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The Aereo Technology: Once a Cable Creator, Now a Cable Threat? - Broadcasting & Cable

The Aereo Technology: Once a Cable Creator, Now a Cable Threat?

The action of retransmitting a broadcaster's signal into a person's household and connecting it to a screen dates back to June 1948. Back then it birthed the cable television industry. Today, the same technology has come back to threaten as an end to what it started.

Recently, Barry Diller, founder of Fox Broadcasting, introduced Aereo, a Web-based service that captures over-the-air signals and streams them to subscribers in "real-time" on various video platforms. The service is expected to start March 14 in New York City and will cost subscribers $12 per month. Broadcasters went to federal court on March 1 seeking an injunction to stop the service.

The content transmitted by Aereo would fill an online video gap and could position itself as a complement to other streaming services such as Netflix and Hulu. In the process, Aereo has placed thousands of personal antennas throughout New York that can re-transmit broadcast signals to its subscribers, allowing them to watch broadcast TV online and on mobile devices.

The service poses a threat to cable and satellite companies since it could prompt further "cutting the cord" by consumers. As part of Aereo's subscription package, a DVR with programming is stored in the cloud as well, along with the capability of viewing live content on mobile TV.

If Aereo succeeds it could bring broadcast stations more and younger viewers who are more apt to watch content on various screens. That said, Aereo faces myriad legal obstacles. For one, a broadcast signal uses the airwaves that are owned by the public and guarded by the FCC. Hence, Aereo is charging consumers for programming that they could get for free using their own antenna.

Another complication is retransmission consent. Since The 1992 Cable Act, broadcasters have been entitled to financial compensation from cable, satellite and telco companies that distribute its content. Only in the past few years have broadcasters begun to receive these carriage fees. SNL Kagan estimates that in 2011 broadcasters collectively received $1.5 billion, a dollar amount that is projected to double in four years. It is very doubtful that these days, broadcasters will allow their signal to be retransmitted by anyone at no charge.

Aereo's platform may be modern, but the concept and even the technology are among the oldest in television's history. In 1948, John and Margaret Walson began selling television sets at their General Electric appliance store in Mahoney City, Penn. They had difficulty selling them since the closest city broadcasting was about 90 miles away in Philadelphia. Complicating matters even further, Mahoney City was surrounded by mountains and people could receive little if any signal coverage from Philadelphia's three channels.

So, Walson, who had a degree in electronics, stuck a pole with a receiver attached to it on a nearby mountaintop. He then connected the receiver to his store and several homes nearby. Walson soon demonstrated the power of the new medium and, more importantly, began to sell television sets. Cable's origins began long before microwave transmission (which Walson was the first cable operator to use), geosynchronous satellites or the hundreds of cable networks now available. He has since been recognized by Congress and the National Cable Television Association as the founder of the cable television industry.

Of course, in 1948, Walson did not have to worry about retransmission consent, and it's doubtful he charged his new "customers" a monthly rate. The greatest irony is that the concept Walson initiated 64 years ago has evolved into the $100 billion cable television industry...and with Aereo, the same technology threatens it today.

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