Relax ...TV Police Are Not Coming

If you have been watching local TV stations recently you may have seen a spot urging you to contact your federal elected officials and tell them not to take away your “free over-the-air TV channels.”  These slick spots tout the benefits of free broadcast TV, but fail to explain what it is that is really in jeopardy. Even if you visit the special website  featured in the spots, the exact nature of the real issue is not clear. From the tone of the spots the viewer is left wondering if the Federal TV Police will soon be breaking down your front door and confiscating your rabbit ears.  Or perhaps the big wigs in Washington are getting ready to levy a TV tax similar to the one in the UK.  Well, if you dig deeper (and the local stations and the NAB, their lobbying group, know you will not) you will find that the issue is all about money and profits and not at all about taking your TV away.

I have written extensively about the revolution in the TV business and how what we see, how we see it, and how it is all financed are undergoing unprecedented change.  The broadcast industry is not a big fan of change since the status quo serves their business model well.

To help you understand the issue, here is a bit of background.  Local commercial TV stations receive cash payments or other compensation from cable and satellite companies that choose to carry local broadcast signals on their systems.  The technical term is retransmission consent payment.  (Note that noncommercial public stations do not receive these payments.)  Nationwide these payments amount to billions of dollars and have become a very important revenue source for local TV stations.   This revenue stream has been on the increase in recent years as other revenue sources for local stations have been on a downward trajectory.  Periodically, stations negotiate with the cable and satellite carriers to establish the fees.  Recently, these negotiations have become more contentious as stations want more and cable and satellite want to pay less. 

Often these negotiations become public and acrimonious.  Right now for example, WXIXChannel 19 is in negotiation with DIRECTV and is running spots on the air warning that DIRECTV may cease carrying the channel.  Increasingly the cable and satellite carriers are balking at these payments and have been lobbying congress to change the retransmission consent regulations.  Their argument is that these escalating fees force them to increase monthly customer bills at a time when fewer people are watching these stations.  Some have threatened to put the local stations on a more expensive tier of service and, of course, charge more.  This may require some FCC rule changes.

This issue is only a small part of a much larger issue of how we pay for our TV.  For many years, cable and satellite companies have used a bundling system to develop your monthly bill.  Subscribers pay for TV channels even though they may never watch them.    The new internet-based TV program distributors can provide an a la carte service with viewers able to select and pay for only what they watch. 

So contrary to what you might gather from the TV spots, there is no need to lock your doors and hide the remote or rabbit ears.  You are safe for the time being.  

Supreme Court Says “No” to Aereo

In January I wrote about Aereo, a TV subscription service that delivered local over-the-air TV channels via your Internet connection to a variety of digital devices and enabled you to record, pause and fast forward the programs.  In essence, it was a personal antenna and DVR in the cloud.  (Full disclosure … I was a beta tester for the fledgling service)

When you signed up for Aereo you had access to all the local TV channels.  By my count there were 24 TV channels available to Cincinnati area viewers.  They included the main channels like WCET, WCPO, WLW as well as all the multicast channels available with digital broadcasting.

To watch any program you used your computer, tablet or smartphone to access the Aereo.com web site and, using the program guide, you could choose the program you wanted to watch or record.  You could watch live, or choose to record a program selected from the on-screen guide up to two weeks in advance.

As reported in January, the broadcasters were not happy about Aereo since the company did not pay them retransmission fees.  These fees are paid to commercial broadcasters by cable and satellite services and are a source of billions of dollars for the TV stations.  The broadcasters and the National Association of Broadcasters, their lobbying group, petitioned the courts to force Aereo to either pay the fees, or cease operation. Late in June, the Supreme Court ruled in favor of the broadcasters.

Aereo had argued that since they were using individual small antennas (one dedicated to each subscriber) to pick up the TV broadcasts and the internet to provide the programs, they were only serving as an enabling agent for each subscriber allowing them to exercise their right to watch and record over-the-air broadcasts for free.

Without going into all the complicated legal prose, suffice it to say the Supreme Court did not buy the argument and essentially said that Aereo was trying to manipulate the intent of the copyright laws governing fair use of broadcasts by individuals in their homes.  So as of last week Aereo is no longer in operation.  Their future is still uncertain.  The company could decide to pay broadcasters the retransmission fees but that would require a significant increase the monthly subscription price for the service.

Many in the industry were concerned that high court’s opinion would have a stifling impact on the operation of other cloud-based services like Dropbox or iCloud.  These services often allow individuals to store and retrieve copyrighted materials.

I’ll keep an eye on this issue and report back.  I don’t think we have seen the last of Aereo or other similar services.

Supreme Court Decision Cloudy At Best

Last week the US Supreme Court heard arguments in a case that will decide if Aereo is allowed to continue operation in a dozen or so communities throughout the United States, including the Cincinnati area.  The fledgling internet based service allows subscribers to watch live local broadcast TV channels on a variety of digital devices like smart phones, tablets and lap tops, and yes, even TVs. It also offers a cloud-based DVR, allowing the subscriber to record programs for later streaming.

As the oral arguments and comments played out in the court room, it became apparent that the ruling might have far reaching and revolutionary implications, not only for how we receive television, but for the future of the multi-billion dollar cloud computing industry.

The issue being adjudicated is whether Aereo should be required to pay TV stations for the right to retransmit their programs.  Traditional cable and satellite services pay billions of dollars each year to local stations.  Aereo counters that they are not a cable system but rather just an agent of each subscriber providing an antenna and virtual DVR for a monthly fee. They note that individuals may watch and record in their home any program transmitted on public airwaves with no fee.  They insist that Aereo is just making this easier.

Much better legal minds will need to ascertain if Aereo is cleverly exploiting a loophole in the copyright laws or standing up for the little guy.  A review of the discussion during the court’s hearing shows that the Justices were quick to realize that their ruling could have great impact on other cloud-based services.

For several years we have all heard about the “cloud” and how it is revolutionizing the way we use our digital devices. Simply put the cloud services make use of large centrally located computer storage arrays and servers to provide to subscribers many services that once resided on our individual computers.  Because most of these cloud services allow subscribers to store and remotely access most any file or program for certain they are storing and playing out movies, music, pictures that are copyright protected.  The amount of illegal content stored on Dropbox or Google Cloud most likely is much greater than Aereo and a ruling against Aereo might well have a stifling effect on these cloud services.

We will need to all stay tuned to see if our highest court in the land can come up with a King Solomon ruling.  The Court is expected to rule in late June.