The Justice Department said yesterday that the Chesapeake and Potomac Telephone Co.'s proposal to enter the cable television business in the District does not violate restrictions specified in the court ruling governing the breakup of the American Telephone and Telegraph Co.
C&P has agreed with District Cablevision Inc., the winning bidder for the D.C. cable franchise, to build and own the cable transport lines. District Cablevision would run the system.
Capital City Cable, one of the losing bidders for the D.C. franchise, had asked the Justice Department in October to investigate C&P's involvement. Capital City had alleged that C&P was, in effect, planning to engage in a new line of business by using "anticompetitive practices" to "capture a major share" of the data telecommunications and information marketplace.
The Justice Department decision removes a second potential obstacle in as many weeks to the arrangement between C&P and District Cablevision.
Last week, the Federal Communications Commission ruled that C&P would not violate the FCC's cross-ownership rules by installing cable lines in a city in which it also provides telephone service.
But there are still unresolved matters that concern city officials. District Cablevision officials have not signed the franchise agreement, saying that a lawsuit filed by Capital City has hampered District Cablevision's ability to raise money for the system.
If the firm does not sign by March 12, the agreement will automatically expire.
Legal questions about C&P's involvement in cable were raised after U.S. District Court Judge Harold H. Greene ruled last July 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 those regional phone companies, is the holding company for C&P. Capital City had argued that C&P's cable arrangement constituted a new line of business because the telephone company would maintain a degree of control over the cable system.
Yesterday, Assistant Attorney General Charles F. Rule sent a letter to Richard C. Schramm, a vice president for Bell Atlantic, saying that C&P would not need a waiver from Judge Greene's order to construct the cable transport lines for District Cablevision.
Rule's letter said that C&P's proposal "would appear to constitute exchange telecommunications" in keeping with the definitions contained in the modified final judgment that broke up the Bell System.
Regarding the question of competition, Rule concluded that the potential problems "usually created when a telephone company provides cable transmission facilities are lessened substantially" by the nature of the agreement between C&P and District Cablevision.
Although the telephone company will keep legal title to the transport lines, District Cablevision would control and operate the system.
"It would be anomalous indeed," Rule wrote, if the court ruling "were construed to permit C&P to provide cable transmission facilities only if it retained substantially more control over its potential rival."
District Cablevision officials would not comment on the Justice Department ruling.