THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, March 30, 1995 TAG: 9503300359
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Medium: 84 lines
Bell Atlantic Corp. is considering another way to deliver cable-TV services faster to customers in Hampton Roads.
The Baby Bell phone company said Tuesday that it and NYNEX Corp. will invest a combined $100 million in CAI Wireless Systems Inc., which operates so-called ``wireless cable'' systems in Hampton Roads and three other East Coast metro areas.
While they're working out the bugs in their ambitious plans to provide cable services through phone lines, the telephone companies may test video services on CAI's systems before the end of the year.
``It's an early-entry strategy,'' Bell Atlantic spokesman Eric Rabe said.
Wireless cable uses microwaves to broadcast a few dozen channels of programming to small antennas on customers' rooftops.
Until the past few years, it was confined to a few rural pockets around the country. But when wireless operators began setting up in urban areas, the industry ballooned. The number of wireless subscribers nationwide has nearly quadrupled since 1992, to roughly 700,000, according to the Washington-based Wireless Cable Association.
That's still tiny compared to the 65 million households subscribing to traditional cable.
But analysts have said the development of ``digital compression'' technologies that will enable wireless operators to squeeze hundreds more channels into their allotted bandwidth will help speed the industry's growth.
Bell Atlantic's Rabe said CAI may be able to deliver as many as 100 channels by the end of this year, compared with about two dozen now.
Over the long term, wireless cable will only be a peripheral part of Bell Atlantic's video strategy, Rabe said. Communications networks relying on fiber-optic cables are the main thrust, he said, because of their greater data-carrying capacity.
Bell Atlantic's eventual plan is to make its video services highly interactive, meaning that people watching a movie on demand, for instance, will be able to pause the film and use their remote control to dial out for pizza. The more robust the video system, the more necessary an actual wire into the home becomes, Rabe said.
But the earliest that NYNEX and Bell Atlantic will have such hard-wired delivery systems operating in Hampton Roads and other big metro areas in the Northeast and mid-Atlantic is mid-1996, he said. Delays in winning government approvals and in engineering set-top converters have been steadily pushing back the launch date.
So the phone companies started looking for alternative ways to get to the market faster, Rabe said.
CAI Wireless certainly could use the $100 million coming its way from the phone companies. The Albany, N.Y.-based CAI lost more than $7 million in the first nine months of the fiscal year ended March 31.
Much of the loss has been because of startup costs in new markets such as Hampton Roads, where it launched service last August and has signed up about 1,000 customers. Most pay $18.99 for CAI's basic 20-channel service. That's about $5 less than subscribers to traditional cable systems pay for 40 to 50 channels.
CAI has also run up debt buying other wireless systems. On Wednesday, it announced an agreement to acquire ACS Enterprise Systems Inc., a wireless operator with systems in Philadelphia, Cleveland and Bakersfield, Calif. And it said it signed agreements to buy wireless systems in Washington, Baltimore and Pittsburgh from other operators.
The deals will roughly triple the company's customer base to 115,000 and give it a service area of 20 million households.
But expansion won't come cheap. The total price for the acquisitions is $100 million cash and $223 million in common stock of CAI. The Bell Atlantic-NYNEX partnership is providing the bulk of the cash and will receive, in turn, warrants to acquire up to 45 percent of CAI's total stock.
Rabe declined to speculate when Bell Atlantic will decide on whether to use CAI's systems.
In Hampton Roads, Bell Atlantic could use wireless cable to deliver video services into territories where GTE Corp. is the local phone provider: large portions of Chesapeake, Suffolk and Virginia Beach, and all of Isle of Wight County.
But that strategy has its limits, too. Wireless cable's signals can be blocked or significantly weakened by obstacles such as buildings or even thick stands of trees. by CNB