BY MAVIS SCANLON It was at last week’s National Cable & Telecommunications Association show in Chicago, behind closed doors, that Time Warner Cable first told executives from the YES Network that it planned to offer YES on an a la carte basis to its 1 million-plus customers in the New York area. TWC wanted to take advantage of a clause in its ten-year contract with YES that allowed it to offer the network on the same terms that YES gave to other cable operators. So when Cablevision Systems and YES Network resolved their own bitter carriage dispute in April and signed a one-year deal that gave Cablevision the right to offer the network on a separate tier, TWC attorneys got busy examining their own YES contract. Late Thursday, TWC said that effective July 29, it would allow customers with standard service to drop the YES Network, lowering their monthly bills by $1. Customers who want the network will pay $1 more than those that opt out. A legal battle is now brewing between TWC and YES, which asserts the change made by the big operator is outside the parameters of the most- favored-nation contract provision TWC invoked to make the change. Not only is the price TWC is charging different from Cablevision’s $1.95 price, or $4.95 for its sports tier, TWC subscribers have to opt out, which may reduce defections. By early Friday afternoon, YES had already sent a breach of contract letter to Time Warner, according to a YES spokesman. TWC, for its part, declares it’s all about giving their customers more viewing options. “We’re trying to give people choices and trying to do it at a very fair rate, which is why we established the tier at $1,” said Tom Baxter, president of Time Warner Cable. The simmering hostility underscores the growing tension between distributors and programmers over the question of a la carte programming, and sets the stage for some prickly negotiating sessions when TWC’s contracts with MSG and Fox Sports New York expire. Looming over the whole situation, of course, is the ongoing battle between sports heavyweight ESPN and virtually the entire cable industry. Barry Rosenblum, president of TWC New York City, says contracts with MSG and Fox Sports New York are both up for renewal over the next six to 12 months. TWC hopes to add the two regional sports networks to a tier at that time, but, as Rosenblum concedes, those contracts currently do not give TWC the right to tier the networks. For now, Time Warner is unlikely to back down, which may have implications for its future negotiations with all the sports networks. “We’ll just have to see how things evolve,” said TWC president Baxter. “Ultimately we believe the right business model is for expensive sport services to be offered on tiered basis.” Under the terms of Cablevision’s YES contract, Cablevision is required to make up losses suffered by YES over their one-year contract if other operators trigger most-favored-nation clauses. Cablevision declined to comment. Comcast, which offers YES in northern and central New Jersey, still offers YES in its standard package.