FCC to Lay Down Rules for New Video Revolution : Technology: Phone companies are expected to gain new access to home entertainment business by being permitted to buy into cable TV operations.

Movies offered via telephone line and the next generation of pocket-size phones and tiny, radio-equipped computers will get a big boost this week as federal regulators issue new rules intended to hurry these products into U.S. homes and businesses.

The Federal Communications Commission is expected today to give the nation’s phone companies new freedom to enter the home entertainment business--now the exclusive domain of network and cable TV operators--by allowing them to buy minority stakes in video programming businesses.

Phone companies say that if they are allowed to buy a big enough ownership stake in cable operations, it would provide the necessary financial incentive to bring advanced telecommunication networks to the doorsteps of the nation’s homes. It is uncertain, however, whether the new FCC rules will provide the kind of incentives the phone companies say they need to build those networks.

The commission is also expected to establish ground rules for the next generation of portable telephones, two-way paging devices and palm-top computers. Known collectively as “personal communications” systems, these devices would allow someone to make phone calls or transmit computer data by radio waves. Under the FCC’s current timetable, the devices could be widely available as early as late 1993.

The commission’s actions are intended to uncork technologies that regulators say have been bottled up by outdated government rules. But a more likely outcome is a further muddying of the political debate involving potentially huge money-making technologies and which businesses will be allowed to offer them.

A central issue is how big a slice of this emerging business--including dial-up home entertainment, electronic Yellow Pages and advanced portable phones--the phone companies will be allowed to provide. Part of that issue involves how much of that business will remain for giant media companies, such as cable TV programmers, newspapers and cellular telephone companies.

So far, that issue, which pits the nation’s largest communications companies against one another, has proven too thorny for federal regulators and lawmakers to resolve. That has produced a stalemate that has delayed development of the new technologies.

Recently, however, the nation’s phone companies have won some individual victories, including the expected FCC action this week allowing them limited ownership of cable TV programming.

“We are moving irresistibly toward the time that the phone will be at the center of the convergence of the video, computer and telecommunications technologies,” says William Davidson, a business professor at USC.

The nation’s phone companies have long contended that they cannot afford to build advanced telecommunications networks unless they are also allowed to use that network to generate additional revenue beyond traditional voice and data transmission. The phone companies have been eager to get into the home entertainment business.

But the phone companies have been thwarted by Congress, which in 1984 passed a law preventing them from owning cable companies. An FCC spokesman said that while changing that law would require congressional approval, the commission may allow phone companies to “own some portion or minor interest” in a video programming operation.

Although FCC officials won’t disclose the terms of their latest order until today, sources said the percentage ownership most likely to be approved is 5%. Phone company executives, though, have said that anything less than a 25% ownership stake would not be enough.

“I have said all along that I want to be an active participant in the cable TV business,” said Philip J. Quigley, president and chief executive of Pacific Bell, California’s largest phone company. “We’re not merely investors; we’re operators. . . . Giving us the opportunity to own 5% is a good step, but it’s by no means what we need.”

Cable TV operators, who have been fighting the phone companies’ efforts to enter the home movie business, say there is no evidence of consumer interest in dial-up entertainment over the phone.

They argue that if the phone companies are allowed into the business, consumers could end up footing the bill for a costly network that is not used. These services would allow customers to order video movies by phone at any time.

Several consumer groups, including the Consumer Federation of America, also oppose the entry of phone companies into the home entertainment business.

While the FCC is expected to give phone companies greater access to the cable business, it is also expected to give cable operators more access to the phone companies’ chief territory--voice and data transmission--on the next generation of wireless, portable phones.

The commission is expected to assign a block of radio frequencies for advanced portable communication services before the end of the year. The big winners under the FCC’s expected new guidelines are likely to be cable TV companies, because the proposal would bar current cellular phone operators from applying for the new licenses for portable communication devices in their own cellular territories.

Tele-Communications Inc., Time Warner Inc. and Cox Enterprises, which have all been running extensive experiments with new wireless communication technology, are considered to be among the companies likely to add portable phone service to their existing cable operations.

Unlike the current cellular phone networks, which cover broad areas of land and are designed to service those who are in transit, the new personal communication networks would cover far smaller territories, such as individual office buildings, sections of a college campus or a single block or two in a city’s downtown and would primarily serve people in a single location.

Future Technologies

The Federal Communications Commission today is expected to issue guidelines that would affect how quickly several new technologies are made available to consumers. The technologies include:

* Home Movies: Telephone companies would be allowed to invest in cable television companies, potentially speeding the day that home movies are available over phone lines.

* Hand-Held Phones: The next generation of these pocket-sized devices would be lighter and need less battery power and could pose substantial competition for cellular phones.

* Notebook Computers: Advanced machines could beam their data via radio waves, allowing truly portable computer communication.