TELECOMMUNICATIONS : FCC Hangs Up on GTE Cable Venture : Cross-ownership: Agency rescinds the 1989 waiver the company received for an interactive experiment in Cerritos.

In a decision that further thickens the cloud of controversy over telephone and cable cross-ownership, federal regulators have ordered GTE to end its federally sanctioned experiment to offer state-of-the-art video services in Cerritos, Calif., with Apollo Cablevision.

After granting to GTE in 1989 a five-year waiver from federal rules barring a single company from providing cable and phone service in the same community, the Federal Communications Commission rescinded its decision this week.

The FCC cited a 1990 federal court’s determination that the agency had not adequately justified why it was necessary to let GTE contract with a construction company affiliated with Apollo to design and build the interactive system. The court at that time sent the case back to the FCC for further consideration.

The FCC decision could be the final straw for GTE’s ill-fated experiment in Cerritos, although exactly what will happen to the project remained unclear Wednesday. A GTE spokeswoman said the company was disappointed by the FCC ruling, which becomes effective March 9, and is mulling its legal options.

Under federal statutes and FCC rules, telephone companies are barred from providing video programming directly to households through an affiliate in their service area. FCC rules also generally prohibit any financial or business relationship between a telephone company and a cable operator other than for common carrier purposes, such as when a phone company provides transmission capacity only over its local lines to a cable operator. However, the FCC has the authority to waive the cross-ownership restrictions for “good cause.”

“Although this decision took a long time, it does put people on notice that waivers will need to be for good cause,” said Jerry Yanowitz, vice president of federal affairs for the California Cable Television Assn. There “will not be a wholesale waiver process,” he added.

But Richard Welch, an attorney in the FCC general counsel’s office, suggested that the impact of the agency’s decision is not that far-reaching. He noted that GTE’s was the only “good cause” waiver of cross-ownership rules ever issued by the FCC and that the agency’s about-face “only applies to the facts of this case.”

In Cerritos, GTE operated what was perhaps the most sophisticated cable system in the United States, allowing many subscribers to use their TV sets interactively for such things as shopping, educational instruction and video games. But the system has attracted relatively little interest, and the waiver authorizing the service was set to expire in July.

The rules governing cable TV and telephone cross-ownership have become engulfed in a legal quagmire as disparate technologies in the burgeoning $300-million telecommunications industry meld into homogenous electronic networks capable of handling voice, video, computer and data communications from under one roof.

The Cerritos ruling comes only months after U.S. District Judge T.W. Ellis III opened the door for Chesapeake & Potomac Telephone Co. of Virginia, a Bell Atlantic Corp. subsidiary, to provide several hundred channels of video programming in its Virginia telephone service area.

Bell Atlantic followed up its court victory, which is on appeal, by announcing that it plans to merge with cable giant Tele-Communications Inc. and offer video and telephone service in various locations throughout the United States.

In response to the growing number of cable-telephone ventures, Rep. Edward J. Markey (D-Mass.), who chairs the House subcommittee on telecommunications and finance, said this week that he plans to introduce legislation to address such combinations.