WASHINGTON -- In a surprising and controversial move to promote cable television competition, the Federal Communications Commission proposed yesterday that local telephone companies be allowed to package and transmit television programming.
The proposed rules, which were unanimously endorsed and are likely to be adopted within a year, would expose cable companies to their most threatening competition yet. But the changes could benefit cable television customers, many of whom have seen their bills double and triple in recent years.
The cable industry vowed to fight the proposals and threatened to challenge the rules in court if they are adopted. Telephone companies, eager to enter a lucrative new business, applauded.
"Today's action will create competition and offer consumers more choices," said James R. Young, vice president for regulatory and industry relations at Bell Atlantic Corp. "Let's hope it's a beginning to the end of turf wars."
In essence, the commission recommended that telephone companies be allowed to offer a "video dial tone" over telephone lines that would carry programming produced by outside companies. Consumers could view whatever programs they pleased and would be charged accordingly.
Initially, telephone companies would serve primarily as a pipeline, not producing the programs. But the commission said that telephone companies also should be allowed to organize and package video services, as long as they make their networks available to all programmers. The commission also opened an inquiry into whether to let telephone companies produce programs.
The idea of allowing a video dial tone service has long been a favorite of FCC Chairman Alfred C. Sikes. Congress, which is weighing regulatory legislation to rein in cable prices, has shied away from the issue. Yesterday's action makes it more likely that lawmakers will have to reconsider the role of telephone companies in television.
Before cable customers would feel much impact from yesterday's FCC proposal, however, most telephone companies would have to spend billions of dollars to install new fiber-optic transmission lines and switching equipment that could carry large volumes of television material.
Analysts have estimated that the cost of connecting every home in the country to a fiber-optic line would be $100 billion to $200 billion and that it would take at least five years.
Most large telephone companies, including all of the regional Bell companies, already plan to replace much of their copper wire with fiber optics over the next two decades. The immense business opportunity posed by the $18 billion cable TV market is likely to accelerate those plans.
The proposals mark the second recent major change in long-standing restrictions on the telephone companies' ability to move into new services. Less than three weeks ago, a federal appeals court cleared the way for the regional Bell companies to begin providing information services, such as news and stock and sports tables, immediately.
That ruling is being protested by representatives of consumer groups, the newspaper industry and others.
In other action yesterday, the FCC voted not to reconsider its decision to allow TV networks limited access to the highly profitable reruns of some prime-time shows, the Associated Press reported. The matter now ends up in a federal appeals court, which has refused to rule on the issue until all "administrative remedies" are exhausted.