Open for lunch Monday through Friday, 11:45 a.m. to 3 p.m.; for dinner 6 p.m. to 10:30 p.m. daily. Reservations. AE, CB, DC, MC, V. Prices: Lunch, appetizers $2.50 to $4, pastas $7, main dishes $8 to $9; dinner, appetizers $2.50 to $5, pastas $9, main dishes $11 to $14. Bar menu about $3 to $11.50. Full dinner with wine, tax and tip $25 to $35 a person.

Terrazza looks like Tiberio, acts like Tiberio, has familiar

faces from Tiberio. Its menu even reads like Tiberio's--

until you get to the prices. They are one-third to one-

half lower than Tiberio's.

What's going on here? Giulio Santillo, who runs both restaurants, answers that he opened Terrazza on a bet--muttering things about Geranio (two doors away) having opened Piccolo Mondo right down the street from Tiberio--and declares, "I plan to lose $20,000 the first year."

This is the same Santillo who charges $19.50 for the veal at Tiberio, but $12 here; $5 for soups at Tiberio, $2.50 here. On Tiberio's wine list the Blue Nun is over $18 and the $26 brunello de montalcino is so inferior that a waiter once winced when we ordered it. You can also get a good French champagne for under $25, a decent brunello for $16 and a St. Jean chardonnay for under $20 at Tiberio. But a recent half-good dinner for two at Tiberio cost twice what an excellent dinner for four cost at Terrazza.

This can't last, we suggested to Santillo. How many menus has he had printed? "Not too many," he answers.

But while it lasts, it's a great deal.

The main dining room, bar and upstairs dining room can hold 300 people, but Terrazzo still looks small and inviting. It's so whitewashed that the sun streaming through the skylight over the stairwell, which is banked with flowering plants, bounces off the walls. Like Tiberio, it's decked with vast bouquets of red roses and tabletop bouquets of salmon-pink roses. Like Tiberio, the furnishings are handsome, from silver salt shakers on the tables to good paintings (of terraces, naturally) on the walls. Unlike Tiberio, there are romantic tables next to the second-floor windows overlooking King Street.

Service has been a problem, partly because of the restaurant's immediate popularity: too many people too soon. There have also been staffing problems and the adjustment to serving on two floors, leading to some Saturday evenings when diners have shouted in frustration--the stuff of restaurant legends. It has been a tough shakedown period. But when Terrazza operates smoothly, it's smooth indeed.

The food has been typically a notch above Tiberio's. Where Tiberio's veal has been overpounded, cooked dry, then topped with machine-sliced rectangular ham, Terrazza's veal has been left with some juiciness and bite under the golden-brown surface, and topped with savory prosciutto. I can't fault Tiberio's brilliant agnolotti, but Terrazza's is every bit as good; and while Tiberio's linguine with lobster is excellent (at $19.50), Terrazza's is even better (at $13), light and tasting through and through of lobster, balancing both pungency and delicacy. Then there's the capelli d'angelo, hair-thin noodles not a whit overdone, either sauced with a forceful, rough-cut tomato-herb sauce or bound with cream and cheese, topped with a julienne of ham and mushrooms and glazed with a crust of cheese.

While the pastas are dazzlers, the antipasti are also tempting--sprightly marinated squid, oysters just warmed in cream and cheese over a bit of spinach, mussels or oysters under a light crusty lace of bread crumbs and garlic, or mussels in a zippy tomato sauce. Terrazza's tomato sauces retain a salad lightness and barely cooked freshness.

The veal dishes--whether saut,eed scaloppine or heavy and rich osso buco--have been fine, and such shellfish as softshell crabs or scallops are simple and quite good. But the standout has been Salmone Bella Vista, an impeccably juicy and fresh- tasting poached fillet topped with warmed oysters and a marvelous cream sauce with the light, refreshing and unexpected touch of diced near-raw tomato. Another exceptional dish-- though more French than Italian--is duck with orange sauce. I don't know whether the procedure is typical, but ours was carved tableside from a whole, freshly roasted duck, perfectly cooked. The sauce was rather sweet but not candylike, just aromatic and delicious.

This kitchen's got to have its vulnerabilities, right? Well, the vegetables are just fair--the overexposed zucchini, here diced with tomato sauce, and potato croquettes that are too pasty, too heavy and too heavily dosed with nutmeg. Not bad, just indifferent. The fried zucchini, which is Ma la carte, is thin and crisp and grease-free.

Desserts outshine those at Tiberio. Terrazza's apple tart is light and flaky and not too sweet, and the profiteroles are smothered in a good chocolate sauce. Only one dessert was disappointing, a strawberry tart whose crust was too thick and tough to cut.

New restaurateurs often respond to criticisms by pleading that they're new and still working out the kinks. I've often countered that they aren't offering discounts to those diners who put up with those kinks. Terrazza is. When the dust settles and those "not too many" menus are revised, I hope Terrazza tries to retain its reputation for good value as well as for quality.