Aereo customers lament the death of a million tiny antennas

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In recent years, cloud computing has become a popular mechanism for storing electronic data.  Rather than storing data on one device at work or home, users can save, store and retrieve their data online using applications such as Dropbox.  The benefits of using cloud computing over traditional data storing methods are obvious—cloud computing provides an automatic back up system and data can be accessed from multiple locations and electronic devices.

There is another side to cloud computing, however, that threatens to disrupt established industries such as music, television and film.  Following in its predecessor’s footsteps, Aereo waded into the murky waters of online media streaming and recording.  The company catches and broadcasts television shows on free airwaves using small antennas and provides a DVR service which allows subscribers to record television shows for later viewing.

From the beginning of Aereo’s short-lived existence, broadcast companies have viewed Aereo’s services as a threat to the industry, making it prone to lawsuits.   Large networks argued that the transmission of TV shows violated copyright laws, and that Aereo was obligated to pay for the material it broadcast.  In a six to three decision, the United States Supreme Court held in ABC v. Aereo (PDF) that Aereo’s services violate copyright laws.  The decision was a major victory for broadcasters, and a possible knockout punch to Aereo.

The little antennas could have been Aereo’s saving grace.

My.MP3.com, a “music locker” service launched in 2000, was one of the first cloud computing service providers to stream media content.  The service allowed the owner of a CD to stream that CD from MP3.com’s servers to other computers.  The recording industry brought a lawsuit against the company for copyright infringement.  The presiding judge described the service as an unauthorized retransmission of the recorded content, and effectively scared those would-be cloud service providers away from streaming copyrighted media.

Eight years later Long Island-based cable provider Cablevision came out with a digital video recorder (DVR) that stored recorded TV shows on a remote server instead of a DVR box.  Users could record TV shows and retrieve them online to watch at a later time.  Like the recording industry, broadcasters argued that the transmission of the TV shows violated their copyrights.

Individuals are allowed to make copies of copyrighted material for personal use, but the issue was whether Cablevision needed permission from the copyright holders to facilitate the copying.  The U.S. Court of Appeals for the Second Circuit concluded  that Cablevision’s services did not violate copyright protection because Cablevision itself was not creating the copies.  Also, Cablevision created a separate copy of content for each user—a crucial factor in the outcome of the case.

More recently, the Fox network sued Dish, a satellite TV company, for storing and making available to users copies of TV shows through its Hopper DVR.  The DVR service provided features such as automatic commercial skipping, much to the chagrin of broadcast networks.  The U.S. Court of Appeals for the Ninth Circuit held  that the service fell squarely within the Second Circuit’s Cablevision decision, since the users, not Dish, were the ones making copies.

Aereo was banking on a similar interpretation of the law by the Supreme Court.   The absurdity of their million little antennas business model could have been their saving grace.   Because each user receives video from a distinct physical antenna, Aereo contends that each transmission is a private performance.  Furthermore, Aereo considered the transmissions to be for private use, even though transmissions of the same television show were broadcast simultaneously.

Aereo contended that it was not obligated to pay retransmission fees because it was catching transmissions that are free to those with personal antennas.

Each antenna is, in essence, a TV tuner with a long cable.  The antenna is able to pick up television broadcasts that are available over the airwaves.  The technology is not innovative—antennas have been used for many years to pick up free broadcasts by those who wanted to avoid paying exorbitant subscription prices for cable.  Aereo’s antennas do much of the same thing, except they simplify the process for the consumer.  Rather than buying an antenna, Aereo customers essentially lease a tiny antenna that picks up the broadcasts that would otherwise be available to the customer.  The added value of Aereo’s service to the consumer is a more reliable broadcast and the lack of maintenance required.

All cable companies pay “retransmission fees” to TV networks to broadcast television shows to cable subscribers.  Aereo contended that the company was not obligated to pay retransmission fees because it was catching transmissions that are free to those with personal antennas.  This seemingly simple solution to streamline free broadcast viewing ended up causing major controversy.  Major TV networks viewed Aereo’s business model as a ploy meant to subvert copyright protection laws.

When Aereo launched in New York, TV networks sued Aereo for copyright infringement.  The Second Circuit held that Aereo’s transmissions did not violate the networks’ copyright protections.  The court agreed with Aereo that the subscribers were responsible for the copies made and that Aereo antennas were little more than a TV tuner with a far reach.

How the technology works does not matter.

The Supreme Court’s decision was in stark contrast to the Second Circuit’s ruling.  Justice Stephen Breyer, writing for the majority, outright rejected Aereo’s argument that its transmissions were private performances.

“You can transmit a message to your friends whether you send identical emails to each friend or a single email all at once,” he said.

Justice Breyer said that Aereo was more than an equipment provider.  Unlike Cablevision, which provided a means to record TV shows that customers already had access to, Aereo’s services were more akin to those of a cable system that transmitted copyrighted materials.

Justice Antonin Scalia, writing for the dissent, expressed his disapproval of Aereo’s business model, but he could not see how Aereo was breaking the law.

“It is not the role of this court to . . . plug loopholes,” Justice Scalia wrote.  “It is the role of good lawyers to identify and exploit them, and the role of Congress to eliminate them if it wishes.”

Other cloud computing service providers were watching intently as the case unfolded.  The transmission of copyrighted materials in the cloud is a common element in online services such as Google Play.  Those in the tech community bemoaned that an overly broad decision from the Supreme Court could suppress the burgeoning technology.  Taking great care to avoid this result, Justice Breyer was adamant that this decision would affect only Aereo.

“We believe that the resolution of questions about cloud computing, remote storage DVRs and other novel matters not now before us should await a case in which they are clearly presented,” he wrote.

Aereo’s founder, Chet Kanojia, was disappointed with the decision, not only because it shut down his company’s operation, but also for the justifications for the holding.  As Justice Scalia stated in the dissenting opinion, Kanojia felt the majority opinion was “built on the shakiest of foundations” and its holding could have far reaching impact on the tech community.

“We’ve said all along that we worked diligently to create a technology that complies with the law,” Kanojia said in a statement after the decision, “but today’s decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry.”

“The Court vows that its ruling will not affect cloud storage providers and cable television systems,” Justice Scalia wrote, “but it cannot deliver on that promise given the imprecision of its results-driven rule.”