprietary study,'' said John Mansell, a senior analyst for Paul Kagan Associates, a Carmel, Calif.-based cable-research company. ``They've already got a competitor out there, in cable, with a 62 percent market share. And they've got two other competitors - direct broadcast satellite and wireless cable - coming down the line.''
Shannon Fioravanti, a Bell Atlantic spokeswoman, said the company stands by its predictions.
``I don't think we would have made those projections if we didn't think they were realistic,'' she said.
Demonstrating that there is a sizable potential market for the kinds of services Bell Atlantic plans is seen as critical to the company as it tries to overcome opposition from the cable industry to its video designs.
Mansell said cable operators are sure to file numerous objections that could delay an FCC decision on Bell Atlantic's application by up to a year.
One of the operators' biggest complaints is that Bell Atlantic and other phone companies planning to enter the video business aren't being required by the FCC, as cable companies are, to get ``franchise authority'' from cities or counties in which they operate. The FCC's position on that matter is under appeal in federal court.
Such franchise rights typically require cable operators to build a network across the entire community within four years - and to pay franchise fees, generally about 5 percent of total revenues, to the community.
Yet Bell Atlantic would initially serve only a portion of each of the six Hampton Roads communities in its three-year video plan - Chesapeake, Hampton, Newport News, Norfolk, Portsmouth and Virginia Beach. And it would pay no franchise fees to those cities.
The same situations would apply in Washington, Baltimore, Philadelphia, Pittsburgh and northern New Jersey, the other five metropolitan areas in Bell Atlantic's initial three-year plan.
Fioravanti defended Bell Atlantic's partial rollout by saying that eventually the company plans to ``go head-to-head'' with cable operators everywhere in its territory. She said the company pays other taxes and fees to cities and counties and that requiring it to pay a video franchise fee as well would be unfair.
by CNB