Time Warner fires warning shot against Disney

Time Warner is now warning its subscribers in the New York area that they could temporarily lose access to ABC, ESPN and other Disney channels -- much as Cablevision subscribers did this weekend.

In an e-mail Saturday to its 13 million viewers in the region, Time Warner described that ongoing Cablevision-Disney dispute as "another example of what we have to deal with every day."

But while the explicit point of Time Warner's weekend message was to assure customers they were "not at risk... yet" of having those channels unexpectedly go dark, the e-mail nonetheless hinted at the challenges Time Warner will face once its contract with Disney does expire in September.

"You may remember last fall we had a similar dispute with FOX which was asking for huge rate increases for their programming," the company wrote, referencing the stalled negotiations that almost darkened the channel during this year's college football Bowl Championship Series.

However, Time Warner quickly seemed to port that incident into a preemptive shot at Disney, suggesting to customers that it would fight any future proposed retransmission rate hikes.

"And with your support we will fight programmers who request excessive price increases," Time Warner wrote.

Disputes between providers and broadcasters are becoming more commonplace, now that consumers have multiple outlets from which to purchase their cable packages.

Cable providers, in general, are less monopolistic in this setting, but they also possess far less market power, explained Sen. John Kerry (D-Mass.) in a letter to the Federal Communications Commission earlier this month.

Consequently, broadcasters can threaten to cut access to their channels if providers refuse to pay more for every customer that tunes in. That puts the cable company in the precarious position of denying the rate increases and losing access to those channels, or accepting the hikes and subsequently raising consumers' monthly bills -- two options that drive viewers to other cable providers, Kerry said.

"The result of these flawed incentives is consumer uncertainty, higher prices, and broadcasters using special events as leverage in negotiations," Kerry wrote, petitioning FCC Chairman Julius Genachowski to change federal rules and prevent broadcasters from cutting their feeds during negotiations.

But many insiders expect the problem to worsen without substantive reform. "We expect these guys to keep coming at cable operators with outrageous demands," a source close to the process told The Hill on Tuesday.

The American Cable Association even issued a statement this weekend decrying the federal retransmission program as "a badly broken system" that was financially harming smaller cable companies and consumers.

However, Time Warner declined to comment on Tuesday whether it had launched any official push against broadcasters.

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