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Aereo should not call itself a cable company

Aereo is trying to reinvent itself after its June 2014 loss in the U.S. Supreme Court where the high court held that Aereo activities were substantially like those of a cable company; therefore it met the definition of performance under the Copyright Act and was required to compensate broadcasters for the performance of their content.  Aereo, like other cable companies, should have to pay re-transmission fees to over-the-air broadcasters whose signals Aereo was capturing via miniature antennas and providing to Aereo’s subscribers.

Aereo’s reportedly new approach will be to ask the courts to treat the company as such, as a cable company, so that Aereo can move forward with a business model that allows it to make some money fast.

Well, Aereo may not want to move too fast with that classification redux.  According to U.S.C. 47 sec. 522 (5), a cable operator means any person or group of persons (A) who provide cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system.

A cable system is defined as a facility consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community, but such term does not include (A) a facility that serves only to transmit the television signals of one or more television broadcast stations; (B) a facility that serves subscribers without using any public rights of way; (C) a facility of a common carrier which is subject, in whole or in part, to the provisions of sub-chapter II of this chapter, except that such facility shall be considered a cable system (other than for purposes of section 541(c) of this title) to the extent such facility is used in the transmission of video programming directly to subscribers, unless the extent of such use is solely to provide interactive on demand services; (D) an open video system that complies with section 573 of this title; or (E) any facilities of any electric utility used solely for operating its electric utility system.

Yes, I know that’s a mouthful, but bear with me.  I believe one can make the argument that while Aereo looks like a cable operator because it grabs broadcast signals out of the air and retransmits them to subscribers, under the Communications Act the company isn’t a cable company.  Aereo falls under the exception carved out in section 522(B) because its antennas are stored in a warehouse, not in a public rights-of-way.  The signals are distributed to subscribers via wireless spectrum licensed to a wireless company or via fixed wired facilities owned by a telephone or cable company.

Aereo itself may be buying access to a wireless or wired broadband provider but again these facilities are probably owned by these carriers.  Even if Aereo owned facilities that connected its warehouses to a broadband provider, that ownership would not amount to enough to be described as a cable operator.

I believe Aereo fails under section 522 (A) of the Communications Act also since, according to its published business model, Aereo captures and re-transmits the signals of broadcast television channels only.

Aereo may be able to sell its technology to an existing cable company or to some other upstart that wants to get its unique content into the hands of subscribers, but Aereo, in my opinion, would only dig itself a deeper hole if it tells the 11 cities it was providing services in that it is now a cable company.  Its financial woes would only be compounded if it held itself out to a local franchise authority as a cable company only to find itself being squeezed by the regulatory gestapo located in a cable office in some county or city government.

Not labeling itself a cable company would give Aereo and its investors some wiggle room as it determines its next best course of action.

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Dear Al Franken. You’re missing the globe for the bushes

The U.S. Senate Judiciary Committee met today to give their thoughts about the proposed merger between media companies Comcast and Time Warner Cable.

Wait a minute.  Did I say media companies?  Yes I did.  Comcast and Time Warner Cable provide end-users with access to content, whether they purchase that content from programmers such as ESPN or produce that content themselves, such as through their regional sports networks or other entertainment networks.  The questions posed by most of the senators displayed either their ignorance or fear of Comcast and Time Warner’s new roles as content providers.  Their unique position as owners of video distribution pipes that go into the homes of consumers shouldn’t lessen their primary roles as content providers nor should ownership of transmission mediums be the primary determinant of the legal and regulatory framework for their oversight.

Senators like Al Franken, Democrat of Minnesota, have the tendency to focus on small issues that generate the most political excitement and this tendency results in myopic analysis of the issue in front of them.  The senators rather focus on consumer issues of increased prices for ESPN and sports blackouts.  They would rather cater to testimony from content providers complaining about their inability to get their products displayed the digital version of a grocery store shelf, complaining that the store brand is getting the prime spot in the middle of the eye level shelf.

Take for example the testimony of James Bosworth, chief executive officer of Back9Network Inc.  Back9Network provides video programming that promotes the golf-lifestyle.  Mr. Bosworth argues that for independent programmers like his company, it will be near impossible to compete against similar programming provided by Comcast.  Mr. Bosworth would like the merger halted because he believes his firm will not be able to compete with Comcast’s other golf and/or lifestyle programming.

Could the real issue be that programmers such as Back9Network don’t bring much value to the end-user much less the “digital grocery store” that is Comcast to put it in a deserving position for more eyeballs?  In an industry allegedly valued at $177 billion with approximately 26 million golfers, maybe Back9Network, still an infant having been in business only since 2010, hasn’t come up with that compelling business model that Comcast’s David Cohen admits is necessary for the company to place a network in its network line up.  Maybe programmers need to focus on creating something that people want to see in the first place.

But there is something more fundamentally telling in this debate over the merger of Comcast and Time Warner.  If there are so many independent programmers out there jostling for room on a media company’s platform, maybe it’s time for programmers to explore technological alternatives for getting their products into market.  For example, why couldn’t independent programmers combine their content, establish a network, and distribute their programming to end-user laptops, tablets, and smartphones via Roku devices similar to the services provided by Aereo.

Mr. Franken and other senators would rather see the media bottleneck forcibly widened by denying mergers like the proposed Comcast-Time Warner combination.  Instead, politicians and policymakers should promote alternative methods of distribution, especially for content providers who are still trying to make a compelling case that their content provides consumer markets sufficient value.

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If Congress, FCC, serious about spectrum, they should leave Aereo alone

Posted June 4th, 2013 in spectrum and tagged , , , by Alton Drew

The Hillicon Valley blog posted an article discussing how television broadcasters may try to drag Congress into its legal battle with Aereo. Aereo has a business model that uses tiny antennas to pick up television broadcast signals and then reroute these signals over the Internet to their subscribers.

Broadcasters have been throwing a hissy fit over Aereo’s potential ability to avoid paying retransmission fees to broadcasters. Broadcasters have been making the argument that they can’t survive on just advertising revenues should the retransmission fee revenue stream be eroded by Aereo’s services.

Some broadcasters are arguing that what Aereo is doing may even be in violation of copyright laws, and if not, that Congress should pass statutes further cementing broadcasters’ intellectual property rights.

In my opinion, if Congress and the Federal Communications Commission are serious about reallocating spectrum through reverse auctions, they should keep their dogs out of this fight. Aereo’s business model would erode the value of spectrum to broadcasters and increase pressure on them to indirectly sell their spectrum to wireless carriers via auction or better yet, petition the FCC to approve license transfers directly to wireless carriers outside of the auction process.

Either way wireless carriers could get spectrum faster and at a lower cost and consumer welfare could be further expanded in the wireless and broadcast television markets without any intervention by the government.

Go on with your bad self, Aereo.