New Yorkers could see a short-term drop in cable television rates and enhanced service after the Bloomberg administration reached an agreement yesterday with Verizon for a new citywide cable television franchise.

Time Warner has had a virtual monopoly on the city’s cable television market except in the Bronx and eastern Brooklyn, where Cablevision offers service. The agreement would allow Verizon to offer its FiOS TV service over its new fiber optic network.

The city in turn would receive 5% of all new cable fees generated by Verizon, the maximum percentage permitted by federal law, and the same rate applied to the city’s other cable franchise agreements. Verizon will also make a $10 million donation to the downtown Brooklyn studios of NYC TV as part of the agreement.

It is unclear how the presence of Verizon in the marketplace would affect consumer prices. A representative of the Consumers Union who specializes in press and telecom issues, Robert Williams, said the practice of bundling, in which providers offer discounted packages of television, phone, and broadband services, have benefited consumers.

“Generally when a new player comes into town there might be an initial price war,” Mr. Williams said. He said he doubted there would be any long-term price drops, as the companies can be expected to learn to “peacefully co-exist,” meaning prices would trend back upward. “It is not fair to say there is robust competition for cable or broadband. We could use five or six competitors and it would be fairly great for consumers,” he said.

“Once you create a market, people’s and companies’ behavior is hard to predict, and we have to let it play out,” a senior counsel for the New York City Law Department, Bruce Regal, said. He pointed out that in general as competition tends to increase, prices trend downward, and he said he was hopeful the same would occur in the city.

Construction would commence on the new fiber optic system, which is designed to reach all of New York City’s estimated 3 million homes, after the deal gets final approval from the city’s Franchise and Concession Review Committee and the New York State Public Service Commission. The first step in the approval process would be a public hearing scheduled for May 20.

“New Yorkers must have access to choice among world class cable television service providers,” the deputy mayor for economic development, Robert Lieber, said at a press conference announcing the agreement.

“This is a historic agreement that when approved for the first time will bring true cable television service competition in each in every home in all five boroughs of New York,” he said.

Verizon said 30% of the new network would be built by the end of 2008, 50% by the end of 2010, and 100% by 2014. The first consumers who would be able to access the new service would be residents of Staten Island, by the end of this year.

Verizon’s FiOS, which stands for Fiber Optic Service, provides telephone, Internet, and digital video services. It is already offered in parts of Long Island and New Jersey.

FiOS TV would include an all-digital channel lineup of more than 400 channels, and 150 high-definition channels along with a library of more than 10,000 video-on-demand selections, according to Verizon.

“The contract ensures that Verizon build won’t reach the city’s more affluent areas without also connecting the low- and middle-income neighborhoods to that premium service within that some time frame,” the commissioner for department of information technology and telecommunication, Paul Cosgrave, said.

The city said it is open to offers from other cable companies to provide additional service.

Mayor Bloomberg was not on hand for the press conference yesterday, having recused himself because of his holdings in his press and broadcast company, Bloomberg LP.