Chesapeake & Potomac Telephone Co. yesterday began operating the first phase of a $20 million fiber-optic network designed to discourage large business customers from bypassing the local system, according to its parent, Bell Atlantic.
Fiber-optic cables, consisting of glass strands that transmit voice and data using light pulses, can carry more information more economically than copper wires. Thus, they give the phone company a way to hold on to large-volume business customers that might be tempted to construct their own communications networks, bypassing C&P.
"Fiber optics allows us to provide different kinds and better services," said Bell Atlantic spokesman Peter R. Hoffman. "We can provide voice and data transmission faster, and that's what business wants. We know our large customers want flexibility, and we know there are suppliers of equipment they can turn to."
Business customers are increasingly bypassing local phone companies to save money and avoid service delays, analysts say, and that is putting pressure on rates for residential customers.
C&P's fiber-optics network connects offices in the District, Hyattsville and Berwyn Heights, initially serving 8,000 business and residential customers, said C&P spokesman Web Chamberlin. By the end of 1985, the network will connect 30 C&P offices in Washington, Maryland and Northern Virginia, he said.
Other small fiber-optic loops in the Bell Atlantic region have been installed in Pittsburgh, Philadelphia and parts of New Jersey, and Bell Atlantic is considering other installations, Hoffman said.
The telephone company also will use the network for its own data and calling needs, Chamberlin said, and residential customers will benefit from the new technology. "There is a demand from our residential customers to improve the service that we have, to bring in new technology and permit residential customers to do things they haven't been able to do in the past," he said. The extra capacity also should prevent busy circuits during periods of heavy use, he said.
Chamberlin said the $20 million network would save $17 million in decreased maintenance costs over the next 20 years, and savings would be passed along to the rate base.
In turn, Chamberlin said, the cost of the system, initially capitalized by all the C&P Telephone Companies, would be "paid for by all classes of customers." As new technologies are used, however, business users would bear more of the expense in their rates, he said.
But some analysts have raised questions about who pays for the new fiber network. "C&P is trying to meet the potential demand of large users for data communication," said Michael Perlman, an analyst with Touche Ross & Co., a Washington consulting firm. "The ratepayers may have to front the technology they won't get any benefits from directly."
Other analysts argue that the network eventually will be completely paid for by business customers who use it. "If it's primarily beneficial to the business customers, it more than pays for itself and ends up, in essence, lowering the rates to the residential customers," said Brad Peery, an analyst with Hicks Peery Inc., a San Francisco investment banking firm specializing in telecommunications.
The installation of fiber-optics networks by Bell Atlantic and other regional telephone companies, some analysts say, could enable them to reenter the long-distance market in the future in competition with their former parent, American Telephone & Telegraph Co.
"You have all these separate fiber networks being installed," said Jerome Lucas, president of TeleStrategies Inc., a telecommunications consulting firm. "There is a market out there for interconnecting all these fiber-optics systems and getting new players in the long-distance market."