Aereo Embraces Ruling, Tries To Re-Classify Itself As Cable Company

An anonymous reader writes Rather than completely shuttering its TV-over-the-internet business, Aereo has decided to embrace the Supreme Court's recent decision against it. In a letter to the lower court overseeing the litigation between the company and network broadcasters, Aereo asks to be considered a cable company and to be allowed to pay royalties as such. Cable companies pay royalties to obtain a copyright statutory license under the Copyright Act to retransmit over-the-air programming, and the royalties are set by the government, not the broadcasters. The broadcasters are not happy with this move, of course, claiming that Aereo should not be allowed to flip-flop on how it defines itself.

Comments

If it looks like a duck

[Anonymous Coward]

Aereo to broadcasters: "quack".

Re:If it looks like a duck

[NotDrWho]

Maybe the broadcasters should have listened to Admiral Ackbar before they argued so persuasively that Aereo was a cable company.

Re:If it looks like a duck

[ZipK]

Congress can simply say that it's "Duck Season"

The court will then counter by saying, "rabbit season."

Re:If it looks like a duck

[Cajun Hell]

Would you like to shoot me now or wait till you get home?

Re:If it looks like a duck

[sconeu]

He does so have to shoot me now, so SHOOT ME NOW!!!!!

[BANG]

You're dettttthhpicable!!!

It's only fair

[Anonymous Coward]

They weren't happy with the disruptive competition. Now they're still not happy with the disruptive competition. Quelle surprise.

Given how the cable companies divied up the market into little monopolies for each, it might actually be best for their customers to let aereo do this, and not allow the multi-monopolies to devour an unwanted competitor.

Re:It's only fair

[DarkOx]

Right, its a complex balance of power the networks have with the cable operators and what they really don't want is people making waves.
Just looks at the fights CBS and ABC have been in lately (NBC is a little different given they are COMCAST subsidary ).

On the one hand royalties from Areo might be a new revenue stream on the other hand premium cable seems to be where the eyeballs are going to the point the cable operators have started expressing less willingness pay to carry the networks. Its probably a smallish number of very vocal cable subscribers that push them to continue to pay CBS's extortion fees. If those folks could just pick up a cheap Areo subscription well it might actually weaken the hand of broadcast networks to charge the other cable operators. ABC has nothing to worry about though because their parent Disney will just make carrying ABC a condition of carrying ESPN which no cable operator would dare drop.

Re:It's only fair

[Mr D from 63]

If they are considered a cable company, then they won't need all those antennas. That should reduce their operating cost, and maybe offset some of the new re-transmission costs.

Re:It's only fair

[DarkOx]

Oh definitely; and they or someone a little bigger ( Amazon? Netflix? ) who could potentially acquire them might be able to deliver profitably service dirt cheap like single digit dollars per month.

I don't want pretend to understand all the dynamics involved with the network to cable co contracts, FCC must carry requirements, local monopolies granted to cable companies, etc.

That last one was never hard to enforce, but how will $MUNICIPALITY enforce the cable monopoly agreement against a cable company like Areo with no cables? Suddenly they or someone like them are going to be a new player in the game like the SAT TV providers were, and it will at least slowly shift the balance somewhat.

Re:It's only fair

[Applehu Akbar]

I was also wondering about the relevance of Aereo's technology in this new business model. If it gets classified as cable carrier, which is what the SCOTUS decision requires, then why not pick up its signal in the same way as all the other cable companies? Then it can trump everyone by offering networks a la carte over the Internet.

Re:It's only fair

[ZipK]

It has started leveraging those stations by selling a set top box [airbox.com] that decodes sub channels on its local broadcast to deliver premium channels from Showtime and Starz as well as PPV content.

It's surprising to find that the FCC has no rule against the broadcast of encrypted PPV content on public television channel allotments. Or maybe it's not surprising at all.

Re:It's only fair

[nedlohs]

Unsurprisingly you do not make up 100% of cable operator revenue. In fact you make up approximately 0% and hence your particular preferences mean exactly diddly squat to their decision on how to value the sports stations that drive a large portion of their revenue.

You can still sit comfortable in your knowledge of your superiority to the people who do enjoy watching sports, of course.

Re:It's only fair

[DarkOx]

Yet don't you dare encrypt anything in an amateur radio band!

Re:It's only fair

[Darinbob]

They're scared of Aereo because it will just increase the number of people cutting the cord with traditional media vendors. They want to keep the $80/month entertainment tax rather than let people have a $20/month alternative.

Normally you would expect broadcaster to not mind where their royalties come from, except that most of the broadcasters are owned by the cable companies.

Idiots

[qbast]

What the hell they are complaining about now? If court ruled that how Aereo previously defined itself was illegal, then obviously it has to change it. First they win now they complain about it?

