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Time Warner Cable gives CBS two options to end blackout

The cable giant offers CBS an either/or route to resolve their fee dispute and resume carriage of its network, with digital rights, online content, and TV Everywhere among the levers TWC is pulling.

An CBS ad on a large screen in Times Square
A CBS ad in New York's Times Square blames Time Warner Cable for CBS programming -- like the PGA Tour -- being dropped for some subscribers. CBS

Time Warner Cable proposed an immediate end to a three-day blackout of broadcast network CBS for consumers in some cities and channels like Showtime for subscribers everywhere by offering two options, neither of which CBS welcomed.

One would crimp the fee increases CBS is fighting for but would limit TWC's digital rights, and another would let CBS set prices for its channels and allow consumers to pick and choose what to pay for, known as a la carte. Time Warner also blasted the media giant for blocking online content.

CBS called the proposal a sham and a distraction.

The latest interchange in the heated dispute between the two companies underscores how the digital side of the business, including demands for television to be available in more ways than the traditional cable bundles, has changed the dynamics between broadcaster and distributor.

In a letter Monday to CBS Chief Executive Les Moonves, Time Warner Cable CEO Glenn Britt said his company would agree to resume carriage of CBS under the conditions "TWC reluctantly agreed to" during their negotiations, which would mean a much lower level of fees than CBS is seeking but also fewer digital rights for Time Warner.

The alternative, Britt said in his letter, was resuming CBS and its cable stations -- Showtime, Smithsonian, TMC, and FLIX -- as a la carte options. It would mean subscribers could see how much each channel costs and decide which ones to get, with all of that money going to content creator CBS.

Later Monday, CBS said the "so-called proposal is a sham" and an "empty gesture" designed to "distract from the fact that Time Warner Cable is not negotiating in good faith."

"Anyone familiar with the entertainment business knows that the economics and structure of the cable industry doesn't work that way and isn't likely to for quite some time," CBS said in its statement.

Programmers are widely opposed to an a la carte option, as it undermines their "bundling" practice that lets them develop content for less-watched channels because they package it with the highly popular networks that distributors know subscribers expect.

At the same time, the fees at the core of CBS' standoff with Time Warner -- retransmission consent fees -- are an important stream of revenue that broadcasters have worked to increase at every opportunity.

The cable giant's chief also rebuked CBS for blocking online content to people who connect to the Internet with Time Warner's broadband service, even if they're not video-service subscribers.

"It is certainly beyond the pale for you to subject these Internet customers to blocking of content that is made available for free to all others," Britt said in his letter. "This conduct is abhorrent in that CBS is using this blocking to punish TWC's Internet customers across the country, including millions of consumers in cities where we continue to carry CBS on our cable systems."

The companies had been hashing out a new carriage agreement under extensions to their old pact, which expired June 30, until they parted ways without a deal on Friday. The core issue is the level of retransmission fees Time Warner Cable must pay CBS to carry its flagship broadcast network. Their impasse Friday resulted in CBS being dropped from Time Warner's lineup in New York, Dallas, and Los Angeles and cable networks like Showtime going dark for all its subscribers.

Updated at 2:52 p.m. PT with CBS responses to the proposals.