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Cable Technology Feature Article

March 27, 2014

Aereo Bashes Broadcasters, Girds for Supreme Court Battle

By Tara Seals, TMCnet Contributor

Online video streaming startup Aereo is getting ready for its trip to the Supreme Court next month to defend its right to exist, and is already prepping its strategy. The Barry Diller-backed company has filed its response brief to the plaintiffs, blasting broadcasters and urging the court to protect the Copyright Act.

Aereo is facing lawsuits from nearly every major content company and broadcaster, which are claiming copyright infringement because they allege that the company retransmits local TV affiliate feeds via the Internet without paying retransmission fees.

Aereo has counter-argued that because it provides dime-sized antennae to its subscribers—who pay $8 per month for access to a couple dozen channels—it constitutes an over-the-air, rabbit-ears-style service, which is exempt from retransmission fees. It has also argued that its content is delivered to a single cloud-based DVR device for one subscriber, and can therefore not be categorized as a public broadcast service, subject to fees and regulations.

“This Court should not rewrite the Copyright Act in an effort to protect petitioners from lawful and logical advancements in technology or from the economic consequences of their transmitting works for free over the public airwaves,” Aereo said in its filing. “The ‘one-to-one’ transmissions from Aereo’s equipment – individual transmissions from personal recordings created from data received by individual antennas – do not constitute ‘public’ performances.”

The Supreme Court is scheduled to hear oral arguments in the Aereo case on April 22, with a decision expected in June. Amicus briefs are due April 2.

The Supreme Court’s decision will clearly have widespread ramifications for over-the-top (OTT) business models going forward, and the battle lines have been slowly becoming clear. For instance, in a Supreme Court filing earlier in the month, the Justice Department has backed the broadcaster contingent in the showdown, ABC vs. Aereo.

The company outlined the case as being about consumer rights. “Last December, we decided to not oppose the broadcasters’ petition for certiorari before the United States Supreme Court,” said Aereo founder and CEO Chet Kanojia. “Today, we filed our response brief setting forth the basis for our steadfast conviction that Aereo’s cloud-based antenna and DVR technology falls squarely within the law. We have every confidence that the Court will validate and preserve a consumer's right to access local over-the-air television using an individual antenna, make a personal recording with a DVR, and watch that recording on a device of their choice.”

The Aereo defense essentially hinges on two precedents: The Cablevision and Betamax court decisions. The U.S. Supreme Court’s Sony-Betamax decision in 1984 affirmed that consumers have a fundamental right to record copies of over-the-air broadcast television using an individual antenna, for their personal use—paving the way for VCRs and later, DVRs. Then, in 2008, Cablevision beat back broadcaster opposition with a Second Circuit decision that cleared the way for network DVRs to be considered legal, paving the way for cloud-based broadcast models and the cloud storage industry.

In Cablevision, the court agreed that legally, there is no difference between DVRs that stored content remotely on a server and those that keep it locally on a set-top box at the home.  Aereo says that this is the same concept behind its own approach, and that broadcasters are simply denying technological innovation and the rise of cloud services.

“The broadcasters are asking the Court to deny consumers the ability to use the cloud to access a more modern-day television antenna and DVR,” said Kenojia. “They are asking the Court to confine consumers to outdated equipment and limit their access to lawful technology in order to protect a legacy business model, the success of which is built on eliminating consumer choice and competition in the marketplace. If the broadcasters succeed, the consequences to American consumers and the cloud industry are chilling.”

But the Justice Department was anxious to narrowly define the scope of the issue, agreeing that the decision could set precedent for how cloud computing infrastructures may be used overall by consumers and businesses.

“A decision rejecting [Aereo’s] infringing business model and reversing the judgment below need not call into question the legitimacy of innovative technologies that allow consumers to use the Internet to store, hear and view their own lawfully acquired copies of copyrighted works,” it said in its filing.

Indeed, “reversal of the judgment below need not threaten the legality of cloud computing,” the department’s lawyers noted. The issue with Aereo, it argued, is that the company is providing access to content that has not already been paid for.

Interestingly, Cablevision itself filed an amicus brief on March 3, arguing that Aereo should be found illegal because it’s “functionally identical to a cable system,” and that cable systems are subject to must-carry regulations that require that they pay broadcasters for the right to retransmit their over-the-air signals.

“The fact that Aereo delivers programming on an individualized basis through mini-antennas and hard-drive copies does not change the basic nature of its service,” it said.

The MSO however also advocated a narrow view of the case, urging the court to uphold the legality of “cloud technology that enables remote storage and playback” of broadcast content.

Edited by Cassandra Tucker

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