Another Reversal of the FilmOn X Decision

In the continuing saga of looking for alternate ways to get programming to the home, the U.S. Court of Appeals for the Ninth Circuit reversed an earlier ruling that said that FilmOn X had a right to retransmit over-the-air television signals.

FilmOn is a global provider of internet-based programming. They carry over 600 channels of broadcast TV from around the world. They also carry a big library of movies and offer a few of their own theme-based channels (such as Shockmasters that specialize in Alfred Hitchcock movies and television shows).

I won’t go through the history of the company and its attempts to carry the major US networks like ABC, NBC, CBS and Fox. The company was granted the right to carry this content several times in various courts and then had those decisions reversed by other courts. This case marks the third time that the company has been told it doesn’t have the right to retransmit these networks.

The company has tried several ways of delivering these networks to customers. They originally just grabbed the signals out of the air and put them on the internet. When told this wasn’t allowed by the courts they then set up satellite farms to wirelessly send individual signals to customers in a manner similar to Aereo.

This latest ruling said specifically that FilmOn is not eligible to call itself a cable company and to demand that local stations sell them content. That ruling hinged upon testimony provided by the US Patent office that said that such authority for internet-based retransmission was not clear. This differed from an earlier US Supreme Court ruling in the Aereo case that said that internet retransmission was equivalent to cable retransmission.

What’s really at the heart of this case is the definition of who is eligible to retransmit signals from the major over-the-air networks. Congress, through various laws, has given the right (and usually also the obligation) for landline-based cable companies to carry the major networks. Cable companies are obligated to carry those stations that are within certain distances from their customer base.

But over the years those that have been allowed to carry local programming has grown. Within the last decade the satellite cable companies began carrying local stations in many markets. I lived in the Caribbean for many years and some of the cable providers in Puerto Rico and the Virgin Islands somehow obtained the rights to carry some New York City local stations. Today there are a number of OTT providers like Sling TV and Playstation Vue that are carrying local network stations.

But the current rules draw a firm distinction between those that must carry local programming and everybody else. And this gives the flexibility to local stations to decide if they will sell their signal to those without the automatic rights. The big networks have decided to provide programming to Sling TV, but not to FilmOn or Aereo.

Originally both FilmOn and Aereo captured the broadcast signals from the air and put them onto their own networks. That obviously angered the big networks and they got that ruling reversed. But then these providers refused to sell their signal to these two companies. One has to think that was partly done to punish these companies for challenging them, and perhaps partly due to the cable companies who lobbied against competition.

This ruling could really stifle new OTT providers. It seems one part of the OTT appeal is the ability to deliver local network programming as part of their packages. This ruling gives local stations the ability to choose who can or cannot buy their signal, and to thus pick winners and losers in the competitive OTT battlefield.

It’s hard to think that this makes any sense. But Congress or the FCC could clarify this issue if they cared to tackle it. Just over two years ago the FCC put out a Notice for Proposed Rulemaking asking about this exact topic. The FCC wanted to clarify the rights for internet-based programmers to buy content, and in that docket the FCC had suggested that anybody ought to be allowed to buy programming if they agree to pay the market rates for it. But the FCC has never acted in that docket which has led to today’s situation where some providers are given programming and others not. The have-nots aren’t just companies like FilmOn and Aereo, and it’s been reported for years that Apple has been unable to get programming rights.

At some point this needs to be clarified. The last companies we want deciding who can or cannot offer programming services are the major networks, especially since some of them are owned by cable companies. I have no idea if the FCC will address this, but they need to.

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