Time Warner in Flap Over Spurs Surcharge

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Continuing its hard-line stance on what it feels are
exorbitant network license-fee increases, Time Warner Cable has refused to pay a surcharge
for several San Antonio Spurs National Basketball Association games.

As a result, Spurs distributor Fox Sports Net Southwest
will not offer 11 of the defending NBA world champion's games to more than 600,000
Time Warner subscribers in San Antonio and surrounding areas.

The dispute centers over an approximately
20-cent-per-subscriber surcharge for Fox's additional Spurs telecasts -- games that
were available on pay-per-view or local broadcast television last year.

Time Warner officials said the surcharge was much too
costly for the value of the additional games. So far, the system has lost three games due
to the dispute. Time Warner carries 20 Spurs games as part of its carriage deal with FSN
Southwest.

"We've long held a position that we need to do
something to bring programming costs -- particularly those from the sports arena -- in
control and to put forth a more realistic price-value equation," Time Warner senior
vice president of corporate affairs Lynn Yaeger said.

But Fox Sports Net vice president of media relations Lou
D'Ermilio said every other system in the market has agreed to the terms, as well as
direct-broadcast satellite services DirecTV Inc. and EchoStar Communications Corp.

He added that Fox Sports would be willing to defer payment
of the additional games until next year to allay Time Warner's concerns that the
additional fees were not originally in the MSO's yearly budget.

"Negotiations have been ongoing [with Time Warner for]
close to four months, but we have been unable to reach an agreement," D'Ermilio
said.

In an effort to appease subscribers in the area, Fox Sports
Net set up viewing parties at several bars for its Feb. 20 and 21 Spurs telecasts. Sources
close to the situation said Time Warner is expected to follow suit and set up places for
subscribers to see the lost games.

"Our division people are handling it and doing
whatever they can for the customers," Yaeger said. "We want to make sure the
customers are satisfied."

She added while the MSO is aware that there may be some
upset subscribers, it is trying to protect the majority of subscribers from having to pay
extra for the games.

"I'm not as concerned about the backlash from the
small group of people who want to see the games as much as I am about the larger base of
subscribers who would really not appreciate having to subsidize the cost of these
games," she said.

Time Warner has been playing hardball with a number of
programmers during the past few months.

For example, the MSO has been vocal in its opposition to
being asked to launch new cable networks in exchange for retransmission consent. Time
Warner is in the midst of negotiations with The Walt Disney Co. and its ABC-owned TV
stations for retransmission consent, but those talks are reportedly stalling over
Disney's attempt to gain carriage for its new channel, SoapNet.

The MSO is also negotiating with Hearst-Argyle Television
Inc. for retransmission consent for its TV stations, which the broadcaster has tied to
contract extensions and license-fee increases for Lifetime Television and the launch of
Lifetime Movie Network. Hearst Corp. and Disney jointly own Lifetime.

As talks between the MSO and broadcasters continue, Time
Warner has obtained retransmission-consent extensions from both Disney and Hearst-Argyle,
both of which expire this week.

In addition, sources said, Time Warner's
corporate-carriage deals with a handful of programmers have expired, prompting officials
at those cable networks to gripe.

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