AT&T; Enters Race to Offer Interactive TV : Media: The giant telecommunications company plans an ambitious nationwide test with Viacom and Bell South.

American Telephone & Telegraph is adding its considerable weight to the already crowded fight for a piece of the emerging market for viewer-controlled television and communication services.

According to AT&T; sources, the nation’s largest telecommunications company will team up with Viacom International, a cable television concern, and Bell South, one of the nation’s seven regional phone companies, in an ambitious nationwide test of AT&T;’s still-experimental interactive TV technology.

The test, involving several thousand households and set to begin next year, represents AT&T;’s most ambitious move yet into an arena that has taken on increased importance as both cable TV and telephone companies move to offer consumers vast quantities of new information and entertainment services through television.

Viacom, a New York-based concern that owns MTV, Nickelodeon and several cable systems, declined to comment. So did Bell South, which is based in Atlanta. But it’s expected that customers of both companies will be involved in the experiment, which AT&T; is expected to announce next month.

Though reliable estimates of its potential size are scarce, the market for dial-up, viewer-controlled video entertainment and information is expected by many to be the brightest--and most hotly pursued--new business opportunity of the decade.

AT&T; researchers say their system was developed to work on both cable television networks, which are built with a combination of coaxial and fiber cables, and their rival for the emerging new video communications market, the Baby Bell telephone network, which relies on fiber and copper wires to deliver signals.

The versatility of the AT&T; technology, the company noted, would let AT&T; participate regardless of which side wins the fight to be the preferred supplier of the new communications.

While several big-name companies are already developing products, AT&T;’s move will bring the biggest-name yet to the market and, analysts say, makes it likelier that this technology will reach mass deployment more quickly.

“AT&T; is the fastest-moving thing on the block now,” says Sharon Armbrust, an analyst at Paul Kagan Associates, a Carmel, Calif.-based media research firm. “They’re throwing money and muscle behind all the coming technology.”

Under wraps at its Bell Laboratories in New Jersey until this week, AT&T;’s new technology turns an ordinary television set into a computer-like device that searches video databases for movies and TV shows, completes shop-at-home transactions and sends voice, data and video mail messages.

Using a specially made remote control device that directs an arrow-shaped pointer on the TV screen, viewers can simply point to what they want and click to see or hear it.

It’s like a cross between a standard remote control and a personal-computer mouse.

Early versions of the system, which made its public debut Monday when Vice President Al Gore toured Bell Labs, allow users to select movies from a video library, gather information for a potential car purchase, place a video phone call and receive voice, video and electronic mail messages.

Unlike work already underway by earlier entrants into the field, including General Instruments, Microsoft, Intel and Silicon Graphics, AT&T; says its system provides everything needed to create a complete interactive TV system: the hardware, in the form of a box sitting atop the TV; the software, in the form of easy-to-read on-screen directions, and a telephone connection, in the form of AT&T;’s long-distance network.

“As far as we know, we’re the only guys who can do it all,” one Bell Labs researcher said.

An AT&T; spokesman said the company views video communications and global expansion of its network as the two largest business opportunities facing it in the coming years.