“Your
technological model,” Chief Justice John G. Roberts Jr. told Aereo’s lawyer,
“is based solely on circumventing legal prohibitions that you don’t want to
comply with.”
“What disturbs me on the
other side,” Justice Stephen G. Breyer said, “is I don’t understand what the
decision for you or against you when I write it is going to do to all kinds of
other technologies.”
And so it went during yesterday's Supreme Court hearing of the case, ABC vs.
Aereo, in which the presumable fate of the entire free-to-air television
broadcast industry will be decided. The background of this case has been well
covered by the media (and not just TV media) in the months and weeks leading up
to yesterday's hearing. At issue is whether tech startup Aereo has the right to
capture free-to-air tv signals and store them for later use by its subscribers,
who pay a monthly fee of $8. The cable companies and the "big 3" tv
networks are all crying foul, saying that Aereo's practice constitutes theft of
copyrighted material, and if they want to rebroadcast this content they must
pay the content owners.
For its part, Aereo says it is not violating anything. It is simply leasing
an antenna and a DVR to willing subscribers, who will gladly pay the $8/month
fee in order to get the local broadcast signals delivered to their home without
the hassle of installing and managing their own antenna on their roof.
And the justices are confused as all getout because to them it looks like a
flimflam scam aimed at exploiting a loophole in order to mine the airwaves for
free and sell the resulting product. And they're worried about the implications
this case may have for other technology innovations, particularly in the area
of cloud computing (which they obviously don't understand, either - but more on
that in a minute).
So here's my take on Aereo's business model and this case: Aereo wouldn't even exist were it not for the fact that most households
do not have adequate access to the free signals that the broadcasters
are required to provide. By failing to provide a signal that can be
easily received by many households, the television broadcasters are able
to package and resell their "free" local broadcasts to cable television
carriers, who then charge their subscribers to view these broadcasts.
It is the broadcasters, not Aereo, who are exploiting a legal loophole
by appearing to comply with the letter of the law by airing their
broadcasts for free, yet still managing to charge the majority of
households to view them.
Free means free, right?
The basic premise of broadcast TV is based on a covenant between the
government, the broadcasters and the American public. The federal government
owns the rights to the entire radio spectrum, which is considered a public
good. The FCC manages access to the airwaves, making portions of the radio
spectrum available for commercial, public, and private use. Because it is a
public good, and because it has value, the FCC charges for access to some
portions of the spectrum, including the part used for television broadcasts. It
made a deal with the major tv networks way back when, basically saying the
networks could have free access to the broadcast spectrum if they in turn made
their broadcasts freely available to the public. As a result we got to watch
All
In The Family, Ed Sullivan and
Bonanza for "free" -
along with an unending barrage of content from Madison Avenue's finest (i.e.,
commercials).
Theoretically you can still put an antenna on your roof, run a wire from it
to your television, and watch for free whatever shows your local tv stations
are broadcasting. I say theoretically because the ability to do this in the
digital tv era has become a bit challenging. TV signals require line of sight
access, and residents living in the canyons of large urban areas like New York
City often cannot get the line of sight access needed to receive these free
signals. As a result if they want to watch local tv news they need to pay their
friendly cable provider an additional fee for the local station package. Same
thing goes for a large number of the tv-watching households across the US (did
you happen to notice the rabbit ears sitting on top of your friend's 60"
plasma when you were over watching the Superbowl? Me neither).
When broadcasters were forced to dump analog signal broadcasts and go 100%
digital a few years ago it made matters worse because unlike analog signals,
digital is a one or zero - you either have the signal or you don't (remember
watching those "snowy" black and white shows?). And many households,
particularly in suburban areas located several miles from the broadcaster or
otherwise obscured due to buildings or geography, cannot in practice receive
the free signals they are supposedly entitled to.
