WASHINGTON -- The Supreme Court blocked an innovative Internet streaming service Wednesday from potentially upending the way Americans watch television.
The justices sided 6-3 with the nation's major TV networks and cable companies against Aereo, an Internet startup that rebroadcasts live programs to subscribers without paying retransmission fees.
The broadcasters had warned that if one company was allowed to avoid those fees, others -- from Dish Network to DirecTV -- surely would follow. That would risk billions of dollars in revenue that broadcasters plow back into creating new programs. Retransmission fees brought in an estimated $2.37 billion in 2013.
Aereo had argued that it differed from cable and satellite services because each subscriber is assigned an individual, dime-sized antenna, often stored on rooftop circuit boards. But a majority of justices saw those antennas as just a way around copyright laws.
"Aereo's system is, for all practical purposes, identical to a cable system," Justice Stephen Breyer wrote for the majority. "Both use their own equipment. Both receive broadcast television programs, many of which are copyrighted. Both enable subscribers to watch those programs virtually as they are being broadcast."
In making their limited ruling against Aereo, the justices stressed that new technologies such as cloud computing should not feel constrained. During oral arguments in April, Aereo's attorney, David Frederick, said "the cloud-computing industry is freaked out about this case."
"We believe that resolution of questions about cloud computing, remote storage DVRs, and other novel matters not now before us should await a case in which they are clearly presented," Breyer said.
Aereo, backed by media mogul Barry Diller, co-creator of Fox Broadcasting, operates in 11 major cities and had plans to expand rapidly. The court's ruling threatens to put it out of business.
Reacting to the decision, Diller said "blocking this technology is a big loss for consumers." He congratulated Aereo CEO Chet Kanojia and his staff "for fighting the good fight."
Chief Justice John Roberts and Justices Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan agreed with the ruling. Justices Antonin Scalia, Clarence Thomas and Samuel Alito dissented, arguing that Aereo successfully exploited a loophole in the federal Copyright Act.
"It is not the role of this court to identify and plug loopholes," Scalia said. "It is the role of good lawyers to identify and exploit them, and the role of Congress to eliminate them if it wishes. Congress can do that ... in a much more targeted, better informed, and less disruptive fashion that the crude 'looks-like-cable-TV' solution the court invents today."
But Breyer said Aereo qualifies as a broadcaster, not merely a supplier of equipment, and performs its work publicly, not privately to each subscriber, as the company had asserted.
Aereo offers TV viewers an enticing package: For $8 or $12 a month, they can get a couple dozen live channels and 20 to 60 hours of remote storage space on cloud-based DVRs. By contrast, cable packages that include scores of seldom-watched channels can cost $100 or more.
The business model, however, was always suspect. Patterned after home antennas, which remain legal for consumers who don't mind limited service and poor reception, Aereo assigns a tiny antenna to each subscriber. That way, it argued, no two customers receive the same "public performance."
It was an argument that had won support from lower federal courts in New York. By the time the case arrived at the Supreme Court, however, Aereo had attracted a wide array of opponents: broadcast networks, cable companies and professional baseball and football leagues, to name a few.
The Obama administration also sided with broadcasters. It argued that licensed services such as Netflix and Hulu prove that cloud-based systems can pay copyright holders.
A federal judge in Utah ordered Aereo to cease operations in six other states in February, calling its business model indistinguishable from that of a cable company, which must pay broadcasters for content. As a result, customers in Denver and Salt Lake City lost their service.
The company operates in New York, Boston, Atlanta, Detroit, Cincinnati, Baltimore, Miami and four cities in Texas.
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