Risk, Payoffs on the Line
BIG changes are looming on the communications front. Those beginning to feel irked at having so many different means of staying in touch - telephone, computer, fax - can look forward to the day when one device does it all, cheaply.
The development of the personal communication system, or PCS, will not happen overnight, however. The communications environment is a mixed bag of analog and digital technologies. Communication will be more efficient when everything goes digital, but building the digital infrastructure will take time and money.
So much money, in fact, that the companies involved will need deep pockets to endure several years of losses. By one estimate, it will cost the industry roughly $100 billion to build and operate four national PCS networks in their first five years in business. The stakes are huge. Analysts say that as few as two of these networks may ultimately survive fierce competition. But the winners will be running businesses many times the size of today's celluar-telephone networks and, eventually, become strong rivals to the traditional phone system.
A Federal Communications Commission deadline for companies who intend to bid on PCS licenses to disclose their partners passed last week. It caused frenzied dealmaking, ending in Sprint Corporation's announced deal with three cable TV companies.
Some of these partnerships make sense. Cable TV operators, used to sending images over cables, are teaming up with telephone companies, who have experience in switching, for instance. This is obviously important to video on demand. But others of the partnerships seem driven by fear of losing an opportunity in an emerging new business.
This is a moment of great risk for businesses, but one that promises a big payoff for consumers - and businesses - eventually.