“One day, a group of brilliant engineers at Aereo created a new species of antenna. Just the size of a thumbnail, this small but mighty creature captured the hearts of New York City airwaves and became accessible to us through the Internet. We combined these antennas with a beautiful interface for what became a perfect marriage. A match made in heaven… Well, maybe not heaven, but close: the New York City Skyline. Your Broadcast is live, DVR is on board. Our launch crew has developed a better way for you to be entertained… So take a deep breath – no more gasping for air. We have your Aereo supply.” – From Aereo’s blog

NEW YORK — A startup backed by media billionaire Barry Diller has launched a service that sends live local TV feeds to iPhones and iPads. But the service may be short-lived, since TV stations are likely to challenge its right to use their broadcasts.

The service, Aereo, launched in New York this week, but it is available only by invitation. It hopes to broaden access to more people next month, and then launch in other cities.

Subscribers pay $12 per month and use their web browsers to access streams from 27 local channels, including the major broadcast networks ABC, CBS, NBC and Fox. For now, the service works only on iPhones, iPads and iPod Touches, but Aereo is planning to make it accessible to PC browsers and Android-powered phones as well.

In a test by an Associated Press reporter, the service provided high-quality streams over Wi-Fi to an iPad, but often it wouldn’t show particular channels. The company says kinks are still being worked out of the system.

Aereo has more than $25 million in venture capital backing, with more than $20 million of it coming from a funding round led by InterActiveCorp, which owns Match.com, Ask.com and other websites.

Diller, the chairman of InterActiveCorp and the former CEO of Fox, says he’s “excited” about Aereo and the chance it has to disrupt the way TV is consumed.

Aereo exploits what it believes is a loophole in the laws governing retransmission of local broadcasts. Yet TV networks and stations are unlikely to buy that legal justification, and could drag Aereo to court.

Representatives of CBS, NBC and ABC and the National Association of Broadcasters had no comment on Aereo’s launch.

The “Vision”

“Our vision is simple; we are trying to simplify. TV at the moment is complicated. Between the lackluster technology and the lack of choice and portability there is room for improvement. So, we’re making our television experience simple. We’re breaking free from clutter and complication, wires and boxes, and useless gadgetry. TV comprises an essential part of our cultural heritage. We enjoy waking up to the morning news – it’s habitual. We love our dramas, our live sports, and ending our day with uplifting sitcoms. TV is a tradition, an escape and a source of comfort. TV is important to our lives so it must function well. We’re providing a new technology that enables choice and freedom. Your life is on your own terms. TV should be as well. It’s that simple.” – From Aereo’s blog

The Loophole

Cable companies pay local broadcast stations for the right to retransmit their signals to subscribers. Aereo doesn’t, and founder and CEO Chet Kanojia says it doesn’t have to. That’s because Aereo doesn’t use one big antenna to pick up the local broadcasts and relay them to the Internet. Instead, it uses one tiny antenna for each subscriber that’s watching.

Aereo has created a dime-sized TV antenna, and crams hundreds and perhaps thousands of them into boxes the size of a dishwasher. The company places these boxes anywhere they can pick up local TV signals.

“Every one of these little antennas has a person’s name on it,” Kanojia says.

However, he clarified that each subscriber doesn’t necessarily use the same antenna all the time. Subscribers do share antennas — they just don’t use the same antenna at the same time.

Kanojia reasons that because there’s one antenna per subscriber, Aereo is just an intermediary between a viewer and an antenna, sort of like a very long antenna cable. That means, he says, that Aereo not a cable company and doesn’t have to negotiate with TV stations for the right to relay their signals, or pay them.

How Aereo Works

“When you sign up for Aereo, we assign you an antenna so you can watch TV on your mobile devices. To activate an account, create a username and password on aereo.com or connect through Facebook or Twitter. There is no downloading necessary. No apps, no cords, no clutter, no fuss. Sign in from your computer, tablet, or phone. You can even stream on your big TV. Enjoy live programming or record your favorite shows. That’s it.” – From the Aereo blog

Thin Ice?

Scott Flick, a media lawyer and partner at Pillsbury Winthrop Shaw Pittman LLP in Washington, thinks Aereo is skating on thin ice, legally speaking.

“When you take somebody’s programming and you make it available on some device that wouldn’t normally receive that, that sounds a lot like retransmission,” which means that Aereo should be paying the TV stations, he says. “The laws here are fairly tight. There’s not a lot of room for wiggle.”

The one-antenna-per-subscriber setup doesn’t look like much of a loophole, Flick says, since courts ruling on retransmission cases have “a fundamental history of saying over the years: ‘Look, if it quacks like a duck and walks like a duck, it’s a duck.'”

NBC, Fox and ABC make their shows available on iPads, iPhones and other tablets and phones through Hulu.com, which doesn’t have live programming or local news. And shows aren’t available on Hulu until the day after they air. Hulu charges $8 per month for access from mobile devices. Cable companies are also making some programming available on iPads and iPhones in the homes of people who subscribe to cable.

Meanwhile, TV stations are trying to make their live feeds accessible on phones through special “mobile DTV” broadcasts. But to receive those, viewers would need phones with special antennas, and phone companies have shown no interest in carrying such phones.

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