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Highway Holdup: TCI Delays Purchase of Converter Boxes

January 21, 1994

NEW YORK (AP) _ Cable TV leader Tele-Communications Inc. will delay for a year the purchase of 1 million set-top boxes that turn a television into a two-way communications device.

TCI, the nation’s biggest cable company, said the delay isn’t significant in its development of more powerful communications networks.

However, it illustrates the technical difficulties in developing even the simplest of advanced communication products, video on demand.

Set-top boxes are changing from simply handling a bunch of cable channels to understanding the digital language of computers and processing programs, data services and phone calls. In time, the advanced features in such a box will be incorporated into TVs themselves.

TCI last year announced plans to buy a new generation of boxes this year from General Instrument Corp. and Scientific-Atlanta Inc. But the companies have had to delay production because a technical standard for squeezing information to fit through a cable or telephone wire has been slower to develop than expected.

TCI will still buy the boxes but not until the end of the year.

″Our order remains firm,″ said Robert Thomson, a senior vice president for TCI. ″But there’s obviously an important premium for us and our customers that whatever boxes we deploy are compatible with this international standard.″

News of the delay, reported first by The Wall Street Journal, pushed down the stock prices of all three companies.

On the New York Stock Exchange, General Instrument was down $2.50 to $57.35 and Scientific Atlanta was down $2 at $33. TCI shares fell 75 cents to $27.62 1/2 on the Nasdaq stock market.

Late in the day, General Instrument issued a statement saying it and TCI had operated under the delayed schedule for several months and had informed Wall Street analysts and shareholders.

Nonetheless, the company and others have made many public statements in recent months about the role they will play in the ballyhooed but ill-defined ″information highway.″

″You create this huge froth of excitement about these new services and to do it too early is potentially detrimental,″ said Steven Dimmitt, director of corporate planning for Southwestern Bell Corp., a regional telephone company that is also developing new communications technologies.

″For the last year, we have been assuming this technology really isn’t going to be available until mid- to late-1995,″ he said of the set-top box advance.

Mark Stahlman, president of New Media Associates, a New York research firm, expects delays from other companies as well.

″I think there are lots of factors going into this, but clearly this technology isn’t ready for prime time and many questions are being raised about advanced services,″ he said.

The situation will ″lead to press release after press release delaying, postponing or rolling back the commitments that have been made over the last six to nine months.″

In recent weeks, many announcements of joint ventures by technology companies have failed to carry a date when a product or service will be ready.

The new standard involved in the set-top box is being hammered out by the Moving Picture Experts Group, an international body that must consider different TV and computer designs. It reached a major agreement in November that allowed makers to proceed with some work.

Time Warner Cable, which plans to offer video on demand and two-way shopping and games in a test in Orlando, Fla., in April, doesn’t believe its effort will be delayed, spokeswoman Tammy Lindsay said.

Scientific Atlanta is building the set-top box for that test, which is to involve 4,000 homes by the end of the year.

″We’re working very hard to make their deadline,″ said Bill Brobst, a spokesman for Scientific Atlanta. ″That’s a project with a very short deadline.″

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