G. Scott Brodey Sr. wants to wire Washington.

Brodey is competing with the local phone company by offering big businesses a way to bypass their local service by using his circuits.

In an odd sign of the times, the phone company helps him. Brodey pays Chesapeake & Potomac Telephone Co. $1 million a year to snake fiber optic cables under the streets of Washington to transmit communications signals in bursts of light over thin glass strands.

Brodey, 53, is the president of Institutional Communications Co., a two-year-old McLean company spawned by the break-up of AT&T. Using technological advances that have made fiber optic cables cheaper and more error-free than some other communications technologies, Brodey lets Washington businesses tie directly into more than a dozen long distance companies. Federal agencies can use ICC circuits for private-line calls between downtown locations, long distance companies can be hooked up to each other, and customers can subscribe to ICC for long distance service.

"We're the flagship of a new industry that provides alternative access to local telephone companies," he said. "One of the last frontiers of monopoly is the Bell operating companies."

Experts say companies like ICC could mean for C&P what companies like MCI and Sprint have meant for AT&T: the end of a stranglehold.

"It's the first major breakthrough in local alternatives," said Harry M. Shooshan, a telecommunications consultant. The driving forces behind the phenomenon are the high fees local telephone companies charge for connections to their networks and advances in fiber optics, he said. "Businessmen who use the {local phone company's} switched network are having to eat a tremendous access charge," he said. "They are fools not to look at alternatives."

ICC'S niche is between the long distance networks -- where competition is fierce -- and the customer's office -- where the Bell system has lost its monopoly to a new generation of competitors. For years that gap has been filled only by local phone companies.

Customers conditioned to think their phone service should come from the local phone company are taking their time, said Shooshan. "Clearly there is some inertia but as these carriers become established they are going to pose competition -- significant competition," he said. Eventually, a company like ICC could become a mini-C&P. "It doesn't take too much of a leap of imagination that if you have a downtown area and 30 customers wired together the technology could certainly permit that," Shooshan said.

C&P looks at ICC as a serious threat. "At this point they are unique in Washington and they are significant competition," said Web Chamberlin, a C&P spokesman. Chamberlin declined to estimate how much revenue ICC is diverting from the phone company or how many C&P customers have defected to ICC.

So far, ICC has built a 112-mile long fiber optic "backbone" stretching from downtown Washington to Dulles, Bethesda, Rockville, Rosslyn, Pentagon City and Crystal City.

The company says it has signed up more than 100 business customers and can reach 105 buildings in the Washington metropolitan area. The company will serve 250 buildings by the end of the year, and projects it will be in 600 buildings by 1989, with 250 miles of fiber optic cable in the ground.

ICC circuits can link customers to the long distance circuits of AT&T, MCI, US Sprint, Allnet, Cable & Wireless and other companies.

Brodey is helping other companies like his get started. ICC owns a 26 percent interest in a Philadelphia company called Eastern Telelogic that is getting off the ground in C&P parent Bell Atlantic Corp.'s hometown. That's just the beginning. Last week, Brodey traveled to Dallas to give a new company there "an assist." For a fee, Brodey says he can be bought. "We've got the cookie cutter," says Brodey. "It will happen in New York, Boston, Atlanta, Chicago, Minnesota/St. Paul, Orlando/Tampa and Dallas."

ICC had rough beginnings. Brodey was lured to ICC from his job as president of Lin Communications Co., a paging subsidiary of Lin Broadcasting Corp., in 1965. One of ICC's founders told him the company was well-financed and ready for operation. "I was under the impression that the financing was all wrapped up, and all I had to do was build a company," he said. "You couldn't find half a dozen pieces of paper."

Brodey ousted the founder, borrowed a quarter of a million dollars and scraped together another $300,000 from about 20 investors. Most are Washingtonians and many are telecommunications lawyers but they prefer to remain unidentified. Kidder Peabody became financial adviser to ICC and helped arrange $17.4 million in debt financing from Manufacturers Hanover and $2.5 million in equity financing from Regional Financial Enterprises, a Connecticut venture capital firm.

