Aereo Debacle Shows Congress Clueless About Net Video

It's a Kafkaesque situation for Aereo, a company that until recently offered a subscription service that captured over-the-air TV signals and piped them to people's homes over the Internet. On June 25, the Supreme Court ruled in favor of TV broadcasters that had sued Aereo for acting like a cable company without paying the licensing fees that cable companies are required to pay. But when Aereo offered to pay the fees this week, the US Copyright Office, which oversees licensing, said Aereo isn't allowed to pay the fees, because it is not, in fact, a cable company.

In a way, both the Supreme Court and the Copyright Office are right, and the fault for the confusion lies with Congress, which has ignored the phenomenon of Internet video for decades. In the process, it has entrenched established media companies like Comcast and Verizon and left innovative startups in limbo. The problem is not that Aereo shouldn't have to play by the rules and pay licensing fees. It's that there currently are no rules for a web-based broadcast company like Aereo.

MORE: Best Aereo Alternatives

Most of the laws covering TV broadcasting are in the Copyright Act of 1976 — when the proto-Internet could barely transmit text, let alone HD video. The Act settled the matter of whether cable companies should license the TV they had been picking up by antenna and sending to customers over wires. Congress decided that cable providers should pay "compulsory licensing" fees. A compulsory license says that a copyright owner, such as the TV networks, has to license its works to a transmitter.

To keep the fees reasonable, Congress set up a complex formula to determine the rates. It's based on factors like how many subscribers a cable company has, how large an area those customers are spread over, and the cable company's gross receipts.

For a while, Congress generally kept up with technology. The Satellite Home Viewer Act of 1988 set up its own system for determining licensing fees for satellite TV providers. And in the Telecommunications Act of 1996 (the same one behind the current confusion over Net neutrality regulation), Congress recognized a new kind of TV broadcaster called "open video systems" — basically just telephone companies that also want to broadcast TV. You can thank that 1996 law for Verizon FiOS TV.

And then, Congress stopped paying attention. Even in the late '90s, startups were already predicting that they would be broadcasting TV over the Internet and asked the Copyright Office what they needed to do to follow the law. But no answer came.

In a 1997 report to the Senate, the Copyright Office wrote that, "it would be inappropriate for Congress to grant Internet retransmitters the benefits of compulsory licensing." The reason, it said, was that broadcasting over the World Wide Web, which is global, was entirely different from transmitting content within a particular country and a particular service region. It would require more study and rulemaking by Congress.

Fair enough, but that was 17 years ago and Congress still hasn't addressed the issue. Meanwhile, Netflix accounts for up to 34 percent of all U.S. Internet traffic during peak times, according to networking services company Sandvine, Inc. That's not including YouTube, Amazon Video, Hulu and dozens of other video sites. Then there are apps from TV networks (such as ESPN and HBO) and cable companies (such as Time Warner), plus Internet broadcasts from local TV stations.

MORE: How to Watch Live TV Online

People are "cord cutting" by getting rid of cable and satellite, but using the Internet to keep watching "TV." To many Americans, the Internet, cable TV, satellite broadcasts and antenna reception are all TV, just different ways of getting it. And to the young "cord nevers" who grew up watching online video, the Internet is the first form of TV that they think of.

Having nothing but a 1976 law to go on, the Supreme Court decided that Aereo was acting like a cable company, so should play by the same rules and pay compulsory license fees. But when Aereo submitted its paperwork to the Copyright Office, it was rebuffed. The Copyright Office had said way back in the '90s that it needed guidance from Congress on how to regulate Internet TV. Congress still hasn't acted.

Government regulations are meant to insure a level playing field that treats companies equally and benefits consumers. By punting on the issue of Internet video, Congress has tilted that playing field heavily in favor of old media monopolies, leaving new technology providers in legal limbo.

Senior editor Sean Captain watches a lot of TV — on his laptop. Follow him @seancaptain and on Google+. Follow us @tomsguide, on Facebook and on Google+.

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  • f-14
    congress already covered this with wired transmission.
    congress isn't clueless congress is owned now days, corporations dictate their policy making. obama care is a perfect example: Section. 8.

    "The Congress shall have Power To:
    To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;"

    no where is the power given for congress to force commercial transactions, only to regulate what already exists freely and willingly. corrupt officials were appointed to the supreme court and ruled improperly on Wickard v. Filburn, 317 U.S. 111 (1942), was a United States Supreme Court decision that recognized the power of the federal government to regulate economic activity.

    A farmer, Roscoe Filburn, was growing wheat for on-farm consumption in Ohio. The U.S. government had established limits on wheat production based on acreage owned by a farmer, in order to drive up wheat prices during the Great Depression, and Filburn was growing more than the limits permitted. Filburn was ordered to destroy his crops and pay a fine, even though he was producing the excess wheat for his own use and had no intention of selling it.

    The Supreme Court interpreted the United States Constitution's Commerce Clause under Article 1 Section 8, which permits the United States Congress "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes". The Court decided that Filburn's wheat growing activities reduced the amount of wheat he would buy for chicken feed on the open market, and because wheat was traded nationally, Filburn's production of more wheat than he was allotted was affecting interstate commerce. Thus, Filburn's production could be regulated by the federal government.
    the government does not have the power to control what is property in the left hand and placed to the right hand.
    Article the eleventh... The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

    Article the twelfth... The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
    the law was written very narrowly with wording describing a cable company, however that wording could also be either more loosely defined with a 2 sentence simple solution. telecommunications companies escaped this by arguing they are not a transmission content provider as they can SEND AND RECEIVE, but given the internet is what it is today and the language of the original law it is the telecommunications providers that made the law so time defined by the technology of that era. the laws covering this should be repealed until they are idea defined wording so as to include new technology beyond cable transmission and just transmission period such as the NFL NBA MLB have it defined as transmission or sharing and what not in their copy right.
  • f-14
    What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not that his plans may be rendered unlawful before they can be executed?
    James Madison
  • fixxxer113

    Drugs are bad, mmkay?