Aereo: Another "cable killer"?

Companies have been trying for years to offer cable television-like services over the Internet, without having to either get permission from broadcasters or pay them to retransmit their shows. FilmOn and Ivi are two companies that tried last year, but are both currently "off the air" as the result of court injunctions. Aereo, a New York-based company, is the latest to try. The company launched its service today in New York City. According to the company, Aereo is designed specifically to get around the legal limitations that shut both FilmOn and Ivi down.

Aereo will stream the signals from 20 New York City-area broadcast stations to its subscribers for $12/month, and will include a network-based DVR service that was upheld as legal by the U.S. Supreme Court last year in a case against Cablevision. All the major broadcast networks, including ABC, CBS, Fox, NBC and PBS, will be included, but cable-only networks such as USA, TNT and CNN won't be. That's one big difference between Aereo's service and those of FilmOn and Ivi, both of which offered a selection of basic cable networks. In addition, Aereo will initially only be available in New York City, and Aereo will only carry signals from local television stations--another difference from its predecessors, which made signals from stations in Los Angeles and New York available to subscribers around the U.S.

Aereo is doing one more thing that it hopes will make its service ligitation-proof: For every subscriber, Aereo will install a tiny, thumb-sized antenna in an undisclosed location in New York City. (Correction, February 15, 2012: Aereo is going to allocate each subscriber their own antenna from a pool of antennas while they're using the service, not install a dedicated antenna for every subscriber.) The idea is that each subscriber will receive the signal from their own antenna, not from a "community" antenna, and therefore, Aereo isn't a cable system and isn't bound by cable retransmission rules. It's an interesting way to try to get around the regulations, but whether the courts will agree is an open question.

Aereo has one more card to play: One of its investors is IAC, and company Chairman Barry Diller will join Aereo's Board of Directors. Diller is a former VP of development at ABC Television, former Chairman and CEO of Paramount Pictures and former Chairman and CEO of Fox, where he founded the Fox Television Network. At one time he owned USA Network. Diller is one of the best-connected executives in the media industry, and he has the experience in running and working with television networks and movie studios that neither FilmOn nor Ivi had. However, it's unclear if that's going to be of any help if the New York television stations go to court against Aereo.

Update, March 1, 2012: The Hollywood Reporter reports that not one, but two, lawsuits were filed against Aereo today to stop it from launching on March 14th. The first lawsuit, asking for a permanent injunction and statutory damages, was filed by Fox, Telemundo and PBS and their New York affiliates. The second lawsuit, asking for pretty much the same thing, was filed by CBS, NBC and ABC and their local affiliates. The Hollywood Reporter says that the two lawsuits are likely to be consolidated.

If you live in New York, have poor television reception and don't care about cable networks (or can get what you want from Netflix), it may be worth considering Aereo as an alternative to cable. If you live outside New York, don't hold your breath--Aereo's unlikely to spread to other cities until the courts determine whether or not its service is legal.

Ivi TV: Let's see how long this lasts (Updated with new information)

Ivi, Inc., a Seattle-based company, has launched what it calls a "revolutionary" live television application. For $4.99 (U.S.) per month, they will stream the live feeds from 16 over-the-air television stations in New York City and 10 from Seattle straight to your computer. Their feeds include ABC, CBS, Fox, NBC, PBS, Telemundo, Univision and other affiliates, as well as independents.

Update, 14 September 2010: Ivi seems to be trying to take advantage of U.S. Copyright law that was written well before the advent of the Internet, while simultaneously avoiding FCC rules that make the company's plans patently illegal. (Keep in mind that I'm not a lawyer, so I'm bringing a layman's knowledge to the situation.) In the Code of Federal Regulations, Title 37, Section 201.17, "cable systems" as defined by this statute are entitled to retransmit ("secondarily transmit") television stations' signals under a statutory (or "compulsory") license. The cable system pays a royalty based on its revenues to the U.S. Copyright Office. This portion of the statute was written in 1978, almost 20 years before the commercialization of the Internet, and it didn't contemplate a technology that would make a national cable service feasible outside of FCC regulations.

The FCC has its own rules on permission and compensation for retransmitting the signals from broadcast television stations. Here's a direct quote from the FCC's Fact Sheet on Cable Carriage of Broadcast Stations:

The Communications Act prohibits cable operators and other multichannel video programming distributors from retransmitting commercial television, low power television and radio broadcast signals without first obtaining the broadcaster's consent. This permission is commonly referred to as "retransmission consent" and may involve some compensation from the cable company to the broadcaster for the use of the signal.

If ivi is a cable operator or other multichannel video programming distributor, the FCC's rules require the company to get permission from broadcasters before they retransmit their signals.

Under Title 37, Section 201.17, ivi claims that it's a cable system and has a right to a statutory license to television stations' programming, no matter where they're located. However, ivi claims that it's not subject to regulation by the FCC, and therefore is not a cable system. CFR 37 Section 201.17 says that cable systems are entitled to statutory licenses, even if they're not defined as cable systems by the FCC.

So, what's likely to happen? My suspicion is that there are many high-paid attorneys at the television networks and cable operators working on this right now. One option would be to get the U.S. Congress to amend or repeal Section 201.17, since the FCC's rules supercede it. Another option would be to get the FCC to rule that ivi is a legitimate cable operator, and the fact that it owns no plant doesn't mean that it's free from FCC regulation. A third option would be for programming suppliers (the major networks, movie studios and syndicators) to file suit against ivi, charging the company with interfering with their exclusive distribution contracts with local television stations outside the New York City and Seattle markets. These suppliers could petition for an emergency injunction to shut down ivi's service.

Ivi might have a better case than I anticipated when I first wrote this post, but I still believe that it's only a matter of time before it gets shut down. It may take a year or two for the necessary statutory changes to be put into place, but a preliminary injunction can be put into effect in a matter of weeks, or even days.