Broadcast TV, cloud computing collide at Supreme Court
WASHINGTON — The future of broadcast television and cloud computing hung in the balance on Tuesday before a seemingly undecided Supreme Court.
On the one hand, several justices expressed skepticism bordering on disdain for the business model employed by Internet start-up Aereo, which rebroadcasts TV shows to subscribers without paying retransmission fees. The company claims to have hundreds of thousands of subscribers who use separate, dime-size antennas that Aereo keeps on rooftop circuit boards in the cities it serves.
"There's a reason people call them copies, because they're the same," Chief Justice John Roberts said in reference to the copies of shows Aereo sends out at customers' requests.
"You'll take anybody who can pay, right?" asked Justice Ruth Bader Ginsburg, who appeared to side with broadcasters that claim their copyrighted material is being pilfered. Aereo charges $8 to $12 a month.
On the other hand, the justices expressed concern that a decision forcing Aereo to pay retransmission fees to the broadcast networks would ensnare at least some players in the cloud-computing industry.
Justice Stephen Breyer said in some ways, Aereo's service to consumers is similar to storing copies of songs in the cloud and retrieving them on demand — or even to a record store that sells copies of the same CD to different customers.
David Frederick, the attorney for Aereo, seized on that concern. "The cloud-computing industry is freaked out about this case," he said.
The broadcasters' challenge to Aereo is one of the most significant cases to come before the court in its current term, and its chamber was packed on Tuesday, with a slew of TV cameras parked outside.
Last April, Aereo won at the U.S. Court of Appeals for the Second Circuit. "Aereo's transmissions are not public performances," a divided three-judge panel ruled — though dissenting Judge Denny Chin called the system "a Rube Goldberg-like contrivance."
But a federal judge in Utah ordered Aereo to cease operations in six states in February, calling its business model indistinguishable from that of a cable company, which must pay broadcasters for content. As a result, customers in Denver and Salt Lake City lost their service.
Several justices, led by Ginsburg and Roberts, seemed to side with Aereo's critics. But their views didn't seem locked in yet, giving the company a last chance at survival.
Some justices worried about the consequences of their decision, which is expected by late June. Not only could cloud computing be implicated by a decision against Aereo, but the start-up also would be driven out of business.
That was fine by Paul Clement, the former U.S. solicitor general arguing the case for the TV broadcasters. "If all they have is a gimmick, then they probably will go out of business, and nobody should cry a tear," he said.
Aereo, backed by media mogul Barry Diller, co-creator of Fox Broadcasting, serves New York, Boston, Atlanta, Detroit, Cincinnati, Baltimore, Miami and four cities in Texas. It contends that each customer is getting a private service — not the sort of "public performance" covered by the 1976 Copyright Act.
Eight bucks gets you a couple dozen channels and 20 hours of remote-storage DVR space to record your favorite shows. For $12, you can get 60 hours and access to two antennas, so you can record two shows at once. By contrast, cable packages can cost more than $100.
"We are not a cable service," Frederick argued Tuesday. "Aereo is an equipment provider."
The Obama administration, which took the broadcasters' side Tuesday, says licensed services such as Netflix and Hulu show that cloud-based systems can pay copyright holders. "The system is clearly infringing," the government's brief says.
Broadcast networks, backed by large cable providers as well as professional football and baseball leagues that rely on retransmission fees, say a victory by Aereo could set off a race among other companies — from Dish Network to DirecTV — to circumvent copyright laws.
That would risk retransmission fees estimated at $2.37 billion in 2013. The Pew Research Center forecasts those fees could approach $3.68 billion by 2016.
Aereo's vision of the future "could exempt the entire Internet from direct liability for unauthorized public performance, as the user always initiates an online transmission," the broadcasters argued in their brief.