As Aereo threatens to alter TV landscape, major networks promise a fight [telecom]

By Cecilia Kang, Washington Post, April 8

For consumers who want to cut their cable cord and get all of their television from the Internet, there's been a major obstacle: It's hard to get live sports and local news.

Now a Web start-up, called Aereo, is offering to remove that last barrier with a simple method. It is using antennas to pick up programming from public airwaves and then deliver shows into homes that have a Web connection -- for as little as $10 a month.

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Neal McLain

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Neal McLain
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Re: As Aereo threatens to alter TV landscape, major networks promise a fight [telecom]

Further to my previous post on this subject: the current decision is far from final. The current decision was the result of a 2-1 vote by a three-judge panel of the United States Court of Appeals for the Second Circuit. The plaintiffs will surely request a rehearing en banc, and the loser in that proceeding will surely appeal to the Supreme Court.

This case bears a remarkable similarity to the battles that the cable TV industry fought 50 years ago. At the time, a number of program suppliers had sued various cable TV companies on grounds that the systems had "performed" their copyrighted works. The then-current copyright law -- the Copyright Act of 1909 -- clearly did not provide much guidance for the courts.

One of these cases, Fortnightly Corp. v. United Artists (1968), reached the Supreme Court. In this case, United Artists Television, as owner of the copyright on several motion pictures, had sued Fortnightly Corporation, a cable television operator, alleging that Fortnightly had "performed" several of United Artists' motion pictures without permission. United Artists won the first round in District Court. Fortnightly appealed; United Artists won again in the Court of Appeals. Finally, Fortnightly appealed to the United States Supreme Court; in a divided opinion, the Supreme Court reversed the Court of Appeals and ruled for Fortnightly.

But the Court made it clear that it was not ruling on the merits of the case; instead, it was merely refusing to write new laws. Justice Potter Stewart delivered the opinion of the Court as follows:

"We have been invited ... to render a compromise decision in this case hat would, it is said, accommodate various competing considerations of copyright, communications, and antitrust policy. We decline the invitation. That job is for Congress. We take the Copyright Act of 1909 as we find it. With due regard to changing technology, we hold that the petitioner did not under that law 'perform' the respondent's copyrighted works. The judgment of the Court of Appeals is reversed."

The Court's decision was far from unanimous: five Justices voted for reversal, three abstained, and one dissented. The lone dissenter, Justice Abe Fortas, noted that the Court was not only reversing two lower courts; it was also reversing a precedent which it itself had set 40 years earlier in the case of a hotel which distributed radio signals by wire to its guests:

"... the Court, speaking unanimously through Mr. Justice Brandeis, held that a hotel which received a broadcast on a master radio set and piped the broadcast to all public and private rooms of the hotel had 'performed' the material that had been broadcast. As I understand the case, the holding was that the use of mechanical equipment to extend a broadcast to a significantly wider public than the broadcast would otherwise enjoy constitutes a 'performance' of the material originally broadcast. I believe this decision stands squarely in the path of the route which the majority today traverses. If a CATV system performs a function 'little different from that served by the equipment generally furnished by a television viewer,' and if that is to be the test, then it seems to me that a master radio set attached by wire to numerous other sets in various rooms of a hotel cannot be distinguished."

Congress eventually enacted a new copyright law, the Copyright Act of

1976. This act imposed copyright liability on cable television systems that carry radio or television broadcast stations. Copyright liability applies to any tier of programming which includes one or more broadcast stations.

The Act created a legal construct known as the "compulsory license" for cable television systems. The compulsory license did two things:

- It guaranteed that cable systems had the right to "secondarily transmit" broadcast stations without having to obtain copyright clearance from the individual stations or from any program supplier.

- It established a system for collecting royalties from cable operators and disbursing them to "claimants". The Copyright Office identified the following groups of claimants: Program Suppliers (movies, reruns, and specials); Sports; Public Television (PBS, affiliates, and programmers); Broadcast (commercial networks and stations); Devotional; Canadian; Noncommercial Radio (NPR and affiliates); and Music (ASCAP, BMI, and SESAC).

Two government agencies were charged with the responsibility for collecting and disbursing royalties:

- The Copyright Office, a unit of the Library of Congress, was assigned the job of collecting the royalty fees and depositing them into a trust fund in the United States Treasury.

- An independent federal agency known as the Copyright Royalty Tribunal (CRT) received two assignments: establishing the fee schedule and allocating the proceeds among the claimants. In the years since

1976, the CRT has been reorganized twice; its functions are now performed by the Copyright Royalty Board (CRB), another branch of the Library of Congress.

The cable TV industry has operated pursuant to this law ever since. Under the regulations established by the Copyright Office, every cable television system is required to submit a Cable Statement of Account Form, accompanied by the royalty payment, semiannually.

How the Supreme Court eventually rules in the Aereo case is anybody's guess. But it seems to me that the Second Circuit's panel has assigned another job to Congress. Congress could, of course, simply extend the existing compulsory license procedure to Aereo.

But if the cable TV proceeding is any guide, it'll be a decade before the Aereo case is final.

Further reading:

- Fortnightly Corp. b. United Artists, 392 U.S. 390 (1968)

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- WNET v. Aereo Inc., 2d Cir., No. 12-2786, 04/01/13

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Neal McLain

Reply to
Neal McLain

Per Neal McLain:

I don't get it.

If a station is OTA in the first place, isn't the size of the audience they are selling to advertisers an important asset to them?

That being the case, it seems like Aereo is simply increasing the size of the OTA station's audience - at no cost to the station.

Only two things I can think of are:

- Raw greed. They figure they can get a few extra bucks out of this. Kind of like the banks introducing automatic teller machines because they saved money for the banks... and then realizing that they could charge people for using them.

- Fast forwarding commercials. This seems the most logical to me... but it's predicated on the percentage of OTA customers who do not know from DVR.

Lacking further knowledge, my money would have to be on raw greed, seasoned with stupidity.

Reply to
Pete Cresswell

This is almost certainly it. It's just like the networks charging carriage fees from the cable operators -- they want these fees IN ADDITION to the ad revenue.

They view Aereo as being like a cable or satellite operator, and think they should have to pay for the content similarly. It's not an outrageous position.

Reply to
Barry Margolin

Not as important as the size of the carriage fees they can extract from every cable subscriber in their market.


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Garrett Wollman Forums website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.