By JEANNINE AVERSA

Associated Press Writer

LAS VEGAS (AP) -- The TV industry probably knows best how to make the most of the coming digital revolution, the nation's top television regulator said Tuesday.

Federal Communications Commission Chairman Reed Hundt told broadcasters at their convention Tuesday that he wants to help them make the historic transition from their current world of analog television to digital technology. The shift will dramatically expand viewer choice and significantly improve picture and sound quality.

One of the ways he is helping is by suggesting that broadcasters -- not the government -- should decide what services may be carried on new channels that stations are to receive in the next few years.

``I am wary of the wisdom of the government mandating how you should take advantage of the business opportunities that the digital revolution creates,'' he said. ``I suspect you know better than government what to send.''

Flexible use of this second slice of the airwaves is vital to the TV industry, which sees money in the new channels. They want to use them to provide an array of digital services -- from home shopping to packages of entertainment and news programs. Viewers who want them could be charged a fee.

``We applaud the chairman's view,'' said Eddie Fritts, president of the National Association of Broadcasters.

Hedging their bets, broadcasters are lobbying both the FCC and Congress to win the right to do whatever they want with the second channel.

``There are two horses in the race and I'll ride the one that gets to the finish line first,'' Fritts said.

The TV industry's switch to digital technology -- which converts broadcast signals to the language of computers -- is the most important change in the business since its birth. The industry's competitors -- cable, telephone companies and high-powered satellites -- are well on their way.

In the new digital broadcasting world, there would be no scarcity of airwaves because one slice could carry multiple programs and services.

That could mean the deregulation of television, Hundt said.

``An overwhelming majority of our rules should be rewritten or junked when we get firmly into the digital age,'' Hundt said in an interview.

But it will take years and millions of dollars for TV broadcasters to get there.

Hundt said he hasn't decided whether TV stations should have to acquire the valuable second channel by bidding in an auction, which could generate tens of billions of dollars for the Treasury, or whether they should have to comply with additional public interest obligations.

In 1992 the FCC decided to give TV stations another channel to deliver what was then believed to be the next generation of television, called high-definition, a digital system that would provide movie-quality pictures and CD-quality sound.

This way, stations could air both the new and existing signals and people wouldn't be forced to buy new TV sets.

But the TV industry, no longer seeing a big business in high-definition television, has asked the FCC to let stations use the second channel to provide the new digital services that would be attractive to viewers and to advertisers.

The FCC will begin within a few months a historic proceeding to decide whether and to what extent TV stations should be given flexible use of this new slice of the airwaves, officials said.

AP-WS-04-11-95 1611EDT

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