(FORTUNE Magazine) – IT'S A SALES PITCH that should appeal to many an owner of a bar or convenience store: Why settle for a paltry 4% to 6% of the revenues from the pay phone installed on your premises by the telephone company--a cut that typically amounts to about $15 a month? Make three to four times as much by buying your own pay phone or allowing a local vending machine company to install one and split the profits with you. Since the Federal Communications Commission approved the practice last summer, new competitors have sold or installed more than 10,000 privately owned coin-operated phones. Many in the industry expect upwards of one million to be in use by 1990, replacing at least some of the 1.8 million phone company quartereaters currently in operation. A technological hurdle is still to be cleared, though. Until recently none of the so-called smart pay phones have been able to determine when a call is answered, and thus when to gobble the coins. To collect the money, the phones typically require users to push a button once the connection is made before they can be heard by the other party. Many people get confused and lose their money. ''Violently smashed phones are a major problem,'' says William Moorehead, a specialist on the industry for the Partridge Group consulting firm in Washington, D.C. Ironically, it was the technological promise of the phones that triggered the FCC's ruling and the ensuing sales blitz by pay-phone operators. Pay phones have historically been hostage to the telephone company's central computer, which can determine when the connection is made, assess charges, monitor coin deposits, and provide charming reminders of impending disconnection. In the new phones, microelectronics perform those tasks so the phones can be hooked up to an ordinary business line. The pay-phone operator pays the phone company a monthly fee for the line, ranging from $10 in some states up to $35 in others, plus a few cents for each call. Phones with the technology needed to solve the collection problem are just now being perfected. Intellicall, a private company in Dallas, installed the first ones in two Chicago restaurants in March. Similar phones from other companies are due in the next few months. Some are touted as offering features that should attract more users, such as speed-dialing of popular numbers listed on the phone--a taxicab dispatcher, say, or pizza delivery. So far, neither AT&T Technologies (formerly Western Electric) nor GTE, the largest makers of pay phones, has announced plans to enter the market. Telephone operating companies don't appear worried about the new competition. Pay telephones generate only 1% (about $1.2 billion a year) of their revenues, and they will recoup much of what they lose through fees for the leased lines. Vending machine companies are betting they can make more money from the business because they have less expensive labor than phone companies, together with established service routes their employees are already plying. They claim they'll provide faster repairs and, where state regulations permit, that they can program phones to extract more money from long-winded callers by requiring more coins more often. For consumers, the competition should mean the opportunity to dial from more locations and perhaps fewer broken phones-at least after the technology has been debugged.