(FORTUNE Magazine) – Howard Stringer is putting the best face on things. It's April, and he's onstage at the Pierre Hotel in Manhattan, trying to convince a crowd of media moguls and Wall Street analysts that the just-announced sale of Pacific Telesis Group to SBC Communications won't derail Tele-TV, the startup company into which he has poured all his energy since leaving CBS last year. A joint venture of PacTel, Bell Atlantic, and Nynex, Tele-TV was created to lead the phone companies into the brave new world of interactive television.

Trouble is, SBC is renowned for its cautious, tightfisted approach to flashy new businesses like video. In the morning papers, to Stringer's dismay, SBC and PacTel executives are quoted saying that the future of Tele-TV barely surfaced during their merger talks. Not long ago, some of those executives were promising Stringer that video was vital to their corporate futures.

But Stringer believes Tele-TV has a good product, and that, he tells his audience, should carry the day--and, not incidentally, win for its phone-company parents a lucrative slice of the $25-billion-a-year cable-TV market.

"In the end, the play is the thing," says the Welsh-born Stringer, who sprinkles his conversation with allusions to Shakespeare and Churchill. "I have no doubt that when we go on the air, we will dazzle the viewers. And if we have to personally educate yet another telco, I think that's punishment beyond the call of duty, but we'll do it."

He's right on both counts. Stringer and Tele-TV have quietly developed an appealing, if not quite dazzling, alternative to cable, using an unappreciated technology known, awkwardly, as MMDS, or "wireless cable." As to punishment beyond the call of duty, well, the 54-year-old Stringer has suffered plenty of it since leaving the CBS of penny-pinching Laurence Tisch for the Baby Bells.

He signed up not just to lead a new company but to invent an entirely new form of television. Instead, he has hit so many delays, setbacks, and bureaucratic obstacles that now he's struggling merely to get a scaled-down product off the ground. While denying rumors that he wants to quit Tele-TV, Stringer cheerfully admits that he often feels frustrated and impatient. "The irony," he says, "is that I went from a situation where things were out of my control to a situation where things are out of my control." He muses: "You'd have to ask a shrink what would make me do that."

These days, he's also wondering what's inside the heads of his parent-company CEOs--Bell Atlantic's Ray Smith, Nynex's Ivan Seidenberg, and PacTel's Philip Quigley. Despite their public enthusiasm for the Tele-TV venture and a commitment of nearly $1.7 billion to the video business, they're distracted by bigger issues: the proposed SBC-PacTel and Bell Atlantic-Nynex mergers, competition in the cellular-phone business, their plans to invade the long-distance market and to defend their local franchises. Management resources at the telcos are strained. Says analyst Philip Sirlin of Schroder Wertheim: "The to-do lists are going to get much longer and much more urgent."

In the meantime, the glittering vision that lured Stringer to Tele-TV has faded. The phone-company CEOs and Michael Ovitz, the Creative Artists Agency dealmaker who recruited Stringer on behalf of the Bells, told him they needed him to create a paradigm for interactive television, where viewers could watch what they want when they want, choosing from a near-limit- less array of programs stored digitally on computers. Unhappily for Stringer, they've since concluded that the dream is no longer on the near-term horizon. "The full-service network was the magnet," says Stringer, "and that has been cruelly delayed."

To make matters worse, Stringer has spent much of the last year doing battle not with the cable industry, as planned, but with his Bell company owners--specifically, with their own video organizations. These units were formed several years ago to get Bell Atlantic, Nynex, and PacTel into television, and remain fiercely protective of their role.

"There's tremendous resentment," Stringer acknowledges. "We're in fiscal competition with each other. We're in practical competition with each other. And they look upon us as Hollywood outsiders." Big spenders too, he adds with a laugh--even though Tele-TV's modest offices in Manhattan display none of the luxuries that are de rigueur at the studios.

Would Howard Stringer rather be running a film studio? "What, go and make action-adventure movies with nine lines of dialogue?" he retorts. But it's clear that the reality of Tele-TV falls way short of the rhetoric that attracted him 15 months ago, not to mention the glamour of CBS. Instead of dining in Hollywood with actresses Fran Drescher or Angela Lansbury, Stringer recently found himself shuffling to Buffalo to address a crowd that included Nynex engineers. (He says he had a fine time.)

Stringer still believes, as his partners do, that the phone companies can make money in television. "We think we can be very competitive in the video market," says Stuart Johnson, chairman of Bell Atlantic Video Services. Partly, their strategy is defensive--if they can take market share from cable, debt-ridden cable operators will find it harder to enter the phone business. As John Aronsohn, senior analyst at the Yankee Group, a Boston research firm, says, "It's already very difficult for cable operators to get the funding they need to upgrade. Any loss in customer base right now would have an impact."

