Aereo’s marketing materials. The service is now launching in the New York City area.

With Aereo now in launch mode, this unconventional service (based upon thousands of tiny television antenna–each smaller than a dime), the television industry is facing some interesting questions about even its most basic operating assumptions.

As a result of reader interest in the blog post “I Want to Watch TV on My iPad,” here’s a legal view of the Aereo situation.This material is used with permission of the law firm Drinker, Biddle & Reath, and it originally appeared in the firm’s Antenna newsletter as “Legal Developments Affecting Over-the-Top TV.” The article was written by DBR communications attorney Howard Liberman and and his associate, Jennifer T. Criss.

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The past several weeks have seen important developments regarding “over-the-top” television. More and more consumers are moving away from traditional means of watching television and are embracing services that provide access to television programming directly on computers, tablets, and mobile devices. While some services such as Hulu distribute copyrighted content with permission of copyright owners, other over-the-top services are providing access to copyrighted content without obtaining copyright licenses or paying retransmission fees to TV stations.

One such over-the-top service, Aereo, provides the signals of local broadcast stations to subscribers who “rent” one of thousands of miniature antennas located in Aereo’s facility, for a monthly fee. In March, numerous television broadcasters, including ABC, CBS, NBC, Fox, and PBS. brought suit against Aereo for copyright infringement. While local stations would ordinarily be available for free to any household with an antenna, today most consumers receive access to local stations through subscriptions with cable or satellite providers. The broadcast companies argue that Aereo, which is backed by Barry Diller, is infringing copyrighted material by allowing its users to access live broadcasts over the Internet. Aereo asserts that it is simply providing access to programming that consumers are able to receive for free by allowing consumers to rent its miniature antennas either on a recurring or a per-program basis.

On July 11,2012, Judge Alison J. Nathan of the U.S. District Court for the Southern District ofNew York ruled that Aereo can continue providing services to its subscribers while the case moves through the courts. Judge Nathan concluded that Aereo does not retransmit broadcast channels to its customers because the company provides an individual miniature antenna for each customer rather than offering access to a single, large antenna that transmits signals to all Aereo subscribers. The court disagreed with the television broadcasters’ claim that they would be irreparably harmed and lose numerous customers should Aereo continue its activity until a final ruling in the case.

For now, Aereo operates only in New York City. But Aereo is planning to expand into additional U.S. markets. Thus, it is important for all TV broadcasters to be aware of developments in this litigation. In the meantime, the FCC is considering what constitutes a “channel” within its definition of “multichannel video programming distributor” (“MVPD”). The FCC is questioning whether Internet-based services such as Aereo and Hulu should be considered MVPDs if they distribute more than one broadcast or cable television channel. Including these services as MVPDs could mean that television stations could seek retransmission consent payments for the delivery of their signals by these systems.

As the Aereo case and the FCC proceeding move forward, it is clear that consumer access to television is rapidly changing. With companies such as Google, Apple and Sony considering offering video channels directly to subscribers via the Internet and going “over the top” of cable and satellite providers, defining what constitutes a “retransmission” and what service qualifies as an MVPD is critical to shaping the next decade of television viewing. Today’s viewers don’t just want their MTV; they want their MTV available inexpensively, 24-7, and on their computers, tablets and smartphones. These two proceedings – the Aereo litigation and the

FCC’s effort to re-define “MVPD” – will have a major impact on the future of over-the-air broadcast television.

This issue also has the attention of Congress. Hearings have been held in both the House and the Senate in recent weeks, as lobbyists and trade associations are gearing up for the introduction of legislation — perhaps this year – to make substantial revisions in U.S. communications laws for the first time since the passage of the landmark 1996 Act. We will monitor all these proceedings and provide updates in future issues.