America is becoming all wrapped up in a new telecommunications revolution called fiber optics.

This year, more than a half-million miles of the tiny glass strands will be laid in cables in cities and along railroad rights-of-way and in military installations. Most of the fiber optic cable will serve a deregulated telephone industry looking for cheaper ways to transmit conversations and electronic data. In 1986, more than 1 million miles of fiber optic cable will be installed, industry analysts predict.

The systems use computer technology to convert sound and data into simple numeric expressions, and lasers to send that information pulsing through the glass fibers at blinding speeds. Conversations, data and images can be broken into bits and crowded into fiber lines at a much faster rate than they can travel over copper wire, permitting a massive increase in capacity.

For local telephone companies, fiber optics is a way to reduce transmission costs, increase capacity and offer myriad new high-speed communications services, such as videotex or teleconferencing, to generate new revenue. Big businesses see in fiber optics a way to move time-sensitive voice and data streams across the country quickly, efficiently and cheaply. Railways such as Amtrak and Conrail are leasing their rights-of-way to phone companies for fiber optic cable lines, adding to the explosion of new high-speed voice and data capacity.

"The real drive behind fiber optics is the much heralded information explosion," said Jon Zilber, an analyst with Kessler Marketing Intelligence, a consulting firm specializing in fiber optics. "There are just countless ways in which new communications applications are popping up all over the place -- videoconferencing, electronic mail . . . there's a need for a communications system optimized for data and video as well as voice."

Fiber optics also promises the potential for lowering long-distance rates. In local telephone company networks, fiber makes busy circuits a thing of the past, and will help make home banking and electronic mail services in the home an eventual reality.

This promise of cheap, versatile information transmission afforded by fiber optics has set off a wild race within the phone industry for customers with new contenders trying to elbow aside American Telephone & Telegraph Co., the established leader in fiber optic systems manufacturing.

The glass strands cannot be made fast enough by manufacturers like Corning Glass Works and AT&T Technologies Inc., which are spending millions of dollars to expand production facilities. The U.S. market for fiber cable will jump from a nearly $300 million market in 1984 to a $550 million market by 1986, Kessler Marketing said. Eighty percent of that will be for the private telecommunications market; the rest will be for government use.

The transmission capacity of the new cables is enormous.

AT&T, for example, is manufacturing fiber strands that bundled together into a single cable can carry nearly 1.8 million simultaneous telephone calls -- 36 times the capacity of the first commercial fiber optics system announced in 1979.

Intense competition is bringing equipment costs down as the capacity of the technology increases, producing a positive effect on the cost of long-distance voice and data transmission. The price for the fiber itself has come down from $5 to $8 for a meter of fiber two years ago to between 45 cents and 50 cents, reports one industry source.

"The ramifications of this is we are going to see long-haul rates . . . fall. The capacity is awesome," says Larry Campbell, president of Licom Inc., a fiber optic systems supplier. The price for leasing fiber optic circuits has plummeted from 60 cents a voice circuit two years ago to as little as 5 cents a circuit today, says LightNet, a joint venture between Southern New England Telephone Co. and CSX Railroad.

A whole industry has grown up overnight.

The Department of Commerce estimates 15,000 people are employed in the industry with about 400 firms actively involved in fiber optics in one form or another. The market is growing at a rate of 25 percent a year.

The telephone industry's biggest users are AT&T and MCI Communications, according to Kessler's Zilber. AT&T alone has produced more than 250,000 miles of fiber and will have installed 154,000 miles of fiber by 1986, says a company spokesman.

MCI estimates it will have laid 1,900 miles of fiber by the middle of 1985, but the company has leased about 7,000 miles of railroad rights-of-way throughout the country for its own national network, according to David Chaffee, editor of Fiber/Laser News, a Phillips Publishing newsletter.

The leading fiber cable suppliers are AT&T Technologies Inc., currently with about 60 percent of the market, and Seicor, a joint venture between Corning Glass Works and Seimens, a German firm, now holding 25 percent of the market, according to industry sources. ITT Corp., Canadian-based Northern Telecom, and Sumitomo, a Japanese firm making a big play for the U.S. market, are other major players.

AT&T Technologies also leads in the production of the communications systems that send the laser pulses over the fiber cables, pursued by Northern Telecom, Telco Systems, and Japanese firms such as Fujitsu and Nippon Electric Corp. Increasing numbers of foreign firms are entering the electronics end of the business, and Japanese companies claim a 10 percent share of the U.S. market, industry sources say.

