Updated Jun. 25, 2014 at 1:03 p.m.

Supreme Court: Aereo a cable company, not hardware provider

Published: 2014-06-25 10:04:00
Updated: 2014-06-25 13:03:27

The Supreme Court ruled Wednesday that a startup Internet company has to pay broadcasters when it takes television programs from the airwaves and allows subscribers to watch them on smartphones and other portable devices.

The justices said by a 6-3 vote that Aereo Inc. is violating the broadcasters' copyrights by taking the signals for free. The ruling preserves the ability of the television networks to collect huge fees from cable and satellite systems that transmit their programming.

The broadcasters told the court, and the majority of the justices agreed, that Aereo's "competitors pay for the rights to retransmit 'live TV' to the public — as they must to avoid liability for copyright infringement — while Aereo does not."

In a statement, Aereo CEO Chet Kanojia said the Supreme Court decision is a "massive setback for the American consumer" and is a "chilling message to the technology industry."

Steven Hammel, vice president and general manager of WRAL-TV, embraced the ruling.

"I am delighted the Supreme Court upheld the basic principles of broadcasting," he said.

Hammel pointed out that Capitol Broadcasting, the parent of  WRAL-TV, WRAL.com and WRAL TechWire, has embraced advances in technology over the years. For example, WRAL was the first commercial station to launch high-definition television in 1996.

"Broadcasters have always embraced innovation. WRAL-TV and all broadcasters led the transition to digital and high definition television," Hammel said. "Our stations are using .2/.3/.4 “multicast” channels to deliver a rich array of niche programming options that target ethnic and minority communities, “family friendly” program options, high school sports, and expanded lifeline weather programming."

Aereo uses thousands of dime-size antennas to capture television signals and transmit them to subscribers who pay as little as $8 a month for the service.

It is available in New York, Boston, Atlanta, Miami, Houston, Dallas, Detroit, Baltimore, Cincinnati, San Antonio and Austin. The company has said it plans to expand to Raleigh-Durham soon.

Some justices worried during arguments in April that a ruling for the broadcasters could also harm the burgeoning world of cloud computing, which gives users access to a vast online computer network that stores and processes information.

But Justice Stephen Breyer in his majority opinion that the court did not intend to call cloud computing into question.

Justices Antonin Scalia, Samuel Alito and Clarence Thomas dissented.

Broadcasters including ABC, CBS, Fox, NBC and PBS sued Aereo for copyright infringement, saying Aereo should pay for redistributing the programming the same way cable and satellite systems must or risk high-profile blackouts of channels that anger their subscribers.

The U.S. networks increasingly are reliant on these retransmission fees, estimated at $3.3 billion last year and going up to more than $7 billion by 2018, according to research by SNL Kagan, which analyzes media and communications trends.

When an Aereo subscriber wants to watch a show live or record it, the company temporarily assigns him an antenna and transmits the program over the Internet to the subscriber's laptop, tablet, smartphone or other device.

The antenna is only used by one subscriber at a time, and Aereo says that's much like the situation at home, where a viewer uses a personal antenna to watch over-the-air broadcasts for free.

"Aereo is in some ways novel, but it is also among a host of technologies that uses the Internet to offer consumers the ability to do what they always have more cheaply and conveniently," the Dish Network and Echostar Technologies said in a supporting legal brief filed in the Supreme Court.

But the broadcasters and their backers argued that Aereo's competitive advantage lies not in its product, but in avoiding paying for it. The Court likened Aereo more closely to a cable provider than to an equipment provider. "Behind-the-scenes technological differences do not distinguish Aereo’s system from cable systems," Breyer wrote.

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