Re:Idiots

[cdrudge]

Networks don't want Aereo as it will rock the boat and introduce competition in markets that have long been dominated by oligopolies. In most areas, you have one cable company that services the area, and if you're lucky, the local telco might also offer television service. You also have Dish and DirecTV.

Most networks opt to charge the cable/telco/satellite company a fee instead of forcing them to be carried as a must-carry station. If a more convenient or alternate source of locals were available, it could result in lower revenues from fees. So stations have a reason to want to keep availability scarce. Networks obviously have a vested interest in keeping the stations happy, so they fight the fight. Cable companies also join in as they may also own the local tv station. Or the TV network. Or are the content producers. Or all the above.

It's all about maximizing revenue while stifling competition that may take a portion of their pie.

Re:Idiots

[fuzzyfuzzyfungus]

What the hell they are complaining about now? If court ruled that how Aereo previously defined itself was illegal, then obviously it has to change it. First they win now they complain about it?

As best I can tell, they are whining because they preferred the imaginary world where the lawsuit against Aereo was actually over whether the filthy, disruptive, upstarts shoudl be burned to the ground and have the earth beneath them salted, rather than whether they were more like an antenna rental service or more like a cable company.

Aereo obviously didn't want to be a cable company, hence its ongoing defense; but the tone of the rhetoric against them was never "Yeah, because of a raft of tedious reasons, Aereo ought to be classified as a cable company for regulatory purposes"; but rather a bunch of fire and brimstone nonsense about the signal-stealing piratepocalypse.

Re:Idiots

[Simozene]

They can end free OTA broadcasting... they just need to give the wireless spectrum back to the US Government. Not going to happen.

Not Flip Flopping

[Anonymous Coward]

They aren't flip flopping at all. They're accepting the ruling against them and adjusting how they do business to remain in accordance with the court ruling.

Tough shit broadcasters. Deal with it.

Simplified summary

[cdrudge]

So a simplified summary of the issue is:

Aereo: We're not a cable company, we don't have to pay royalties.
Networks: Yes you are, you have to pay us
Aereo: No we aren't. Sue us.
Networks: Ok
Lower Courts:You're like a cable company.
Aereo: Are you sure?
SCOTUS: Yes.
Aereo: Crap. We'll be a cable company and pay the royalties then.
Networks: You're not a cable company
Aereo: C'mon man!

Re:Simplified summary

[Solandri]

Close, but what's happening here is similar to what happened with Pandora and online music broadcasters. They tried to get by by paying the same royalty rates as radio stations, which are negotiated between the RIAA and all radio broadcasters en masse. The RIAA smelled an opportunity and finangled the courts so Internet radio got defined as something new and different, and thus they could negotiate rates against a much smaller and less established entity. Consequently, Internet radio pays much higher royalties than broadcast radio.

I suspect the TV stations are trying for a similar play here. It's completely illogical (like saying you're not buying the movie, you're just buying a license to view it; but then saying you need to buy a new one at full price if you're upgrading from VHS to DVD to Blu-ray), but logic is secondary to them if there's an opportunity to extract more money from people. I think that's my biggest gripe with Copyright law - since it's a completely artificial monopoly I think the rules governing it must make logical sense in order for supply and demand to work as with natural property. But instead the copyright holders are twisting that artificiality to completely illogical means that break how markets naturally work.

So, how does this go?

[robbak]

Companies: Hey Courts, Aero is a cable company!
Aero: We really aren't.
Courts: I agree with the Companies. Aero is a cable company.
Aero: Sigh, I guess we'll have to become a cable company then.
Companies: I Object! Aero isn't a cable company!

Go Aereo!

[Simozene]

The cable companies simply want to put Aereo out of business using whatever means necessary. The SCOTUS ruling might actually be a blessing in disguise. If they can legally be classified as a cable company, and therefore obtain a compulsory license to the content, they will be able to rearchitect their entire system to make it more efficiently able to serve a large number of customers. Even after paying for the compulsory license I believe they will still be able to keep the costs way down and provide a great and inexpensive service to their users.

Re:Go Aereo!

[Solandri]

Yeah, this could lead to the demise of the cable companies as we know them. For a long time I've said cable TV/Internet needs to be regulated as a utility. With a utility like gas or electricity, the utility company owns the pipes but is prohibited from selling the content that's carried over the pipes. They can set up a subsidiary to sell the content, but they must also allow other gas/electric suppliers to sell to customers at the same transport rates they charge their subsidiary. Those transport rates are set by a public utilities commission. Effectively, the utility company has a monopoly on the pipes (it makes no sense to install multiple gas or electric lines to each house), but due to the monopoly its transport pricing is subject to government approval and it must offer the same pricing to all sellers. Thus maintaining a free competitive market for gas and electricity.

