The Federal Communications Commission granted permission yesterday to the Chesapeake and Potomac Telephone Company to install transport lines for the District's cable television system.
C&P plans to build, own and maintain the cable lines for District Cablevision Inc., the firm that has been awarded the city's 15-year cable television franchise.
The FCC's decision removes one possible stumbling block for District Cablevision, which would have lost the franchise if the FCC had not approved C&P's involvement by June 15.
But a major obstacle remains. District Cablevision has not signed the franchise agreement and officials for the firm have said that a lawsuit filed by Capital City Cable, one of two losing bidders, has had a "chilling effect" on District Cablevision's ability to raise money for the system. If the franchise agreement is not signed by March 12, the agreement automatically expires and the city can seek new bids.
In addition, the U.S. Justice Department is still considering a request from Capital City that it investigate C&P's participation in the cable system, said Kevin R. Sullivan, a Justice Department spokesman. In the request, Capital City maintained that C&P should be required to seek a waiver from the modified final judgment governing the breakup of the American Telephone & Telegraph Corp.
Yesterday, District Cablevision officials had no comment on the FCC ruling, but Garry M. Epstein, a C&P attorney, said that his client was pleased.
"We're excited and gratified," said Epstein. "The FCC did the right thing."
The telephone company was required to seek FCC approval under cross-ownership rules that generally prohibit telephone companies from providing cable services in areas where they also provide telephone service.
Yesterday, over the objections raised by the losing cable bidders, the FCC ruled that C&P would not violate cross-ownership rules because it would have no control over the District's cable service or District Cablevision.
"The commenters have raised no persuasive arguments as to why the application should be denied and we believe that the public convenience and necessity will be served by grant of the application," the FCC ruling stated.
Robert James, an FCC engineer, said yesterday's action represented the first time that the agency had granted permission for a telephone company to install cable lines in a major metropolitan area since 1971, when permission was granted to a New York telephone company.
The agreement between District Cablevision and C&P calls for C&P to install the transport lines that would be paid for by District Cablevision over a four-year period. Beginning in the fifth year, C&P would be paid an annual fee for maintenance of cable lines and rental of pole and conduit space. Although C&P would maintain legal title to the transport lines, District Cablevision would be granted exclusive use of those lines.
C&P's FCC application was opposed by District Telecommunications Development Corp., the third company that sought the franchise, and Capital City's partner, Inner City Broadcasting Corp., a New York-based company headed by former Manhattan borough president Percy E. Sutton.
Both companies argued that C&P would use funds designated for telephone service to build the system and, by maintaining the cable lines, would be in a position to restrain competition.
But the FCC concluded that there is "no substantial likelihood" that the telephone company would restrain competition and added a condition that requires C&P to keep separate records on its cable activities "to assure that any cross-subsidization will be more readily apparent."
"This accounting will provide a basis for subsequent action, should it be necessary," the ruling stated.