(FORTUNE Magazine) – WHY IS EVERYTHING so expensive in Europe? Why are the simple tools of business, such as telephone and computer services, so limited and poor? And why, in the age of a multimedia explosion, do the British put up with programs on gardening during prime time? American service companies are rushing into Europe with the kind of firepower that could zap those questions into history. The U.S. invasion is concentrated in three areas: retailing, where a rigid distribution system has kept prices high; telecommunications, which has been hobbled by government regulation; and entertainment, often stifled by state control of television. Says John Morgridge, 60, president of Cisco Systems, a developer of computer networks: ''We're part of a new wave of technologies crossing the Atlantic. Nearly all the advances in computers and telecommunications are coming from the U.S.'' Adds Ashley Faull, 27, marketing vice president for United Artists in London: ''You can take quantum leaps in Europe. The media industry here is myopic.'' Price/Costco Inc., the biggest U.S. warehouse club operator, has just opened one outside London. Prices average 30% below traditional retailers'. Staples, the U.S. office supplies discounter, has opened eight stores in Germany. U.S. Baby Bells and cable companies, including Nynex and TCI, will spend up to $9 billion over the next three to five years on cable TV, telephone networks, and cellular phone systems, primarily in Britain but also in France, Scandinavia, and Eastern Europe. AT&T plans to build a European Community-wide computer network for business communications, either with partners or alone. NBC, with no previous global experience, just took control of Europe's Super Channel and has begun beaming NBC and CNBC programs to 56 million homes and hotels across Europe. The QVC shopping channel and United Artists' CMT (Country Music Television) and Discovery channels are also available throughout the EC. So far, European businesses have been meeting the incursion with a mixture of anxiety, protectionism, and copycatting. J. Sainsbury, Britain's largest and most profitable supermarket chain, mounted a legal challenge to Price/ Costco's status as a wholesaler, claiming that the American newcomer should comply with the more elaborate -- and costlier -- regulations that apply to retailers. It lost, and promptly cut prices across Britain on 300 of its basic food items. Protectionist forces won, however, when Europeans managed to get audio-visual trade excluded from the recent GATT agreement (see Trade). American programmers will still be able to expand in Europe, but they may be forced to use more European-made programs than they would like. The Americans aren't just gaining new markets -- they are also gaining valuable expertise. Take the hot new business of multimedia services. ''Americans talk about the Superhighway, but that highway is being built right here,'' says Eugene Connell, president of Nynex CableComms, a division of Nynex based in suburban London. When the British government opened the telephone market to cable operators in 1990, American cable companies and the Baby Bells rushed in. With nearly $2 billion of a planned $8 billion invested so far, the Americans are already operating the first segments of a nationwide interactive cable and phone network offering educational services and videogames -- the kind of network that the TCI-Bell Atlantic merger envisions and that is only in the experimental stage in the U.S. Nynex has the largest cable subscriber base in Britain, followed closely by Telewest, a joint venture between US West and TCI. Other U.S. companies include Southwestern Bell, Cox Cable, Comcast, International CableTel, and Jones Cable. Nynex figures its revenue in Britain alone will top $1 billion annually in three years. Other U.S. cable and telephone companies, like US West, are using Britain as a launching pad for cable and cellular phone services in the rest of Europe. Last June, Barry Diller of QVC and Rupert Murdoch of News Corp. shook hands on a joint-venture deal to start the QVC home-shopping channel in Europe. The channel began broadcasting in London on October 1 and is already fielding 4,500 calls a day. QVC plans to expand into 12 more European countries within a year or two. Turner Broadcasting System, United Artists, and other U.S. entertainment groups made the leap into European living rooms too. By September, viewers with cable or satellite links in Spain, France, Sweden, Finland, and Norway were turning on Bugs Bunny and Droopy Dog, the cartoon rap dog, dubbed into their own languages courtesy of Turner's TNT and Cartoon Network. Also available: Viacom's Nick at Nite and VH-1, Country Music Television, the Family Channel, and newcomer Sci-Fi Channel. CAN THEY ALL make money? The grandfather of the U.S. cultural incursion, MTV, has been in Europe six years. It now has more viewers (56.5 million households) outside the U.S. than inside. Bill Roedy, head of MTV Europe, says that advertising revenue should top $70 million for 1993 and more than $100 million in 1994. Pearl Jam and Bugs Bunny aside, Europeans also want American-style prices. Until recently, U.S. retailers abroad have not been providing them. Toys ''R'' Us, for example, does not sell its toys at much of a discount in Europe because it doesn't have a lot of discount competition. The U.S. retailers now coming into Europe want to exploit this gap in the market. Price/Costco's East London store is the first of ten planned for Britain. Staples now operates eight office supplies warehouse stores in Germany with a local partner called MAXI-Papier. Staples is planning 12 more stores in 1994. In 1992, Kmart spent $120 million to buy 13 department stores in the Czech Republic and Slovakia. Two have been refurbished and reopened recently as Kmarts. T.J. Maxx, the Boston-based clothing discounter, will open three stores in Europe in 1994. Again, can so many newcomers make money? Paul Morris, retailing analyst for Goldman Sachs International, believes that U.S. discounters can be more profitable than back home because in Europe they will be competing against full-margin retailers. He thinks that Costco stores in Britain will generate average sales of $150 million a year each by 1996, about 50% more than an American Costco store. Telecommunications is a particularly ripe field for American companies. Lack of competition has stifled innovation and kept rates high. AT&T is talking with two state monopolies, France Telecom and German Telekom, about a network for corporate clients. If those talks don't succeed within the next several months, John Foster, head of AT&T Communication Services in Brussels, says the company will spend as much as $350 million to set up its own system. Smaller operators are already in business, exploiting niches that the Europeans can't or won't enter. Take Cisco Systems, which specializes in linking different computer systems and recently was ranked by FORTUNE as one of America's fastest-growing companies. Sales in the U.S. grew 90% last year, to $370 million. In Europe they rose 108%, to $170 million. Cisco executives think that half their revenues will come from outside the U.S. within four years. New U.S. service exports to Europe aren't all bytes and bargains. WMX, the big waste treatment company formerly known as Waste Management Inc., says its sales and profits are growing 20% a year in Europe and should continue to do so for the rest of the decade. International revenues were $1.4 billion last year, about 15% of the company's total sales. Anne Evans, 37, a former U.S. tire retailer, recently set up Elm Energy in Britain with the backing of Northern Indiana Public Service Co., an electric utility. Since October, Elm has been turning waste tires from Michelin, Pirelli, and Goodyear into electricity that her company sells to British utilities. Based on U.S. technology, the new $75 million British plant is the first of four. Elm intends to spend another $100 million on two more plants in Britain and $75 million on one in Belgium. NOT EVERY U.S. service company will succeed in Europe. You need only look at the mounting losses at Euro Disney to see that Americans can't simply export a concept lock, stock, and Tinker Bell. But QVC's Risdale defends the Disney effort: ''They've got everything right. Somebody dropped the ball on location.'' France may be the wrong place for Mickey Mouse, but Europe remains full of opportunity for American companies able to find niches in heavily regulated markets, apply the latest technology, or sacrifice high profit margins for greater market share.