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Courting favor

The cheeky ways people find to circumvent the status quo are always fascinating. The case of American Broadcasting Companies v. Aereo, which reached the US Supreme Court this week, is a perfect example.

Aereo is a wacky scheme that probably could only happen under the specific conditions prevailing in American broadcasting. As CNN has a helpful video explaining the service, but the gist isn't too difficult. The stations and networks that have spectrum to do so - CBS, NBC, ABC, PBS, Fox, local independents - put out their broadcasts free-to-air and anyone with an antenna inside their broadcast range can pick them up. But if you pick up and retransmit the signal, as cable companies do, to a large number of subscribers, then under the 1976 Copyright Act it's a public performance and you must pay the broadcasters retransmission fees. Aereo's service is based on a loophole: the company assigns to each subscriber a tiny antenna which remains dark until or unless the subscriber turns on his television and chooses a channel. At that point, the antenna is tuned to that channel and receives the broadcast, relaying it over the Internet to just that subscriber. Granted, Aereo has a giant antenna from which the tiny ones get their signal, but the company's lawyers believe that intermediate step makes all the difference.

At $8 a month, the service's appeal is clear. The math is easy: cable TV is increasingly expensive and standard packages saddle most consumers with a vast wasteland of advertising spread out over channels they rarely watch. The shows they really do want to see are better enjoyed via streaming in one form or another: from the broadcaster itself (way fewer ads) or a while later via Hulu, Netflix, Amazon, another service, or even purchased DVDs. So you can see why this is a service to upset everybody except the consumers who use it.

Aereo's legal argument is based on the 2008 Cartoon Network, LP v. CSC Holdings case (often referred to as "Cablevision"), in which Second Circuit Appeals Court ruled that the cable company could store programs subscribers saved on their servers rather than a home-based VCR or PVR. The similarity Aereo is betting on is that in both cases users are in control of what's saved, and in both cases users have their own personal copy (or antenna).

As a strategy, though, the structure of Aereo's serves reminds me much more of that turn-of-the-millennium casualty of copyright lawsuits, MP3.com. MP3.com asked you to prove you owned a CD by inserting it in your computer's drive. Thereafter, it allowed you to stream MP3s of that CD from the ripped collection it stored on its servers. Like Aereo, MP3.com argued that it was only providing access to something you already had the right to use. The resulting lawsuits bankrupted MP3.com, but 14 years later another company created a very similar service, which so far has been accepted without demur: Amazon.com. The most likely is that Aereo will suffer a similar fate; reports of this week's hearing suggest that the Supreme Court is trying to find a way to rule against Aereo while avoiding damage to the cloud computing industry. Dan Gillmor has a wonderful rant pointing out the public benefits that could accrue from freeing up spectrum if the broadcasters actually made good on their threat to pull their terrestrial broadcasts (ha!) if Aereo were to win.

It's at this point that the other big story of the week - the FCC's announcement that it will allow "fast-lane" discriminatory pricing - shows the size of the precipice upon which we're standing. Gillmor has another great rant about the FCC's announcement; FCC head Tom Wheeler has denied that the new rules will end network neutrality; Tim Wu seems clear that Wheeler is wrong.

In the next six months, the shape of the Internet as we know it could change entirely. The companies that will make deals like those the FCC seems to envision fall into three groups: media, telecoms, and cable. All three of those are industries dominated by a few large players - oligopolies - with a long history of protectionism. This is the much more serious side of the Comcast-Time Warner Cable merger, which until now was largely disparaged for its likely impact on consumers. In a discriminatory, "fast-lane" Internet, however, the bigger impact will be the merged company's market power in deal-making. Companies like Netflix, Hulu, Google (YouTube), and Amazon (Live) are Comcast's competitors in terms of providing access to television content, but will have to rely on it to deliver their Internet traffic. And that's without considering the difficulties of the next new idea to hit the Internet, which until now could have relied on having its traffic treated equally with everyone else's.

Aereo, as already noted, is a business model that's unlikely to be repeated elsewhere. Cord cutters are not limited to the US, but freely accessible alternatives, such as the UK's Freeview and Freesat, are entrenched. The battles over the bandwidth needed for video streaming and over who controls the mass audience will happen everywhere. If the US gets it wrong...will that create an opportunity for the rest of the world to do better?

Wendy M. Grossman is the 2013 winner of the Enigma Award. Her Web site has an extensive archive of her books, articles, and music, and an archive of earlier columns in this series. Stories about the border wars between cyberspace and real life are posted occasionally during the week at the net.wars Pinboard - or follow on Twitter.


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