Major television broadcasters and Aereo will argue before the U.S. Supreme Court Tuesday in a case that is about much more than the future of a controversial startup. The outcome could have far-reaching effects on the future of television and cloud computing, the quality of wireless service, and entrepreneurs trying to create the next big thing in technology.
Aereo is a 2-year-old startup that uses tiny antennas to capture broadcast airwaves and stream those signals to users who pay about $8 a month for the service. The company offers a handful of network TV offerings in several cities, and subscribers can watch and record the programming on their computers and mobile devices.
Broadcast channels -- popular networks like Fox, ABC, NBC and CBS -- are transmitted free of charge to anyone who has a television and an antenna. But cable companies like Comcast and Time Warner pay the broadcasters billions of dollars in fees for the right to re-broadcast the network TV channels as part of paid cable packages. Aereo argues it doesn't need to pay those fees because the broadcast signals -- which it's capturing and then retransmitting to its subscribers over the Internet -- are free.
Broadcasters have sued, claiming that Aereo is violating copyright law by retransmitting the shows and threatening their industry's business model. If Aereo is legal, they fear there’s nothing stopping cable companies from copying Aereo to avoid paying the broadcasters billions of dollars in fees.
“What is at stake in this case is much bigger than Aereo,” Aereo founder Chet Kanojia said last week.
A decision is expected this summer. Here are five reasons why you should care about the case:
‘CORD-CUTTERS’ WOULD HAVE ONE LESS OPTION
About 10 percent of Americans watch broadcast television via antennas instead of through a cable or satellite subscription. In addition, a small but growing number of “cord-cutters” have canceled their cable packages and pieced together their TV viewing from streaming services like Aereo, Netflix and Hulu.
Aereo supporters say if the company loses the case, it will likely shut down. If Aereo wins, broadcasters have threatened to yank their broadcast signals off the free airwaves and instead offer them only to paid subscribers.
Either scenario could leave millions of people without a way to watch basic network television without paying for it.
IT COULD CHANGE THE WAY YOU WATCH SPORTS
If Aereo wins, the National Football League and Major League Baseball have threatened to stop broadcasting their games on basic channels and instead show them only on cable networks.
The leagues have a financial interest in siding with the networks: They receive about $100 million of the $300 million that cable and satellite companies pay broadcasters in fees.
CBS, Fox and NBC currently broadcast most NFL games on Sundays. Fox still shows some baseball games, though most of them are now broadcast on ESPN and TBS, which are only part of cable TV packages. If Aereo wins and the major networks reconsider broadcasting for free, you may no longer be able to watch any of those games without a cable subscription.
CLOUD COMPANIES COULD FACE LEGAL RISKS
Aereo streams network TV to subscribers via servers in “the cloud.” A Supreme Court decision against Aereo “threatens to outlaw the entire cloud-computing industry,” Barry Diller, the Aereo investor and media mogul, wrote in a recent op-ed in the Wall Street Journal.
If Aereo is violating copyright law, that means other cloud providers could also be held responsible for helping users access illegal content, according to Richard Greenfield, an analyst for the research firm BTIG. For example, Google or Dropbox could be responsible for policing the content stored in a Google Drive or Dropbox account to avoid copyright violations, Greenfield wrote in a recent blog post.
But the solicitor general, who has sided with the broadcasters, has argued in a legal brief there is "no sound reason" that a ruling against Aereo should impact the cloud computing industry. Most cloud services offer users ways to play back legal content, while Aereo "performs a wholly different function," the solicitor general said.
WIRELESS CONNECTIONS COULD IMPROVE
If Aereo wins and broadcasters follow through on their threat to stop beaming over-the-air programming, it could have an unintended benefit for smartphone users.
As people consume more data on their mobile devices, it has created a shortage of wireless spectrum that could lead to dropped calls and slower wireless speeds if more airwaves aren't freed up.
The government is preparing to auction off some of those unused broadcast airwaves to wireless companies so they can improve service and avoid network congestion. An Aereo victory could prompt broadcasters to sell more of those airwaves to wireless companies, which could ultimately lead to improved smartphone service.
“The logical end point is for all the current broadcast spectrum to end up in the hands of institutions which can use it much more effectively as digital bandwidth,” Reuters columnist Felix Salmon wrote in a column about Aereo last year.
NEW INNOVATION COULD BE BLOCKED
Some have likened the controversy over Aereo to the debate three decades ago over a disruptive technology of that era: VCRs.
At the time, the entertainment industry sued Sony, claiming that allowing customers to use its Betamax VCRs to record TV programming for later viewing amounted to copyright theft. But the Supreme Court dismissed their arguments.
Aereo supporters say the decision gave entrepreneurs the freedom to create all sorts of new technology over the next 30 years without fear of being sued. They worry that freedom could be taken away if the Supreme Court rules against Aereo.
But broadcasters argue that if Aereo is deemed legal, it could stifle the very innovation that copyright law is supposed to promote.
"What is at stake is the basic right of every copyright holder to determine if, when, and how to make its copyrighted work available to the public," the broadcasters wrote in their brief to the Supreme Court. "Copyright protection need not fall by the wayside for innovation to continue."