In the year before Aereo launched, chief executive Chet Kanojia held meetings with executives from the broadcasters who would later sue his company. He explained the idea behind the company: renting a tiny antenna to each customer would keep it within the bounds of copyright law while allowing users to have a host of features usually only available to cable subscribers.
The idea was to use the Internet and cheap cloud storage to give new life to a way of watching TV that was fading: free, over-the-air broadcasts. Put the antenna in the cloud, add the kind of recording and storage abilities that consumers came to expect with television, and offer it at a fraction of the price of a typical cable subscription.“Their reaction was no reaction,” Kanojia recalled in an interview with Ars. “It was, hmm, interesting.”
By February 2012 with the service promoting its imminent launch in New York City, the silence from the TV stations seemed ominous. When Aereo’s launch was covered in the New York Times, broadcasters declined to comment.
“We understand that when you try to take something meaningful on, you have to be prepared for challenges,” Kanojia said then.
The next month, the first lawsuit was filed. It wouldn’t be the last. A flurry of litigation, from Boston to Salt Lake City, has pushed the copyright fight to the US Supreme Court, where it will be argued on Tuesday.
Aereo has been mostly winning the court battles so far, and it won a major victory at the US Court of Appeals for the 2nd Circuit, the only appeals court to consider the case. In Utah, however, a federal judge banned Aereo from six states, including two markets in which it was already operating.
The Supreme Court is going to decide things one way or the other, which makes the Aereo case the highest-profile copyright battle since the 2008 Cablevision case that legalized remote DVRs. The stakes are higher than the Cablevision case as well, even if one ignores some of the wilder rhetoric around the case. (Executives at Fox and CBS suggested they might stop broadcasting over the air if they lose.)
The Aereo argument on Tuesday is the broadcasters’ last and best chance to dismantle the Cablevision precedent, which they loathe. For Aereo, it’s a life or death case; textbook “bet the company” litigation. Kanojia says he doesn't know what the company's future will look like if they don't win. "Frankly, I don't think about it," he said.
In one way, the Aereo fight is the latest incarnation in a battle over consumers’ right to record and make copies, a tension that has existed at least since the rise of videotape.
Aereo will be missing a few political advantages that Sony had when it won its seminal legal victory 30 years ago. By the time the Betamax case was decided by the Supreme Court in 1984, millions of consumers had video recorders. A gadget-crazed nation found its new favorite; the households that didn’t have one, for the most part, wanted one. Aereo, by contrast, is still largely unknown to the US public. It's available in just 11 cities.
1976: Different views
In their briefs, Aereo and the broadcasters present competing versions of the history that led up to this case.
What they agree on is surprising. Legal challenges to the concept of a “remote antenna” aren’t new. In a 1968 court case, Fortnightly Corp. v. United Artists Television, copyright holders said their “public performance” rights were infringed by “community antennas,” which received signals from five televisions stations, converted them to different frequencies, and re-broadcast them. The case went to the Supreme Court, which ruled that re-broadcasting of a signal wasn’t a performance at all.
In 1974, the high court considered another case, Teleprompter Corp v. Columbia Broadcast System, involving a cable system that transmitted TV signals from faraway markets. The court applied a similar framework: carrying the signal wasn’t a public performance at all, and the cable company didn’t have to pay.
Two years later, Congress passed a major overhaul of copyright law. Aereo and the broadcasters have differing views of what Congress intended in this sprawling law. The 1976 law includes the “transmit clause,” which makes clear that re-transmitting a signal is definitely a public performance. In that sense, it overturns the framework the Supreme Court used in both the Fortnightly and Teleprompter cases. The law established rules under which copyright holders could charge royalties for carrying signals to a “distant” audience. However, it also allowed for free re-transmission within a local market. Aereo’s brief argues that with all the tweaks to copyright law throughout the years, Congress has maintained that balance.
The broadcasters argue that Congress intended to overturn both Fortnightly and Teleprompter. Under the new regime, the “antenna entrepreneur” in Fortnightly was a bandit, just as much as the non-paying cable system in Teleprompter. The transmit clause was deliberately “purposefully broad and technology-neutral,” the broadcasters write in their brief.
In 1992, Congress passed the rules around “retransmission fees” that are in effect today. Aereo notes that those rules give broadcasters the right to withhold content but “not a general property right in those signals.” Again, the company notes that local broadcasts were exempted.
Keeping it local may end up being the key to Aereo’s legal success. One strategy it’s not pursuing is trying to get itself branded as a cable company. That was tried by a Seattle company called ivi TV, which was shut off when broadcasters won a preliminary injunction in their copyright lawsuit—the exact remedy they weren’t able to get against Aereo.
