Aereo scores big court win and looks for distribution partners

Earlier today, the New York Times reported that Aereo, the Internet TV service that uses banks of tiny micro-antennas to give subscribers access to broadcast TV stations over the Internet, has scored an important Federal court victory. Shortly after the Aereo service launched in New York City, a group of broadcast stations and networks filed suit against the company, charging that it was retransmitting their content without permission. Aereo defended itself by referring to a U.S. Supreme Court decision that said that a similar system implemented by cable service Cablevision for providing DVR service to its customers didn't require permission from broadcasters, broadcast networks or cable networks.

U.S. District Court Judge Alison Nathan denied a request for an emergency injunction made by broadcasters to stop Aereo's service, saying that it was unlikely that they would prevail when the full case is heard by the court. The broadcasters then appealed to the Court of Appeals for the Second Circuit, which ruled 2-to-1 today that Aereo's video streams don't constitute a "public performance," because for the duration of a usage session, one antenna is dedicated to a single subscriber, and therefore, the broadcasters are unlikely to win their case.

The broadcasters are likely to request an "en banc" hearing from the Court of Appeals, where the entire Court of Appeals would hear the case. (Update, April 17, 2013: The broadcasters filed an appeal with Court of Appeals for an en banc review on April 15th.) No matter which side prevails, however, the case is likely to be appealed to the U.S. Supreme Court. At this point, the Court of Appeals' decision is only binding in the states that comprise the Second Circuit (Connecticut, New York and Vermont.) Judges in the Ninth Circuit have heard similar cases and have been considerably more sympathetic to the broadcasters' arguments; conflicting rulings in two districts would be another reason for the Supreme Court to take the case.

In other Aereo news, the Wall Street Journal reports that the company is in talks with several pay-TV companies and Internet service providers; the article names Dish Network and AT&T as two companies that Aereo has had discussions with. The discussions center on Aereo providing a low-cost, Internet-based video service that its partners would offer to customers who don't want or can't afford hundreds of channels. Most "basic cable" bundles include many cable networks; the Aereo package would presumably offer broadcast channels only, with a smattering of cable channels that are more interested in distribution than in carriage fees.

In addition, the Wall Street Journal writes that pay-TV companies could offload all of their broadcast channels to Aereo and supply subscribers with set-top boxes that get those channels from Aereo. That would eliminate the need for Aereo's partners to pay for retransmission rights from broadcasters. If the courts ultimately rule that Aereo also doesn't have to pay for them, that could cut off a great deal of income for broadcasters and broadcast networks.

The stakes are so high that if broadcasters lose in court, they're certain to lobby the U.S. Congress to change the law so that the same rules that cover cable, satellite and IPTV video services also cover Aereo and similar services. However, such a change would most likely also require the broadcasters (and possibly cable networks as well) to deal with Aereo and others on the same basis as cable, satellite and IPTV companies. Right now, content providers are free to ignore requests by Aereo and others to distribute their content, or they can set prices that would make services like Aereo uneconomical. Whether content suppliers are willing to pay that price in order to rein in Aereo remains to be seen.