The fog surrounding Time Warner ( TWX) continues to thicken.

Just as the media giant and its peers were uniting Tuesday against the threat of regulatory action, activist shareholder Carl Icahn dropped his own bombshell, naming as his new brother-in-arms the hard-hitting Lazard banker Bruce Wasserstein.

Icahn's group, which controls 2.5% of Time Warner shares, hired Wasserstein to rummage through the trash bins outside 1 Columbus Circle and to choose a fantasy-league board slate. Icahn's displeasure with Time Warner stems from the company's stock, which has been frozen in the teens for more than three years since its well-chronicled plunge after the big AOL-Time Warner merger of 2001.

Icahn has demanded a full cable spinoff and a $20 billion stock buyback. Time Warner earlier this month agreed to meet him halfway on the buyback, raising its repurchase target to $12.5 billion from $5 billion, though the company hasn't changed its limited spinoff plans.

But some media investors doubt even a change atop Time Warner -- something that seems to be in no danger of taking place, given repeated promises to stay the course CEO Dick Parsons has charted -- would get the stock moving Icahn's way.

"The price of Time Warner is not being affected by management," says Larry Haverty of big shareholder Gabelli & Co. "It's really about external realities."

Haverty says those realities include low cable valuations and concerns about capital spending and free cash flow. The FCC's move Wednesday, which raises the prospect of an extended debate over the industry's pricing model, only adds to the morass.

One analyst strongly agrees. "Media and entertainment valuations are in the toilet," says the analyst, "What Icahn does or proposes isn't going to change anything. It hasn't worked for Viacom ( VIA) or for Liberty ( L). Investors are not unhappy with Time Warner management."

What Wall Street is unhappy with is that television advertising is declining in popularity, as a welter of cable channels and the four big broadcast networks fight off digitally equipped viewers looking to tune out ads altogether, and as the Internet becomes a more viable ad vehicle. Meanwhile subscriber growth has slowed for the big cable operators, and the prospect of trimming the average consumer's cable tab -- however remote -- is most distasteful to investors who have footed the bill for years of hefty capital spending at the likes of Comcast ( CMCSA) and Cablevision ( CVC).

As far out as the a la carte talk seems, some observers say it's worth considering just how little sense it makes economically. Haverty says history shows that no more than 30% of the general population will typically pay for a given channel.

So if 80 million Americans subscribe to a premium channel like Disney's ( DIS) ESPN at a cost to cable programmers of $2.50 per month, that's $200 million in monthly revenue for the channel. If you replace the current bundled system with an a la carte one, with only 30% willing to pay for a premium channel, then to make that $200 million in revenue Disney would have to charge more than $8 per month.

Haverty suggests networks would be likely to charge a significant premium to make up for the decreased ratings and lost ad revenue associated with those viewership declines, suggesting that ESPN would be priced in the $10 to $12 range. Similarly, Haverty says a property like the Disney Channel, which currently charges programmers about 50 cents a month and has some 5 million subscribers, would need to charge $8 to $12 to replicate its current revenue stream.

Haverty suggests only 10 of the 100 or so channels out there would remain economically viable for their owners, because the others would not have enough revenue to produce content. Lost jobs would be significant. Most Americans probably aren't aware that filmed entertainment is also the country's second-largest export. With no channels to sell filmed entertainment, that steady stream goes, well, kaput.

Companies such as Verizon ( VZ), currently testing and investing big bucks to develop and compete in the video industry, may also do a quick about-face on such uncertainty.

Others are more measured if similarily pessimistic. Merrill Lynch media analyst Jessica Rief Cohen sees little chance that a la carte pricing will take effect, because of the lobbying power of pay-TV and content companies and the difficulty of implementing change. Still, she writes, "The exact impact of any potential change is difficult to quantify, but it is hard to see how it could be positive for either pay TV operators or content providers."