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TW and TCI to create joint cable venture

Time Warner Inc. and Tele-Communications Inc. are teaming up to speed the delivery of their respective electronic superhighways.

The nation’s two largest cable operators announced on Thursday they were creating a joint venture to develop and install compatible hardware and software for two-way interactive cable systems.

The still-unnamed venture will work with industry suppliers to help design the new systems and will invest in new technologies as they are needed. Both companies are eager to promote an “open architecture,” where a large number of suppliers can be involved. Moreover, cable subscribers will benefit from a uniform system that offers similar services nationally.

“Both our companies are committed to transforming our cable systems into powerful networks that will deliver a broad array of services,” said TCI CEO John Malone in a statement. “As we do that, it is critical that these networks be compatible with each other so people across the country can use them to simply and conveniently access the services we offer.”

The two giant MSOs have already selected key providers to certain elements of their respective systems. So far, TCI has picked AT&T for a server in one video-on-demand test and General Instruments Corp. to make its set-top boxes. TW has selected AT&T as the supplier of its switches and Scientific-Atlanta Inc. for its boxes in Orlando, the first site for FSN. U S West has joined TW to provide telephone service and billing capabilities.

The joint venture’s timing is clearly tied to the National Cable TV Assn. conference in San Francisco next week. The confab will focus on cable technology since it will be held outside Silicon Valley.

“It’s a very positive message,” said Richard Green, CEO of Cable Labs, the industry’s research consortium. “The industry has to unite on interoperability. It’s very useful to have the two largest cable companies say they’ll do that.”

Software developed for one system, for example, will be able to run on another, making for a lower cost investment. An open system will also promote lower prices for equipment, said analysts.

If there are too many competing networks, adds Bob Wells, an industry consultant with Denver-based Lenox Group, “the real problem may be one of supply. The cable industry doesn’t want to freeze out any manufacturers, but to craft an open system that all can participate in. It makes sense for the industry’s one and two operators to close ranks to get the job done faster.”