While several cable operators are hoping over-the-top startup Aereo prevails in its litigation with TV broadcasters -- seeing the case as potentially ending or otherwise changing the landscape of the current retransmission-consent regime -- other MSO executives predicted that Aereo ultimately will be judged guilty of copyright infringement.
On Wednesday, Aereo won an initial legal victory after Judge Alison Nathan of the U.S. District Court for the Southern District of New York denied a request by broadcasters for an injunction to shut down its Internet-streaming service.
Aereo, whose backers include IAC's Barry Diller, this spring launched a live TV and DVR service in New York City that delivers about two dozen broadcast channels over the Internet to various devices for $12 per month. The startup was promptly sued by major broadcasters for copyright infringement.
Aereo's defense, which Judge Nathan agreed with, relied on a previous decision finding Cablevision Systems' Remote Storage DVR did not violate copyright laws because it provided dedicated disk storage for every subscriber. The Aereo service uses micro-antennas for each individual user mounted in a rooftop array.
Time Warner Cable CEO Glenn Britt, speaking Wednesday at the Allen & Co. media conference in Sun Valley, Idaho, said cable operators have an interest in the outcome of Aereo case given its implications for retrans payments, Reuters reported.
"If [Aereo is] found to be legal, then the idea of consumers having to pay for otherwise free broadcast signals is called into question," Britt said.
American Cable Association president and CEO Matt Polka more explicitly said the trade group -- which represents smaller cable operators -- is hoping Aereo's legal battle changes the current state of retrans.
"We're pleased that the court did not prevent the deployment of this new technology," Polka said in an emailed statement. "We hope that technological innovation both within and without the cable industry provides answers for consumers and cable operators that today suffer under the oppressive retransmission-consent regime forced upon them by the broadcasters who take advantage of old laws and regulations."
Comcast executive vice president David Cohen, speaking at the New England Cable & Telecommunications Association conference Thursday in Newport, R.I., said that in his opinion Aereo's service ultimately will likely be found to violate copyright laws. Comcast holds a majority stake in NBCUniversal.
Cohen and Patrick Esser, president of Cox Communications, both said on a panel that Aereo's case is quite different from Cablevision's legal efforts to validate its network-based DVR service. "I do not draw a parallel between the Cablevision lawsuit with network DVR and this antenna," Esser said. "I think it's very different."
That said, if upheld by the courts, Aereo will prompt other video distributors to look into the business of distributed antennas owned by consumers, Esser added.
Cohen said: "I think there are enough distinctions between the two that will play out over the course of the litigation, and we will ultimately find that the network DVR legal precedent does not apply in this particular setting."
Of Aereo, Cohen said: "Essentially it is a business grabbing a television signal that is copyrighted and selling it to a consumer. I think that will be found to violate the copyright laws and an infringement, and ultimately will be enjoined on a permanent basis."
The National Cable & Telecommunications Association declined to comment on the Aereo case.
Aereo, formerly known as Bamboom Labs, argues that its dime-sized individual antennas, although mounted in a massive rooftop array far away from any actual subscriber, represent fair use. The broadcast companies say a service delivered via an operator-controlled antenna is "community antenna television" by any other name, and thus Aereo is subject to retransmission-consent regulations.
Aereo CEO and founder Chet Kanojia, in a statement late Wednesday, called the court ruling a win for consumers. "We said from the start that we believed that a full and fair airing of the issues would reveal that Aereo's groundbreaking technology falls squarely within the law," he said. "Today's decision should serve as a signal to the public that control and choice are moving back into the hands of the consumer -- that's a powerful statement."
During the case proceedings, Judge Nathan revealed that Aereo's subscriber base in New York City has grown from 100 to 3,500 users this year. Aereo noted that service is currently available on an invitation-only basis.
Broadcasters have vowed to appeal the Aereo decision.
"Today's decision is a loss for the entire creative community. The judge has denied our request for preliminary relief -- ruling that it is OK to misappropriate copyrighted material and retransmit it without compensation," plaintiffs in the case including WNET, Fox Television Stations, Twentieth Century Fox Film, WPIX, Univision and PBS said in a statement. "While we are disappointed, we will continue to fight to protect our copyrights and expect to prevail on appeal."
In November 2011, Aereo applied for four U.S. patents: Antenna System with Individually Addressable Elements in Dense Array; System and Method for Providing Network Access to Individually Recorded Content; Method and System for Processing Antenna Feeds Using Separate Processing Pipelines and System and Method for Providing Network Access to Antenna Feeds.