A group led by a Chicago attorney said Thursday it plans to drop its challenge to the broadcast license of WBBM-TV (Channel 2), ending a dispute that threatened to drag on for years.

The challenge, launched last October against the CBS Inc. owned and operated station, had jolted the broadcasting community.

It also intensified calls for reforms of the Federal Communications Commission`s comparative renewal process-a process some broadcasters claim has been used solely to ”extort” large cash settlements from stations.

CBS and Center City Communications, a limited partnership whose only local representative is Chicago attorney Brenda A. Minor, agreed to a settlement, which requires FCC approval. The agreement calls for Center City to drop its competing application for WBBM`s license and not to challenge any CBS station`s license renewal for five years, in return for $187,500 from CBS. According to documents submitted to the FCC, the cash settlement covers only ”out-of-pocket” expenses, including legal fees, incurred by Center City.

Broadcasting industry sources described the settlement as relatively insignificant and suggested it might discourage similar license challenges.

Minor, an attorney at the Chicago law firm of Jones Ware & Grennard and Center City`s general partner, was to be general manager of the station Center City hoped to run, had the FCC awarded it WBBM`s license.

In an affidavit submitted to the FCC, Minor gave the following reason for the settlement:

”I now find that my duties at my law firm are taking an increasing amount of time and that my personal and career objectives would be better served by devoting my full time and energy to the practice of law.”

In asking the FCC not to renew WBBM`s license for another five-year term, Center City never provided detailed complaints against WBBM.

Because Minor is black and because of some highly publicized clashes between Operation PUSH and WBBM over the station`s hiring of blacks, there had been speculation the challenge might involve the station`s minority employment record or its on-air handling of minority issues.

In a telephone interview Thursday, Minor said, ”Our challenge was based on what we believe was WBBM`s failure to fulfill its (public-service)

obligations with regard to public affairs programming.” She didn`t provide specific complaints about such programming.

Asked about the station`s hiring practices, she said that was one of several areas of WBBM and CBS operations the group planned to investigate.

The Center City challenge had been in procedural stages before an FCC administrative law judge, with a hearing not slated until November. Center City had requested documents from CBS on a wide range of matters, but a few weeks ago the judge restricted the scope of Center City`s inquiry.

Last month, the FCC said it would consider possible changes in its comparative-renewal process, including a limitation on settlement payments to license challengers.

Broadcasters claim many groups launch comparative renewal challenges solely to wring money from stations, which would rather settle than get tied up in litigation that can last years, if not decades.

Center City`s challenge against CBS, a widely respected broadcaster, disturbed the industry and raised fears of widespread license challenges.

Lewis Cohen, an attorney for Center City, said the administrative law judge`s ruling and the FCC inquiry on comparative renewal ”had nothing to do with the decision” to settle with CBS.

Cohen, whose Washington law firm Cohen & Berfield has represented several license challengers, said he didn`t believe the settlement with WBBM would influence other groups considering challenges.