Fibertrak, a joint venture formed by two large railroads, is postponing construction of a $1 billion fiber-optic system because it has not gotten a sufficient customer base.
"I didn't get as many customers as I thought I would," said Gus Grant, president of Fibertrak, the Reston, Va.-based venture formed by Norfolk Southern Corp. and Santa Fe Southern Pacific Corp. "I'm short a fairly small amount."
Fibertrak had signed up seven long-distance customers that had committed themselves to 10-year contracts totaling $1 billion to use Fibertrak's system for voice, data and video transmission.
The joint venture, announced last September, was to install an 8,000-mile transcontinental fiber-optic system linking 53 cities and serving long-distance companies.
Fiber-optic technology, consisting of tiny strands of glass, greatly increases phone network efficiency by transmitting voice, data and video signals via pulses of light. The technology vastly increases the capacity for transmitting information.
Grant said he expected the joint venture to proceed with construction within a few months.
Long-distance companies, which would purchase wholesale fiber capacity to expand their networks and improve efficiency, have complained recently that some would go out of business in the face of intense competition and rising costs. The uncertainty in the marketplace has prevented some companies from signing long-term contracts to purchase fiber-optic capacity.
"The reason has been the hesitancy on the part of some long-distance competitors; they don't know what the market is going to be," a spokesman for Norfolk Southern said. "The day they sign the 10-year contract, they want to make sure they'll be around a while. The best way to characterize it is confusion and chaos."
A long-distance shakeout has already begun, with MCI Communications Corp. purchasing Satellite Business Systems, a business telecommunications provider, from International Business Machines Corp. Allnet Communications Services Inc., the Chicago-based fourth-largest long-distance company, has announced plans to merge with Lexitel Corp., a regional long-distance provider.
Analysts said competition among builders of fiber-optic networks also was intensifying and that Fibertrak had announced a system when others already had a head start.
"It was kind of a late announcement" against the backdrop of systems already being installed by MCI and American Telephone & Telegraph Co., said Mark Lutkowitz, senior analyst with Northern Business Information Inc., a New York consulting firm.
AT&T is rapidly installing fiber-optic cable and will have 18,000 miles in place, including overseas cable, by 1989. MCI is installing 7,000 miles of cable along railroad rights of way, Lutkowitz said.
But regional telephone companies that are banding together form formidable competition as well, said Jerome Lucas, president of TeleStrategies Inc., a Virginia telecommunications consulting firm. "You have National Telecommunications Network, a consortium of 12 regional fiber-optic networks mainly operated by long-distance company resellers" who already have rights of way for fiber, he said.
"It's tough for Fibertrak and other railroad-backed fiber systems because such a consortium brings a solid customer base as well as facilities to the business," he said.