By PETER GRANT, STAFF REPORTER, The Wall Street Journal

Internet technology, which has rapidly changed how many phone calls are made, is beginning to fundamentally change TV.

As big cable companies morph into providers not only of television but also of telephone and high-speed Internet services, they are setting up national fiber-optic networks capable of transmitting all three signals using Internet technology.

The new networks are expected to allow cable companies to offer features combining phone, data and television, such as flashing the phone number of a telephone caller on a TV screen when the phone rings.

The move is another sign that cable companies are shifting away from traditional scheduled programming to shows that are available whenever viewers want to watch them. The fiber-optic networks will make it possible for digital-cable subscribers to click their remotes to view tens of thousands of hours of content stored on cable company servers -- the same way Internet users click on a mouse to get Web pages and other online content stored on distant servers.

Cox Communications Inc. of Atlanta and Time Warner Inc. of New York have each created networks by laying their own fiber and by leasing capacity on fiber networks owned by major telecommunications companies. Comcast Corp., the country`s largest cable operator, last week announced it was leasing 19,000 miles of ``dark,`` or idle, fiber, from Level 3 Communications Inc., Broomfield, Colo., to link together 95% of its cable systems, a 20-year deal valued initially at $100 million.

By leasing raw fiber, rather than leasing wavelength on fiber as some other cable companies are doing, Comcast is giving itself maximum flexibility to design its network from the ground up. The network will use at type of Internet technology called ``gigabit Ethernet`` to transport television signals. ``You can use your personal computer as your television set. You can use it as a telephone. You can use it as your video telephone,`` says Dave Fellows, Comcast`s chief technology officer. (Comcast doesn`t at present offer videophone service.) ``We`re trying to go all services, all devices, one network.``

The growing use of national fiber networks by cable operators is encouraging news for Level 3, one of the many companies left with a glut of fiber-optic cable after the telecom boom of the late 1990s collapsed. Six of the largest cable operators have leased fiber or bought other services from Level 3, such as Internet connectivity and voice services.

``They`re a very large and high-growth segment of our business,`` Sureel Choksi, a Level 3 executive vice president, says of the cable companies. But even with a recent uptick in demand for fiber, analysts estimate that 80% to 90% of the fiber installed during the telecom boom is still sitting unused.

Until now, cable systems have relied primarily on satellite technology to deliver programs and movies to their thousands of distribution points, known as ``head ends,`` that are the nerve center of each local cable system. Cable programming networks such as ESPN and HBO transmit content via satellite to satellite ``dish farms`` attached to the head ends, which pipe the programming through fiber-optic and coaxial cable to homes.

While most operators will continue to send traditional programming this way, Comcast is planning to use its new nationwide fiber network to distribute thousands of hours of ``on-demand`` programming, which digital-cable subscribers can watch just as they do a video or DVD. Brian Roberts, Comcast`s chief executive, has made such content -- most of it free -- a cornerstone of the Philadelphia company`s strategy for competing with satellite-TV operators.

Technological limitations prevent satellite-TV services from offering two-way, on-demand programming comparable to what the cable companies are offering. Comcast says it has seen a sharp increase in orders for the on-demand service in cities where it has been introduced, such as Philadelphia, along with a reduction in the service-cancellation rate in households that get the feature.

When cable operators first launched on-demand services in the late 1990s, some of them relied on Federal Express to send videotapes of movies and other programming to their head-end offices. Soon, cable companies began using satellites to distribute this on-demand content. But the efficiency of these methods declines as the amount of content adds up. Comcast`s Mr. Fellows estimates that it takes close to a month to send 4,000 hours of on-demand content via satellite to all 500 Comcast head ends. Transmitting the content through fiber-optic cable is much faster, he says.

Unlike traditional television, which is sent in a constant, live stream, on-demand content must be stored so that customers can tap it at will. Currently, cable operators store programming in servers at the head ends. But as the amount of on-demand content grows to thousands of hours, it becomes more efficient to store it throughout the network rather than at every head end. Some content, such as libraries of old television shows, could be stored in a single location but remain available to all digital-cable subscribers throughout the network.

Large cable companies began developing national fiber networks in 2001 and 2002 as they expanded their high-speed Internet businesses. To ensure quality and cut costs, they leased dedicated wavelength on telecom companies` fiber cable to connect their systems scattered throughout the country. The fiber glut meant the price tag was cheap.

The resulting networks have made it easier for some cable companies to introduce phone service using an Internet technology known as ``voice over Internet protocol.`` Time Warner`s cable division was able to introduce the phone service in 27 states this year because its national network consists of seven regional fiber-optic networks each with its own data center. The company expects to have signed up more than 200,000 customers by the end of the year. Rather than installing phone switches for each of its 31 cable systems, Time Warner simply put one switch in each of the seven regional centers. ``Having central locations that serve multiple divisions was a major component of our ability to ramp up so quickly,`` says Derrick Frost, a senior vice president of Time Warner Cable.

Eventually, most major cable companies plan to transmit TV signals using Internet protocol as well. That will give them more flexibility to combine TV with data and phone services.

Some companies have already begun to use the networks to transmit conventional TV programming. Over the summer, Cox transmitted 100 Padres baseball games from San Diego to Las Vegas using its fiber-optic network, not satellite. Jay Rolls, a Cox vice president, says it helped Cox save money, especially because the games were shot in high definition, which takes up more transmission capacity. ``We`ve started to do some things, sending video on our [fiber] backbone, not envisioned five years ago,`` Mr. Rolls says.

But cable companies` growing use of fiber to transmit video has raised concerns among consumer watchdog groups that it may give unfair advantages to operators who also own popular cable networks. Congress was worried about this in 1992 when it passed a law prohibiting cable companies that own programming from withholding satellite-transmitted content from competitors. That means Comcast is required to provide its networks, such as Golf Channel and the G4 technology channel, to satellite operators.

But Comcast is under no such obligation to share content it distributes other ways, such as over a fiber-optic network. In fact, Comcast doesn`t make its Philadelphia regional sports channel available to satellite operators because it is transmitted on a terrestrial network in the Philadelphia region.

``The sheer size of Comcast combined with an ability to keep programming out of the hands of competitors is a pretty frightening thought,`` says Harold Feld, associate director of Media Access Project, a Washington public-interest law firm.

A Comcast spokesman says that ``both terrestrial and satellite methods [of distributing programming] are part of our plans for the foreseeable future,`` but declines to elaborate.