Washington

Aereo's Kanojia: On Track for 22 Markets by Fall

In C-SPAN interview, calls service criticism 'irrational saber rattling from people not interested in innovation' 7/18/2013 02:49:53 PM Eastern

Fresh off its latest court victory, which its founder says validates the service, Aereo is on track to be in 22 markets by fall.

That is according to Aereo founder/CEO Chet Kanojia an interview with C-SPAN for its Communicators series.

He called his service "a really new way of thinking about how people are going to consume television in the future." And what of those -- major broadcasters chief among them -- who think Aereo is instead a way to violate the spirit as well as letter of the copyright law and deny payment for content? He characterized it as "irrational saber-rattling from people not interested in innovation."

For traditional broadcasters, a cloud -- and the rain fade interference it might bring with it -- is a bad thing. For many broadcasters, that holds true for what Aereo bills as a cloud-based innovation in delivering TV signals over the web. Broadcasters argue it is an illegal poaching of their signal and a storm cloud that threatens to wreak havoc on their revenue model.

That is because Aereo does not pay for delivering TV station signals -- broadcasters call it "illegally retransmitting," Aereo says "allowing its subs remotely to access." Those Aereo subs themselves pay $8 or $12 a month for the service.

Kanojia said that that cloud technology is allowing the consumer to capture the individual free signal they are entitled to and is a way to lower the cost dramatically. That is not the cost of the TV station signal, of course, which is free to consumers. He says the barrier Aereo is lowering is the cost of getting that signal via a box or a cord -- i.e. cable or satellite or telco TV. "You just go online, sign up and have access."

Asked what the legal status of Aereo was -- the U.S. court of Appeals just this week refused to enjoin Aereo from operating while a lower court decides its legal fate -- Kanojia said that decision, combined with two other court refusals to enjoin the service, was vindication of the company's technology and analysis.

Calling it one of the "mild luxuries of being a private company," Kanojia declined to reveal his sub count, citing the ongoing litigation and pointing out that it as a private company it doesn't have to.

But he did say that as it goes into a market, "several tens of thousands" preregister saying they like the idea and understand the concept.

And what about broadcasters' contention that the reason Aereo can offer a price point to woo customers from cable or satellite is that it is stealing broadcasters signal? Kanojia dismissed it as name-calling. "When three federal courts express an opinion that it is a legal technology and it is consistent with what Congress intended, it is difficult for me to look at it in any other way except as name-calling and mischaracterization."

He says the issue essentially boils down to the length of the wire from the antenna to the device. "A consumer has a right to an antenna," he said. "If you live in an apartment building where you have a 50-foot wire rather than a 10-foot wire, how is that any different [from Aereo's remote access]?"

Judge Denny Chin was the Second Circuit judge who was the initial dissent from the three-judge panel denying the broadcaster injunction. He repeated his dissent from this week's full-court ruling, saying the technology was over-engineered to avoid copyright law -- the technology features hundreds of thousands of separate antennas so that it is providing remote access to an antenna for each customer.

Asked about that criticism, Kanojia conceded the company had spent a lot of time and money to engineer technology that would fit within the law. "All we are doing is taking advantage of the guard rails that the law has set up and to build technology that applies within those guard rails. And I think that is a perfectly fine thing to do." He likened it to someone who looks at the speed limit and sets their car to not exceed that limit and "follow the law."

But does that violate the spirit of copyright law and content producer's fair compensation? Kanojia responded, quoting what he said were NAB statistics: "About 54 million people get television over the air... So, are you saying that those 54 million are wrong? The intent behind the broadcasting law was that the spectrum would be granted to broadcasters to program in the public convenience and interest. It is paid for every day by the value of the spectrum and it is paid for every day by advertising." He says the size of the antenna or where it is located shouldn't be a matter of debate. "People are obviously getting compensated because there is plenty of advertising. In fact, that is the revenue that is dominant for a lot of these broadcasters."

Broadcasters have argued and continue to argue that retransmission consent payments are a vital and growing revenue stream that supports all of that public interest programming and helps them compete with cable and other dual revenue stream competitors.

Kanojia accused the broadcasting industry of responding to technological changes -- cable, VCRs -- with the same reaction. "The default reaction of the industry is to keep everybody out and stop innovation because fear leads, as opposed to opportunity."

But, he was asked, if a broadcast signal is Aereo's for the taking and distribution without payment, are cable operators being treated unfairly because they have to pay for taking those signals off the air and distributing them to their customers? "I don't think so," said Kanojia. "I think we are treated very unfairly."

He said there has been a distinction between equipment providers, which he suggests is Aereo's function, and MVPD's. A box maker doesn't pay retrans, but an MVPD does because it has monopoly rights to access over utility poles, he said. "What's next? Every car radio needs to pay retransmission fees. It is a taxation scheme that you are really talking about at that point."

He said Aereo is comparable to the network DVRs that Cablevision, Comcast and other cable operators are trying out. In fact, it was a court decision upholding Cablevision's remote DVR service that subsequent courts have used to suggest Aereo could win its court battle with broadcasters.

Kanojia said there was no copyright ambiguity about his service. "I think it is absolutely crystal clear today," he said, putting his own exclamation point on it. "This is an important point and I hope the press is diligent in educating people that there is a huge distinction between broadcast, which is supposed to be free to you as a consumer, and other copyrighted content that you are required to pay for separately." He said that if Aereo doesn't get paid, it follows that others -- say a Time Warner Cable moving to net delivery of stations to avoid retrans --won't have to pay either. That is just wrong, he says, and naive. "A lot of these are empty, hyperbole arguments."

March