Telecommunications company Verizon Communications Inc. said on Wednesday that officials in Montgomery County, Maryland, have agreed to let it sell Web-based video service to local residents and that it may drop its lawsuit against the county for blocking it.

The No. 2 U.S. telephone company sued the county, which is near Washington, D.C., in June, saying the subscription television licensing process was delaying plans to expand the company's new FiOS TV video service and violating U.S. antitrust and communications laws.

The company said it reached an agreement with county officials under the mediation of U.S. Magistrate Judge James Bredar, although a dismissal of the lawsuit and a franchise agreement depend on final approval by the county council.

Verizon, as well as the largest U.S. telephone company AT&T Inc., have launched new video services to compete with cable operators, who have been taking away customers with packages of voice, video and Internet services.

Verizon said it plans to begin offering FiOS TV to the county's households by early next year if the council gives its approval. It will be competing with Comcast Corp. , the No. 1 U.S. cable provider, in that area.

Montgomery County said Verizon agreed to pay it $1 million over five years for cable-related investments, in addition to five percent of gross revenues as a franchise fee and three percent of gross revenues for public access programming and other costs.

Verizon also agreed to support public education and government channels and offer cable services to 100 public-use buildings, such as schools and libraries, under the 15-year franchise agreement, the county said.

Verizon launched FiOS TV last September in Keller, Texas. Short for Fiber-Optic Service, it is connected to subscribers' homes using fiber-optic cables, which allow for high-definition pictures and quicker downloads.

Verizon and other carriers are pressing Congress to simplify the process to obtain cable franchises so they can more quickly offer video service to compete with cable operators. But the chances of legislation passing this year is considered slim.