Huge Blow to Cable Cord-Cutters: SCOTUS Says Aereo is Breaking the Law

The Supreme Court has ruled that the Internet television service Aereo is operating in violation of federal copyright laws and can no longer transmit broadcast television signals over the Internet and resell them to consumers. Broadcast networks, the NFL, and the cable industry have fought the 2-year-old start up, claiming that it was stealing their programming. 

Aereo's service picks up over-the-air broadcast signals and sells them as streaming video over the Internet. Had it won, Aereo would have been allowed to continue to offer the service in more than a dozen metropolitan areas where it now operates. Some regional and municipal laws already ban Aereo from broadcasting in their areas. 

The service had been looking into expanding across the country, where it could reach consumers that want an alternative way to access broadcast networks other than subscribing to expensive cable services or using digital antennas. Aereo sold its service for as little as $8 a month, and allowed consumers to use it over many digital devices, such as smartphones, computers, and tablets. Consumers could view selections live or record them for later viewing.

Soon after Aereo's launch, the major broadcast networks sued claiming that Aereo illegally retransmitted their programs. Aereo countered that it was not covered by the current federal copyright laws since each Aereo user was assigned a single micro antenna to receive a chosen station. The signal was sent to a sector of a video recorder dedicated to an individual consumer and then streamed to the consumer's watching device. Therefore, it was dedicating a remote, single antenna for each individual consumer's broadcast choice.

The ruling was 6-3. 

 "Aereo's activities are substantially similar to those of the CATV companies that Congress amended the act to reach," Justice Stephen Breyer wrote for the majority. "Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, almost as they are being broadcast. ... By means of its technology (antennas, trans­coders, and servers), Aereo's system 'receive[s] programs that have been released to the public and carr[ies] them by private channels to additional viewers.' It 'carr[ies] ... whatever programs [it] receive[s],' and it offers 'all the programming' of each over-the-air station it carries."

Justices Clarence Thomas and Samuel Alito joined Justice Antonin Scalia in dissent. Scalia wrote that while Aereo's service maybe "ought not to be allowed," the court should "not distort the Copyright Act to forbid it."

"It is not the role of this court to identify and plug loop­holes," he wrote. "It is the role of good lawyers to identify and exploit them, and the role of Congress to eliminate them if it wishes. Congress can do that, I may add, in a much more targeted, better informed, and less disruptive fashion than the crude 'looks-like-cable-TV' solution the court invents today."

NBC's Legal correspondent, Pete Williams, says the ruling "kills Aereo in the crib" although it is not known whether the company has a Plan B to buy the content from the broadcast networks.

Aereo is backed by Barry Diller's IAC, and more than $100 million had been invested in the start up.

Of the 116 million homes with television, only 12 million do not have cable, satellite or some other form of pay television, according to Nielsen. It is possible that Aereo's rollout could have greatly changed this dynamic. 

Over-the-air television broadcasters already charge retransmission fees in exchange for their signals. CBS, for example, says that retransmission fees are a huge source of earnings. CNBC reports that such payments to CBS are expected to reach $2 billion by 2020. Broadcasters like CBS feared a ruling in favor of Aereo could undercut the legal foundation requiring cable and satellite networks to pay fees to carrying the over-the-air transmissions.

This ruling is considered a huge victory for the cable industry because they will retain near-exclusive rebroadcast rights in most major media markets. Digital satellite providers also pay a rebroadcast fee. Digital antennas are not an option for many apartment dwellers and those that live at the far reaches of a regional broadcast area. 

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