The company, which now employs 47 people, went through a cash crunch this year, laying off some salesmen. The firm borrowed another $2.5 million from the bank, raised $2 million more from company investors, and has arranged for another infusion of $5 million from new investors.

"It's a very promising business," says one original investor, Ted Pierson of the law firm Pierson, Ball & Dowd.

ICC isn't profitable yet. Its revenue will be between $6 million and $10 million by year end, and Brodey estimates the company could turn a profit by the third quarter of this year. Through the help of long distance companies like Cable & Wireless, the American subsidiary of the British communications giant, ICC is becoming known around town. "We gave them one of their first contracts in town" for just under $1 million, said Al Peyser, president of Cable & Wireless of Vienna. Cable & Wireless provides long distance service to businesses.

"We needed the service and they did it all very quickly," said Peyser. Cable & Wireless uses ICC links to hook its own offices together, to hook a few dozen customers directly to its long distance system and to link up with other long distance companies. Cable & Wireless has cut its costs by about 30 percent from what C&P costs and may give more business to ICC, Peyser said .

In the federal sector, Brodey's clients include the Federal Communications Commission -- which uses his service to communicate between buildings downtown -- and the U.S. Postal Service, which uses ICC for some local services. Brodey is working on a half-million-dollar contract with ABC News to transmit broadcasts from points around town to the company's offices in the heart of Washington.

Though Brodey won't confirm it, industry sources say he is teaming with BellSouth Government Systems and Northern Telecom to compete against C&P to replace the federal government's entire local telephone system. Ben Bennington, deputy commissioner for telecommunications services of the General Services Administration is looking to replace about 114,000 C&P local private lines for about 20 major federal agencies by the end of next year.

C&P considers itself a strong contender for the government contract and has invested $108 million to install 23,000 miles of fiber optic cable around Washington to compete for federal and private business, Chamberlin said. "We lose some business and then we get some," he said, pointing out that C&P has just signed MCI as a customer and will provide private links for MCI computing centers in Rockville and Reston.

C&P has lowered the price of its private line circuits in the area by about 17 percent to compete with ICC, Chamberlin said.

But some customers say they can save more by switching. John Keator, director of telecommunications for National Public Radio said the network is soon going to be hooked directly to AT&T via ICC. "ICC is more reliable," he said.

"We've had a lot of problems with C&P with their circuits going dead." With ICC, "we're very pleased." Keator said ICC is targeting other radio and TV broadcasters for local links to long distance companies.

An official at Aspen Systems, a Rockville information sciences company, said MCI approached the company saying ICC could connect Aspen directly with MCI. MCI has also approached neighboring companies, he said.

"We were not displeased with C&P but the overriding factor was cost," said the official who switched the company's service. Still others are using ICC for long distance service. "So far, it seems to be very economical," said Cleathan Lewis, manager of telecommunications for BDM, a professional services company.

Long distance companies are loathe to discuss the details of their arrangements because they also pay the local phone companies for connections to complete the vast majority of their long distance calls. AT&T spokesman Herb Linnen said AT&T's policy is to use the local telephone company. If a customer requests an alternative, AT&T will ask the local telephone company for better service before switching its customer away.

MCI's mid-Atlantic division president Gerald Taylor said the company is using ICC to hook some of its own facilities together and for some large customers but also continues to use C&P.

According to Brodey, ICC is about to hook up six AT&T customers in the Washington area and both Cable & Wireless and MCI have "major orders" pending with ICC for more local circuits. "By 1990, we'll have $50 million in revenue with about $20 million (diverted) from C&P," he said.

Brodey could face some obstacles. Shooshan said there are risks to the business. Local telephone service prices are dropping for businesses. "These guys are riverboat gamblers," said Shooshan. "They are making the bet that prices would remain distorted long enough that they can move in and make a killing. ..."

What happens next is going to depend on the local phone company. "These guys are really dependent on the phone companies not getting too interested," MCI's Taylor said .

Even ICC investor Pierson admits local phone companies still could stamp out competitors because of their hold over passageways needed to string cable. "The power the local phone company has is extraordinary."