But the primary reason the Bell companies want video is that they, like all big players in the melee of deregulated telecommunications, hope to offer consumers one-stop shopping for local, long-distance, and cellular phone service, Internet access, and TV. That explains why AT&T, which some telcos regard as their most formidable competitor, has bought a 2.5% stake in DirecTV, the satellite-to-home TV service that it began marketing to some custom-ers in April. Even as Bell Atlantic, Nynex, and PacTel were wooing Stringer last year, rival telcos SBC, Ameritech, BellSouth, and GTE were forming a $500 million joint venture with Disney, now called Americast, to create and package programming. At first blush, Stringer was an odd choice to lead Tele-TV. As president of the CBS Broadcast Group, he had staunchly defended free over-the-air television and never missed a chance to ridicule claims being made for the information superhighway. "I don't think we've found the entrance ramp yet," Stringer would say. And, "It's a lot of hot air." And, "I shall just not live to see it."

Stringer always gave great quote. Reporters and colleagues found him funny, smart, honest, and idealistic, a rare combination of traits for a network executive. His Oxford education and British accent helped him stand out from the crowd, as did his imposing 6-foot 3-inch frame, curly blond hair, and boldly striped shirts.

His self-deprecating wit belied grand ambitions. Hired by CBS as a clerk in 1965, Stringer became a news writer, a documentary producer, executive producer of CBS Evening News with Dan Rather, creator of the long-running news show 48 Hours, and then president of CBS News. There, prodded by Tisch, he presided over the layoffs of about 200 people in 1987 but did so in a way that satisfied his longtime CBS News colleagues that he had done his best to protect them.

A year later Tisch chose Stringer to run all of CBS. The lifelong journalist moved easily into Hollywood, helped lead CBS from No. 3 to No. 1 in the prime-time ratings, and, most famously, persuaded late-night host David Letterman to defect from NBC. By 1995, though, with CBS's ratings tumbling and Tisch shopping the network around, Stringer wanted out. Ovitz, who was Letterman's agent and Stringer's friend, engineered the deal that, as Stringer would joke, made him "chief executive of a phone booth."

Kidding aside, Stringer was genuinely excited. Soon after signing a contract that pays him more than $2 million a year, Stringer was touting interactive TV, promising that the digital age would liberate programmers and viewers from "linear television" and "the tyranny of the ratings."

But as Stringer waxed eloquent about niche programming ("You could do two hours on books!"), the enthusiasm of Tele-TV's corporate parents waned. They weren't letting go of their vision, just delaying it--by five years, or perhaps ten. Bell Atlantic and Nynex had learned that the technology of fiber-optic and coaxial cable they'd been counting on to deliver two-way video over phone lines was costlier than expected. They needed a quicker, cheaper way to deliver video--any video--to consumers. Says Walt Rickard, president of Nynex Entertainment and Information Services: "We said to ourselves, let's get into the marketplace and play."

Enter MMDS, an acronym so unwieldy that it has given way to an oxymoron, wireless cable. (MMDS stands for multi- channel multipoint distribution service.) Historically, MMDS has been a low-rent alternative to cable TV: Local operators beam 30 analog channels from high towers to antennas resembling barbecue grills on customers' homes. Overregulated and undercapitalized, MMDS systems serve only about 850,000 households nationwide. For years the business was best known for the shady TV advertisers who peddled worthless MMDS license applications in late-night infomercials.

To their credit, when the telcos looked into wireless cable, they spied a potential bonanza. Think of the MMDS spectrum as idle land waiting for the right developer. By applying digital technology, the telcos figured, they could deliver 120 channels of wireless cable, twice as many as most cable systems, with superior pictures and sound.

Better still, there would be no need to spend huge sums on infrastructure. If the transmitting antenna can be piggybacked onto an existing tower, a state-of-the-art wireless cable operation costs less than $25 million to set up. Depending on the terrain, a single transmitter can distribute signals for up to 45 miles; other costs, for set-top boxes and household antennas, grow only as customers sign on. That pleased the risk-averse telcos. Says Lee Camp, president of PacTel Enhanced Services: "This was a big turn in our thinking."

The MMDS strategy gained favor on both coasts just as Stringer came aboard. He began work on March 1, 1995; four weeks later, Bell Atlantic and Nynex announced they were investing $100 million in CAI Wireless Systems of Albany, New York, a wireless cable company with licenses for New York City, Philadelphia, Boston, and Washington. Then PacTel paid $175 million for Cross Country Wireless of Long Beach, California, which owns licenses for Los Angeles, San Diego, and Orange County. Stringer's job description shrank before his eyes: Instead of leading a revolution in interactive TV, his charge was now to deliver what he bravely calls "a higher form of cable." Says Stringer: "It was a wee bit disappointing." In August, Ovitz, whom Stringer had described as "the glue" behind Tele-TV, left for Disney.

