THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Saturday, February 8, 1997 TAG: 9702080344
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: 82 lines
Its big-time ambitions were dashed a few months ago, but Hampton Roads' ``other'' cable-TV operator is still in business and seeking subscribers.
That's the message from John Prisco, president of CAI Wireless Systems Inc., which owns the local system known as Hampton Roads Choice TV.
``We certainly haven't turned our backs on Hampton Roads,'' Prisco said.
Last fall, the Albany, N.Y.-based CAI was in the midst of a major upgrade of its Hampton Roads ``wireless cable'' system. Bell Atlantic Corp. had made a big investment in CAI, whose local system broadcasts via microwave 25 channels to the home antennas of several thousand subscribers. The phone company vowed to transform CAI's offering into a super-deluxe 120-channel lineup.
Together, the two companies reportedly invested tens of millions of dollars to challenge Hampton Roads' traditional cable behemoth, Cox Communications Inc. They promised the most advanced wireless cable system in the country, with a digital platform enabling CD-quality sound and laserdisc-quality pictures.
Bell Atlantic Video was by far the bigger noisemaker. Courting advertisers and underwriting a local public-broadcasting news show, it prepared to christen a glittering center for the revolutionary new system in Chesapeake's Greenbrier area.
But it was all for naught.
In December, Bell Atlantic and its intended merger partner, Nynex Corp., suddenly pulled the plug. They suspended further investment in the system in Hampton Roads and another system in Boston, and they gave CAI a one-year option to repurchase their combined $100 million in securities in the company.
Exactly what went wrong still isn't clear. Bell Atlantic has said it was concerned that an expanded series of transmitters that CAI erected reached too few homes in the intended broadcast area. Industry analysts speculated Bell Atlantic had decided to temporarily shift emphasis to satellite TV because of the rapid growth of small-dish services like DirecTv.
The decision represented an embarrassing misfire in Bell Atlantic's often-delayed plan to deliver ``video services.'' But the phone company's setback was minor in financial terms. The really big bet - billions of dollars - won't come until it starts trying to use its phone network to deliver TV programming. Bell Atlantic insists that's still its ultimate plan.
For CAI, the news was disastrous.
CAI's stock tumbled after Bell Atlantic's pullout. It hit an all-time low of less than $1 in late December, after trading as high as $17.50 only a few months before. That landed CAI on Bloomberg Financial Markets' list of the 10 worst-performing stocks of 1996.
The market fallout prompted two class-action lawsuits on behalf of shareholders claiming they invested in CAI because of overly optimistic statements from the company. CAI has said the suits lack merit.
The company's insiders, meanwhile, have been busy sellers of CAI stock. In one series of transactions in early December, Chairman Jared Abbruzzese sold 333,400 shares at prices ranging from $1.42 to $2.88 a share.
In spite of the trouble signs, Prisco insisted in an interview that CAI is still committed to its wireless platform.
This week, CAI's stock rose again on news that it had signed an agreement with Minneapolis-based ADC Telecommunications Inc. to develop a system in Pittsburgh that could provide two-way transmissions of video, voice and data. CAI said the technology could enable wireless cable operators to sell access to the global Internet computer network.
In Hampton Roads, Prisco said CAI is working to increase availability of its cable offering to 75 percent of the market and hopes sometime this year to roll out a scaled-down version of Bell Atlantic's planned service. There are no plans to take over Bell Atlantic's video center in Chesapeake, he said. Bell Atlantic said it hasn't yet decided what to do with that facility.
Prisco declined to say how many channels will be offered with CAI's expanded service. But he said: ``It will be a service that will be competitive with the current cable service. It will give people more of a choice.''
He declined to divulge how many subscribers CAI has locally - saying only that it is less than 5,000. That's tiny compared with Cox, which has 335,000 customers in Hampton Roads.
CAI subscribers pay as little as $21 a month for the service. At that price, they get more than a dozen leading cable networks and all the major local TV stations.
The closest comparable service at Cox runs about $26 a month, but it includes more than twice as many channels.
``They've got a product that some people find attractive,'' said Cox general manager Franklin R. Bowers. ``But it's not a major threat at taking away cable homes.''
KEYWORDS: WIRELESS CABLE TELEVISION