Cold shoulder in California Will Tele-TV dissolution leave PacTel shivering? >BY SHIRA LEVINE, New Media Editor

While the mouths of Tele-TV's three telco partners remain shut, the prevailing rumor has it that a scaled-down version of the organization will simply be folded into the Bell Atlantic/Nynex merger. Tele-TV Systems is already located in the same building as Bell Atlantic Video Services in Reston, Va., and the recent departure of Tele-TV Media President Sandy Grushow reduces the likelihood that the venture will keep its Los Angeles office open.

With its multichannel multipoint distribution service (MMDS) plans essentially canceled, and its wireline switched digital video networks not expected to be completed until mid-1998, Bell Atlantic and Nynex have no immediate need for Tele-TV. Of the 3 million digital wireless cable set-top boxes ordered from Thomson Consumer Electronics in 1995, only 250,000 have actually been delivered, with Tele-TV paying a substantial penalty for canceling the rest of the order, a source close to Tele-TV said.

But Pacific Telesis, which is using the remaining Thomson boxes in its digital MMDS network in Southern California, continues to cling to shreds of Tele-TV.

Analysts say that Pacific Telesis' continuing commitment to MMDS has created a fair amount of strife as Tele-TV's partners try to redefine the venture.

"PacTel was hoping to put off any announcement of Tele-TV's demise until after it was able to launch service, but that wasn't meant to be," said John Aronsohn, senior analyst at The Yankee Group, Boston.

Bell Atlantic and Nynex have balked at keeping the venture running for Pacific Telesis' sake, the Tele-TV source said, adding that the venture is just sitting and waiting for the telcos to decide what to do.

"Bell Atlantic and Nynex are responsible for two-thirds of the cost of the venture," the source said. "What's the sense of having high-priced entertainment talent like Sandy Grushow and Howard Stringer sit there if they're not going to get into the market right away? They're happy to fold the tent on it.

Perhaps in anticipation of Tele-TV closing up shop, the Pacific Telesis MMDS service will be called Bell Digital TV, not Tele-TV.

"It's pretty obvious to me that they intend to separate themselves completely from the organization in a matter of months," Aronsohn said.

But launching service without the support of Tele-TV will make Pacific Telesis' job much harder, particularly when it comes to its budget. While terms of Tele-TV's contract with Thomson set the per-box price at less than $400, that price depended on volume shipments, Aronsohn said. With the original order so dramatically slashed, the cost for each box is likely much higher, he said.

He predicted that Pacific Telesis will do a limited rollout of MMDS this spring and will then shut the door on video services. The telco is delivering analog video services to some households in San Jose, but it has put most of its wireline plans on hold elsewhere and has said it will continue to move slowly on its video plans.