Aereo: Changing Over-the-Air Broadcast

The idea of getting all of your television content on your digital devices grows stronger every day. The latest startup to bring those dreams into reality is Aereo, a new service that allows you to get live television broadcast directly to your computer, mobile device, or Apple TV or Roku device. The concept isn’t dissimilar to the old days of broadcast television—it uses over-the-air broadcast waves to grab the signal and transport it over the Internet, turning your computer or tablet into a television. Aereo charges a small monthly fee for this service, which includes housing the antenna at their own facilities, transmitting the signal over the Internet and giving the user the ability to record television for viewing at a later date (like a DVR). It’s a game-changing technology that will allow more people to access live, network television more broadly.

So why exactly are the broadcasters so upset, enough to take legal action? It’s because Aereo represents a threat to a source of income that the networks have had for years—retransmission fees. Since 1992, network television channels (ABC, NBC, CBS, Fox) have been able to charge cable operators fees for carrying their channels on the cable operators pay packages. The networks, of course, don’t get these retransmission fees when someone watches their content over the airwave. So how is Aereo doing any different than watching you watching television with bunny ears?

It isn’t, as courts have affirmed. It’s really no different than placing an antenna on your computer, the same as you would with bunny ears on your television. The broadcasters are looking for a free ride—although their business model used to subsist on advertising revenue alone, these retransmission fees have become a source of revenue that they rely on. Broadcasters took in $2.36 billion in fees last year alone, and it’s predicted they’ll take in $6 billion yearly by 2018. Now, it seems that broadcasters are upset that consumers are actually using their product the way it was originally intended. How dare they! Broadcasters are hoping to get Aereo to pay the same retransmission fees that cable providers currently pay. As Barry Diller, a major investor in Aereo, put it: “When you get Radio Shack to pay you a slice of profit for selling an aerial, we’ll pay you.”

Now, broadcasters are threatening to pull the plug and become pay services. This would actually be great news—they’re sitting on billions of dollars of spectrum that is barely being used. Broadcasters have gotten a free ride on the consumers back, using the valuable spectrum for next to nothing–valuable spectrum that would be more useful the broadband market. Carriers like AT&T, Verizon and T-Mobile are dying to get their hands on it—and willing to pay billions.

The spectrum crunch is real and it’s huge. If the broadcasters find their revenue from retransmission fees to be so significant that they’re willing to become pay channels, then perhaps the spectrum they’re sitting on could be utilized elsewhere—perhaps in the upcoming spectrum auctions.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research

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