Fox, Time Warner Head to Washington - TheStreet

Fox, Time Warner Head to Washington

Cable industry woes are heading for new lows as programming fees take the stage.
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NEW YORK (

TheStreet

) -- With

News Corp's

(NWS) - Get Report

Fox Network

and

Time Warner Cable

(TWC)

at a deadlock over TV programming fees, Washington will likely force a resolution.

On Wednesday,

Fox rejected Time Warner Cable's offer to extend the current deal and put the dispute before arbitrators

. Fox threatens to open the New Year with a blackout of its shows on the nation's No.2 cable network that serves key markets like Los Angeles and New York and has even encouraged viewers to switch to satellite TV providers like

Dish

(DISH) - Get Report

and

DirecTV

(DTV)

.

Fox's American Idol

The battle comes at a particularly critical time for cable shops like

Comcast

(CMCSA) - Get Report

and Time Warner Cable, which are struggling to hold on to customers who would rather watch shows free on the Internet or opt for cheaper bundles of TV, Internet and calling services from phone companies like

AT&T

(T) - Get Report

and

Verizon

(VZ) - Get Report

.

For its part, Comcast has made a bold move to rely less on its cable TV distribution business and

gain a piece of the programming prize through its pending merger of media properties

with

GE's

(GE) - Get Report

NBC Universal

.

Enter the politicians.

Sen. John Kerry (D., Mass.), who chairs the Senate's Commerce Subcommittee on Communication, Technology and the Internet, has asked the Federal Communications Commission to step in to keep the Fox broadcasts from ending and arbitrate a deal between Fox and Time Warner Cable.

New Yorkers will recall a bitter three-year battle over so-called carriage fees between the all-sports

YES Network

and

Cablevision

(CVC)

that interrupted Yankees game broadcasts. The service disruption was so severe in 2003 that New York Mayor Michael Bloomberg stepped in and brokered an initial agreement. A year later arbitrators sided with YES and required Cablevision to pay YES $2 per subscriber.

Fox is seeking a new agreement allowing it to collect $1 per Time Warner Cable subscriber for rights to carry Fox broadcasts of the upcoming college football bowl games as well as popular shows like

American Idol

,

House

and

The Simpsons

.

If the YES Network battle is any indication, political and industry forces will likely back a deal on Fox's terms, handing cable yet another defeat in what looks to be a tough future for the industry.

Cable prices keep rising and content is less relevant, says a Wall Street analyst who asked not to be named.

"The real interesting video growth is happening on the Internet," says the analyst. "Fox and Time Warner Cable can battle as long as they want -- in a few years consumers won't care."

-- reported by Scott Moritz in New York