Round one: Aereo mobile TV service attempts leap beyond NYC

Barry Diller, the billionaire investor in the new mobile TV service Aereo, made it clear this week: It’s time to start marketing and touch down in most major cities. A federal judge this week denied a temporary injunction that several television broadcasters were seeking against Aereo, providing the justification needed to blanket the U.S. market. But can Aereo’s game plan include the most important aspect of adoption — scalability?

In its New York data center, Aereo houses a small dime-sized HD antenna for each subscriber to it service. This antenna picks up local over-the-air network television and streams it live to the customer, on their internet device, tablet or smartphone. The problem? Since the signal is being picked up over the air, Aereo doesn't pay a nickel for its dime-sized service, and that is why networks such as CBS, FOX and PBS brought legal action against the company. Since Aereo grabs a free signal and then resells it for a package price of $12, it leaves all the networks out of a piece of the pie. The federal judge denying the injunction brought about by the networks gives Aereo (for now) the freedom to press on to other markets.

The only problem remains is one of scalability. In a world where chips and technology are getting infinitely smaller, Aereo’s business plan is decidedly old-school clunky. The company must create and house a separate antenna for each and every subscriber in its data center. This is a challenge when you are covering thousands in NYC, but what happens when you hit millions in larger markets? And what is the prospect for rural areas, where Aereo may actually matter the most?

Barry Diller plans to press on. His goal with this injunction is to really start marketing and expanding, and he says by 2013, Aereo will be in most major markets. Supporters and detractors are split. It’s great for cord cutters, and it loosens the grip cable TV and satellite have now over consumers. However, it also offers something anyone could get for a $20 antenna they can purchase at Walmart. Granted, the signal does stream to mobile TV devices and there is even DVR functionality, but the promise is polarizing.

Diller needs to move fast though. The injection is temporary and still has to move though the courts, so the end is not here yet as far as lawsuits. But this could buy Aereo the momentum and time it needs to gain traction and get the mobile TV consumer on its side.