NEW YORK (AP) — The Supreme Court dealt Internet startup Aereo a major setback on Wednesday in ruling that the television-over-the-Internet service operates much like a cable TV company. As a result, the service violates copyright law unless Aereo pays broadcasters licensing fees for offering TV stations to customers' tablets, phones and other gadgets.
Aereo was still operating Wednesday afternoon without paying such fees, as the U.S. District Court in New York must still implement the Supreme Court's findings. But Aereo's options are limited. The ruling may also affect other Internet services, though the Supreme Court did try to limit the scope of its decision.
Here's a closer look at the ruling and what it means for Aereo and Internet users.
Q: What does the ruling say?
A: Aereo streams television shows to customers in New York and 10 other markets. It has claimed that the service is legal because each customer is temporarily assigned an individual antenna about the size of a dime, so it's akin to customers putting up their own antennas on rooftops. By contrast, cable systems typically have one antenna serving thousands of customers in an area.
The Supreme Court rejected Aereo's argument, saying that it acts like a cable system. Aereo's use of individual antennas, the court says, "does not make a critical difference." As a cable system, the court says, Aereo must pay the same retransmission fees that broadcasters demand from cable and satellite TV providers.
Q: Why is Aereo still operating?
A: Although the Supreme Court expressed its thinking on the law, it's the lower court that must issue a preliminary injunction stopping the service, as requested by broadcasters. That could take a few weeks. It's not guaranteed that the lower court will halt Aereo's operations, but it's very likely.
Once an injunction is issued, broadcasters must prove copyright infringement during a trial. Because it's now likely that broadcasters will ultimately prevail, Aereo might simply decide to shut down. Even then, broadcasters might still decide to pursue the case and seek damages, possibly as a message to future entrepreneurs contemplating video services that don't involve licenses.
Q: What's the big deal? Couldn't Aereo simply pay the licensing fees and continue to operate?
A: Yes, although broadcasters and Aereo would have to negotiate the amount. Disputes over fees have frequently resulted in channels temporarily disappearing from various cable and satellite lineups. Broadcasters aren't likely to offer Aereo friendly terms, especially if doing so would alienate the cable and satellite providers from which broadcasters already generate much more revenue.
It's also not clear whether Aereo can really afford it. Aereo's service starts at $8 a month, which is much cheaper than cable. The company spends much of that on equipment such as antennas and computers, along with leasing indoor and outdoor space to house all that. If Aereo starts paying fees to broadcasters, monthly subscription rates would likely have to go up significantly— the way cable bills have steadily increased over the years.