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Tele-TV may fade to black

Tele-TV, a multimillion-dollar foray by three Baby Bells into interactive television, is in danger of being dismantled.

    Is Tele-TV--the two-year-old interactive television effort jointly owned three Baby Bell companies--being dismantled? The answer is a definitive maybe, according to officials at Nynex (NYN), Pacific Telesis Group (PAC), and Bell Atlantic (BEL).

    The three companies said late this afternoon that they are "continuing to discuss" the future of the technology initiative. The statement was released jointly in response to a Wall Street Journal report this morning stating that the phone companies were killing off Tele-TV and negotiating severance packages with high-profile Chairman and COO Howard Stringer and President Sandy Grushow.

    "Tele-TV and its partners are finalizing a 1997 business plan for Tele-TV focused on supporting the partners' digital television products," according to the statement. It added that the venture has yielded some "key programming agreements and operating support systems" and that Stringer and Grushow continue under contract to Tele-TV.

    But sources close to the project confirmed that they have been told that Tele-TV will be dead by the end of this month.

    Interactive television has lost much of its luster as public interest has shifted to the Internet in the last few years, and Tele-TV has suffered a few setbacks in particular. Sources said the Baby Bells weren't completely satisfied with the technology developed so far, which they deemed unreliable and inefficient. And Michael Ovitz, the high-profile Hollywood agent who signed on to shape original programming for the project, has defected.

    Before issuing the joint statement, Pacific Telesis spokesman Craig Watts denied knowledge of the dismantling plans. "The speculation that Tele-TV is going to fold up its tent is incorrect from the point of view of Pacific Telesis," he said earlier today. "We don't have any interest in dissolving Tele-TV."

    Wall Street did not seem to mind the potential failure of the experiment. The three companies saw their stock fall only slightly today.

    At least one stock market analyst, Douglas Christopher, of the Los Angeles brokerage firm Crowell, Weldon said he does not expect the decision to significantly effect the companies stock or hurt business operations.

    "The companies have their hands full attending to their core business," Christopher said. While pulling the plug on the venture may prove somewhat embarrassing, he said, "Tele-TV wasn't key to their business and wasn't producing any money."

    Already, however, the project has cost the Baby Bells about half a billion dollars in the last two years. And if Tele-TV does fold, it may hurt other affiliated companies, such as Thomson Consumer Electronics, which had a deal to supply the set-top boxes needed to view Tele-TV. CAI Wireless, which has a contract to supply video programming for Nynex and Bell Atlantic, saw its stock tumble more than 40 percent today on the news. Bell Atlantic and Nynex plan to complete a merger in the first half of next year.

    In a separate venture, Pac Tel plans to roll out wireless technology developed in the Tele-TV labs in a "handful" of communities in the Los Angeles area. The service, which has yet to be named, will compete against cable companies by offering 160 video channels when it debuts next spring.