New Yorkers were
falling over each other Wednesday as they negotiated crowded city sidewalks while
watching a celebrity chef implode on NBC courtesy of mobile TV service provided
by Aereo. No, they were not, because, as Aereo-bankroller Barry Diller told
Walt Mossberg in late May, the service has “very few” subscribers. This may
be why Aereo is still a going concern. That, and some court drama.
We all know Aereo as the New York-based startup that’s retransmitting broadcast
TV signals to mobile devices via the cloud. Much of Aereo’s marketing power is
derived from getting sued by those broadcasters for copyright infringement, and
having myself and others like me write about it. So we all know what Aereo is
even if we don’t care.
Aereo launched in New York in March of 2012 to much fanfare, in part because
broadcasters failed to secure an injunction on the service. It has since been
switched on in Boston and Atlanta and soon, in Chicago—also to much fanfare but
likely not much consumer adoption. This could be the key to Aereo’s success,
astute observers observe.
Aereo charges $8 a month for 20 hours of cloud storage. Aereo CEO Chet Kanojia
last December that the company is scoring storage for as low as $95 per TB.
That translates to roughly $3 per 20-hour subscriber, at around 1.8 GB per hour
for HD content. There are also data handling and file transfer costs. Amazon
charges 48 cents an hour to process large on-demand files, or about $10.67 a
month; plus $3 = $13.67 for the Aereo customer paying $8.
Assuming Aereo cracked this storage/transcoding/cost equation and will squeeze
a buck or two a sub should those materialize, it is nonetheless missing out on
the kind of licensing fees that would make Larry Ellison blush.
Aereo claims to use tiny antennas, each serving an individual (theoretical) subscriber.
company says its technology model reflects the one argued years ago in
. That case established the
legality of centralized DVR service by deeming it a private rather than a
public performance. Public performances are subject to copyright protection and
thus, retransmission consent law.
Aereo says each of its little antennas provides a private performance per
individual subscriber. The federal judge who declined broadcasters’ request for
an injunction agreed.
use of single antennas does… reinforce the conclusion that the copies created
by Aereo’s system are unique and accessible only to a particular user, as they
indicate that the copies are created using wholly distinct signal paths,” Judge
Alison Nathan of the U.S. District Court for the Southern District of New York
wrote in her ruling.
The rub is that these
antennas are packed so tightly that Aereo says it can fit 50,000 pairs (TV and DVR
service) into a 200-square-foot vertical array. Non-theoretical physicists and
engineers alike agree that this is on par with alchemy.
“Anyone who has taken antennae 101 knows that tiny pieces of metal separated by
tiny distances act as one piece of metal,” said one.
another: “Does Aereo start with one tiny little antenna
for their first subscriber and add another little tiny antenna as they add each
additional subscriber? Can they point to a tiny antenna and say, ‘That one is
for subscriber 932,’ and, if they disconnect that one, does subscriber
932 lose off-air TV via Aereo?”
For the antennas to act
individually, each would have to have a local oscillator for tuning, which
would cause enough interference to overpower reception. However, Aereo’s
describes a system that relies on switching rather than
dedicated demodulators and tuners.
pipelines are used to demodulate, transcode and index the content transmissions
to produce content data that are streamed to users,” the patent states. “In
this way the feeds from the antennas can be accessed by users over a network
connection.” It then goes on to say that the “antenna elements
the antenna processing
Even if the tuning problem has been resolved through the clever use of
“pipelines,” the antennas are too small to have any resonance at UHF
frequencies, let alone high-band VHF channels, according to technology
journalist Pete Putman.
“The close spacing of each antenna element virtually assures, through inductive
and capacitive coupling, that the individual arrays act as a larger antenna,
which can achieve resonance,” he said. “And Aereo has
admitted that subscribers can lease ‘one or more antennas’ when they are
watching broadcast channels, which of course contradicts their ‘one antenna,
one subscriber’ argument.”
Which is indeed what the good Mr. Diller promulgated to the good Mr. Mossberg:
“If you go to Radio Shack…
and buy an aerial to put on your roof to receive free over-the-air
broadcasting, that costs money. The device, the platform costs money. We’re not
charging anybody for free over-the-air broadcasting.”
The main problem with the antenna fandango is that no one other than the good
folks at Aereo have had access to the arrays—the New York one is said to be located
somewhere in a Brooklyn warehouse. So the court is relying on Aereo’s word that
it’s renting individual antennas rather than distributing one signal (via one
big antenna) to many subscribers, making it a public performance and legally
subject to retransmission.
One D.C. attorney familiar with the particulars said an itty-bitty TV antenna
that picks up signals in Brooklyn for reception throughout New York City would
“There’s been a lot of incentive over the years to come up with an antenna that
didn’t take six foot over the top of a person’s TV set,” he said “Wouldn’t the
first step have been to license this antenna technology to RCA?”
Aereo has expended a lot of effort to keep the antenna business at a “very
theoretical level” in court, he said. This, then, goes to the heart of a query
put forth by Wells Fargo analysts in a June 6, 2013 note on the service:
“Aereo’s technology has not even factored into any of the legal discussions,
i.e., how can Aereo be considered a [private] use when 1) it is fueled by one
big antenna, and 2) it retransmits broadcast content via the Internet? This
might be the tipping point that shuts Aereo down,” they wrote.
That might have been so except for legal hijinks. My sources tell me that the
engineer hired by broadcasters to dispute the antenna claims before Judge
Nathan essentially phoned it in and got raked by Barry’s Band of Barristers. Judge
Nathan was left with a written report from the plaintiffs and oral testimony from
Aereo attorneys. She accepted Aereo’s version of the technology.
Broadcasters appealed her decision in the Second Circuit, which had to accept
finding of fact
. Therefore, the
technological argument could not be reexamined by the appellate court. The
Second Circuit also refused to grant an injunction based on the
defense, though Judge Denny
Chin wrote a pointed dissent:
“There is no technologically
sound reason to use a multitude of tiny individual antennas rather than one
central antenna; indeed, the system is a Rube Goldberg-like contrivance, over-engineered
in an attempt to avoid the reach of the Copyright Act and to take advantage of
a perceived loophole in the law.”
The broadcast plaintiffs have requested an en banc hearing with all 13 judges
in the Second Circuit. The folks at Wells Fargo say it’s not likely, according
to their sources. That leaves a copyright trial in Judge Nathan’s court and a
“meanwhile in California” scenario where Alki David is doing his best
impression of Barry Diller. David, another mad hatter with way too much money,
launched an Aereo-like service from the West Coast, where broadcasters sued and
won and injunction from the U.S. District Court for Central California. That
case is on appeal in the Ninth Circuit. Should the Ninth Circuit affirm the
injunction and disagree with the Second Circuit, the resulting “Circuit Split”
likely will trigger a grant of cert from the U.S. Supreme Court.
And so the moral of this story is that there isn’t one. There’s no morality
involved, whatsoever. Veracity has taken a back seat to manipulation. The
question is, to what end? Should Aereo prevail, what is the
intent of overturning copyright
law as it applies to broadcast signals—taking the the cable business into the
cloud without pesky retrans fees? Maybe.
The bottom line is that a handful of judges could decide the course TV distribution
without proof positive of technology claims upon which their decision rests.
The result will be the legacy of a flimflam.
image from Stuff I Stumbled Upon