Fox Accuses Cablevision of Encouraging Theft in Increasingly Rancorous Dispute

Sends cease and desist letter after report that the cable operator recommended illegal sports Web sites.

UPDATED 5:40 p.m. Tuesday, Oct. 26, 2010

NEW YORK -- The carriage showdown between Cablevision and News Corp.'s Fox became more heated Tuesday thanks to a cease-and-desist letter from Fox and a Hail Mary play by Cablevision CEO James Dolan as the clock ticked down to the start of the World Series.

Sources said that, barring a restart of talks and an unlikely last-minute agreement that would bridge a big gap, tonight's Game 1 will not be available in Cablevision homes in the New York area. Cablevision lost select Fox programming, including two Fox TV stations that air Major League Baseball and NFL games, more than 10 days ago because of a carriage-fee dispute.

Fox sent a cease-and-desist letter to the cable operator demanding that it stop "encouraging theft of copyrighted material" as Fox stations and networks signals remain dark in Cablevision homes. The New York Daily News reported Tuesday that a Cablevision customer-service representative had directed a caller, who is a Fox employee and taped the call, to two websites that show Fox-aired sporting events without having rights to do so.

Meanwhile, Dolan made an eleventh-hour play in a possible attempt to sway public opinion or gain momentum in the dispute. He sent and published a note to FCC chairman Julius Genachowski late Tuesday requesting that the chairman call a meeting for today between the Cablevision boss and News Corp. president and COO Chase Carey in the FCC's Washington office to ensure Cablevision customers can watch the World Series on Fox.

"Based on the negotiations to date, I can assure you that only with your assistance in bringing the parties together in your office will productive, good-faith talks occur," Dolan said. He promised to bring "new, constructive offers, prepared to reach agreement [today]."

A Fox spokesman called the letter a publicity stunt. Given that the companies haven't reached out to each other with new proposals in days, the statement likely is as much a public-relations play as an attempt to force Fox to submit to intervention from Washington, something it has consistently declined to do, arguing that an agreement should be reached without government involvement.

Even so, observers have argued that the FCC has no real authority to intervene beyond reprimanding or fining the parties involved if they haven't negotiated in good faith.

"It's encouraging that Cablevision has a new 'constructive offer' and is prepared to negotiate in 'good faith,' " a senior FCC official said late Tuesday. "But they should spend less time writing publicity-seeking letters to the FCC and more time at the negotiating table reaching an agreement. Consumers deserve no less, and the law demands it. That's the only way to get programming back on the air. By now, the message from the FCC should be crystal clear: Stop the stunts and start negotiating."The agency previously suggested that the two parties bring in an independent third-party mediator.

Meanwhile, Fox on Tuesday again called on Cablevision to "return to the bargaining table and resume constructive negotiations."

In a note on its cease-and-desist letter, Fox had said: "Copyright law exists to protect the very creative freedoms that fuel our industry. As both a creator and owner of intellectual property, not to mention major sports franchises, Cablevision knows better and should immediately call an end to this unlawful activity."

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Cablevision didn't comment on the allegations but said the letter was "an obvious tactic" from Fox "to shift focus from their pulling the plug on 3 million New York households." It added, "Fox should cease and desist its World Series blackout, put its programming back on Cablevision and agree to binding arbitration."

According to the Daily News, the customer-service rep in the taped call also said Cablevision has a team that is "trying to find things online for free" in case customers ask about ways to get Fox content.

In its letter to Dolan, Fox said the cable operator is "inducing and materially contributing to the infringing activities of these illegal websites."

Meanwhile, the companies had until end of business Tuesday to submit responses with the FCC to the other party's Monday filing with the government agency about the negotiations to date. The FCC had no comment beyond saying, "We will review the submissions and continue to monitor the situation."

Fox said it was "confident that the FCC will review the information before the commission and find that we have acted with the utmost good faith."

Although the Fox-Cablevision negotiations have been on hiatus since the middle of last week, Fox is continuing talks with satellite TV giant Dish Network.

Dish lost some Fox cable networks at the beginning of the month in another carriage dispute, with the company's deal for Fox TV station signals expiring at month's end. "We are still negotiating," a Dish spokeswoman said.

Sanford C. Bernstein analyst Craig Moffett said in an investor note Tuesday that Dish's focus on budget-conscious consumers has been a challenge amid the weak economy and struggling housing markets and makes it hard for the firm in carriage talks. Fox's demands for higher fees "are obviously problematic at a time when the bottom 40% of households have virtually no disposable (after-necessities) income," he wrote.

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