Crossed Wires

THE WIRE WAR IS HEATING UP. AS THE PACE OF DEregulation quickens and emerging new technologies blur the boundaries separating their markets, the telephone and cable-television industries are set on a collision course. The confrontation moved another step closer when Southwestern Bell, based in St. Louis, Missouri, agreed to acquire two cable-TV systems in the Washington, D.C., area from Hauser Communications for $650 million. If approved, the deal will mark the first time any of the seven so-called Baby Bells owns a cable-TV franchise. Until now, the former Bell System companies have only formed joint ventures with cable operators.

The Southwestern Bell-Hauser transaction left the cable-TV industry abuzz with apprehension about buyouts and drive-outs by bigger rivals. Many analysts think this deal could touch off a new round of investments in cable franchises by phone companies. Though nervous, cable firms face no immediate danger; federal law still prohibits phone companies from owning cable systems in their home market. The Southwestern deal, however, could set the stage for a Baby Bell in one region to raid a sibling's home market. If so, it would be an unprecedented family feud.