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News Corp.'s Carey Rejects Arbitrationor Interim Carriage in TWC Retrans Dispute

In a Dec. 30 letter to Sen. John Kerry
(D-Mass.), News Corp. Deputy Chairman-President-COO Chase Carey rejected the
idea of arbitration and an interim carriage agreement in the company's
retransmission consent dispute with Time Warner Cable.

"We respectfully believe these
discussions do not belong in the hands of a third party," Carey's letter reads.
It also says: "We understand the justifiable concern felt by Time Warner
households in the face of a possible service disruption. However, we believe
the appropriate solution is for Time Warner Cable and Fox to negotiate a fair
and mutually beneficial deal."  

Kerry suggested arbitration and interim
carriage in a letter to both Time Warner and Fox. TWC Chairman Glenn Britt gavea thumbs-up to the proposal.
However, Time Warner has not officially sought arbitration from the FCC.
"While Time Warner says they would submit to arbitration in front of us,
neither party has filed anything," said a media bureau spokesperson.

In an internal News Corp. memo also
issued Dec. 30, Carey, indicated that an agreement was not likely by the time
the deals expired and that the company would pull their network signals:
"At this time, it looks like we will not reach an agreement and our
channels may very well go off the air in Time Warner Cable systems at midnight
tomorrow, December 31."

The dispute concerns retransmission
consent deals between Time Warner Cable and News Corp. for Fox-owned TV
stations and cable networks, which are set to expire at midnight Dec. 31 local
time in six markets. There are Fox stations in New York, Los Angeles, Tampa,
Orlando, Dallas and Austin. The companies also are negotiating deals for
carriage of regional sports networks and/or some of Fox's national cable
channels in more than two dozen markets. The national cable networks deals
expire at midnight Pacific Time. Several big-draw programs are due to air on
Fox in January, after the current carriage deals expire, including college
football bowl match-ups and the new season premieres of American Idol
and 24.

In his memo, Carey addressed why Fox
isn't providing an extension while negotiations continue: "The fact is that
we've been trying since the summer to negotiate a fair deal and that further
extensions simply extend the period of time that Time Warner profits from our
marquee programming without fairly compensating Fox for it. These customers
will have the option to switch to DISH, DIRECTV, or one of the telephone
providers to continue to receive Fox programming. I can assure you that we have
worked very hard over the past few months to prevent this event. While we are
continuing to engage with Time Warner Cable to try to resolve the issues, we
will not do a deal that does not value our programming fairly."

As previously reported, the agreement
these two companies come to have benchmark implications across the board for
both the broadcasting and cable sectors (see "Cover Story: Retrans...The BloodyBattle to Save Broadcast Television" ).
Fox is seeking a dollar per subscriber, and whatever fee they do get will set a
precedent for retrans negotiations industrywide.

Executives from
the two sides have both pledged to remain at the negotiating table right up to
the deals' expirations, which as of press time are little more than a full day
away. Despite the companies duking it out with much at stake and consumer
campaigns, "negotiations are actually going in a very constructive way with
professional people dealing with it and each other in a very positive way," Fox
Networks Group Chairman-CEO Tony Vinciquerra told B&C in an
interview in early afternoon Dec. 30. Vinciquerra said News Corp. execs at the
time remained "hopeful we can come to a conclusion but it remains to be seen."

John Eggerton
contributed to this report.