TCI owns half of Telewest, an unquoted UK company that has interests in cable franchises covering about 3 million homes. The other partner in the venture is US West, which, like Bell Atlantic, is one of America's 'Baby Bells', the regional telephone operating companies.
Telewest's franchise areas include south London, Bristol and Edinburgh. It has been among the leaders in expanding into local telephone services from simply providing television. Telewest now accounts for 70 to 80 per cent of telephone lines operated by cable companies in Britain.
According to the Cable Television Association, there are more than 225,000 cable telephone customers in Britain and 20,000 are being added every month.
Niall Hickey, spokesman for the CTA, said: 'The UK has been a testing ground for cable and telephone joint ventures. The operators have proved it can work.' The US companies regard the UK as having the 'information superhighway' of television and telephony, which in America is still a dream.
Kleinwort Benson, the merchant bank, argues that the combination of revenues from both services has turned the economics of the cable sector from 'marginal' to 'outstanding'. Annual revenues from the telephony side of the business are predicted to be up to pounds 1.6bn by the end of the decade.
BT, acknowledging the threat from cable companies, is trying to treat them as partners, offering more favourable terms for linking the companies into the national network.
Cable companies market aggressively, offering to undercut BT prices by around 15 per cent. Increasingly, they are installing their own exchanges rather than relying on BT and Mercury to switch calls. This allows local calls in some cases to bypass the BT or Mercury networks, enabling cable firms to provide cheap or even free off-peak calls.
While BT sometimes asks for deposits of as much as pounds 400 for residential customers, cable operators require little or no connection charge.
Ed Mattix, executive director of US West International, said that the combination of the television and telephone services was affordable and irresistible to many customers. 'It is a powerful marketing tool,' he said.
Industry analysts believe that there will be further rationalisation and acquisitions in the UK cable sector shortly and that buying into franchises will become more expensive.
Bell Atlantic is also acquiring substantial programming interests in Britain through the TCI deal. TCI owns United Artists Programming, which provides about half a dozen cable and satellite channels. These include Bravo, the old movie channel; Discovery, which specialises in documentaries; the Learning Channel and the Parliamentary Channel.Reuse content