Walt Disney Merges Onto Video Highway

GIVEN the allure of interactive TV, it was perhaps just a matter of time before Mickey Mouse joined the corporate crew constructing the ``information superhighway.''

On Aug. 8, the Walt Disney Company and three regional telephone companies announced their intention to offer a broad vista of video programming - including movies, home shopping, educational programs, games, and travel assistance - to homes and businesses.

The proposed joint venture would ally Disney with Chicago-based Ameritech Corporation, BellSouth Corporation, and Southwestern Bell Corporation. It is the latest of several efforts by computer software, cable TV, and phone companies to link video programmers and the country's vast TV audience.

The initiative coincides with the advance of a bill in Congress that would intensify competition in communications and entertainment by allowing cable TV and phone companies to enter each other's businesses. ``Our work with Disney would be designed to make cruising the information superhighway as fun and easy for our customers as it is useful to them,'' says Richard Notebaert, chairman of Ameritech.

A video superhighway

But skeptics say it is fitting that cartoon characters have enlisted in the grand but sketchy effort to build a video, fiberoptic highway. ``I call it the `information superhypeway' because there is very little evidence to date that the new services that can be offered are mass-market services to the point where they really make significant amounts of money,'' says Stephen Effros, president of the Cable Telecommunications Association in Washington.

Interactive shopping and games have shown some promise and have helped beguile executives with the prospect that when broadly applied, interactive TV would offer boundless profits. But there is no evidence of a viable market and format for an array of interactive video programming, these skeptics say. ``Everyone is looking around for what they call the `killer ap,' or the `killer application,' and I don't think it exists,'' Mr. Effros says.

Executives acknowledge that the current picture for interactive TV, like the recently proposed initiative between Disney and the phone companies, is somewhat fuzzy. ``To say now what consumers will latch onto and value the most, I think is premature,'' says Tom Staggs, vice president for strategic planning at Disney.

Venture's potential snags

Disney, Ameritech, and the other ``Baby Bells'' say as they investigate a possible joint venture in coming months, that they will look at the programming, financial, logistical, and marketing quandries that provoke skeptics.

It is already clear that phone companies face logistical and financial challenges as impressive as their potential reach into the homes, schools, and businesses of the television audience.

The three telephone companies involved in the prospective joint venture serve 50 million customers in 19 states. Should they sign on with Disney, they would have to spend billions of dollars to upgrade their phone lines to the broadband format necessary for transmitting video. Nationwide, phone companies would have to spend from $200 billion to $500 billion installing the digital video dial tone networks that can carry video programming.

Earlier this year, Ameritech announced a $4.4 billion plan to bring video to 6 million of its customers by the end of the decade. The money represents an incremental increase in the company's practice of spending about $2 billion annually to upgrade its network, according to Mike Brand, an Ameritech spokesman.

As early as next month, Congress could enact a far-reaching bill revising a law that has governed the nation's communications for 60 years. On Aug. 11, the Senate Commerce Committee approved a bill that would allow cable TV and phone companies to go head-to-head in their traditionally exclusive business fields.

The bill also would allow the nation's seven regional phone companies to offer long-distance service. The House approved a similar bill in June.