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THE LAW Aereo 2 – Broadcast Networks Zip Aereo emerges as the victor in a second court challenge aimed at shutting the Web-TV company down. By Carl Kandutsch / Attorney O ne of the big stories in cable television these days is the ongoing (so far) success of Web-television company Aereo, founded by CEO Chet Kanojia in 2012 and funded in part by Barry Diller. For $12 per month, Aereo users can stream highdefnition feeds of more than 20 local broadcast networks, including CBS, NBC, Fox, ABC and PBS, through an Internet connection. Aereo uses a phalanx of postage-stamp-sized antennas that are leased to Aereo subscribers and pull broadcast signals of the air, just as oldfashioned "rabbit ears" and rooftop antennas attached to individual televisions did. Te signals are then sent over the Internet to DVR devices at customers' premises or to customers' mobile devices. Currently providing services to subscribers in New York City and parts of New Jersey, Connecticut and Pennsylvania, Aereo plans to expand into at least 22 additional U.S. markets. However, unlike traditional cable television systems, Aereo doesn't pay compulsory copyright license fees or retransmission consent fees to the broadcast networks that own the of-air programming content. Aereo thus presents a threat to the broadcast business model. To measure the potential loss in revenue to broadcast networks, consider the fact that analyst SNL Kagan recently predicted that retransmission consent fees will top $6 billion by 2013. Every time a cable or satellite television subscriber "cuts the cord" and switches to Aereo, that revenue stream erodes marginally. Te cable or satellite operator 14 | BROADBAND COMMUNITIES | www.broadbandcommunities.com loses pay-TV subscription revenue, and the broadcasters' copyright/retransmission cuts are correspondingly reduced. If Aereo's content distribution model prevails, the efect could be devastating for broadcast networks. Predictably, the broadcast television industry immediately attacked Aereo in a federal district court in New York last year, claiming copyright infringement based on the startup's charging a subscription fee for content owned by others. Aereo won the frst round, and the broadcasters appealed. Round two went to Aereo as well; on April 1, 2013, the U.S. Court of Appeals for the 2nd Circuit denied the broadcasters' motion for a preliminary injunction to shut down Aereo. Te Copyright Act gives a copyright holder the exclusive right, in the case of television programming content, to "perform the copyrighted work publicly."1 Te legal question in the Aereo case is whether Aereo is "publicly performing" copyrighted material when it rents individual antennas to subscribers, allowing those subscribers to view of-air broadcast programming via the Internet. According to the Copyright Act, to perform a work "publicly" means (1) to perform or display it at a place open to or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specifed by clause (1) or to the | May/June 2013