Bell Atlantic Video-on-Demand Effort Begins Commercial Transition; Company Winds Up Market Trial

Bell Atlantic Video-on-Demand Effort Begins Commercial
Transition; Company Winds Up Market Trial

Service to Debut Commercially in Philadelphia in 1998

October 3, 1996

RESTON, Va. -- Bell Atlantic Video Services today
announced the start
of the commercial transition phase of its video-on-demand (VOD)
product development effort. The goal is commercial deployment of
interactive, on-demand video services in 1998 over the Bell Atlantic
switched broad band network that is being deployed in
Philadelphia.¹
The company also reported today on the second-stage results of its
pioneering VOD market trial, which is drawing to a close.

This latest phase in the VOD development effort will entail a return
to the lab from the field. The objective will be to enhance and
upgrade the VOD delivery and support systems used in the
Stargazer^TM
trial and make them ready for deployment over an optical
fiber-to-the-curb distribution architecture, also known as a
"switched
broad band network" and as a "full service network."

"BVS' video-on-demand market trial has resulted in a tremendous
number
of lessons learned and skills mastered -- many of which will carry
over to our commercial launches in Hampton Roads, Va., and
Philadelphia next year," said Stuart Johnson, chairman of Bell
Atlantic Video Services. "We have reached, however, the point
of
diminishing returns in terms of what we can learn from a VOD field
test using copper wires. Now we need to adapt our video-on-demand
service for roll out over glass fiber, and that can most efficiently
be done in a laboratory environment at our facility in Reston, Va."

Substantial portions of the service and system developed for the
Stargazer trial will be applicable to the glass fiber
configuration.
These include lessons learned on how to select, present and promote
programming in an on-demand environment; digital TV post-production
capabilities; video file server and associated business support
systems; and digital encoding capabilities. The Stargazer
market
trial system, however, is based on 1993-vintage technologies -- such
as set-tops and copper wires enhanced for video transmission -- that
have been surpassed by the fast pace of technological change.

Bell Atlantic's VOD development effort began in 1993 with a technical
field test of the Stargazer service by Bell Atlantic employees to
prove-in the concept of delivering video over telephone lines. In
this early, first-phase effort about 30 movies were digitally encoded
and stored on an IBM mini-computer. Three hundred employee households
were able to order movies -- on demand -- by placing a telephone call
to an interactive voice response unit and entering codes with a
touch-tone key pad. The movies were transmitted, at no charge, to
employee homes over telephone lines equipped with asymmetrical digital
subscriber line technology (ADSL). ADSL technology entails the use
of
super-charged modems to shoot video over standard copper telephone
wires. By using ADSL Bell Atlantic was able to begin developing a
mass market video-on-demand service several years earlier than if it
had waited on the deployment of the fiber optic transmission systems
that will be the basis for widespread commercial deployment.

The second phase of the development effort began publicly in May 1995
with the start of the Stargazer market trial, again using
ADSL-equipped copper telephone lines. The market trial, which has
been conducted under field conditions with real customers, was
preceded by more than a year of work in-house at Bell Atlantic Network
Services and Bell Atlantic Video Services laboratories.² This
laboratory work involved a massive systems integration effort and more
than 200 technicians, engineers, producers and artists. The result of
this work was a commercial-scale, interactive video delivery
system.³ This end-to-end system is the
basis for Bell Atlantic's
current market trial of a robust video-on-demand service.

As the VOD development effort now shifts its focus to preparing for
commercial roll out in Philadelphia over a switched broad band
network, work will return again in-house to Bell Atlantic Network and
Bell Atlantic Video Services labs. TELE-TV also will be involved in
the preparation for Bell Atlantic's commercial roll out, just as it
has supported the company's VOD market trial. TELE-TV is a video
programming and technology company equally owned by Bell Atlantic,
NYNEX and Pacific Telesis.

Stargazer Lessons Applicable to Hampton Roads and
Philadelphia

"The Stargazer video-on-demand trial has been a tremendous
success,
whether measured by our customers or our own internal goals," said
Stu
Johnson. "It has allowed Bell Atlantic and its partners to develop
core competencies in several areas of the video entertainment
business." These areas include the selection, scheduling and
presentation of programming, production of a monthly program guide,
digital TV post production, database marketing, content management,
customer service and digital encoding.

Much of this experience is applicable to the digital TV service Bell
Atlantic will introduce first in Hampton Roads, Va., next spring over
wireless technology and later next year in Philadelphia, over the full
service network. The lessons Bell Atlantic has learned also bode well,
of course, for the introduction of interactive, on-demand offerings in
1998 in Philadelphia.

Nearly 1,000 households in Fairfax County, Va., have been
participating as paying customers in the market trial, which began May
24, 1995. Stargazer customers have been able to order from a
list of
about 700 program choices each month, with each title available
whenever they desire. They order their choices by "surfing" or
navigating through on-screen presentations and then clicking on icons,
using a hand-held remote control device. Alternatively, the
Stargazer
service includes a monthly magazine; viewers can leaf through the
magazine and go directly to their program of choice. Each program
begins several seconds after being ordered. Viewers can use their
remote control to pause, rewind and fast forward the video.

Promotion And Programming Changes Increase Stargazer Buy
Rates
By 35-40 Percent

Promotions, changes in programming and navigation and even the
implementation of a monthly subscription fee during the second stage
of the Stargazer market trial have helped increase usage of the
service. Monthly buy rates in August and September 1996, for
instance, were 35 to 40 percent higher than the buy rates for the same
months in 1995, which were unaided by promotion. Overall,
participating subscribers in the Stargazer VOD trial averaged
3.6
videos purchased per month from January through September 1996. ⁴

Not surprisingly, new movies again proved to be the most popular
content overall, yielding 57 percent of total purchases. Viewers,
however, demonstrated a consistent interest in children's and special
interest programming as well as TV series and specials.

The Stargazer market trial will officially close on October 31,
1996,
when the last customers are disconnected and the effort moves back
into the laboratory in Reston.

Bell Atlantic Corporation (NYSE: BEL) is at the forefront of the new
communications, entertainment and information industry. In the
mid-Atlantic region, the company is the premier provider of local
telecommunications and advanced services. Globally, it is one of the
largest investors in the high-growth wireless communication
marketplace. Bell Atlantic also owns a substantial interest in
Telecom Corporation of New Zealand and is actively developing
high-growth national and international business opportunities in all
phases of the industry.

####

1. "Bell Atlantic To Begin
   Full Service Network Deployment In
   Southeastern Pennsylvania In '96," Bell Atlantic News
   Release, July
   15, 1996

2. "Bell
   Atlantic Is Building World's First Full Scale Facility To
   Produce And Deliver Entertainment And Information On Demand,"
   Bell
   Atlantic News Release, March 30, 1994

3. "Bell Atlantic, Video Programming and
   Navigators," Bell Atlantic
   Backgrounder, February 9, 1995

4. Compare to: "Bell Atlantic's Market
   Trial Shows Video-On-Demand
   Capable Of Becoming Key Revenue Generator With Buy Rates 12 Times
   That Of Pay-Per-View," Bell Atlantic News Release, March 19,
   1996