While there have been some deals between cable providers and competitive local exchange carriers, or CLECs, a section of the Telecommunications Act of 1996 presented a potential barrier.

The FCC said Monday that it would forbear from enforcing section 652(b) of the Act, which prohibited cable operators from acquiring more than a 10% stake in a telecom within its markets, following a request from the National Cable & Telecommunications Association.

While CLECs raised billions of dollars during the 1990s, many were victims of the telecom bust and landed in bankruptcy protection. After losing regulatory battles that granted them access to the residential market, the companies have targeted business clients.

The market for business telecommunications is a growth area for cable operators, which have reached high penetration levels of residential pay-TV subscriptions. Comcast Corp. has purchased two CLECs: Cimco Communications Inc. and New Global Telecom Inc.

While the FCC had cleared some deals, Time Warner Cable Inc. said that the threat of regulatory snags created a "chilling effect on pro-competitive transactions," in a filing to the Commission.

The cable operator argued that Congress intended section 652(b) of the Communications Act to block deals between cable operators and incumbent telecoms, not CLECs.

The FCC's order could benefit carriers such as Time Warner Telecom Inc. and Cbeyond Inc., Stifel, Nicolaus & Co. analyst Chris King wrote in a Monday report.

In an accompanying petition, NCTA had asked that the FCC issue a declaratory ruling clarifying that section 652(b) does not block cable-CLEC deals. The FCC denied the request.