CBS and Time Warner Dispute Could Leave NYC Residents High and Dry

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The dispute over the fees that CBS Corp. (NYSE: CBS) charges Time Warner Cable Inc. (NYSE: TWC) will come to a conclusion of some sort this Wednesday. One outcome floated by the cable operator is that Time Warner will tell its 3 million New York City customers that they may choose Aereo to provide their CBS feed for a fee of $8 a month.

If that happens, it will put more pressure on the CBS and the other broadcast networks that are currently fighting Aereo’s service in court. Aereo uses a small antenna assigned to a specific subscriber to grab over-the-air network signals from broadcast networks and then re-sell the signals as an Internet stream to its subscriber. The company is partially backed by IAC/InterActiveCorp (NASDAQ: IACI) chairman Barry Diller.

Time Warner Cable has said that CBS is seeking a 600% increase to its retransmission fees. The cable operator is getting support in its fight from a consortium called the American Television Alliance, which includes as members DirectV (NASDAQ: DTV), Verizon Communications Inc. (NYSE: VZ), and Cablevision Systems Corp. (NYSE: CVC).

As competition from Internet over-the-top services threatens both broadcast and pay TV services, it’s interesting to see how the battle between Aereo and the broadcasters is shaping up. One might expect DirecTV and Cablevision to jump on the Aereo bandwagon, but Verizon’s participation is not so clear cut. The thinking there has to be that moving subscribers toward a streaming model supports Verizon’s own model, at least in the mid- to long-term. Like we said, interesting.