Telly, Telecom Unite in U.K.

The sun may long since have set on the British empire, but in the United Kingdom, the future of telecommunications is dawning.

On this side of the Atlantic, legislators, lawyers and lobbyists are struggling to undo the Gordian knot of regulations constraining the development of the 21st-century telecom services. Meanwhile, consumers in the United Kingdom can already receive telephone, cable television and data services over the same network from the same provider.

Ironically, the carriers furnishing these services are not obscure British concerns. Rather, they are household names like TCI , NYNEX and Southwestern Bell -- American companies unable to offer similar services in their own backyards.

Besides cashing in on a lucrative opportunity, these companies are gaining valuable technological and marketing experience they can apply at home once the American market becomes as free as Britain's.

"When we went to the U.K. we hoped to learn more about packaging cable and telephone service and see what we could apply to the U.S.," said Steve Lang, a spokes-man for US West's multimedia group.

In 1984, the British government decided to end British Telecommunication's monopoly of telephone service in the United Kingdom.

To foster competition from traditional and non-traditional carriers, the right to provide voice and data services was extended to cable television operators.

It worked: In the past 10 years, the cost of telecommunications service has fallen an estimated 40 percent in the U.K.

One such venture is TeleWest, a joint venture between Baby Bell US West and TCI, the world's largest cable television company.

US West first entered the market in 1989 and in 1991 joined forces with TCI to form TeleWest, which is now the U.K.'s largest provider of combined telephone and cable television services, with 150,000 telephone access lines and 230,000 cable subscribers.

Another Baby Bell, NYNEX, entered the British market in 1990, and as NYNEX CableComms is now the kingdom's second largest cable communications operator, with 71,000 cable customers, and more than 53,000 telephone exchange lines.

These and other cable/telephone hybrids all share several distinct features. Although subscribers have the option of receiving only telephone or television service, a majority, between 70 and 80 percent, opt for both.

Consumers clearly prefer the convenience of dealing with one provider, said Ed Mattix, executive director with US West International in Great Britain. There is one less bill to pay, one less repair number to call and far more calling and viewing options available.

And bundling services -- in essence, letting the telly subsidize the telephone -- allow the cable/telcos to offer telephone rates 10 to 40 percent cheaper than British Telecom.

"We can offer very attractive pricing packages, and greater discounts," said Mattix. "Telephone service almost becomes free."

Indeed, some providers actually offer free local calls if subscribers take a premium channel.

British Telecom itself estimated its revenue losses to these upstarts could approach three-quarters of a billion dollars within five years.

"We sought market share by offering unbeatable cost, and our telephone package is 15 percent cheaper than BT," said Simon Bond, Nynex CableComms' spokesman in Britain.

Another important lesson learned by these Connecticut Yankees in King Arthur's Court is that consumers who receive telephone and television service from the same source are far less likely to cancel their cable -- known and feared in the business as "cable churn."

British pay television had traditionally been dominated by satellite providers, leaving the Crown significantly "undercabled."

As a result, these cable/telcos were forced to build their networks almost from scratch, and are all pouring billions of pounds into the construction of advanced digital fiberoptic networks capable of carrying interactive programming.

"We believe the U.K. will be the first place in the world to offer a wide range of video-on-demand," said Mattix.

The progressiveness of British regulators is such that these companies already possess licenses to offer interactive television, which they expect to introduce by the end of the millennium.

One should bear in mind, though, the U.K.'s position as a pioneering island of convergence has far more to do with politics than technology.

"The U.K. is looked on as a hothouse of leading-edge technological development, but the only thing different is the regulatory environment," said Bond. "This is very much the crude beginning; we are only just starting to explore convergence."

Be that as it may, their British experience has confirmed the need for American companies to aggressively pursue the emerging interactive marketplace.

And you can be sure the companies will export their marketing, programming and technical experience back home once the United States puts its regulatory house in order.

"Our experience here in the U.K. has led to our belief in this type of network and service," Mattix said. "Customers want them and will use them and it is the wave of the future."

U.K. also leader in pcs market

Britannia once claimed to rule the waves, and now it's poised to rule the airborne kind, too. The U.K.'s liberal regulatory atmosphere has allowed the island kingdom to get a jump on the rest of the world in deploying the next generation of wireless telephones.

As American companies plunk down million of dollars at FCC auctions for the right to one day offer personal communications services, Great Britain is already home to a budding PCS market, or as the British call it, PCN, or personal communication network.

Last September, US West International, together with joint-venture partner Cable &amp Wireless plc, unveiled the world's first commercial personal communication network. Known as Mercury One-2-One, the new service caught on quickly and attracted 100,000 new customers in the first nine months of this year alone, forcing the partners to speed up deployment plans, said Ed Mattix, executive director with US West International.

"Basically, it's a wireless voice service for the mass market that takes it past business users and other people on the high end of the economic spectrum," said Mattix.

Mercury One-2-One, he said, is as much as 40 percent cheaper than cellular service, more reliable by virtue of its digital technology, and offers free local calling in off-peak hours (7 p.m. to 7 a.m., plus weekends and holidays). Mercury will market wireless data services in the near future, he said, but already offers PCN users an electronic voice mail system to leave and retrieve messages.

"We will tailor it differently here," Mattix said of the U.S. "But experiences we've gained here will be invaluable as we begin to pursue PCS opportunities in the U.S."

--Jorgen Wouters