NEW YORK (MainStreet) It hasn't been a great year for cable customers. Comcast's merger with Time Warner, if it goes through, will further cut down their already limited choices and new changes to the law on net neutrality mean that the Internet is probably about to get a lot more friendly to big money.
Now the market has gotten even tighter with Wednesday's 6-3 Supreme Court ruling against startup company Aereo for violating federal copyright law.
What is Aereo?
Aereo allows users to watch live television over the Internet for $8 per month. The company uses small antennas to capture network broadcasts and then stream them out to subscribers. It also allows users to record and save shows to watch later through their account.
This is an attempt to answer one of consumers' biggest frustration with modern TV pricing models. Most viewers want only a small fraction of what they actually sign up for, especially sports fans, but thanks to bundled cable pricing they don't have many options. À la carte models have been suggested in the past, but never actually go anywhere.
Aereo addresses that issue, offering a limited range of options for a fraction of the price. Consumers can watch the NFL or "Big Bang Theory" without paying $100 per month for cable. Important to this issue is that they could also watch for free, as these are all broadcast channels, but few homes still have antennas.
What was Aereo's defense?
Public access. The company assigns each user an individual HD antenna, picks up signals that are broadcast for free and only works if you access it within your town (in other words, people in Miami can't watch shows from New York). The result, according to the company, is nothing more than a different way of watching TV shows to which customers already have a right.
In a nutshell, the signal is free and Aereo users just choose a new way to receive it.
What's the problem?
A doctrine called public performance. Although these shows are sent for free over the airwaves, television networks get nearly $4 billion in rebroadcasting fees from cable and satellite companies that pick up their stations. Most viewers end up paying for the content, because few people actually watch antenna TV anymore.
For networks, these rebroadcast fees are important because content costs an enormous amount. They charge third parties to access and redistribute their signal and wanted Aereo to pay as well. It's called "public performance licensing," and covers virtually any situation where a third party makes copyrighted work accessible to the public.
The Supreme Court agreed with this argument. The justices held that although viewers have the right to watch a public broadcast for themselves, that doesn't allow them to capture and re-transmit the signal. Doing so constitutes performance without license regardless of the technology involved.
"Aereo is not simply an equipment provider," Justice Stephen Breyer wrote. "Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, virtually as they are being broadcast."
How will this impact consumers?
In the short run, it won't. This is a decision for the status quo, so only Aereo users will be affected. In the long run, however, this is part of a trend against experimental business models when it comes to the media.
There's a saying among lawyers that bad cases make bad law, and Aereo is a perfect example. Aereo was going to lose this case. The company's business model depended on free riding. It exploited a loophole in copyright law to get something for nothing, profiting off of someone else's investment. Aereo's not the first, and regardless of legal footwork the courts don't stand for it.
But the law is a blunt instrument. No matter how tightly Justice Breyer wrote his opinion, it will have a chilling effect on new businesses. This is another decision favoring established companies over disruptive startups. It will make entrepreneurs think one more time before offering an alternative to Comcast or RCN.
The (almost inevitable) death of Aereo will mean less choice for consumers. More importantly, especially if Aereo ends up paying copyright law's potentially crippling fines, it will mean fewer companies that take risks with the traditional broadcast and cable business model. Internet broadcasting is a legally difficult issue, and the Aereo decision was far from unanimous. Still, it's also the best shot we have right now of adding real choice to the polite fiction that cable is not a monopolized industry. This decision could mean a very real step backward from that.
--Written for MainStreet by Eric Reed, a freelance journalist who writes frequently on the subjects of career and travel. You can read more of his work at his website www.wanderinglawyer.com.