UPDATE 2-DirecTV in dispute with Comcast over sports cost

(Adds Comcast response, background)

By Yinka Adegoke

NEW YORK, Jan 7 (Reuters) - DirecTV Group (DTV.O) said on Wednesday it has advised Comcast Corp (CMCSA.O) it plans to file for arbitration in a dispute over rate increases to carry Comcast's sports networks in New England and the San Francisco areas.

Executives from DirecTV, the largest U.S. satellite TV provider, said Comcast is asking for increases of 25 to 40 percent for its subscribers to be able to view games of teams like the National Basketball Association's Boston Celtics and National Hockey League's San Jose Sharks.

The dispute could impact nearly 2 million DirecTV subscribers and also includes programming for other sports franchise like the San Francisco Giants and Oakland Athletics baseball teams and the Golden State Warriors basketball team on the Bay Area sports network.

But executives at both companies said it was likely the two sports TV networks would remain on air for fans during the arbitration process.

Derek Chang, executive vice president of content strategy at DirecTV, said the increases were several times above normal market rates.

Chang said it was ironic that Comcast, the No. 1 U.S. cable operator, was charging "above market" rates for its sports programming as Comcast has been vocal about the rising costs of sports networks.

"It's somewhat astounding that they can have two polar opposite views on the same topic," said Chang.

He said Comcast is trying to charge 40 percent more for a third less programming on the Bay Area network by dropping games of the Oakland A's and San Jose Sharks.

Comcast SportsNet Tim Fitzpatrick spokesman said those two teams are in talks to move their games to another Comcast Sports Network based out of Sacramento, California alongside basketball franchise Sacramento Kings.

The Philadelphia-based company said that DirecTV has undervalued the investments it has made in expanding the original programming and services on the networks.

"We continue to negotiate in good faith and have put a fair offer on the table that reflects the growing value of our networks, the investments we have made in them, and is reasonable based on market trends," said Fitzpatrick.

DirecTV said though it has sent notice of its intention to go to an independent arbitrator, under a process mandated by the U.S. Federal Communications Commission, it may continue to negotiate on terms with Comcast during a two-week cooling off period. Programming must remain on air during that period.

But after two weeks there is a formal demand for arbitration which includes a final offer which would take place toward the end of the month.

The arbitrator could issue his or her decision within 30 days from the date that he or she is appointed but it could run on for several months. (Reporting by Yinka Adegoke; editing by Richard Chang)