TCI unveils $ 2 bil fiber-optic plan
The nation's largest cablecaster said Monday it is embarking on a four-year project to lay 7,000 miles of fiber-optic cable, starting in 100 cities this year. The system will bring Fiberglas strands that can carry thousands of phone calls, video images and data to nodes that will then connect up to 200 homes with traditional coaxial cable. It will make possible services ranging from videophones to movies on demand.
At a nationally televised press conference from TCI's Denver headquarters, president and CEO John Malone detailed his plan to offer 90% of his customers a broad array of new services.
It will affect the computer, publishing, retailing, entertainment and cable industries, he said.
There will be plenty of opportunity to provide programming as well. When asked about TCI's interest in divvying up Turner Broadcasting System Inc. with co-investor Time Warner Inc., Malone smiled.
"TCI is very interested in all the assets of TBS," he said. "To some degree we feel a parentage to those."
TW and TCI came to Turner's rescue in the late 1980s, fending off Kirk Kerkorian by buying large stakes in the company.
Several technical factors are making Malone's latest project possible. First, the technology to digitize pictures into computer language, compress and then decompress them with little loss of quality is commercially feasible. Moreover, the cost of fiber optic cable has dropped dramatically, 10% in the last year alone.
Last fall at the Western Cable Show, Malone said his cable company would offer 500 channels of programming to customers with the aid of digital compression.
TCI expects to pay for the upgraded service through cash flow, generated from sales. The company produced $ 1.6 billion in cash from its operations last year. The investment of $ 750 million on the project's first leg this year is a 50% jump over 1992. The set-top boxes will be jointly made by General Instruments and AT&T, with customers seeing them as early as next February.
TCI has already started in four cities where the company has large penetration: Pittsburgh, Miami, Denver and San Francisco. Another four cities -- Chicago, Hartford, Conn., Salt Lake City and St. Louis -- will be tapped this year.
The similarity with Time Warner's two-way cable system of the future is obvious. TW's Full Service Network was outlined in January and will start in Orlando in early 1994. TCI's plan, dubbed the Infostructure Network, also will offer telephone service, home shopping and movies on demand.
But Time Warner will take awhile to reach all of its 7.1 million subscribers. According to a TW Cable spokesman, the nation's second-largest cablecaster expects to reach a "vast majority" of its customers by the end of decade.
The TCI and TW efforts are creating both opportunity and new competition. Both companies will eat into the $ 28 billion local access revenue that regional Bell companies enjoy. And that, says Bob Wells of Denver cable research firm Lennox Group, spells trouble for the Baby Bells.
"It's turning into something of a mad dash, because the telcos are faced with losing money made from local access charges -- over 50% of the profits in local Bell operating companies," said Wells. "The telcos may suddenly find themselves without the money to do it later."
But the cable companies may end up in joint ventures with the telcos, or computer companies, to bring many of the new services to customers. TCI is already experimenting with U.S. West in the Denver area and McCaw Cellular in Medford, Ore. Malone is already negotiating with software companies over the onscreen interface viewers will need to navigate through 500 channels.
