A Cord Cutter’s Dream: What happens if Aereo wins in the Supreme Court?

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On April 22nd, American Broadcasting Companies, Inc. v. Aereo, Inc. will be heard in the Supreme Court and if Aereo should prevail all hell will break loose.

Aereo offers a service that takes all the local broadcast channels and streams them to your mobile devices for only $8 per month. In the Boston area this would provide you with all the major networks and a collection of other independents and affiliates amounting to about 35 channels.

"Individual" antenna? Aereo's fate depends on this

“Individual” antenna? Aereo’s fate depends on this idea.

The big problem is that Aereo doesn’t pay a cent for their content. Nope, they just take it off the air for free. Comcast, Time Warner Cable, etc don’t have this advantage. They must pay re transmission fees, and that is what in part makes Pay TV so expensive. Recall the recent battle that TWC had with CBS.

So what could happen if Aereo wins? Here are a few of the possibilities:

1. Aereo gains major publicity and successfully expands across the US.
  Aereo apparently has their hopes up with plans to expand to 19 new cities already. And Aereo has been avoiding the western US  for legal reasons. The supreme court could change that.

 

2. Cable operators refuse to pay re-transmission fees.
Why should they pay for what Aereo gets for free? I know it all has to do with Aereo’s “individual” antennas, but that’s not rocket science. Comcast is perfectly capable of making the same thing.

 

3. Broadcasters flip the switch on Aereo by shutting down OTA.
Well maybe. The major networks for example could go Cable only in major metro areas. This would be a kind of scorched earth approach as it inflicts pain on affiliates and the networks themselves.

4. Aereo clones emerge.
Given the go ahead from SCOTUS , multiple Aereo’s could pop-up over night.  And since Netflix already has the infrastructure in place couldn’t they do this without help from Aereo?  The original Aereo could go the way of Napster after having paved the way.

Well these are just a few of the possibilities. Now to speculate, I think Aereo will lose. I personally don’t buy the argument that each consumer has an individual antenna. Nonsense and here is my technical argument:

Put up one giant antenna, carefully amplify and split that signal over coax cables and you have have the originals of Cable TV in the US.  So now Aereo has thousands of dime sized antennas that feed the Internet with individual streams.  What you end up with is the same thing by a different technical method. Aereo looks like a Cable operator to me.

In any case the ramifications of this case are enormous on the industry.  I’ll be watching.

 

 


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14 Comments » for A Cord Cutter’s Dream: What happens if Aereo wins in the Supreme Court?
  1. Len Mullen says:

    Most people do not understand the Aereo proposition. The Supreme Court is not going to rule that Aereo can rebroadcast without paying a retransmission fee. That, as they say, is settled law. The SC is going to rule WHETHER Aereo is rebroadcasting at all. If the court finds that Aereo is rebroadcasting, then Aereo will need to license content just like the cable companies. If the court finds that Aereo is simply leasing an antenna to a customer, there is no law against that. In fact, it was common in the early days of television for communities to erect repeaters to improve reception in a valley or behind a hill.

    None of this has any impact on the cable companies’ requirement to pay retransmission fees. I think a more reasonable comparison would be to satellite companies that erect an antenna for reception of local channels then integrate that signal into their programming. That, of course, was never challenged and no retransmission fees were ever paid.

    In my opinion, that is the basis of the case and the court should rule that it is legal for Aereo to lease antennas and DVRs.

    The implications of an Aereo win are not clear. I think there are a couple likely outcomes…

    1) Aereo branches out and the reach of broadcast tv extends dramatically. This accelerates cable cutting, streaming, and a resurgence of ad supported television
    2) Google or Amazon buy Aereo to add local programming to their streaming products.
    3) Comcast improves and lowers the cost of basic programming.

    I think the third outcome is most probable.

    Aereo will not be widely adopted because it’s not inexpensive and it’s not very good. You have to have a good network connection. You need to buy hardware for each television. You end up paying $8 per month for each set. There is no continuous programming. DVR space is too limited.

