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Baby Bells May Have to Grow Up Quickly

INNOVATION / MICHAEL SCHRAGE

October 10, 1991|MICHAEL SCHRAGE

Maybe Pacific Telesis should buy 10% of Microsoft--and put the software firm's multibillionaire chairman, Bill Gates, on its board. Perhaps Bell Atlantic should acquire a stake in USA Today publisher Gannett. Nynex could do worse (and has) than make a cozy investment in software publisher Lotus Development Corp.

In the Information Age, opportunity doesn't knock, it rings. Pick up the phones! Now that a federal appeals court has given the go-ahead for the Baby Bells to participate in the "information services" market, who knows what they'll do? They don't. But if they're not careful, Gates' Microsoft will buy one of them .

As an industry, the regional Bell operating companies have moved with all the grace and urgency of sloths on Quaaludes. Their advertising has been consistently more creative than their technology. Rather than collaboratively turn their networks into genuine platforms for innovation and growth, they found it easier to blame U.S. District Judge Harold H. Greene for restricting their ability to market new services. Now that the legal cuffs are off, we'll see if the intensity of their future investment lives up to the intensity of their past whining.

If the Baby Bells remain passive-aggressive lumps, then change is going to be painfully incremental; like watching a sloth trying to run like a cheetah. Remember how long it took to phase in touch-tone dialing? But, maybe, if the Baby Bells decide to throw their considerable weight--and capital--around (which is what the newspaper and cable industries fear), then the media jungle has got an interesting new animal.

At a time when even Apple Computer and IBM find it necessary to join forces, it would be downright weird for the Baby Bells to make a go of it on their own. There's no doubt that mergers, acquisitions, consortia and coalitions are in the air. The question is, for what?

To be sure, the Bells have shelled out big bucks for cellular phone companies and the like--extensions of their voice telephony business. However, when you listen to them talk, it's clear that the Bells have a much more multimedia vision of the future--a future where the phone lines carry video just as easily and cheaply as they now carry voice.

The court's ruling allowing Baby Bells into information services effectively allows them to own the images and information they pipe down their networks--much as they now own the profitable Yellow Pages and directory assistance information markets.

That could mean that PacTel and Nynex may have more in common with Sony and Matsushita than AT&T and MCI. Why? Sony and Matsushita believed that the future wasn't in more and better hardware--but in the intersection of hardware and software. So they paid huge (exorbitant?) sums of money to gobble up a slice of Hollywood and the record industry. Some of the Baby Bells believe that the future of telecommunications won't be in bigger and faster networks, but in the intersection of networks and their software.

Indeed, as futurists and technocrats never tire of mentioning, technology and market forces are making formerly disparate media converge. Compact discs that carry digitized music can also hold video and computer programs. Cable connections that carry video images can also carry conversations. Video monitors that play back videocassettes can also hook into on-line computer networks.

The point is that the telephone networks of the Baby Bells aren't confined to voice any more than the television networks are confined to sitcoms.

Michael Ovitz and the folks at Creative Artists Agency, which helped marry Matsushita and MCA, have got to be drooling at the opportunity of the seven Baby Bells in the market for new media programming.

As Nintendo systems, personal computers and provocative consumer electronics continue to proliferate, don't be surprised if a CAA or a William Morris eventually gets as much money creating a "computer network game" package from the Baby Bells as they now do for a television movie package from an HBO or an ABC.

But don't hold your breath. If the past is any precedent, the Baby Bells do a much better job of advertising a bold vision of the future than delivering one.

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