Baby Bells Should Stick With What They Know

Imagine you’re running a giant, highly profitable company whose core business lies at the heart of the information revolution. You have tons of cash. You have a well-developed technology that’s perfectly positioned to be a key building block for the information superhighway. You have an intimate, long-term relationship with virtually every business and household in the area you serve. What would you do?

If you were a regional Bell telephone company, you would take a big chunk of that cash and put it into businesses you know nothing about. You would spend a lot of time and money complaining about how your competitors have an unfair advantage. And you would ignore obvious extensions to your existing business while gradually alienating your customers by allowing service to deteriorate.

Of course, it wouldn’t be easy to do this for long without ending up in embarrassing situations. Thus, if you were US West, you would suddenly find that a company in which you had invested $2.5 billion in the hope that it would lead you to the multimedia promised land--Time Warner--had decided, over your objections, to spend $7.4 billion buying Turner Broadcasting System. And Time Warner wants to strip away a key asset from the piece of the company in which you had invested. A lawsuit becomes your only option.

If you were Pacific Telesis, Nynex or Bell Atlantic, you would hear on the radio one day that your multimedia Pied Piper, one Michael Ovitz, had bolted for Walt Disney Co., leaving your $300-million television programming company in the lurch. Not much you can do there, though luckily you still have a passel of extraordinarily well-paid television executives working on that venture.

Meanwhile, at Pacific Telesis, you would realize one day that building a state-of-the-art, video-capable telecommunications network is an expensive, long-term proposition with an uncertain payoff. So you’d announce that you’re going to spend a billion dollars less than you had originally intended, and that you’re going to move rapidly into the television business via a new kind of wireless cable technology.

Never mind the fact that wireless cable enables you to offer little that cable television operators and direct-broadcast satellite companies don’t already. Never mind the criticisms of people like John Aronsohn, a senior analyst at the Yankee Group, who say that wireless cable is unproven technology and that your whole video strategy is incoherent. You think that your reputation for good service, and the bad name of the cable companies, and the price advantage you expect to have over satellite providers will enable you to compete.

Well, maybe. But you would do well to recall the all-too-recent past: You and your brethren have an atrocious track record when it comes to anything that isn’t directly related to the core telephone business. Remember how all the regional Bells were going to make all that money selling telephone equipment and computers? Remember how US West was going to be a big player in real estate? How about Bell Atlantic in equipment leasing and maintenance? Or Nynex as a computer retailer? The losses on these efforts run into the billions.

Michael Noll, professor at USC’s Annenberg School of Communication, recalls that the old AT&T; tried to get into the cable business in the 1960s, but quickly got out because its costs were too high. He thinks you’re acting like “Bells in a china shop, crashing around with no focused strategy.” And that’s one of the nicer things he says.

What you’d need to do more than anything is overcome your own fears and take the opportunities that are staring you in the face. Yes, yes, competition is coming to the local phone business, and AT&T; and MCI and Time Warner and Tele-Communications Inc. are all on the attack. But if you’d stop panicking, you’d acknowledge that competition has hardly made a dent in your business so far, even though it’s been under way in some places for years. And it’s not as if you’re without resources.

If you were so determined to get into a sexy new business, you might start with the Internet. Everyone’s talking about it, and you’d actually be in a good position to do something about it! You could sell Internet access along with local phone service at bargain rates: You’d make money on the additional traffic, after all, and maybe even sell a few more phone lines. And it would be a good way to finally offer electronic yellow pages. Pacific Bell and others have announced plans for Internet access, true, but why is it taking so long?

While you’re at it, you could also make a serious go of that advanced network service you’ve been dragging around for the past 10 years: ISDN, or integrated services digital network. It’s the only way to get high-speed access to the Internet from a home or small business, and it will probably remain the only option for some years to come.

So why not work hard to make it possible for mere mortals to use ISDN? At the moment, even a technically sophisticated customer has to spend hours and hours dealing with the phone company and an Internet provider and several equipment vendors to get ISDN to function. It doesn’t have to be that way.

And if you were really forward-thinking, you’d even be interested in--guess what?--that terribly boring, $80-billion-a-year local telephone business. Demand is growing, after all, and it could grow more if you’d invest in it more and market it more. How come you’ve never tried to sell me another phone line? How come service is slipping at a time when phones are more critical than ever?

If you were really interested in serving customers, like you always say you are, you wouldn’t be so anxious to give the world more television, something it already has in abundance. You wouldn’t be listening so closely to the investment bankers, who for their own reasons are eager to scare you into mergers and acquisitions that would only make you more unwieldy than you already are.

Instead, you’d concentrate on the one thing you do pretty well: providing better and cheaper ways for people to communicate with one another. Sure, continue to invest in wireless phones and try to get permission to enter long-distance and even pursue international telecom ventures. But stick with what you know. If you think about it, there’s nothing so dull about the telephone business.

Jonathan Weber is technology editor for The Times’ business section. He can be reached via e-mail at Jonathan.Weber@latimes.com.