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Summary:

Viewers can stream over-the-air TV services like Aereo in New York but not California. The case could go to the Supreme Court – but not until 2015 or later, leaving consumers ample time to get to know the new service.

Day 287

The legal saga of Aereo, a start-up that offers an $8-per-month TV streaming service, entered a new chapter last week as a California court heard arguments over whether to lift a ban preventing Aereo-style technology from going live in the western United States.

The California hearing was just the latest twist in a complex series of cases that many lawyers predict could land before the Supreme Court and redefine the rules for TV. By the time that happens, however, rapidly expanding Aereo or some other streaming service may have already disrupted the current business model for television.

Here’s a quick primer of where the case stands, and why time is on Aereo’s side.

If you’re unfamiliar with Aereo, the Barry Diller-backed start-up provides tiny antennas that allow subscribers to watch and record Aereo antennasover-the-air TV via iPhones, laptops and other mobile devices. Aereo says the service does not violate copyright law because the individual antennas result in a private, not a public, transmission.

In 2011, all the major broadcasters sued to shut down Aereo, as they have done to earlier TV streaming services, but a federal judge in New York court ruled that the service was legal. An appeals court upheld the ruling earlier this year, meaning that Aereo is clearly legal for now in three northeastern states.

Meanwhile, in California, an eccentric billionaire launched a would-be rival to Aereo called FilmOn, but this time the broadcast networks were able to shut down the service in short order. It was an appeal of this order that took place in California last week. The appeals court will rule in weeks or months, but in the meantime nine western states are off-limits to Aereo.

The split between the two appeals courts — regarded as the most sophisticated in the country on tech and copyright matters — means a test case could be teed up for the Supreme Court.

Supreme Court would decide in 2015 or 2016 (if ever)

According to Lyle Denniston, a veteran reporter with SCOTUS blog, an authority on Supreme Court news, the case is unlikely to be heard anytime soon.

“Unless there is an actual split … it would be unlikely that a review-worthy case would reach the Court in the coming term — October through June. That would mean the fall of 2014 at the earliest,” wrote Denniston by email.

The Supreme Court’s docket is largely set, in other words, and any Aereo-related case would only appear on the calendar in late 2014 or 2015 — meaning a decision would be unlikely before mid-2015. And, since the California appeals court has yet to rule, it’s not even clear that there will be a split in the first place.

People familiar with the Aereo litigation also note that the California court could remand the case to the lower court for further evidence, meaning a potential trip to the Supreme Court could take as long as 2016.

Aereo marches on

As the legal jousting takes place on both sides of the country, Aereo is putting its foot to the floor and going forward with plans to launch in city after city: it’s already live in Boston and Atlanta, and this month will be available in Florida and Texas. The company has said it is aiming for 22 cities in the near future.

Aereo devices in actionIf the service gets traction, it could have a permanent effect on the way Americans perceive and pay for television service. Right now, sports fees are driving cable and satellite packages to ever higher levels, and viewers, familiar with digital on-demand services, are increasingly frustrated with “bundles” that force them to buy channels they don’t want to watch.

Pay television rates have begun to decline for the first time in history and, in this context, Aereo could be the vanguard for blowing up the current bundle model once and for all. Indeed, CEO Chet Kanojia has vowed to transform the TV industry into a la carte model or at least a “rational bundle.” In the meantime, the impending approach of companies like Google and Apple into the TV market is likely to make viewers more receptive than ever to an Aereo-style model.

So is Aereo’s ascendence inevitable? On the legal front, the answer appears to be yes. The long lead time until any Supreme Court decision (which may never happen at all) means the company has a green light outside the west. While there are other, flickering court challenges in Boston and Washington, these have been moving slowly, and judges in those places will be reluctant to further complicate the legal landscape.

Given the slow pace of the courts, broadcasters have also made appeals to Congress. But, at a time when the current legislative slough involves subjects like the debt ceiling, the tax code and Syria, a brand new retransmission law seems a long shot at best.

Ultimately, then, the best broadcasters may hope for in the near term is that Aereo proves a business failure. The CEO of CBS, Les Moonves, has panned the service, saying “We don’t think it’s catching on at all.”

Aereo itself has refused to release revenue or subscriber numbers but, given its on-going expansion, the company appears confident in its prospects. Consumers outside of the west, meanwhile, have ample time to decide for themselves.

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  1. Not only is an actual split in the circuits uncertain, it’s looking less certain than it was a few months ago. In its ruling in July upholding a lower court’s refusal to grant Fox a preliminary injunction against Dish Network’s AutoHop ad-skipping feature the Ninth Circuit explicitly adopted the Second Circuit’s reasoning in the Cablevision case, which held that Cablevision’s remote DVR service did not directly infringe the networks’ copyrights because because it is the consumer who causes the copies to be made, not the service provider.

    The ruling in Cablevision, of course, was the basis for the Second Circuit’s later ruling in favor of Aereo (not to mention the blueprint from which Aereo designed its system). With the Ninth Circuit now on record embracing the logic of Cablevision, getting it to abandon that logic to rule against FilmOn/Aereo and produce a genuine split in the circuits on Aereo’s liability will now be a much tougher legal nut for the networks to crack.

  2. Just got the closed Aereo beta on Monday in Dallas … so far it’s been great!

  3. Bruce A. Johnson Thursday, September 5, 2013

    I stand in continual amazement at how broadcasters – which, due to unfortunate technical decisions made almost twenty years ago, have *no* mobile over-the-air capability – are trying to kill a service that can make that happen in mere months. C’mon, NAB, make a deal with Aereo so that every iPad and mobile phone can watch your local signal! Your viewers will thank you, and maybe – just maybe – you’ll get back some of h the young folks that stare at their smartphones 24/7.

  4. From my point of view, companies should not be able to collect retransmission fees as long as they’re using airwaves for free. Those airwaves belong to the public and the companies are entrusted with them for the public’s good.

    If companies like CBS want to move their content to “pay only” it just means less choices for me to watch commercial advertisements. When you have both hands in the cookie jar it is only a matter of time until things don’t go your way.

  5. With HULU and NETFLIX, etc who needs the crap that is on network tv. Gave up
    2 years ago and got hulu. Would not go back. Even with a outdoor antenna and
    preamp I get spotty signal at my house. The difference is with hulu if you get loss
    of signal on the internet when it comes back you are in the same place of the program
    where with over the air when it comes back you have lost a good bit of the program.
    It looks like the advertisers would want more people watching their ads and would
    step in and insist that aereo be legal.

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