Communications: A Giant Tug-of-Wire

Randy and Betty Hyatt may not realize it, but their two-story ranch house in Cerritos, Calif., is a high-tech battleground. The Hyatts, along with 58,000 other residents of this affluent Los Angeles bedroom community, are testing a futuristic cable-television service that is years ahead of conventional systems. Linked by 2,500 miles of hair-thin optical fiber, the network not only offers 78 channels of TV but also lets subscribers browse through the Sears catalog, check their bank accounts and select from a large menu a movie of their choice anytime they want. Perhaps most surprising is the builder of the sophisticated TV system: the local telephone company, GTE. Says Betty: "I thought the only thing phone and cable companies had in common was that they both dig up the streets."

Historically, the two were as different as sight and sound. Phone calls reached the home over one kind of line, while cable-television signals traveled along a different kind. Their markets were separated by a thick wall of government restrictions, so competition between the two public utilities was almost impossible. But that has been changing dramatically owing to the rapid pace of deregulation and emerging new technologies. Among the most important developments:

-- Recent decisions by the courts and the Federal Communications Commission have given telephone companies -- like GTE, Pacific Bell and U.S. West -- limited entry into such businesses as information services and television.

-- The FCC, prodded by its chairman, Alfred Sikes, has proposed a more sweeping set of rules -- which it may enact later this year -- allowing phone companies to provide a "video dial tone" that would allow people in effect to attach their television sets to their phone lines and call up shows they want to watch.

-- At the same time, cable operators, such as Cox Cable, Comcast and Continental Cablevision, have received permission from the FCC to develop a new "wireless" telephone service.

-- The development of compressed fiber-optic wiring will give cable companies the potential to supply hundreds of programming channels in the home as well as interactive communications, movies and musical releases on demand, and digital information services.

With the fading of the technological differences and regulatory barriers that keep them apart, cable-TV and phone systems are trying to position themselves -- legally and financially -- to provide the expensive fiber-optic networks that can handle communications, entertainment and digital information of the 21st century. Some Bush Administration officials and other proponents of deregulation hope the result will be competing pipelines that can carry voice, video and digital information into homes, so that consumers will have more choices. More likely -- and probably more economically efficient -- only one company will end up providing the fiber-optic pipeline in each local market. Says Clifford Bean, a telecommunications expert at the consulting firm Arthur D. Little: "The cable industry and the telephone industry are headed toward each other like two steaming locomotives."