Industry insiders claim Sky plans to slash the amount of subscription revenue it gives to Flextech when a five-year transmission deal runs out in January.
In response, Flextech is threatening to make the channels free-to-air, even though subscription currently makes up 40% of its revenue.
The fallout is the latest chapter in an increasingly torrid relationship between Sky and the cable company - soon to be rebranded under the Virgin Media label - after its coming together with Richard Branson's Virgin Mobile.
Sources claim the deal proposed by Sky would drastically reduce the amount it pays for the cable company's channels, although it is understood it has agreed a deal with UKTV, whose channels are jointly owned by Flextech and the BBC.
NTL's chief executive of content, Malcolm Wall, is believed to be heading negotiations.
Flextech has a limited presence on Freeview and has preferred the subscription model. However, as capacity becomes available, Flextech could move them onto Freeview.
Channel 4 has shown its faith in the free-to-air model by moving E4 and Film4 onto Freeview. NTL has plans to drive revenue for its content through a quadruple play offering under Virgin Media.
A Sky spokesman said: "We negotiate agreements with channels all the time and they take place in private. Discussions are ongoing."
This article was first published on Media Week