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Three months ago, Bell Atlantic Corp. CEO Raymond Smith preached the interactive revolution to advertising agencies. Now, Bell Atlantic has endangered its position as a leader of that revolution.

In the latest blow to the image of two-way TV, the company last week pulled applications it had filed with the Federal Communications Commission for permission to offer video and interactive services to 3 million consumers in its East Coast service area. Bell Atlantic said it cancelled the two requests because it wanted to upgrade the technology it had committed to.

Bell Atlantic's two market trials, the high-profile Stargazer video-on-demand system in northern Virginia and the lower-tech Toms River, N.J., test, will start this year as planned, the company said, even though the technology for the video network's rollout will likely be very different.

Bell Atlantic's original plan was to wire its system with a mix of fiber-optic and coaxial cable. The company now will go to all fiber, allowing for more interactivity and better picture quality.

The barrier, Bell Atlantic admits, is that digital technology for fiber networks may not be available for a few more years. The Baby Bell must also go through the excruciatingly slow FCC approval process once again, and that could mean more delays.

Bell Atlantic executives were scrambling last week to portray their surprise decision in the best light.

"It's not another Time Warner," a Bell Atlantic Video Services spokesman insisted, referring to the technical difficulties and image problems that have plagued the Full Service Network trial in Orlando.

In a speech before the Advertising Women of New York in February, Mr. Smith told agencies to be prepared because interactive TV will be here much sooner than people expect.

"The leaders will establish themselves very fast," he said. "The rest will have trouble ever catching up."

Bell Atlantic, long perceived as one of those leaders, now must prove to agencies and marketers that interactive TV still has luster.

The company will bring 1,000 Stargazer households online by July, the spokesman said, ramping up to 10,000 to 20,000 by December. Media Co., the consortium of Bell Atlantic, Pacific Telesis Group, Nynex Corp. and Creative Artists Agency, will eventually take over the project and the rollout.

Marketers that will participate in the first phase of the Stargazer test include Lands' End, Nordstrom, J.C. Penney Co. and Nissan Motor Cars USA. Visa International is also known to have signed on. As of last week, none were known to have pulled out.

"The plans that we had talked to [advertisers] about .*.*. have not changed," said Celia Stokes, a director at Bell Atlantic Video Services responsible for advertising product development. "We will still have a very robust co-advertising program to span both 1995 and 1996."

Agency executives familiar with the test took the news in stride, noting Bell Atlantic is just one of several interactive TV trials.

"It was quite obvious that Bell Atlantic was strategically withdrawing its current applications [at the FCC] because the technology is going to change," said John R. Osborn, senior VP-associate media director at BBDO Worldwide, New York. "An advertiser [or] marketing partner would support that."

He added: "It's the consumer behavior and the marketing opportunities that are going to be the most valuable to me ....I don't think we have to trouble ourselves with hardware issues.'

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