Fox Sports and ESPN claim that Verizon FiOS is violating programming contracts by relegating sports channels to optional TV bundles, but Verizon has pressed ahead with its new bundles anyway.

Verizon's Custom TV bundles, which became available two days ago, let FiOS customers buy a basic cable TV package with or without sports channels. With Custom TV, customers get 34 channels plus the choice of two channel packs. ESPN, Fox Sports, and other sports channels are available in the sports-themed packs, so customers don't have to pay anything extra to get them. However, customers could instead choose other channel packs, such as lifestyle or pop culture, and avoid the sports channels altogether.

ESPN and Fox say this violates their contracts with Verizon, but Verizon disagrees.

"We reject Verizon’s view that it can pursue the new packaging scheme it announced yet still comply with our agreements," Fox Sports said, according to Multichannel News. "That said, we prefer to keep our commercial discussions confidential, and we will continue to address our concerns directly and privately with Verizon."

ESPN said the new packages “would not be authorized by our existing agreements. Among other issues, our contracts clearly provide that neither ESPN nor ESPN2 may be distributed in a separate sports package.”

The dispute first cropped up Friday, and Verizon defended itself today. While speaking to investors on today's quarterly earnings call, Verizon CFO Fran Shammo was asked if the company has explicit permission from programmers to offer the channels in this way. He did not answer directly, but made it clear that Verizon believes it can offer Custom TV without violating contracts.

"This is a product the consumer wants, it's all about consumer choice," Shammo said. "If you look at TV bundles today, most people on average only watch 17 channels, so this is a way to give consumers what they want on a choice basis, and we believe that we are allowed to offer these packages under our existing contracts, so we'll leave it at that."

Verizon

Verizon

Verizon's Custom TV is just a small step toward à la carte pricing, in which customers can pick and choose what channels they want. FiOS customers still have to buy channels in bundles, making it likely they will pay for channels they never watch, and the prices are not much different from FiOS plans that already existed. One benefit for non-sports fans is that a $5-per-month regional sports network fee is applied only when you buy the Sports Plus package.

The reaction from ESPN and Fox shows how difficult it would be to fully break up traditional pay-TV bundles, as programming contracts limit cable TV providers' ability to sell channels individually instead of in groups. The contracts also make it hard to ditch cable TV and go Internet-only, particularly for sports fans. Online streaming of sports channels such as ESPN requires a cable TV subscription, and contracts with regional sports networks that show local games often include Internet blackout provisions that prevent fans from watching the local teams online.

While Verizon appears willing to pick a fight with sports broadcasters, other pay-TV companies have little incentive to do so because they own the sports networks. Comcast, the largest pay-TV provider, owns NBC Sports and numerous regional sports networks, providing a financial incentive to limit online availability of sports games. Time Warner Cable also owns regional sports networks and has been involved in a long-running contract dispute with other pay-TV providers that has prevented many Los Angeles Dodgers fans from watching the team's games.

UPDATE: The Comcast-owned NBCUniversal has joined Fox and ESPN in saying Verizon's new bundles violate their programming contracts, The Wall Street Journal reported.