The Pepsi-sipping, Barnes & Noble-shopping members of the University will now be communicating via AT&T in a new and unique $10 million alliance with the American Telephone & Telegraph Co.

During a 10-year period, the agreement will generate $10 million in new funds, provide $17 million from existing contracts and may save students, faculty and staff up to $20 million.

"An alliance of this scope and magnitude is, we believe, unprecedented," said University President Joab Thomas at a news conference held yesterday to officially announce the agreement.

Additionally, AT&T plans to develop the use of electronics in the classroom, test new technologies at the University, set up a fellowship to attract doctoral students and provide alumni with special long-distance rates.

They will also create an AT&T Center for Service Leadership, which will prepare students for roles in business and community service. The center will open in 1995.

Robert Kavner, AT&T executive vice president and CEO of Multimedia Products and Services, said the contract will also benefit AT&T.

"We're going to make a profit," he said.

The agreement, finalized after 18 months of discussions between University and AT&T officials, differs from other alliances. Kavner said he attended a telecommunications summit with Vice President Al Gore where almost all of the dialogue revolved around using the new information highway for entertainment.

"I don't recall any discussion on education," Kavner said. Thomas' innovation brought everything together, he added.

"We're talking to other universities about doing similar kinds of things," Kavner said. "This one happened to be the innovator." He did not name any other schools.

The AT&T agreement comes about a year after signing a contract with Barnes & Noble to manage the Penn State Bookstore on Campus and two years after a deal with Pepsico Inc. But Thomas said the University isn't selling out to private companies.

Penn State has ongoing relationships and contracts with several companies, Thomas said, adding, "These are just more extensive and more comprehensive.

"This strategic agreement between Penn State and AT&T goes far beyond the traditional university-corporate relationships," he said.

Students also expressed interest in the new deal.

"I think it's good for the University to be involved with companies as long as it's not the main goal," said Laura Tuberson (freshman-division of undergraduate studies).

Christian Massetti (sophomore-liberal arts) said the alliance would give the University access to more technology.

"It's going to open up other avenues," Massetti said. "AT&T's not just telephones."

The University uses AT&T's technology in classrooms to support distance education, where students and instructors are in two different places. Thomas said students could eventually be taught from professors around the world -- a "virtual reality" professor.

Massetti said distance education would be especially helpful in language classes. A student learning Italian could take in the culture and the language from a professor in Italy, he said.

Tuberson said attendance in a class where the professor is beamed in could be sparse. But she added that most classes are so large, there would be no loss of interaction.

The University had considered hooking up with other telecommunication companies, but chose AT&T, Thomas said. He did not say which companies.

"Only AT&T had the products, the services and the personnel to make an alliance like this possible," he said.