Control Video Corp., the Vienna, Va.-based company that almost folded when the video games market collapsed last year, will begin test marketing its new home computer software-by-telephone service in Washington and three other cities before the end of the month.

Working with Bell South, the regional telephone company, Control Video will conduct tests in Atlanta, Houston and Los Angeles, as well as Washington, as part of its effort to establish a national position as an electronic data and software distribution network.

"We're expecting the tests will prove that there's a broad market for this kind of service," said William von Meister, Control Video's founder and chief executive.

Several large companies, including IBM, AT&T and CBS, are exploring the home electronic distribution market and have market tests under way.

However, there are industry-wide concerns over whether electronic distribution of software and data is economically feasible now.

Control Video asserts that it is and that these tests should prove it.

The company's new service, called "MasterLine," would permit home computer users to dial up Control Video's central computers toll-free and have software piped down the phone lines at high-speed into their computers to sample on a limited basis.

MasterLine subscribers would have to use a special telecommunications device, called the Mastermodule, to link their computer to the MasterLine network.

Von Meister describes the service as "the MTV of software," likening it to the rock music video cable channel that has been a valuable promotional tool for the record industry.

Originally, however, Control Video had planned to create a pay-per-play videogames telephone network to capitalize on the videogames boom.

The company had gone so far as to ship thousands of communications modules for Atari games consoles.

The collapse of the videogames market, which cost games companies over a billion dollars in losses, almost brought down Control Video with it.

But the company's investors, which include Citicorp Venture Capital and Kleiner, Perkins, agreed to let the company abandon video games and try to tap into the growing home computer market. They installed new managers to work with von Meister.

In addition, the company struck an alliance with Bell South to help sell Control Video's Mastermodules. The relationship gave the troubled venture some badly needed legitimacy, according to several of its investors.

Control Video and Bell South plan to offer the trial service at various prices ranging from $14.95 to $19.95 a month.

Reportedly, the company will provide both public domain software and software from such companies as Electronic Arts, Datamost and Datasoft.

The company expects "several thousand" subscribers for the service, von Meister said, and he said a key question the test will try to answer is what it costs to sign up customers.

Privately, sources close to the company indicate that preliminary test results in December could determine whether Control Video's investors will continue to support the company.

Von Meister pointed out that a successful test, however, could lead to larger companies making a significant investment in Control Video.