Stringer plowed ahead. Backed by its owners, Tele-TV formed two units, Tele-TV Systems in Reston, Virginia, to develop technology, and Tele-TV Media in Los Angeles, to handle marketing and programming. Stringer hired Ed Grebow, 46, a former CBS colleague who had managed technology for two Winter Olympics, to run the systems company; for the media company he recruited Sandy Grushow, 36, a programming and marketing whiz from Fox. Today Tele-TV has more than 200 employees.

Grebow's most visible accomplishment has been the development with Thomson Consumer Electronics of a computerized set-top box to receive the digital TV signal. Technologists have struggled for years to build digital set-top boxes, and conventional wisdom held that the cost per box would exceed $500. But Grebow got Thomson to sign a contract to build three million boxes for $1.1 billion. "Bringing that box in at the $350 range was a coup," he says. "It gave us a lot of credibility with the telcos."

Not exactly. After the deal was struck, some telco executives griped. "The immediate response was, 'Could you get it for a little bit less?' " Stringer recalls. What's more, negotiations to develop literally thousands of specifications for the box had been tortuous. PacTel had wanted an even cheaper, stripped-down version until Bell Atlantic and Tele-TV convinced the Californians that more circuits were needed to deliver snazzy graphics and at least some interactivity.

Grebow has wrestled with countless other issues, including the design of an antenna that's not an eyesore. He can't, however, overcome MMDS's major drawback: It needs each antenna to have a direct line of sight to the signal. Buildings, hills, even trees hamper reception. "I facetiously say that we'll give our installers chain saws," Grebow says.

Grushow, meanwhile, is designing a package of 120 channels that will provide "everything you can get from your cable company today and a lot more." Tele-TV will offer the usual broadcast and cable channels, plus 40 channels of pay-per-view movies running every half-hour or so. Unlike most pay-per-view systems, Tele-TV won't require customers to phone in orders; the set-top box tracks charges and relays them periodically to a billing computer via telephone.

Cleverly, Grushow has devised a way to target niche audiences not with entire channels but with two- or four-hour blocks of sponsored or pay programming. The idea harks back to the early days of TV, when corporate advertisers sponsored whole series. Explains Grushow: "Say Classic Coke wants to get out of the traditional linear advertising environment. Now they can own their own real estate. They can do a deal with, say, whoever owns the rights to Your Show of Shows or whatever classic television Nickelodeon hasn't run into the ground. Then, once a week or once a month, Classic Coke can present classic television." Other minichannels might feature Stringer's beloved British series or even, dare we say it, two hours on books. To steer viewers to pay programs, Grushow is creating a barker channel that he describes as "Entertainment Tonight meets the Home Shopping Network."

Tele-TV service will be priced to compete with cable, so keeping down programming costs is crucial. Concerns about costs have prompted Tele-TV's parents to question some acquisitions, including a Turner Broadcasting deal. Says Stringer: "We've got second-guessing all over the lot. There are more lawyers at the telcos than there were legions in Rome."

Still unfolding, meanwhile, is the debate over how Tele-TV will be marketed. Stringer and Grushow want control, but final say on local marketing will probably rest with the telcos. Such haggling can be a drain. "We've had nine-hour meetings, going mano a mano," Stringer says. "I never had a nine-hour meeting in the entire time I was at CBS." Even when the Bell company CEOs and their top video executives work out compromises with Tele-TV, underlings sometimes refuse to go along. During a Tele-TV board meeting, Nynex CEO Seidenberg lamented: "I've got 70,000 people in my company. I can't control my company."

The turf warfare got so intense that Stringer hired McKinsey & Co. to mediate. The consultants assembled a list of some 100 tasks, distributed it to all parties, and helped the executives sort out the conflicts. Bell Atlantic's Stu Johnson declares: "The roles are now clear." Agrees Stringer: "The worst is over."

But the show has yet to begin. Early next year, Tele-TV is scheduled for a triple-header commercial launch: by PacTel in Los Angeles, Nynex in Boston, and Bell Atlantic in Hampton Roads, Virginia. PacTel wants to expand to San Francisco and San Diego by mid-1997, while Nynex and Bell Atlantic are hedging about their future plans. That's a problem for Stringer, who is eager to reach a critical mass of viewers and build the Tele-TV brand.

Not that he faults his partners for their caution. No one knows, after all, whether Tele-TV will make any money. Stringer essentially wants the phone companies to trust him--or at least let him do the job they hired him to do. "I'm the sand in the oyster, with no idea whether there's a pearl there," he quips.

Right now his future couldn't be more uncertain. PacTel's video plans are subject to review by SBC. Talks have begun about merging Tele-TV with Americast, the Disney-telco joint venture. Tele-TV could be spun off as an independent company, or Stringer could quit, or he and his troops could soldier on, older and wiser. "I walked into this with a measure of idealism and a dash of naivete and high expectations," Stringer says. "Many of those have been delayed, if not aborted." He must wonder how he, who used to scoff at the information highway, ended up stuck in the slow lane, waiting for tomorrow.

REPORTER ASSOCIATE Ed Brown