Dec. 30 NEW YORK– Although both sides say they will negotiate up until the deadline of Midnight tonight News Corp. (NWS) said it’s unlikely to reach an agreement with Time Warner Cable (TWC) and expects to pull Fox broadcasting from the cable system when their deal expires tomorrow.

The two sides have been unable to come to terms since midyear, said Fox Chief Operating Officer Chase Carey . Time Warner Cable would accept federal mediation, Chief Executive Officer Glenn Britt wrote in a letter to U.S. Senator John Kerry of Massachusetts, a proposal News Corp. rejected.

“We deeply regret that millions of Fox customers will be deprived of our programming,” Carey said today in a memo to employees. “We need to receive fair compensation from Time Warner Cable to go forward.”

Firing back, Alex Dudley, a Time Warner Cable spokesman is quoted as saying “Fox isn’t looking for fair compensation and we too are prepared to be without the Fox signal”. He also went on to say “We hope Fox doesn’t punish our customers, but that decision is up to them.”

The media mayhem centers on the pricetag that News Corp. is expecting to receive from Time Warner, the second largest cable operator in the U.S.for the Fox programming with includes the NFL, NCAA Football, Major League Baseball, and of course, “American Idol”, the #1 most watched Network TV Series.

Carey said, “Fox has attracted the biggest 18-to-49 age audience, a group that advertisers target, since 2004. Fox can’t continue to operate at the same level with only advertising revenue”.

As an alternative to arbitration, Time Warner Cable would like to enter into an interim agreement to continue carrying Fox programs including football games on New Year’s Day and beyond, Britt wrote. Fox’s Carey ruled out an extension in the memo.

Per Subscriber Cost

News Corp. has asked Time Warner Cable to pay as much as $1 a month per subscriber for rights to Fox, home of “The Simpsons,” Rumors around the negotiations say that Time Warner Cable favored about 20 cents. The talks are not open to the public, so these numbers are from anonymous sources.

News Corp., the New York-based media company controlled by Chairman and CEO Rupert Murdoch, fell 6 cents to $13.91 at 4 p.m. New York time in Nasdaq Stock Market trading. Time Warner Cable dropped 60 cents to $41.83 in New York Stock Exchange composite trading.

Scott Grogin, a spokesman for Fox, had no comment on the arbitration offer. FCC officials are declining any comment on whether or not there would be an arbitration.