No. 1 Cable Operator Will Switch to Digital : Technology: The new compressed signal system will make possible a huge increase in the number of available channels and pave the way for a variety of advanced TV services.

SAN FRANCISCO —  Ushering in a new era in home television viewing, the nation’s largest cable TV operator said Wednesday that it will soon deploy a revolutionary technology capable of providing more than 500 TV channels to its subscribers.

The announcement by Tele-Communications Inc., which serves more then 9 million homes nationwide, is the first major step in what is expected to be a worldwide shift to digital video technology.

By converting video images into the ones and zeros of computer code and then compressing them, digital video makes possible a massive increase in the number of available channels. It also paves the way for a variety of advanced TV services such as “interactive” TV and high-definition television.

TCI said it will roll out digital service to 1 million subscribers beginning in January, 1994, but added that it has not yet determined which cities will receive the service first. However, the San Fernando Valley and San Francisco Bay Area are said to be likely candidates.

Initially, customers will have access to 50 to 70 channels offering 20 to 30 pay-per-view movies, a variety of college sports events and cable services not already available on their systems.

The digital services will be in addition to the 54 regular channels available on most TCI cable systems. Because 10 digital channels require only one standard cable channel, TCI will be able to offer more than 500 channels if there is enough demand. Future offerings will include “interactive” programs such as home shopping, participatory games and educational programs that allow students to talk back to the TV.

“Our ultimate goal is to give control of the TV service back to the customer, to allow people to build their own customized TV services,” said Bob Thomson, TCI’s vice president of engineering. The company expects its movie offerings to be price-competitive with video stores, thus posing a major threat to that business.

The combination of digital video and cable will also make life more difficult for several fledgling satellite TV ventures, including Hughes Communications’ Direct TV, which aims to beam hundreds of movie channels directly to pizza-sized home satellite dishes.

And digital video promises to have an impact far beyond consumers’ living rooms. The explosion of channels will create a vast new market for innovative programming, thus providing a potential boost for Hollywood and independent video producers.

The U.S. electronics industry--especially AT&T; and General Instruments, which won the contract to supply gear to TCI--should also be a major winner in the transition to digital video.

Over the last several years, U.S. companies have established themselves as the clear world leaders in the technology, gaining an edge over the big Japanese electronics vendors.

Under their preliminary agreement with TCI, AT&T; and General Instruments will provide 1 million digital converter boxes as well as the cable transmission and satellite equipment needed to carry the signals. Although the value of the contract was not disclosed, Jerry Heller, vice president of General Instruments, said the converters would cost about $200 each.

As part of the agreement, AT&T; and General Instruments are required to license their technology to other manufacturers such as Scientific Atlanta and Zenith, their major competitors in the cable TV equipment business. Though that could mean less revenue for AT&T; and General Instruments in the short run, it should improve the chances of their system being adopted as a standard by the rest of the industry.

Both companies have been major players in the ongoing race to establish standards for HDTV, which promises to bring cinema-quality pictures and superior sound to home TVs.

While TCI, based in Englewood, Colo., is the first cable company to make a firm commitment to bring digital video to the home, other cable firms are also laying the groundwork to switch to digital.

Times staff writer John Lippman contributed to this report.

Digital Video Compression

In a traditional analog television system, images are represented by an undulating electrical wave, with the shape of the wave telling the TV receiver what type of shape or color to display. But advances in computer technology make it possible to convert that analog wave into the digital ones and zeros of computer code, and this digital stream can then be compressed. This makes it possible to squeeze dozens of digital video signals into the same transmission pipe occupied by a single analog signal. Alternatively, that pipe can be used to carry one digital signal that contains enough information for a vastly superior picture--the approach being used for “high-definition television.” Under the plan announced Wednesday, Tele-Communications Inc. will in 1994 begin converting its cable systems to handle the digital signals. Eventually, the stream of digital data flowing through the cable system could carry HDTV, “interactive” TV services or even high-speed computer communications.