AT&T's traditional monopoly position is going to erode in the face of competition, industry sources predict. "AT&T and Corning market shares are going to decline as GTE, Seicor, Northern Telecom begin to package systems and bid on contracts . . . it's becoming a very competitive market even though AT&T Technologies still has a very large market share," said the Commerce Department official.

AT&T must begin to do battle with the Japanese, who are developing electronic systems capable of delivering information at ever faster speeds for less money. "We are buying electronics from the Japanese," says one long-distance company. "They are the only people who supply the high-speed electronics right now . . . they just scooped the market and left everybody with their pants down."

At the same time, the former Bell operating companies, once a captive AT&T audience, are no longer. "The old ties have long been cut. Where AT&T was our primary supplier in past years, now we have a bidding procedure that treats everyone with the same even hand," said Peter R. Hoffman, spokesman for regional telephone company Bell Atlantic.

Local telephone companies have become voracious installers of fiber. The former Bell operating companies and independent telephone companies together installed 158,000 miles of cable in 1983, said Mark Lutkowitz, a senior analyst at Northern Business Information Inc., a consulting firm. That figure is expected to jump from between 1.5 million and 2.3 million fiber miles by 1988, says Lutkowitz.

While the local telephone companies say the initial benefits of fiber systems will go to business customers who require high-speed, high-volume transmission services, they also say the fiber will be good for residential customers in time, vastly expanding circuit capacity more efficiently.

"Ultimately, residential customers will be in data transmission too, with personal computers and other different banking services," says John Mitchell, district manager of construction for Illinois Bell, the most aggressive installer of fiber among regional holding company Ameritech's five local companies.

But local phone companies must also install fiber networks to discourage businesses from constructing their own systems and bypassing telephone companies.

"The telephone companies all have a fiber strategy," says Jerome Lucas, president of TeleStrategies, a telecommunications consulting firm. "Their biggest long-range counter to bypass is special fiber optic connection right to a customer's premise."

But the desire of the telephone companies to provide their businesses customers with fiber systems has raised the question of why residential phone users should have to pay for the new technology, at least initially. "You don't want to sock people for technology they don't use and price everybody out of telephone service," says one Captol Hill aide who follows telecommunications issues.

Railroads are the other major players in fiber cable installation. AT&T, MCI, United Telecom and Fibertrak, a joint venture between Norfolk Southern Railroad, and the Santa Fe/Southern Pacific Railroad have announced national networks requiring billions of dollars and feet of fiber, according to Fiber/Laser's Chaffee.

Six regional companies, all of which are joint ventures between railroads or railroads and telephone companies, also are constructing fiber optic systems and some are thinking about linking systems together, Chaffee says. The price tag for those systems is anywhere from $300 million to $600 million, sources say.

Simply put, "We're in it for greed," says a spokesman for one railroad that plans to build a network along its rights-of-way.

The construction boom has raised concerns within the industry about overcapacity. Some analysts believe there may only be room for one national network and a few regional companies in areas with the heaviest communications traffic. "There has been some movement in signing up customers," says Chaffee. "By the same token, if everything gets built there is going to be way too much capacity and I think everybody in the industry realizes that."

It hasn't happened yet. "There's been a reprieve in the marketplace," which is generating enough business to fill capacity, currently, says telecommunications analyst Robert E. LaBlanc says. AT&T's long-distance competitors still don't pay as much to local telephone companies for interconnection, keeping many companies afloat. The former Bell operating companies have not been permitted to enter into reselling long-distance services, eliminating competition to fiber networks. And satellite transponders are filling up -- leaving fiber optics the next best thing, says LaBlanc.

The rapidly changing new market is even forcing behemoths like AT&T into rethinking whether to sell off some fiber facilities to customers or construct more of their own. "We are considering selling our facilities," says George Petty, director of network planning for AT&T Communications Inc. "There are two sides of the coin. We could lease from others or . . . lease ourselves."

But no one in the industry has the luxury of waiting too long in terms of market strategy as communications needs multiply. "We can't be fooled by this position of strength," says Petty. "We don't take where our competitors are going lightly because ultimately they have the potential to shape the market."

If the industry doesn't shape the market, demand will, according to analysts. "There's the joke about whether the government would need one central computer, or five or 10," says Kessler's Zilber. "The answer is they need 2, 3, 4 million. They had no idea the demand and applications for computers would be so widespread and that the cost of computers would come down so much. The same thing is going to be true in communications."