Aereo antenna

An Aereo TV antenna, next to a dime to show its size. The company's use of these devices lies at the heart of a dispute with broadcasters that the Supreme Court is hearing Tuesday. (G. Giraldo / Aereo / February 2, 2012)

The Supreme Court is scheduled to hear arguments Tuesday in the most important copyright case of the year, and possibly the most important one since it took up file-sharing piracy in MGM vs. Grokster. The new case, ABC vs. Aereo, tests the reach of a key monopoly held by copyright owners: the rights to the "public performance" of their works.

On the surface, this case is a slam dunk for ABC and the other broadcasters that brought the lawsuit. Aereo sells a subscription TV service that provides consumers access to their city's local broadcast channels via the Internet, enabling its customers to watch live or recorded shows on their tablets, smartphones, laptops or smart TVs. That's a truncated version of cable, and Congress made clear in 1976 that cable companies have to get broadcasters' permission before retransmitting their programs to the public. In recent years, broadcasters have been demanding (and receiving) increasing retransmission fees, creating a major new revenue stream.

To the broadcasters and their allies, that's the entire case. Exactly how Aereo offers its service to the public is almost immaterial; Congress wrote copyright law broadly enough to cover any variation of cable TV that technology companies were clever enough to come up with. If you retransmit a TV broadcast to members of the public, you're covered. Pay up.

To Aereo and its allies, however, the details are important. Because even if the networks, the U.S. Solicitor General and others on ABC's side are right about what the law says, they're wrong about what's actually happening when an Aereo customer watches TV.

Unlike cable operators, Aereo doesn't gather the programming feeds from local broadcasters and then pipe them to their subscribers. It starts by setting up scores of tiny antennas that are connected to high-capacity hard drives, which in turn are connected to the equipment necessary to stream video over the Internet. By default, the antennas are tuned to dead air, with the hard drives recording nothing and the streaming circuitry idle.

Things change only when an Aereo subscriber logs on to the service to watch or record a video. At that point, an antenna is assigned to the customer, it's tuned to the selected channel, the bits flow to the hard drive and (if the customer is watching the program live) the stream begins. Each customer viewing or recording session has its own antenna, hard drive space and stream; no content is shared.

In that sense, Aereo precisely replicates what would happen if someone had a TV antenna connected to a computer's TV tuner card in his or her living room, with the computer running a version of Windows that supports Internet streaming. (I'd be shocked if there wasn't a way to do this with a Mac as well.) The consumer is the one tuning in the program, making the recording and streaming the video. And that, according to the principle laid out in the U.S. 2nd Circuit Court of Appeals' decision in Cartoon Network vs. Cablevision, is what makes an Aereo stream a private performance, not a public one.

The solicitor general argued that this case has no implications for cloud-based services such as online music lockers because they typically let consumers store and play back content they've lawfully acquired, whereas Aereo is the one doing the acquiring. But that's a chilling thing to say to companies that replicate in the cloud what people can legally do with technology installed in their homes. In the view of Aereo and other cloud-based services, the TV shows being streamed are lawfully acquired by consumers. They're simply doing so using equipment they rent from Aereo.

Many copyright holders no doubt consider these to be distinctions without a difference. The bottom line is the same: Aereo is a service provider selling TV for a monthly fee, just as the cable and satellite companies do, and so like them it shouldn't be able to do that without the broadcasters' permission.

To me, though, the distinctions are crucial. If broadcasters are beaming their programs for free to antennas in my community, and someone offers to rent me a better antenna than the one I might buy at the local electronics store, why should I have to pay broadcasters for that? Is it because the antenna is connected to me electronically, not by a wire? If so, does that mean I couldn't set up an antenna at a neighbor's house and have it transmit programs to my home via the Internet? Or is the issue simply the fact that someone else owns the antenna and the transmission facilities? And if that's the case, would broadcasters be able to demand licensing fees from a company that rents people antennas installed on their customers' own rooftops?

In other words, this case could ultimately affect how flexible business models will be, as well as companies' ability to build online services around consumers' fair use of copyrighted material. If the justices decide how to treat Aereo by ignoring its technology and looking only at the market segment it occupies, that would be troubling news for innovators. As a group of academics who support Aereo urged the court, the details are important:

"When the statute is silent or ambiguous on the copyright implications of a new technology -- where Congress has not (yet) spoken on the question or performed the necessary and often-difficult balancing of competing interests -- the court’s role in construing the statute is not to produce maximum authorial reward but maximum public benefit," attorney Michael C. Rakower wrote on behalf of 34 law professors. "Where that means (as it often does) that it is the copyright owners who must persuade Congress to address the matter and adjust the balance so that it tips more in their favor, they are entitled and well-equipped to do that, as they have done so often in the past."

(Let me note for the record that Tribune, which owns the Los Angeles Times, also owns WPIX, one of the companies that joined ABC in suing Aereo. So my views clearly do not reflect those of my employer's owners.)

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