No, Aereo isn’t really claiming to be a true cable company


Aereo's service uses thousands of tiny antennas to help it stay within the bounds of copyright law. (Aereo)

In an effort to survive, Aereo's throwing everything against the wall and hoping something — anything — sticks. Its latest tactic? To embrace the Supreme Court decision that effectively killed its existing business model, and to work within the confines of the ruling to arrive at an alternative that won't land the company in court again.

Aereo is now conceding that it is a cable company after all, after having argued the opposite point before the Supreme Court. If you'll recall, the Court didn't find Aereo's initial testimony very persuasive. It ruled in a 6-3 vote that by pulling TV signals out of the air and streaming them over the Internet, Aereo was effectively broadcasting in a "public performance" of content that it should be paying for.

The company now says it's willing to pay those licensing fees — but to the Copyright Office, rather than to the broadcasters who were suing Aereo in the first place. In short, Aereo is trying to thread a very small needle: It wants to say it's just enough of a cable company that it qualifies for the benefits that come along with it (more on that shortly) but not so much of a cable company that it needs to pay expensive retransmission fees required of other cable companies.

Problem is, the path forward for Aereo here is deeply uncertain, and its argument almost sure to fail.

The key to understanding why has to do with a legal distinction that'll sound silly to almost any consumer.

"Aereo wants to be a cable company for copyright purposes, but not for communications law purposes," said Brent Skorup, a telecom policy scholar at George Mason University's Mercatus Center.

Here's what that means in plain English: If Aereo were considered a cable company in the eyes of the Federal Communications Commission, then it would be bound by a set of FCC-specific rules governing many pay-TV providers. This group includes cable companies, satellite TV companies — basically, anyone who makes multiple channels of video programming available to consumers. Collectively, the FCC refers to these firms as multichannel video programming distributors, or MVPDs. And MVPDs have to pay retransmission fees to TV stations, which is exactly what Aereo was hoping to avoid in the first place.

Aereo is only making a claim about what it is in the eyes of the copyright law, not the FCC. On its face, this idea seems uncontroversial; the Supreme Court's quack-like-a-duck reasoning held that for all intents and purposes, the same copyright rules that apply to cable companies should also apply to Aereo.

Agreeing to abide by cable-company copyright rules stinks for Aereo in that it no longer gets to grab broadcast signals out of the air for free. But we already know that the Court has closed off that option for Aereo, so now it has to make the best of a bad situation. And its new strategy — should it hold — actually wards off the worst-case scenario. Aereo would simply pay a licensing fee to the government at government-regulated rates, under what's called a compulsory or statutory license. And that'd be that.

Except for one thing: If Aereo admits that it's a cable company in the eyes of the copyright law, what's to stop the FCC from branding Aereo as a cable company that has to pay retransmission fees?

Aereo's only hope at avoiding that outcome rests on the FCC's historical reluctance to say whether online video services count as MVPDs. The commission has an open proceeding to consider what terms like "MVPD" and "channel" really mean, but two years later, it still hasn't come to a conclusion. That's no surprise. If the FCC said that online video distributors were MVPDs, it wouldn't just cover Aereo but potentially also popular services like Netflix and Hulu, according to The New York Times and other companies that have a stake in online video, such as Google. Suddenly these companies might be forced to pay broadcasters for TV content, and that would set off a political and economic battle nobody at the FCC wants to see. (John Bergmayer, an attorney at the consumer group Public Knowledge, disagrees, saying that because Netflix is an on-demand service, it wouldn't be considered an MVPD, even if Aereo were. That's still bad news for Aereo.)

It'd be ironic if Aereo got away with labeling itself a cable company on copyright but not in regard to communications, according to a former industry official who asked for anonymity in order to speak more freely. That's because the compulsory license that Aereo's trying to take advantage of was originally put in place to benefit broadcasters, who stand to lose money if Aereo isn't forced to pay retransmission fees, a revenue system that was put in place years later.

"With the broadcasters clinging to this compulsory license, it may wind up biting them in the rear end," said the former official. "I think that, long term, it's in the best interest of broadcasters to get rid of this compulsory license."

Of course, that argument weakens if Aereo fails with its current plan, and is ultimately forced to pay the broadcasters directly.

 

Have more to say about this topic? We take your questions every week in our weekly livechat, Switchback, Fridays at 11 a.m. ET. The comment box is open, so submit your questions now.

 

Brian Fung covers technology for The Washington Post, focusing on telecom, broadband and digital politics. Before joining the Post, he was the technology correspondent for National Journal and an associate editor at the Atlantic.
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Brian Fung · July 11