Copyright, Internet Television, and the Aereo Lawsuit

A start-up Internet TV company called Aereo recently announced 20 million dollars in funding a few weeks ago. U.S. broadcasters celebrated the news by suing it for copyright infringement.

Broadcasters brought very similar suits against the first cable companies in the 1960s and 1970s, and took those cases all the way to the Supreme Court. The broadcasters should lose these cases just as broadcasters lost those cases.

Aereo provides a simple value proposition: you can watch broadcast TV through the Internet on any of your devices. You might want to watch NBC on your iPad or iPhone instead of your television. That would be convenient. You do other things with your iPad–like listen to music you own, call your friends, read books, watch movies. And, hey, you already can watch NBC for free over the air, with a regular antenna. Why can’t you just take that antenna signal and stream it to your own devices?

That’s where Aereo comes in. The company decided to rent high-definition antennas to consumers. Nothing problematic there: anyone could go to a Radio Shack and buy, or even rent, an antenna. Aereo then provides the technology to let you stream that antenna’s feed directly to your devices. Of course, the antenna you’re renting isn’t on your roof; it’s in some windowless Aereo building somewhere. But it’s your antenna and nobody else’s. You’re not sharing that antenna with anyone else.

Aereo’s business model is creative, convenient, and looks completely legal.

Let me explain one limit–it applies only to broadcast channels. Some TV channels are available over the air and on cable & satellite, like NBC and ABC affiliates, while others are available only on cable & satellite, like ESPN, CNN, and others. Those available over the air are “broadcasters.” Anyone can watch them for free with an antenna. And Aereo is capturing those over-the-air signals.

The broadcasters don’t like Aereo. This isn’t because they oppose every innovative new business model that would make it easier for users to watch and enjoy their content. (But good guess!) It’s because most people don’t watch their channels over the air for free–most people watch broadcasting through cable and satellite subscriptions. Big broadcasters generally charge the cable and satellite companies who carry their programs. That is, CBS can charge Time Warner Cable or Comcast for carrying CBS. If people start watching CBS online, then CBS can’t charge Time Warner Cable or Comcast nearly as much. Also, the broadcasters have their own designs for streaming broadcasting content to your iPad: it’s called Hulu Plus and it costs money every month. This is why broadcasters have blocked devices like Google TV, which tried merely to display websites on a bigger screen–the bigger screen was a TV and the websites included broadcast TV websites, but the broadcasters prohibited streaming of the websites on big screens. Finally, if you’re keeping score here, the cable companies have their own strategy for how you watch TV on your iPad–their internal name for the strategy is “TV Everywhere” and it requires you to pay a cable subscription to watch what you want on the Internet. (I have argued that TVE is the product of anticompetitive agreements.)

Broadcasters and cable companies could compete with Aereo and see what consumers prefer, but they preferred to file suit. The suit is probably designed to distract executives at Aereo, raise their costs considerably, rattle investors ever considering in investing in a similar company, and drive Aereo out of business whether or not it’s illegal. (See Veoh.)

I haven’t seen the pleadings, just the news reports. But the broadcasters sued the first cable companies forty years ago. Those cable companies were “copyright pirates.” They took one TV antenna, put it on top of a hill, and then rolled cables out to lots of different houses so that everyone with a cable could get better TV reception. They then imported TV channels from far-away broadcasts; the NBC broadcasting affiliate in New York probably had better football games and better evening programs than those in Omaha, so Omaha broadcasters would lose money when people watched the New York programming instead.

The broadcasters sued, accusing the cable companies of pirating their signals and sharing the signal with thousands of people–some of them hundreds of miles away. But the Supreme Court didn’t bite. In two cases, Fortnightly and Teleprompter, the Court held that cable companies could take the freely available content just like anyone else with an antenna. At the time, cable companies were known as “community antenna television”–they provided TV to an entire community. The Court said cable systems “basically do no more than enhance the viewers’ capacity to receive the broadcast signals,” so they fall in the same “category of viewers,” which is a category of people not infringing on the broadcasters’ copyrights.

I cannot see how Aereo could be infringing if the cable companies were not. The cable companies were offering community antennas. Aereo is offering an antenna per person, individual antennas. Congress later overturned those cases in 1976 and imposed a compulsory license for cable companies in 17 USC 111–and later gave broadcasters additional rights against cable companies of “retransmission consent.”The 1976 law did not envision today’s world and there is an argument that some of the language in 111 might ensnare Aereo. And some recent court cases have been less friendly (herehere) to disruptive innovators than the Supreme Court was years ago.

But Congress never said that using your own antenna is an infringement. That is the key argument that appeals to me here. A do-it-yourself way of receiving broadcasts on your iPad screen instead of on your big “TV” screen or some other little “portable” TV screen would have to be legal–from your point of view they’re just two different screens. Why can’t you watch TV, from your own antenna, on any screen you want to use in your house?

So the legal case is [update: might] be shaky.

The broadcasters’ messaging can’t be pretty either. NBC is offered over-the-air for free largely because of history and because of US government handouts. Since the 1930s, the government regulated the airwaves to favor large, powerful broadcasters rather than amateurs or unlicensed uses–handing large broadcasters billion-dollar licenses for free in exchange. In the 1990s, broadcasters received billions handed to them in terms of new spectrum, spectrum they now want to be paid for relinquishing. All along, the broadcasters’ key argument for their value was that they provided “free” over the air broadcasting available to all Americans, rich or poor.

Now the broadcasters are trying to stop people from “enhancing” their ability to receive TV signals–to any screen they own, for free. That should lose in court of public opinion no less than it should lose in court.

(These are initial impressions. As always, happy to correct mis-impressions. And two notes. I have long written about threats to online TV from incumbent providers, including in this law review article. And I represent some tech companies but not on these issues.)

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