The old guard: Telcos

Tele-TV, the Baby Bells' ill-fated foray into television, is lasting proof that the promises of deregulation have yet to pan out since President Clinton made history by signing the Telecommunications Act a year ago tomorrow.

The law cleared the way for telephone companies to get into the cable business, and Tele-TV was formed to create competitive programming. In a rare display of solidarity, Bell Atlantic, Nynex, and Pacific Telesis agreed to invest $300 million in the start-up and hired Hollywood superagent Michael Ovitz and former CBS broadcasting chief Howard Stringer to run the show.

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But the plan fell apart, leaving Stringer to joke that he now feels like the lead in Agatha Christie's And Then There Were None, in which the characters disappear one by one.

Bell Atlantic and Nynex proposed a merger, and Pac Tel is about to be swallowed by Southwestern Bell--two mega-deals that preempted Tele-TV and other adventurous expansion. Ovitz quit, and Stringer has been left alone at the helm of this telco Titanic.

And that may just be the tip of the iceberg.

Most people praise the law's intent, to reform 60-year-old telecommunications regulations and inspire market competition. As Lee Bauman, vice president of Pac Tel subsidiary Pacific Bell, puts it: "The Telecom Act is based on some fundamental concepts we think are good for the country: opening all telecommunications to competition."

But despite the promises, many benefits of deregulation--competition in local and long distance phone calling, lower rates, and new, improved technologies--have yet to materialize, according to consumer groups, analysts, and industry executives.

Hanging in the balance are hundreds of billions of dollars and the very future of modern-day communications. Whatever course is taken by the telephone companies will likely shape what technologies and services are available to the public into the next century, from television programming to Internet access.

Yet, appropriately enough, the obstacles to this new generation of telecommunications are some decidedly old-fashioned problems: cost cutting, turf wars, and regulatory gridlock.