MCI Communications Corp. plans to expand its telecommunications network with a new optical fiber system that will link Chicago, Milwaukee, Cleveland and other Midwest points with its existing New York-Washington fiber-optic system, the company announced last week.

The Washington-based firm said the expansion will increase total transmission capacity by more than 80 percent by the end of the year.

The new midwestern system will be part of a planned 3,300-mile network of single-mode fiber-optic line that will provide "high-quality, high-speed transmission of voice, data and broadcast" traffic.

Construction this year will include about 2,900 miles of fiber-optic routes and about 8,000 miles of supplementary routes for digital radio and single sideband analog radio signals. MCI said it also plans to build more digital switching systems.

The company said it has arranged 7,300 miles of railroad right-of-way for the expansion and has purchased more than 100,000 miles of fiber. The company didn't say how much the project will cost.

The firm also announced the introduction of a new network capable of carrying intra-company voice and data communications. The system is designed for MCI's corporate users.

Fairchild Aircraft Corp., a division of the Chantilly-based manufacturer, has won a contract to supply Gull Air with seven new Metro III Turboprop airliners.

The 10-year-old regional airline will use the new planes to expand and upgrade its operations in southern Florida and the Bahamas.

The contract, valued at about $27 million, calls for delivery of the aircraft beginning in June, with an option for three additional units scheduled for early 1986.

A proposed state-owned coal terminal in Portsmouth, Va., "may die a natural death," a Virginia Port Authority official said last week, after another company abandoned plans to build an oil refinery on the same property.

Officials with Cox Enterprises Inc., a media company based in Atlanta, announced Thursday that the company had ended efforts to build an oil refinery. Both projects were vigorously opposed by nearby residents and people who said the refinery would harm the environment.

The coal terminal, planned by the Port Authority in conjunction with a consortium of six coal companies, was proposed for a 400-acre site on the Elizabeth River that included about 220 acres of the refinery land.

Although G. Robert Bray, executive director of the port authority, declined Thursday to declare the project officially dead, he said it "may die a natural death."

Bray said he thought that eventually a coal facility with ground storage capacity would be needed in Hampton Roads, "but nobody can say it is needed today, because the coal market is depressed."

Legislation passed by the General Assembly stipulates that construction must begin by July 1, but the VPA has not begun the lengthy process to obtain the necessary permits to construct the facility.

"We all know that legislation is sitting out there, but I don't know that any action will be taken to start the permit process before then," Bray said.

Comsat International Communications, a unit of Communications Satellite Corp., has signed a three-year service agreement with Merrill Lynch & Co. to provide "digital express" service to the brokerage firm's British offices, in cooperation with British Telecom International. The service eventually will transmit voice and traffic data to Bern, Switzerland, as well.

Terms of the agreement were not disclosed.

Primark Corp., a diversified McLean firm, has purchased all the outstanding stock of National Comtel Systems, a small telephone service firm in Boston, for an undisclosed price.

NCS operates a telephone rental service for use by patients in hospitals. The service provides hospitals with a way to recover the cost of providing telephone service to patients. The company's sales are currently less than $1 million.

Under a new procedure endorsed by the National Security Agency and Secretary of Defense Caspar Weinberger, Allied Corp.'s Bendix communications division will market NSA-approved telecommunications protection systems directly to U.S. government contractors.

For 25 years, Bendix has provided NSA with secure communications equipment which, in turn, was furnished to selected defense contractors. The new procedure allowing contractors to purchase equipment directly is designed to accelerate the protection of contractor telecommunications. The cost of protecting the transmission of classified and unclassified national security-related information can be charged to the government.

According to division Vice President and General Manager Bill Harokopus, the first equipment marketed under the new program will be devices that protect digital information being transmitted by electronic mail, facsimile, computer, teletype and digitalized telephone circuits.