The heat rises in nation's hottest cable, TV market; new players merge onto information superhighway.

Los Angeles -- the most competitive TV and cable market in the country -- is on the threshold of much hotter competition with the expected arrival of new microwave and mini-satellite dish systems and a 500-channel information and entertainment superhighway owned by telephone companies.

The highly charged competitive atmosphere between the phone and cable industries is sparked by lawsuits, expensive public relations programs, duels before regulating agencies and high-powered lobbying campaigns.

When the dust settles and either the cable conglomerates or their telephone company rivals emerge with the larger share of the extremely lucrative telecommunications pie, the victors may well eat the vanquished.

Currently, half of all L.A. County households have cable. The firms that serve L.A. County through district monopolies are now upgrading their systems by adding significant amounts of fiber-optic cable, which will both improve picture quality and offer a vastly larger selection of channels.

Pacific Bell and GTE, which serve the Southland, have announced plans to provide new video services and multimedia networks in the near future. Both have filed applications with the Federal Communications Commission and are awaiting approval.

Steve Harris, external affairs vice president at Pacific Bell, said: "In light of the recent re-regulation of cable and a couple pieces of federal legislation pending, it is unclear what the evolving industry structure will be."

Alan Gardner, vice president of regulatory and legal affairs for the California Cable Television Association, an industry trade association headquartered in Oakland and Sacramento, said the CCTA has filed a suit in U.S. District Court in San Jose that "seeks to block Pac Bell's attempt to have open entry into cable in California while still maintaining a partial monopoly in telephone service."

In several states, phone companies have gone to court to fight for the right to provide video services. Two such suits (in Virginia and Washington state) have been decided in favor of phone companies -- which are therefore now gearing up to provide cable -- and Pac Bell is confidently pursuing a similar case in California.

Pac Bell and GTE are waiting for FCC permission to provide "video dialtone" by building a new broad-band fiber-optic cable network. They are already in discussions with programmers who will buy transport services from the phone firm and then create, package and/or sell programs to customers.

If approval comes in the early fall, as expected, Pac Bell's system -- consisting of 70 analog channels and 150-300 digital channels -- will be available to customers in the San Fernando Valley and the Inglewood-South Central areas in the spring (as well as in Orange County and Silicon Valley).

Pac Bell's Harris said: "This will give customers a choice; there will be multiple systems available and various packages to choose from. We hope to offer a higher quality visual image and more reliable service that won't go down as much."

Customers will also be able to buy new kinds of digital services not currently available, the most imminent of which is Video on Demand. Other digital interactive services will follow in the years ahead, including home shopping, game channels, video telephony (picture phone), computer software, High Definition Television and applications that haven't been developed yet. To compete with cable, Pac Bell and GTE will have to price their services attractively.

After decades of stasis, the L.A. County market is seeing a rapid increase in competition. DirecTV (a direct broadcast satellite system from G.M. Hughes Electronics) will be launching service in late September or early October. Cross Country Wireless Cable (a microwave system) will begin delivering service in 1995 to any customer who has a dish with a line of sight to the transmitter atop Mount Washington.

Local cable firms are not standing around watching the newcomers encroach on their turf. In addition to participating in the lobbying, judicial and PR campaigns, they are upgrading their systems, adding high-tech fiber-optic cable and planning to offer more channels and services.

Continental Cablevision is bringing its system, plant and electronics capability up to 750 megahertz (from 400-550) and plans to activate 77 analog video channels within the next year.

"Because we are upgrading, federal regulations would allow our prices to be substantially higher, but strong competitive pressures will keep them down," said John F. Gibbs, vice president for corporate and legal affairs at Continental Cablevision's western division headquarters in El Segundo. "We are anticipating an explosion of television options, including High Definition Television, which should be available in this country mid- to late-decade. Our current upgrade assures that we will be ready to deliver all of the new services as they arrive."

CCTA's Gardner estimates that, statewide, cable can upgrade its existing networks for about $2 billion, whereas Pac Bell faces an initial investment of $16 million for 31 California cities and may spend as much as $40 billion to serve the entire state.

Susan Herman, general manager of the City of Los Angeles Department of Communications, observed: "Phone companies are operating on a model different from cable TV, and there isn't the level playing field consumers might expect.

Cable firms have to pay a franchise fee for using public assets but phone companies are not currently obligated to." That is something Herman's department is examining.

She said she is also concerned that telcos are not required to carry local access programming and are not yet held to the customer service and technical performance standards cable is.

Tom Bracken, director of communications for El Segundo-based DirecTV, said: "We are coming to L.A. this fall with 150 channels of entertainment programming (including 30-40 sports channels allowing access to nearly any game) for anyone who purchase a $700- to $900-dish."

"Cable operators are not happy with us, because we are their first major form of competition but the intent of Congress was to create competition in the marketplace, so consumers would get better service either from us or their cable systems," he added.