    Cable retransmission fees are not related to this court case.

    Broadcasters will not shut down OTA channels because 1) they are profitable, and 2) there are alternatives to the networks. Syndicated programming and clones of network reality programming would be less expensive and nearly as popular as what airs now. Look at the top ten programs…

    1 CBS NCAA BSKBL CHAMPSHIPS(S) CBS 12.4 21,196
    2 NCIS CBS 11.1 17,392
    3 THE BIG BANG THEORY CBS 10.0 16,288
    4 NCIS: LOS ANGELES CBS 9.3 14,560
    5 DANCING WITH THE STARS ABC 9.3 14,467
    6 CBS NCAA BSKBL CHMP-PRE-2(S) CBS 7.3 12,015
    7 VOICE NBC 7.2 11,966
    8 BLUE BLOODS CBS 7.1 11,051
    9 VOICE-TUE NBC 6.9 11,085
    10 60 MINUTES CBS 6.8 10,987

    Syndicated programming is not much worse…

    1 JUDGE JUDY (AT) CTD 7.2 9,908
    2 WHEEL OF FORTUNE CTD 6.8 10,611
    3 JEOPARDY (AT) CTD 6.7 10,435
    4 BIG BANG-SYN (AT) WB 6.0 9,119
    5 FAMILY FEUD (AT) 2/T 4.9 7,306
    6 LAW & ORDER:CI-WKL (AT) NBU 4.3 5,632
    7 MODERN FAMILY-MF-SYN (AT) 2/T 4.2 6,060
    8 BIG BANG WKND (AT) WB 4.1 6,457
    9 MODERN FAMILY-WK-SYN (AT) 2/T 3.6 5,461
    10 ENTERTAINMENT TONIGHT(AT) CTD 3.5 5,112

    Cable trails far behind…

    1 GAME OF THRONES HBOM 3.5 6,310
    2 WWE ENTERTAINMENT (WWE RAW) USA 3.3 5,313
    3 WWE ENTERTAINMENT (WWE RAW) USA 3.2 5,094
    4 WWE ENTERTAINMENT (WWE RAW) USA 3.1 5,032
    5 WMNS NCAA BKBL CHAMP L (ND/CT) ESPN 2.8 4,271
    6 REAL HOUSEWIVES ATLANTA BRVO 2.6 3,816
    7 PAWN STARS HIST 2.5 3,692
    8 WATCH WHAT HAPPENS LIVE BRVO 2.4 3,506
    9 AMERICAN PICKERS HIST 2.3 3,543
    10 BREAK HBOM 2.1 4,018

    It’s easy to imagine broadcast television without ABC, CBS, Fox, and NBC.

    I think there are some significant barriers to market entry. I’m not sure Aereo is very profitable. I don’t expect to see their hardware cloned and even Aereo has not had a lot of success with the software. I think they well may be a national niche.

    • Greg says:

      Such a thorough response Len. We agree on a lot and you know Aereo better since you actually have the service.

      But don’t you think the re-transmission fee comes in to play at least indirectly? Many argue that what Aereo has done is just a legal loop-hole, and I kind of agree. Couldn’t Comcast then apply the same technical trick?

      Of course that would be a lot of dime sized antennas….

      • Len Mullen says:

        Like I said, the question is whether Aereo’s business is re-transmitting programming or leasing antennas. I would be shocked if the decision is broader than that simply because it would have such unpredictable consequences. I expect the SC to rule that Aereo is leasing antennas simply to make up for all the anti-consumer rulings by the librarian of congress over the past three years.

        I could be wrong. Just ask my wife. I didn’t think Obama would be elected even once. So don’t go by me.

        • Augustine says:

          While i hoot for Aereo, they are betting on splitting legal hairs, as yet another typical example of laws and regulations in this country. The direction that if really like to see this suit go is the questioning of how a broadcast signal, using spectrum granted by the government, is free to some but not to others, a blatant case of unequal treatment by the law.

