It’s All Up to the Courts

Seal of the United States Court of Appeals for...

Seal of the United States Court of Appeals for the Second Circuit. (Photo credit: Wikipedia)

As often happens with many controversial topics in our society, the fates of Aereo and its clone FilmOn X are now in the courts. These companies supply antenna receivers to customers and let them receive live, local, over-the-air television from the local network affiliates of ABC, CBS, FOX and NBC on internet connected devices including TVs, tablets and smartphones. These companies are claiming that since the signal goes directly on a single antenna to only one customer that they don’t have any obligation to pay retransmission fees to the network affiliates for the programming.

Of course the large networks disagree vehemently with that interpretation and have sued the two companies. In April, Aereo won a suit in New York, which was then upheld later in July in the Second Circuit Court. The judge who ruled in the Aereo suit concentrated on the way that Aereo transmits the signal rather than rule on the issue of copyright infringement that was brought by the networks.

The networks also sued FilmOn X using the same arguments that they had used against Aereo. FilmOn X is an odd company in some ways because in the past it went by the names of Aereokiller and BarryDriller.com, both names that are a dig at Barry Diller, the founder of Aereo. In fact, there are conspiracy theories flying around the Internet that FilmOn X was secretly founded by the networks for the purposes of being sued and losing on the Aereo issue.

A week ago the District Court of Washington DC ruled against FilmOn X saying that the company had violated the copyrights of the networks. A week later the same court refused to accept an appeal on the issue. The suit puts an injunction on FilmOn X from operating.

So now there are two district courts with differing opinions on the same topic. The two courts heard essentially the same arguments and came to different conclusions. Generally the only way to resolve this kind of dichotomy is for the Supreme Court to hear the case and to resolve the issue.

But until then both companies are in legal limbo. Aereo came out this week and publicly advised FilmOn X to ignore the injunction. Aereo also made an effort to distinguish that its technology is different than that of FilmOn X, but the differences are subtle. Aereo continues to expand to new markets and continues to face additional lawsuits in each new market it enters.

As somebody on the sideline I really don’t know how I hope this case resolves. Part of me says that this suit is a result of the greed of the networks which are now pushing to get as much as $2 per month per subscriber in retransmission fees for each local channel. Everybody in the industry understands that we are starting to price cable TV service out of the range of a lot of households, and yet the networks and every other programmer keep pushing for higher and higher fees. As a whole the industry is laying the foundation of its own decline, and if the fees weren’t this high, then Aereo wouldn’t have a business plan.

But the other side of me says that the networks are right, at least under the current cable rules at the FCC. Of course, those rules were made in a very different time a few decades ago when nobody contemplated the ability for somebody to bypass the cable companies as Aereo has done. Certainly the FCC ought to take another look at cable regulations and update them to account for the realities of TV over the Internet.

But from what I understand, nothing is likely to happen since Washington is in gridlock. The FCC is not free to change the rules too much without authority from Congress, and there does not seem to be any impetus for Congress to look at the cable rules. So, like often happens when policy makers don’t make policy, it’s all up to the courts.

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