The idea that Congress intended in 1976 to require payment for every type retransmission is “absolutely a false narrative,” says Kanojia. It’s an attempt to conflate to regulatory regimes: copyright, and the retransmission scheme passed in 1992. “Retransmission consent is not a copyright regime, and it came in a decade and a half after the Copyright Act,” he said. “Aereo doesn’t retransmit. It allows the consumer to tune their antenna.”
The broadcasters' case against Aereo is nothing less than an attempt “to extend the idea of copyright to equipment,” says Kanojia. But Congress has rejected that approach, he adds. When they lost the Sony Betamax case, copyright owners tried to get a tax on blank media like videocassettes. At that time, copyright owners were rejected.
Broad ideas of "public performance"
A single person watching video in her own home seems like a quintessentially private viewing. But copyright owners have a substantial history of being able to wield the exclusive right to control “public performances” in surprising ways.
In 1984, a movie studio was able to shut down a video store’s plan to offer private viewing booths in Columbia Pictures v. Redd Horne, also known as the Maxwell Video case. Even one individual watching one movie in a private booth was a “public performance,” the court ruled, since Maxwell was open to the general public.
In another case, On Command Video v. Columbia Pictures, hotel videos being distributed to individual rooms were found to be a “public performance,” even though this was nothing more than a bank of videotape players. Each tape could only be transmitted to one room at one time.
That precedent has survived into the Internet age. The federal judge who shut down DVD-over-Internet startup Zediva, which played only one rented DVD to one customer at a time, cited On Command Video.
How could a case like On Command Video be reconciled with Cablevision? Well, it probably can’t be. The US Court of Appeals for the 2nd Circuit simply said that On Command Video, which came from a district court judge in another circuit, was wrongly decided.
The broadcasters’ view on public performance has support from other copyright holders—songwriters’ group ASCAP and record companies and those who work in related industries like the Screen Actors Guild and other Hollywood unions. The National Football League and Major League Baseball, afraid they might have segments of their licensing business chipped away, also support the TV networks.
The broadcast view's most significant support comes from the US Solicitor General, which represents the Obama Administration before the Supreme Court.
Kanojia downplays the importance of that, noting that it’s essentially the brief of the US Copyright Office alone, “which has a very maximalist view.” If the FCC and other agencies weighed in, things might look different. “It’s disappointing that the government is taking a very narrow, highly lobbied perspective,” he said.
Aereo has plenty of support in its corner: from the Computer and Communications Industry Association, which represents gadget-makers and Internet companies alike; from satellite TV providers DISH and EchoStar; from small and medium sized cable businesses; and from two non-profit groups concerned with home recording rights, the Electronic Frontier Foundation and Consumer Federation of America.
"Efficiency is a dangerous word"
Aereo exists because of a confluence of law and technology. The Cablevision case was decided at a time when storage costs were dropping dramatically. The legal backbone for cloud computing came along at a time when the cloud got really cheap and, for many, really exciting.
“In 2002, I bought a terabyte of storage and spent $1.2 million,” notes Kanojia. “Today we buy that amount for about $70.”
When Aereo launched, some commentators saw its arrays of thousands of antennas as a metaphor for everything that’s wrong with copyright. It seemed so obviously inefficient. You don’t have to be a technical genius to see that it would be cheaper and easier to use one master antenna to serve all users instead of renting an individual one to each user.
Aereo can’t use some of the strategies that other cloud computing companies use to make more money. For instance, one big saver in cloud computing can be re-using identical data, or "deduplication." For instance, Dropbox uses deduplication of files to save space; in other words, if two users save the same file in their respective accounts, Dropbox just keeps one copy of the file.
From a technical standpoint, Aereo could use that to even greater effect—but it doesn’t. Instead, Aereo uses its current setup in order to make it crystal clear that everything happening on its system is done by the direction of the user. If one thousand Aereo customers record the latest episode of New Girl, Aereo keeps one thousand separate copies.
To Kanojia, though, these are small hiccups that are vastly outweighed by the overall efficiency of using cloud technology. The company pays about $50 per customer in capital outlays. That’s far cheaper than a set-top box in every home.
“Efficiency is a dangerous word,” he said. “The other side should be careful on this point, because the current regime we live in is the absolute worst regime, in terms of efficiency.”
Moving TV into the cloud will be a massive net gain in efficiency compared to the current system of having a DVR in every home. Could it be done more efficiently with a master antenna and sharing content? “Of course you could,” says Kanojia. “But we are a company that’s obsessed with compliance, and that’s not the law of the land.”
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