Industry advances shake up regulatory environment; activity expands as more new technologies come on line.

Even the regulators are having a hard time figuring out what's happening in the telecommunications industry.

"It's tumultuous right now," said a staffer at the California Public Utilities Commission. "It's fascinating but it can also be very confusing. Every week something happens. I can certainly understand why the public can't follow it because we're having a hard time."

Joseph DeUlloa, counsel to PUC President Daniel Fessler, added, "The technological advances are pushing the industry forward faster than ever before. The picture is blurring, which makes our job as regulators more difficult.

"The line between market forces and regulation is becoming harder to define, and defining that line is where we come in."

From the point of view of those being regulated, however, it's the traditional refrain: Too much regulation.

"We believe their words belie their actions," said Steve Carlson, executive director of the Cellular Carriers Association of California. "They're thwarting the entrepreneurial zeal that has created what is happening in the industry and which has created all these opportunities."

For years, the state PUC and the Federal Communications Commission had a fairly cut and dried task when it came to telecommunications, which basically meant phone service. With one company running the nation's phone service -- American Telephone & Telegraph -- regulation meant setting rates and handling consumer complaints.

In 1982, the U.S. Department of Justice broke up AT&T and created the seven regional Bell carriers, confining AT&T to long-distance traffic. A couple years after the AT&T break-up, cellular and portable phones first made their appearance through an entirely different set of players.

In more recent years, new telecommunications companies have been formed on almost a weekly basis. Companies from other industries, like high tech, computer and entertainment, have moved into the telecommunications business as well. New technologies, such as fiber optic cables and wireless transmitters, to say nothing of a vast satellite system, are emerging constantly.

This explosion of communications, of course, has been dubbed the information superhighway, and regulators like the PUC and the FCC are the traffic cops.

In a 70-page study called "Enhancing California's Competitive Strength: A Strategy for Telecommunications Infrastructure," the PUC in 1993 listed as one of its primary goals open competition and fewer regulations.

"Eliminate, within the next three years, all remaining legal barriers to competition for telecommunications services in the state," the PUC said.

Ultimately, what the PUC wants to do, said commission staffers, is open up the telecommunications industry to every company that wants in and allow the business to be self-regulating. Under that scenario, in 10 years perhaps, the PUC would almost entirely be out of the telecommunications industry, except for handling consumer problems, staffers said.

Next month, the five-member board of commissioners is expected to take a very big step in that direction. At its Sept. 1 meeting, the board is expected to approve a measure that will tear down all existing barriers for new entrants into the intrastate phone business. Currently, Pacific Bell and GTE are the only two permitted operators of the service.

So far, almost 100 other companies have indicated an interest in operating phone service in California, according to a PUC spokeswoman.

Long distance, or interstate service, is regulated by the FCC. Restrictions on long-distance service have been steadily loosened, and that has opened the way for many new players. The three primary long-distance carriers are currently AT&T, MCI and Sprint.

After the state commission approves the proposal, which is expected, companies interested in getting into the California intrastate market will have to become certified as fit to provide such service by the PUC.

"I don't know if there are going to be 100 different providers, but they're certainly is going to be more than there are now," she said.

After the certification process, it could be two years before any of the new providers actually start service.

When it comes to cellular phone service, it's a different story.

The FCC, following federal legislation passed by Congress, has said that cellular phone service should go the way of long-distance service. In other words, regulation should be taken out of the jurisdiction of state agencies like the PUC and put in the hands of the FCC.

The California PUC disagreed and on Aug. 3 filed an appeal with the FCC to retain control over the cellular industry.

"The PUC is seeking to continue unnecessary regulatory engineering that does not benefit consumers," a statement by the cellular carriers association said following the decision.

The PUC said the cellular phone industry needs continued regulation. "We issued a decision that the industry is uncompetitive. The rates have not come down," said DeUlloa. "But with that said, I must add that it is our ultimate goal to see the market regulate itself and we expect that that will happen."

In Los Angeles County there are currently two basic providers that share the cellular market -- AirTouch Cellular and L.A. Cellular. A third provider, Nextel Communications, has also entered the market but its system is not yet operational.

Later this year the FCC, as part of its effort to open up the telecommunications industry, will auction off licenses for wireless telephone service. That auction could produce five or six new cellular providers in Los Angeles County in the next couple of years.

If and when the new entrants become established in the cellular market, the PUC would probably withdraw from rate-setting regulations and only address consumer complaints, said DeUlloa.

He noted that under its general philosophy to gradually relinquish all controls over the telecommunications industry, "It is a possibility that we will be out of the business in not too long a future."