Telephone sex lines face a less than fetching future: increased regulation, waning interest signal the end is near.

The racy, some say pornographic, ads for phone sex that appear on the back pages of some newspapers and magazines long have provoked debates over pornography and censorship, and a few court cases challenging their legality. But the arguments soon may be moot -- it looks like the phone-porn industry is becoming a shrinking violet.

According to most industry projections, teleporn probably reached its peak last year when it captured 3.2 percent of the pay-per-call, or "900," telephone market. This year the business is expected to decline to about 2 percent of the overall market, then 1.3 percent in 1992 and less than 1 percent the following year.

Last year, consumers in the United States paid out $1.6 billion for 900-line telephone services, half of which went to operators of sports lines. Other operators, in order of use, include talk/social, news/information, business and then adult-oriented entertainment.

Operators of the phone services claim the primary reason the business is shrinking is there are more restrictions on the content of the ads and the phone messages and, as a result, fewer people are calling. When the pay-per-call business took off about six years ago, and the ads began showing up in newspapers and magazines, there were few if any restrictions on content, the operators said.

The print ads' content also has provoked a heated debate among publishing companies and publishers on whether their newspapers or magazines should carry such advertising, or whether such promotions turn off more potential readers and advertisers than they turn on.

In Los Angeles County, there are several newspapers that carry ads containing 900 area code or 976 prefix telephone numbers for sexual messages.

One paper that doesn't carry such ads is the Easy Reader, a weekly publication that covers the South Bay area. Jim Cohen, the advertising director of Easy Reader, said operators of sex lines using 900 or 976 telephone numbers ask to advertise in the paper on almost a daily basis. He said the paper turns down between $5,000 and $10,000 worth of the phone sex ads a week.

"There are two basic reasons we don't accept them. One is that we are a community newspaper (circulation of about 60,000) and too many of our readers would be offended. The other is advertising; too many of our advertisers would be offended and would not want to be associated with a paper that runs ads like that," said Cohen.

"We lose some ads but if we ran them we would probably lose a lot more," he said. But Cohen noted that the Easy Reader does carry classified ads for singles that use 900 area code numbers.

The difference between 800- and 900-area code numbers is that calls to an 800-code number are toll-free while with 900-code numbers, the person that makes the call is billed. Sex services that begin with the 976 prefix are local calls billed back to the person making the call.

Terry Cassel, advertising manager at the Village View, said the newspaper is constantly reviewing its decision of a year ago to carry the phone sex ads.

"One of the primary reasons we started accepting them is that we required immediate payment. It's been hard to turn down the cash but there has been a lot of negative feedback from readers and we are always reviewing whether to continue to accept them," said Cassel.

He said between 6 percent and 8 percent of the weekly newspaper, which circulates in West Los Angeles and covers arts and entertainment, is devoted to sex ads that carry 900 telephone numbers. He said some advertisers have stopped running ads in the paper since it began running the sexually oriented telephone services.

Cassel noted that the novelty of the ads has worn off and the paper has started to impose its own restrictions, like only people's faces can be shown and starting in January, no photographs will be allowed at all. "We will only allow copy," he said, "which is quite different than what was allowed originally. They were pretty explicit."

Village View, he said, typically carries about two full pages of sexually oriented ads that include 900-code or 976-prefix telephone numbers.

When the 900-code sex services began there were virtually no restrictions on advertising or content of the ads, said Jim Kaplan, an account executive with Integrated Data Concepts in Los Angeles, a company that produces and operates 900-code services.

Now, advertising must carry certain disclosure statements like the cost and who pays for the phone call. In addition, telephone carriers like AT&T and MCI can now review the contents of the telephone services and refuse to provide the service.

Ads for 900-code telephone services that used to include mentions of certain body parts are no longer permitted. "You can't have titillating information in them," he said.

Kaplan said the restrictions have forced many sex-service operators to get out of the business.

"The future of 900 services is with information services, not sex services. Operators that provide information about business or sports or help lines or charities are the future," he said.