Aereo Brings Broadcast Television And Regulatory Arbitrage To The Cloud

A blog about business and economics.
Feb. 14 2012 4:56 PM

Aereo Brings Broadcast Television And Regulatory Arbitrage To The Cloud

Television stations are constantly broadcasting digital signals over the air these days, free for anyone with an antenna to capture and use. And devices exist that let you record these broadcasts and store them digitally. And the technology exists to stream digitally stored video to people. So why isn't there a company that captures all this freely distributed content, stores it, and then streams it on an on-demand basis to people who want to see it? Well there is now, it's called Aero, and instead of a dozen antennas to capture all the different channels out there it's going to have a zillion antennas as a matter of regulatory arbitrage:

The technology behind Aereo's service is pretty unique. The company has several large "antenna arrays" set up somewhere in Brooklyn, filled with thousands of mini-TV antennas. Each array is capable of receiving local over-the-air TV broadcasts. When you're using your Aereo account, either to record TV or watch live, you're assigned your own individual mini-antenna.
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If you are wondering, yes this is as dumb as it sounds. Thousands of mini-antennas that are not actually necessary for the operation of the service are going to be built in an effort to bring Aereo into compliance with the law:

If all those mini-antennas seem redundant, well, that's by design. Aereo is hoping that each viewer having his or her in ny own antenna will help the company avoid (inevitable) legal challenges. As Aereo investor Barry Diller explained it, "Think of every little antenna having someone's name on it", although that's not quite true. Individual antennas aren't reserved for individual subscribers; when you stop using Aereo, someone else may start using the antenna you were just using.

Making matters even worse is the fact that this all ladels perverse policy on top of perverse policy. After all, why are there all these over-the-air broadcasts in the first place? Well it's because Congress made a gift of the airwaves to television stations decades ago and hasn't seen fit to properly reverse the gift. The spectrum could be auctioned to the highest bidder or some of it left as open spectrum that nobody has an exclusive license to. Under that scenario I think it's very unlikely that many bids would come from people who want to do over the air TV broadcasting. After all, though this was a very reasonable way to do TV broadcasts in 1962, here 50 years later it leaves you awkwardly vulnerable to Aereo-style poaching of your signal. Conversely, I find it difficult to believe that Aereo is going to succeed in exploiting this loophole. The whole point of the existing framework of law around broadcast television is to provide revenue to the broadcasters. If you change the policy framework to one less oriented to this goal, you naturally go toward spectrum auctions. If you stick with the existing framework, then clever as the mini-antennas idea is there's no reason for Congress and the FCC to let it stand.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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