Aereo+CloudAereo might not cease operations after all. The company is now arguing that because the Supreme Court ruled that the company was a cable TV service provider, it is entitled to a compulsory license to offer local broadcast content.

Aereo had argued that what it offered was an antenna service. The company’s service uses dime-sized antennas – one per customer – to receive local broadcast stations and then delivers that content over the Internet, also providing DVR functionality to end users, for a fee of about $12 a month. Unlike traditional cable stations, Aereo wasn’t paying retransmission fees to broadcasters, who took legal action against the company.

Last month the Supreme Court ruled in favor of the broadcasters, arguing that Aereo violated copyright laws. The same day key Aereo investor Barry Diller reportedly told CNBC that “it’s over now.” A few days later Aereo discontinued service – at least temporarily.

‘Cable Company’ Aereo
Events took a different turn yesterday when Aereo sent a letter to U.S. District Judge Alison J. Nathan. In the letter, Aereo argued that “after the Supreme Court’s decision, Aereo is a cable system with respect to [near-live transmissions]” and that as a cable company it was entitled to a compulsory license of the local content it had been providing.
That license wouldn’t come for free. Aereo would have to negotiate terms with the broadcasters. But the company apparently believes it can get the content at a price that would enable the company to continue to have a viable offering.

In the letter sent yesterday Aereo noted, however, that it would be critical for the court to make a decision “on an immediate basis” about the company’s eligibility for a compulsory license – “or Aereo’s survival as a company will be in jeopardy.”

The letter indicates that Aereo has continued to pay staffers even though it is not collecting revenues from customers. Aereo also said in the letter that it is proceeding to file the necessary statements of account and royalty fees – apparently for transmissions that have already been made in preparation for a settlement with the broadcasters.

The letter was sent in response to a requirement put in place as part of the court system and also contained comments from ABC – the company that brought the suit against Aereo. “Should Aereo permanently discontinue its business, a consensual resolution of the litigation seems more likely,” ABC said in the letter.

At the time the Supreme Court made its decision, Aereo was offering service in 27 markets. The offering appeared well suited to meeting the needs of consumers who do not want to pay for traditional cable content but instead are content with a combination of over-the-top video delivered through the Internet and local television channels, which are available over the air for free. Since local TV stations converted to digital broadcasting several years ago, some people are finding that traditional antennas do not pick up signals as well as they did when broadcasts were made in analog form over wider spectrum bands.

This state of affairs would suggest that Aereo’s technology ought to have value to someone. If the company is unsuccessful in gaining compulsory licenses at reasonable terms, one obvious avenue would be to sell or license the technology to the broadcasters as a means of better serving their over-the-air viewers. The broadcasters would not get retransmission fees for those customers but they could gain replacement revenues by charging a monthly fee for the antenna service and the DVR capability that Aereo’s technology would add.

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