          It’s actually absurd that a retransmitted broadcast signal, even if for pay, be subject to fees. In many other countries this is illegal and does not subtract revenue from networks, on the contrary, as it extends the range of the signal to a greater audience at no cost for them.

          Of course, this might be the case in market economies, but in this neo-mercantilist economy and with a corporatist state, which the SC is party of, it’s easier that heck freezes over.

        • Consider what you say is the question that’s a very tricky one. What is exactly the difference between re-transmitting and leasing antennas? The end result is the same?

          Edit 4-20-14
          Here are 2 quotes on either side that preview interesting arguments:

          PRO BROADCASTER
          The Obama administration is siding with the broadcasters. Even though individual viewing decisions are made by Aereo customers, the overall mechanism for collecting and transmitting the selected programs was set up by Aereo, government lawyers say.

          PRO AEREO
          A friend of the court brief filed by students and professors at Southwestern Law School in Los Angeles argues that the Aereo innovation “is a healthy free-market response to a dysfunctional and anticompetitive television distribution system.”

          The broadcast companies first gained their access to the public airwaves with a promise to serve the public by providing advertiser-supported programming that would be offered free to the public.

          As long as the broadcast companies continue to use the public airwaves, they must uphold their end of the bargain by supporting the wide accessibility of broadcast television, Michael Epstein, a law professor at Southwestern Law School, says in his brief.

          • Len Mullen says:

            Everything. There is lots of precedent for people paying to receive broadcast television via equipment owned by others.

            – If I rent an apartment and there is an antenna on the roof and a cable in my living room, the landlord is renting an apartment with an antenna not re-transmitting programming.

            – DirecTV leases a box that takes a signal from the air and integrates it into your DirecTV program guide. You pay a premium for that equipment and do not own it.

            – TiVo streams broadcast television over ethernet to other televisions. TiVo charges a monthly fee for this service — one fee for the transmitter and another fee for the receiver.

            If you read the FCC FAQ on Must Carry, it’s clear it does not apply to Aereo…

            http://www.fcc.gov/guides/cable-carriage-broadcast-stations

            Note that 1) the requirement for cable carriers is specifically documented, and 2) that this was added to the fcc rules as a matter of fairness to broadcasters who were singularly required to abide by the rule until 1992.

            The fcc would have to amend their rules again for them to apply to re-transmitters who are neither broadcasters not cable carriers. The problem with changing the law to include Aereo without specifically naming the company is in the use cases I cited above. Any law would be unenforceable and Aereo could say they are being targeted.

          • Greg says:

            Why is it so obvious that it does not apply to Aereo? As I’ve stated I think one argument will be that Aereo is in essence a cable operator using a new technology. There is a lot of discussion in this case and the precedents about a “public” vs “private” performance. Opinions of individual judges (see the Utah case) have varried.

            Don’t get me wrong I actually hope Aereo wins. I’m also disappointed that the Obama administration seems to have taken the pro corporate side. At best they should have remained neutral.

  2. I have been a subscriber of aereo for a few months now… Love it… Hoping for the best outcome …

    • Greg says:

      How do you like the interface? Is changing between programs quick? Or is it more like switching between one Netflix program and another?

  3. I find using it on my iMac is smoother than on my iPhone. I am NOT a fan of trying to fast forward on the iPhone. Switching between programs is pretty quick in my opinion… nothing like an interface of Netflix. You have a guide (like comcast or verizon) find the station, or show you want, click on it… and another menu will come up if you want to watch or record.. pretty darn easy to use…

  4. Len Mullen says:

    @ greg re: why is it obvious…

    fcc: Since 1934, broadcast stations that use the programming of other broadcast stations have been required to obtain the prior consent of the originating station. This requirement was made applicable to cable systems because the absence of this requirement was distorting the video marketplace and threatening the future of over-the-air television broadcasting. This law treats broadcasters the same as other programming services carried by cable systems.

    note that the law applies to broadcast stations and did not extend to cable companies until the law was changed to specifically apply to cable systems. Aereo is neither.

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