In the U.S., cable TV/Internet has been the big exception. Because it doesn't make sense to install multiple cable lines, most municipalities only grant access to a single cable company. Yet that artificial monopoly is not regulated like a utility - the cable company completely controls the pipes and the content that's sent over those pipes. (This is a necessary step when an industry is first developing. Different companies have to be allowed to try different ways to lay down pipe and offer content over those pipes for the market to determine the most efficient way to distribute that content. But once the best method is determined, the industry is essentially a utility. At this point I think we all know TV/Internet delivery is headed towards fiber to the home.)

If Aereo can get themselves classified as a cable company, that does to cable TV what VoIP did to phone service. Right now the cable companies sell you TV, and oh by the way you can get Internet access too. With Aereo's model, you only need to get Internet from the cable company, and you can get your TV from Aereo. The cable company essentially becomes a utility giving you only Internet service. Companies like Aereo could then sell you TV service delivererd over the Internet.

Unfortunately, this means Aereo is going to have both the broadcasters and cable companies arguing against them to the FCC and the courts. While I hope they succeed like VoIP did, the influence of money in politics makes me think their chances are slim.

Re:Go Aereo!

[bluefoxlucid]

If you sue someone for putting a fence on their lawn and screwing up your nice, pretty neighborhood with a fence--because fences are universally visually disruptive--and then sue them for not having a fence, something else is going on.

In this case, there are obvious business dynamics in play here. What those dynamics imply may not be obvious, but that the dynamics exist is blatant. A business raising conflicting lawsuits is obviously trying to play some kind of legal three card monty, and forcing the courts to rule another business as X and then coming to court to complain that the business cannot be X is exceedingly easy to hit with SLAPP rules: suddenly you have to show, before discovery, that you can reasonably win this case, all while you just won a case where a judge ruled that the thing you were previously demanding and that you are now against is in fact the thing that must be done. You've already won the case against this, and you are now bringing bullshit to court.

As for backtracking, it's extremely unlikely. I said it would be monumental; but it's possible. If the courts hit the plaintiffs with SLAPP, there opens an argument that the lower courts often sided against the final ruling or made opinions to the effect that their judgment was extremely borderline and the issue is unclear from both a legal and logical perspective. If that's the actual case, then the supreme court has a lot of opinion to take into account to re-evaluate its position: the supreme court could decide that the situation is not clear-cut and, although their opinion does lean in the direction of the prior ruling, it was never strong and there is no strong legal opinion in the courts in general.

In such a situation, the court can stretch this analysis to infer that the plaintiffs, having forced the defendant into a court-ordered position and then attacked the defendant in court from exactly the opposite position, were never interested in he legal position the courts were actually examining. Given that the courts aren't *exactly* sure how to approach that issue, the plaintiff's motives become much more important: to engage in long, drawn-out legal battles they don't have strong likelihood of winning.

Having one legal battle on a nebulous issue that's not well understood by legal precedent or statue is fair. This happens, it's a normal part of civil disputes. Going through all that and then immediately reversing your position and starting over signals to us that you're just trying to drag the defendant through as much legal bullshit as possible, which suddenly makes every suit you've filed the whole way up look like SLAPP. Ironically, there is neither precedent nor statute to guide the courts in matters where it becomes clear you've been abusing the court system for a very long time; if any such legal case does come up, it would end in a landmark decision telling us whether the statute of limitations is measured in years or in how far out the door you can get before the judge smells bullshit.

Why not? Learn from Verizon..

[i_want_you_to_throw_]

The broadcasters are not happy with this move, of course, claiming that Aereo should not be allowed to flip-flop on how it defines itself.

Verizon has been on a tear to get itself reclassified as a common carrier for a while.

Loopholes: not just for big companies anymore.

What about the ads

[jandrese]

As I understand it, if they get classified as a cable company Aero will be legally allowed to put their own ads into the stream, overwriting the ads the original broadcaster put in there or maybe removing them entirely if they still want to be an entirely subscription driven service. They could really seriously piss off some OTA broadcasters with this approach.

Re: What about the ads

[Anonymous Coward]

You understood wrong. Multichannel providers pay the local stations who wish to be paid, and don't pay the ones who request their must-carry rights. Never does a cable company insert their own programming over a local station (except in the case of sports blackouts, and this is often done by literally blacking out the station instead of replacing it with other programming).

Does not matter to me

[paiute]

The reason I subscribed to Aereo was that it was cheap enough that those few times I wanted to watch local TV on my tablet were reasonable. If they raise their rates, I will just go out and buy an HD antenna of my own and not pay them anymore.