UPDATE 1-Gannett, Dish dispute could black out channels

* Dish says Gannett wants it to shut down Hopper DVR

* Gannett source says it never asked Dish to disable Hopper

* Source says dispute is over fees, not Hopper

(Adds Gannett source over Hopper's role in dispute, interviewwith Dish exec)

By Liana B. Baker and Sruthi Ramakrishnan

Oct 5 (Reuters) - Gannett Co Inc and the DishNetwork Corp are sparring over fees that could leaveDish customers blacked out from major networks on Sunday in afight the No. 2 satellite TV provider said involves itscontroversial DVR, the Hopper.

Dish Network Corp said Gannett has threatened toblock its channels in 19 cities if Dish does not block thecommercial-skipping feature on its digital video recorders oragree to pay massive penalties.

Dish introduced a DVR called the Hopper earlier this yearwith an "autohop" function that allows subscribers to skipcommercials automatically when they are watching recorded shows.

Dish maintains that the product is something consumersdesperately want. But CBS and fellow broadcasters -- Disney's

ABC, Comcast's NBC, and News Corp'sFOX -- argue that Dish, led by chairman Charles Ergen, isundermining the networks' key source of revenue: advertising.Gannett owns local TV stations that broadcast NBC, ABC and CBS.

A person at Gannett with direct knowledge of negotiations,who did not want to be named because the discussions are notpublic, said that while the business implications of the Hopperwere part of negotiations, the Hopper is not at the center ofthe dispute, as Dish is claiming.

"Nothing in the negotiations requires Dish to disable theHopper," the source said.

The source said the fight is over fees that Dish must payGannett for the rights to carry its TV stations, which is alsoknown as a retransmission consent agreement.

Dish's senior vice president for programming, Dave Shull,told Reuters that Gannett "has been very clear that they wouldlike us to reduce the consumer choice by removing the auto hopfeature in the Hopper."

He added that Gannett is trying to charge Dish a"significant penalty" to allow customers to use the autohopfeature to skip commercials and that Gannett had included thesedemands in documents.

If Gannett Broadcasting lets the current broadcastingcontract expire without renewal, Dish customers in 19 citiesincluding Atlanta, Washington D.C., Denver, Minneapolis,Cleveland, Phoenix and Sacramento would lose various ABC, CBSand NBC-affiliated stations, Dish said in a statement.

"Gannett's demands translate into more than a 300 percentrate increase, which would likely result in higher monthly feesfor consumers," Dish said.

Dish says it has offered to pay Gannett market rates,including an increase of more than 200 percent above currentrates, and offered to extend the transmission contract duringnegotiations, which Gannett has refused.

Gannett said in an emailed statement that GannettBroadcasting has worked hard to reach a fair agreement withDish, but Dish has refused to reach a fair, market-based deal. AGannett spokesman declined to comment on the specific feeincreases being negotiated.

"If Dish refuses to reach a deal before midnight, Oct. 7,Dish subscribers could lose their local Gannett station andaccess to some of the year's best programming," Gannett said.

Gannett said it is committed to continue negotiations withDish till the Oct 7 deadline and that an agreement is possible.

Other cities that could be affected by a blockage are St.Louis, Little Rock in Arkansas, Tampa and Jacksonville inFlorida, Macon in Georgia, Bangor and Portland in Maine, GrandRapids in Michigan, Buffalo in New York, Greensboro in NorthCarolina, Columbia in South Carolina, and Knoxville inTennessee, Dish said.

In August, Fox Broadcasting Co asked a court to put a stopto two features on Dish's new digital video recorder that letconsumers skip commercials because it is hurting the TVnetworks' business.

Dish shares were down 0.4 percent to $32.14 in afternoontrading on Friday, while Gannett shares were up 0.8 percent to$18.47.

(Reporting by Liana B. Baker in New York Sruthi Ramakrishnan inBangalore; Editing by Muralikumar Anantharaman and Tim Dobbyn)

((sruthi.ramakrishnan@thomsonreuters.com)(Within U.S.+1 646 2238780, outside U.S. +91 80 4135 5800)(Reuters Messaging:sruthi.ramakrishnan.thomsonreuters.com@reuters.net))