Californians May See Price War Down the Line : Telecommunications: Cable firms are expected to battle Pac Bell to sell the same services. But some obstacles remain.
California has been battered by the recession, but it still looks like the Golden State to cable and telephone companies, who seem likely in the not-too-distant future to be battling head to head for the lucrative territory.
With Pacific Telesis Group’s pledge last week to spend $16 billion over the next seven years to install a high-speed video and information network, many Californians will soon have two lines into their homes competing to offer the same array of telecommunications services, from dial tone to dial-up movies. But one will be from their cable operator, a local monopoly, and the other will be from Pacific Bell, the giant monopoly providing most of the state’s local phone service.
It’s a situation likely to prevail in California before most other places, which could make this populous, affluent state one of the hottest battlegrounds in the business.
“We ultimately see that consumers are going to have a choice--a full range of services from us or a cable company,” said Lee Camp, president of Pacific Bell Information Services in San Francisco.
But before consumers experience a telecommunications price war in their own homes, the phone company and cable providers will have to scramble over some pretty steep obstacles that stand in the way of direct competition.
As it is, state rules prohibit cable companies from offering phone service. And federal law prevents phone companies from providing cable service in their service area. Both industries are campaigning with lawmakers and regulators to remove the barriers, but success is probably years away.
Full competition would hit in 1996 at the earliest, noted Carrington Phillip, assistant general counsel of the California Cable Television Assn., a trade group in Oakland. Meanwhile, however, the playing field on which the game will be waged is ever-shifting as telephone and cable companies rapidly team up. The cable industry is fond of portraying itself as a David battling the phone industry Goliaths.
But partnerships are turning the cable concerns into forces that Pacific Bell would have to reckon with. For example, if Bell Atlantic Corp. buys Tele-Communications Inc. of Denver, it will win 1 million cable subscribers in Southern California and the Bay Area. Meanwhile, Nynex Corp., the New York-based regional Bell, has allied with Viacom International Inc. to shore up Viacom’s effort to buy Paramount Communications. Viacom’s cable operation, based in Pleasanton, Calif., has nearly 500,000 subscribers in Northern California.
Time Warner, with US West as its telephone company partner, serves more than 320,000 cable subscribers in San Diego and Bakersfield.
Cox Enterprises, which intends to form a partnership with Southwestern Bell, serves 438,000 subscribers in San Diego, Santa Barbara, Bakersfield and Fresno. Other cable operators in California include Comcast, Continental, Century and Times Mirror Cable Television.
“All the cable companies, including us, are talking about finding lucrative partnerships that will help us compete better,” said Bruce Crair, director of telecommunications services at Times Mirror Cable in Irvine. Its parent company, Times Mirror Co., publishes the Los Angeles Times.
Pacific Bell has set itself a daunting task. For one thing, it will have to replace most of its network of 14 million access lines with fiber-optic and coaxial cable. And it has no access to programming, having failed in recent efforts to align itself with a cable or programming company. Camp said the company is “anxious to come to some agreements with people who would provide the content,” and he expects that to happen “over the next few months.”
Cable companies, meanwhile, have years of experience securing and packaging programming. One thing they do not have is Pac Bell’s enormous reach and influence with customers statewide. But they claim to welcome the chance to compete.
“It will mean increased competition in all of the information/entertainment services, and increased competition is always good for the customer,” said Dale Bennett, vice president and state manager of TCI Cablevision of California.
Cable companies and Pacific Bell do have a potentially significant thing in common: feisty faces among consumer organizations.
“For consumers, it’ll be a disaster,” said Audrie Krause, executive director of Toward Utility Rate Normalization, a consumer group in San Francisco. “You have the phone company, which has historically cheated and defrauded its customers, and you have the cable industry, which has historically cheated and defrauded its customers. Competition between the two will be a nightmare.”
