Capital City Cable has called for a Justice Department investigation into the Chesapeake & Potomac Telephone Co.'s participation in a proposed District cable television system.

Capital City, one of three companies that submitted bids for a District franchise, asked for the investigation last week in a letter sent to the Justice Department. The letter marks the first official action taken by one of two cable bidders rejected when the City Council authorized the city to negotiate a cable agreement with District Cablevision Inc.

Frederick D. Cooke Jr, an attorney representing Capital City, said that C&P's cable involvement raises serious questions about whether the cable system would be able to compete with the telephone company and may violate U.S. District Judge Harold H. Greene rulings regarding the breakup of the Bell System.

Cooke said Capital City maintains that C&P should be required to seek a waiver from the Modified Final Judgement governing the breakup of the American Telephone & Telegraph Corp., which would force the telephone company to explain its plans before Judge Greene.

City Council member Betty Ann Kane (D-At-Large), chairman of the council's cable committee, said yesterday that Capital City has raised legitimate questions about C&P.

She said that she has already asked the city's cable negotiating team to seek a Justice Department opinion about whether Greene's order applies.

Phil Watson, an investor with the third company, District Telecommunications Development Corp., said that there will be other actions to oppose District Cablevision and called the Justice Department letter "just the first cannon fire."

Kevin R. Sullivan, the Justice Department's assistant chief for the special regulated industries section, said that the department is obligated to respond to complaints under the Modified Final Judgement.

"Any investigation we do is confidential until we take some action, but I can say that we will respond to the complaint," Sullivan said.

Robert L. Johnson, president of District Cablevision, charged that Percy Sutton, head of the New York based Inner City Broadcasting Corp. and a principle Capital City investor, influenced the decision to seek federal help.

"It's a sour grapes letter," said Johnson.

"They lost at the City Council and they are trying to overturn the legislative intent of the City Council. Outside leadership (for Capital City) from New York is insensitive to our keen interest in preserving home rule. By inviting federal intervention from the Justice Department, Capital City is threatening home rule."

In July, Judge Greene ruled that the regional phone companies created by the breakup of the Bell System must concentrate on providing telephone service rather than launching such business ventures as long-distance service and computer leasing.

Bell Atlantic, one of the regional phone companies, is the holding company for C&P, which plans to build, own and maintain the cable transport lines if District Cablevision receives the city's 15-year cable franchise.

Kane, Capital City and District Telecommunications objected to C&P's involvement, arguing that the cable system would be prevented from competing against the telephone company in highly competitive and potentially lucrative fields such as data transmission and two-way communication services.

"We object to C&P's bold campaign to capture a major share of the burgeoning interactive data telecommunications and information processing marketplace through anticompetitive practices," the letter to the Justice Department stated.

" . . . (C&P's cable involvement) could threaten to divert C&P's attention and resources away from its two primary functions -- local telephone service and equal access service for all interexchange carriers," the letter said.

But in an application seeking permission from the Federal Communications Commission to construct a cable system in an area in which it also provides telephone service, C&P states that it will not preclude District Cablevision "from using any facilities to provide any telecommunications service in competition with C&P."

The FCC application, however, also states that the telephone company "reserves the right to oppose" any District Cablevision service "which, in C&P's view, may not lawfully be provided by the customer."

Johnson acknowledged that the statement means that C&P could object to services such as data transmission but said that should not be a major concern: "Whatever the phone company felt was detrimental to its local service base they could oppose it. But that's not new. That would be the case no matter who gets the cable franchise."

The city cable negotiating team has six months to reach a contract agreement with District Cablevision. If an agreement is not reached, the City Council could select one of the other two companies.