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Broadcasters bring Aereo to Court
The future of the cloud-based television service Aereo will be determined by the United States Supreme Court. Last week, the Court heard arguments from lawyers representing broadcasters who claimed that Aereo violates copyright law. Lawyers representing Aereo vigorously defended the service, claiming that it leases innovative technology that allows viewers to access content which is available free-of-charge on the DTT platform. Alarmist rhetoric has been used by both sides with some broadcasters threatening to remove their content from the DTT platform should Aereo continue to operate while Aereo and its proponents have claimed that a decision against Aereo could threaten the future of cloud computing.
During the hearing, the justices of the Supreme Court tried to understand the distinction as to why Aereo was not a cable system governed by cable regulation. They noted that Aereo technology was designed to circumvent copyright law while also expressing concern about the impact of a decision on cloud computing. Ultimately, however, the Court’s decision will hinge on the Justices’ interpretation of one clause of the Copyright Act of 1974 and whether they determine Aereo to be a public or private performance. A Supreme Court decision is not expected until June.
Aereo service offering
Subscribers to the Aereo service can access local television services available on the free-to-air DTT platform using an antenna, the size of a small coin, located at an Aereo facility. One antenna is assigned to each subscriber as well as a hard drive which is used to record the content selected by the subscriber. The content is then delivered to the subscriber’s web-connected television set, computer or mobile device. Aereo offers the streaming of television content as well as remote storage services at a cost of $8 to $12 per month. As a comparison, the average monthly cable bill in 2011 was $86 and has since increased.
Aereo launched in New York City in February 2012 and has since rolled out to 10 additional cities. Further expansion is planned depending on the outcome of the Supreme Court decision. Subscriber figures have not been published but are believed to be relatively low.
All of the major broadcasters in the United States, including Disney (ABC), CBS, Fox, Comcast (NBC and Telemundo), Univision and PBS, have joined in the legal challenge against Aereo. According to these broadcasters, the Aereo service is a “blatant and unapologetic copyright infringement.”
The Copyright Act of 1976 protects all “public performances,” whether the performance is direct (i.e. a concert or play) or indirect (i.e. the transmission of a performance by means of a device or process). However, viewers are permitted to record television content for their own personal use. This had been determined by the Supreme Court in a case from 1984 when Hollywood studios had unsuccessfully challenged Sony and its Betamax device.
More recently, broadcasters and Hollywood studios have challenged the cable operator Cablevision and its remote DVR offering. Rather than storing content locally on the viewer’s device, content is stored remotely on company servers. However, the courts ruled in 2008 that a remote DVR is considered a private performance since the content stored by Cablevision on behalf of the subscriber is only available to the person who originally requested the recording. It also clarified that video-on-demand is considered a “public performance” since the content is made available to anyone who would like to receive it.
Aereo has relied on the Cablevision ruling to buttress its position. It claims to offer a remote DVR service similar to the one offered by Cablevision since viewers select the content that they wish to record. While viewers can watch a broadcast service, they must wait several seconds for the hard-drive to record the DTT signal before the content can be transmitted to the viewer. Subscribers are attributed a unique antenna which they are leasing to access content they are able to receive from the free-to-air DTT platform.
Because Aereo is a cloud-based antenna solution, some fear that a Supreme Court decision against Aereo could hinder the growth of cloud-computing companies and place them in legal jeopardy. Aereo has received the support of the lobby group Computer and Communications Industry Association which includes Microsoft, Google, and Yahoo as members. In a brief filed with the Supreme Court in support of Aereo, the Association claims that a ruling against Aereo could result in “years of costly litigation, chilling much valuable innovation in the meantime.”
However, the Solicitor General, who represents the position of the government, has noted in a brief filed in favor of broadcasters that the content stored by iTunes and GooglePlay is legally obtained. As a result, the Supreme Court could issue a narrow decision declaring Aereo unlawful without hindering the development of cloud computing. Even Cablevision has opposed Aereo which it believes is no different from a cable system or video-on-demand provider. However, Cablevision remains critical of broadcasters who, by seeking to overly extend their copyright privileges, could imperil cloud computing.
The actual threat of Aereo to broadcasters is minimal given its rumored insignificant subscriber numbers. However, Aereo poses a real threat to the revenue of broadcasters.
While broadcasters generate revenue through advertisement, they also rely upon the fees paid by cable and satellite operators for the re-transmission of their content. Currently, re-transmission fees account for $3.3 billion in revenue each year and are expected to grow. Although improbable, cable and satellite operators could be tempted to set up an Aero-like system with their subscribers and reduce their re-transmission fees. More likely, cable and satellite operators could use such a system as a negotiating tool with broadcasters and avoid the blackout of broadcast content when negotiations reach a standstill.
Should the Supreme Court decide in favor of Aereo, it is unlikely that broadcasters would exit the DTT platform. However, they may decide to make their most lucrative content, such as sporting events, only available on pay platforms. And Aereo, a small start-up, could become a casualty of the net neutrality rules recently proposed by the Federal Communications Commission (FCC). These rules, which would ban Internet service provider (ISPs) from blocking access to specific websites, would allow ISPs to enter into commercial agreements with companies seeking faster access to Internet users. Such rules could be an impediment to small start-up companies like Aereo without the clout or financial means of Netflix or Amazon.
Broadcasters have indicated that should they lose their case before the Supreme Court, they will seek to redress the loophole in copyright law that Aereo has exploited by legislative procedures. But this could lead to a broader examination of communications policy and the eventual regulation of online video services.
Source: Natalie Mouyal, on behalf of the DigiTAG Project Office
DigiTAG is an association of stakeholders in the digital terrestrial TV industry and has members from broadcasting, network operators, regulatory, and professional equipment and consumer electronics manufacturing organisations throughout the world. DigiTAG has recently re-launched with new Statutes and the mission of defending and promoting digital terrestrial television on a worldwide basis, and, notably, will work tirelessly to protect spectrum for broadcasting, regardless of the technical standard used on the DTT platform.
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