Enter Aereo
Aereo came up with a way to leverage some
interesting
advances in antenna technology, giving them a way to build a very capable,
low-cost, dime-sized antenna, that they could use to pull down these
free-to-air broadcast signals for customers who wanted to view their local
stations' signals, but didn't have access to them. Aereo determined it could
set up an antenna farm with thousands of individual antennas, each hooked up to
a DVR, and use these to capture the local tv broadcasts, store them, and then
give its customers access to the stored content via the internet using TCP/IP
transmission. So now, instead of me having to figure out how to get an antenna
on top of my apartment building's roof in Manhattan, I could just lease an
antenna from Aereo, and skip having to put one on top of my building and
running a wire from there to my tv, or having to deal with my landlord at all.
Cool.
So: by the convenant between the US federal government and the tv
broadcasters, everyone should have the ability to freely receive via an antenna
in their home the complete suite of content broadcast by local television
broadcasters, and, via a wire connecting their antenna to their tv set, watch
this content on their tv for free. They should furthermore be able to save this
broadcast content for viewing later on a DVR if they so choose. The
broadcasters, for their part, have the right to include a specified number of
minutes of advertising in their broadcasts; and can charge advertisers whatever
the market will bear for inserting these ads in the broadcasts.
In the event that an individual doesn't wish to install and maintain their
own antenna and dvr, or their viewing location is unfavorable for receiving the
free-to-air signal from the broadcasters, why shouldn't that invidiual be
permitted to lease an antenna and dvr from someone who is in a favorable
location for receiving the signal? In effect that is what Aereo is doing. And
instead of running a physical wire from the antenna farm to each subscriber's
residence, Aereo is using the near ubiquitous TCP/IP data transmission
capability of the internet to move the stored programming to a subscriber's
home.
The US Supreme Court Justices are confused - but why?
The "other technologies" referenced by Justice Stephen Breyer
include vague references to cloud computing, and some nebulous concern that the
popular business models in use by other existing companies like Apple and
Amazon could somehow be disrupted by this case if it ends up in favor of Aereo.
The network broadcasters and the cable companies both claim that what Aereo
is doing amounts to theft of copyrighted material, and a violation of the laws
restricting retransmission of broadcast content to public audiences. If you
look at this closely, however, it doesn't quite add up.
Apple's iTunes and cloud-based music collections are not apt comparisons to
what Aereo is doing. Sony and other owners of copyrighted music never intended
to make their content available for free. You pay Apple for the music in your
iTunes collection, and Apple pays the owner.
Radio stations pay a small fee to the copyright holder of every song they
play over the air. And technically if you're in a bar (a "public
place") listening to a song on a jukebox or over the air the bar is
supposed to pay for making that song available to you because it is
rebroadcasting the content for profit (I say "technically," because
policing this has historically been a challenge).
All Aereo is doing is making available to the consumer a signal that:
a) the broadcasters had intended for the consumer to have for free; and
b) the consumer either cannot access due to physical inability to get the
signal; or choose not to access for whatever reason
They are doing this by setting up a dedicated antenna, dvr and wire, for
each of their customers, and leasing access to this equipment. That's it. The
end result is exactly the same as it would have been had the customer been
willing to set up their own antenna and DVR - assuming that they are in an area
where their antenna would be able to receive the signal that they are supposed
to be able to receive.
The revenue model from the broadcaster's position is not affected at all -
they still have the right to charge advertisers whatever the market will bear
for including ads in their free broadcasts. If anything, Aereo's model could
end up increasing the number of viewers of free-to-air television, by capturing
viewers who do not have cable tv, and are otherwise unable to receive the
signal in their homes.
Conclusion
What Aereo is doing does not violate any copyright or
rebroadcast agreements. It also seems to me that if Supreme court holds for
Aereo in this case it could have quite a disruptive effect on the broadcast
television industry. But it's the right thing to do, since it is consistent
with current laws, and would benefit consumers.
As for the Justices and their comments, in my opinion the tenor of yesterday's discussion had more to do with positioning, and less to
do with the actual facts and merits of Aereo's argument. At least, that's what
I hope. Otherwise, I have great concerns about the ability of our highest court
to understand and correctly evaluate the implications of other more complex
technological developments that are surely coming their way.
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