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McAdams On: Aereologica

π: At some point I will get to Aereo, but first I have to muse about March Madness. ESPN says March Madness generates about $2.5 billion in illegal gambling every year. This is clearly a massive opportunity for a friend of mine who intends to run for office. He could run on a platform of authorizing* March Madness betting* under a 20 percent license fee,* enabling the country to pay down the national debt in 31,047 years, one month, two weeks, two days and five hours. That’s far quicker than auctioning off TV spectrum, which, according to Aereo, belongs to me, Deborah.

“The Aereo Technology operates within the confines of three well-established principles of telecom-munications and copyright law,” the outfit’s hired guns said in court this week. “First, it has been well-settled since the Radio Act of 1927 that the airwaves are owned by the public...”

Don’t I wish. I’d be collecting me some rent money. Aereo is reselling TV station signals in New York for reception on smartphones, iPads, long underwear and tuna fish cans. The TV stations sued because they want them some rent money, too. TV station signals are supposed to be licensed for retransmission. Paid for, that is. Aereo’s not gonna. So there, it told a federal court in Manhattan. 

Aereo is backed by Barry Diller, who is married to the iconically cool inventor of the wrap dress, and who launched the Fox broadcast network and took reality TV into the back of police cars. Mr. Diller has a lot of money, arguably from being in the right place at the right time. You have to wonder, however, if this is the right time to be sinking a wad of money into rebroadcasting TV signals. Especially since the new iPad came out today. With the “stunning new Retina display, 5 MP iSight camera and ultrafast 4G LTE. Starting at $499.00.”

Never mind that “ultrafast 4G LTE” actually means, “slightly faster than what you have now.” These babies are here to take over the airwaves, putting Aereo in the odd position of catering to iPad users with content from a distribution system those very devices are expected to displace. What does he know that we don’t know? Federal Communications Commission Chairman Julius Genachowski, for one. The FCC chief was once Diller’s general counsel. Some people don’t need no stinkin’ Linkedin.

Genachowski is the telegenic evangelist for reclaiming broadcast TV airwaves to use as a wireless broadband network for things like the new iPad. Only 15 percent of U.S. households rely on over-the-air TV reception, after all. Congress has discussed subsidizing cable boxes for the Luddites, though not with any seriousness. Not yet, anyway. So broadcasters are arguing to keep their airwaves for launching mobile DTV. The problem with launching mobile broadcast DTV is that no one can get it..

While the new iPad has a 2,048-by-1,536-pixel display perfect for watching hi-def TV, it does not have a mobile DTV receiver chip. Nothing on the market has a mobile DTV receiver chip. Aereo works right out of the gate on all kinds of handheld devices through the use of “massive amounts of cloud storage.” The cloud also serves as a virtual digital video recorder, so subscribers can watch “Downton Abbey” whenever. Aereo beta launched this week after the broadcasters in New York failed to win an injunction. The service is not yet available on the iPad prominently displayed at Aereo’s website, but iDevice compatibility is on deck.

Should Aereo win in court, there’s nothing to stop it from providing fixed service and underselling cable, further diminishing any arguments for the preservation of broadcasting, particularly in metropolitan areas where spectrum is at a premium. Aereo certainly could drive demand for wireless broadband and thus for spectrum in cities, where wireless carriers are most intent upon taking over the airwaves. They could justifiably argue for limiting TV station transmissions to select receive points for other distributors, via satellite. Then “broadcasters” become content providers for other distributors. In other words, regional cable networks.

Should Aereo lose in court, it will appeal until it has no choice but to license TV station signals, by then having established itself as a programming provider.

Aereo is consequently a safer bet than predicting the Final Four. Mr. Diller’s timing may be spot on, after all.

~Deborah D. McAdams

*Consecutive politically nonexplosive terms for “legalizing,”
“gambling,” and “tax.”