10/14/96 A WIRELESS WEAPON IN THE CABLE WARS

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A WIRELESS WEAPON IN THE CABLE WARS

Hidden in an industrial park in El Monte, Calif., an assault on cable TV is being readied. Guarded by infrared beams and a 10-foot fence, six gleaming white satellite dishes point skyward. Inside, a half-dozen Pacific Telesis technicians install chips inside racks of digital boxes.
By Mar. 1, the telephone industry is expected to launch its biggest single bid to take business from cable companies. That's when PacTel says it will give 5 million Southern California households the option to get up to 135 channels of TV shows and pay-per-view movies for less than any cable company charges.
``DESPERATE.'' To do this, PacTel won't be ripping up streets to lay wires or launching a satellite into earth orbit. Instead, it will use so-called wireless cable technology to send signals from mountaintop towers to antennas atop individual homes (diagram). Later in 1997, PacTel and others will spread these services to San Francisco, Boston, and Hampton Roads, Va. ``We figure we can get 15% to 20% of the market wherever we offer it,'' says Michael J. Fitzpatrick, president of Pacific Telesis Enterprises. ``Our customers are desperate for an alternative to cable.''
Eager to siphon off some of the $25 billion a year people spend on cable service, Baby Bells hope to leverage their low startup and operating costs. PacTel figures it can undercut by about $2 the monthly bills of existing cable systems, which on average offer just half as many channels.
Wireless cable has been around for a while and is already beamed into about 900,000 U.S. homes. But current systems all use old analog technology. At most, they can handle 33 channels, and the signals are easily blocked by trees and tall buildings.
PacTel's rollout, in contrast, will be the first large-scale use of digital technology, which gets around some signal obstruction problems. The new systems also use compression to broadcast many more channels. In addition, wireless promoters say they can offer better service than the cable companies. ``You won't have to wait a week to get hooked up,'' says financier Gary Winnick, who launched Dallas' Op-Tel. In less than three years, it has signed on 125,000 apartment dwellers.
Phone companies will dig into their deep pockets to make wireless cable take off. PacTel has spent $350 million on wireless cable licenses covering 7 million California homes. Bell Atlantic and Nynex paid $100 million for warrants to buy 45% of CAI Wireless, which has access to 11 million homes in New York and Philadelphia. Nearly 5 million homes will subscribe to wireless cable TV by 2001, figures Paul Kagan Associates analyst John Mansell.
The big cable operators don't seem worried. ``So far it's just talk,'' says Marc B. Nathanson, chairman of Falcon Cable TV in Los Angeles. ``They still have to prove someone will buy their service.''
But phone companies are believers. Later, some will switch to optic fiber, which has far more capacity. But wireless is here now. ``The interim may be a lot longer than anyone thought,'' says PacTel's Fitzpatrick. For the cable industry, that means more competition from the sky.
By Ronald Grover in El Monte, Calif., with Neil Gross in New York

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