Fox, Aereo, and the End of TV

Steve Wildstrom / April 8th, 2013

Aereo antenna array (Aereo, Inc.)

News Corp. Chief Operating Officer Chase Carey’s threat to pull the Fox network from the airwaves if Aereo wins its legal battle to retransmit over-the-air TV signals without paying for them is probably nothing more than bluster. But the fact that he could make such a threat with a straight face, and in front of the National Association of Broadcasters, no less, is a clear indication that the end of TV as we have known it is approaching.

The broadcast networks, especially Fox and the old big three of ABC, CBS, and NBC–are still tremendously important players in the TV world. Far more people watch their content than any of the cable-only channels. They still dominate news and live sports (though ESPN and to a lesser extent Fox have made significant inroads in the latter).

But over-the-air is no longer how they reach most of their viewers. And while we still think of broadcast TV as ad-supported, the retransmission consent fees paid by cable carriers–and avoided by Aereo–have become a tremendously important source of revenue to local stations. In a sense, they already are pay TV stations from the point of view of most viewers, and that is why  Carey’s threat is not an empty one.

What would it mean if over-the-air broadcast TV disappeared? For one thing, we could forget about the hideously complex incentive auction now being planned by the FCC to free a bit of the prime spectrum now occupied by TV stations for wireless data use and just turn the whole thing over to wireless.

Some of the more interesting consequences would be for politicians. Members of Congress depend on local stations to keep their names and faces in front of voters, especially as local newspapers fade away. Politicians are also the beneficiary of regulations that require local stations to sell advertising to candidates for federal office at the lowest rates they charge any customer. In fact, if stations stopped broadcasting over the air, the Federal Communications Commission would lose essentially all ability to regulate their content, rates, or much of anything else.

Even the most anti-regulation Republican doesn’t really want that to happen. That’s why Carey’s real audience may have been Congress. If Aereo wins in court, as seems increasingly likely, the broadcasters are likely to turn to Congress for relief. Carey’s statement was likely a shot across the bow in that fight.

But history has shown us that depending on favorable treatment from government to save you from the forces of change can work, but only for a little while. The times they are a-changing for television.

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.
  • Rich

    “If stations stopped broadcasting over the air, the Federal Communications Commission would lose essentially all ability to regulate their content, rates, or much of anything else.”

    To whatever extent content creators put their content online exclusively, the FCC doesn’t regulate it now. And if the proliferation of online delivery continues (which presumably it will) we could eventually reach a point where *most* content is not regulated by the FCC. A new government regulating agency might then be required.

    Other than the loss of being able to receive free TV by the percentage of the population that isn’t in a financial position to pay for cable, I’m not sure I’d be sorry if stations stopped broadcasting over the air, because the spectrum now occupied by TV stations could then be donated to wireless. I’d very much like to see that happen.

    Looking at the situation with a long-term view, I see OTA TV broadcasting as a holdover from a past technology, and wireless (meaning cellphones, tablets and the like) as a major present and future social phenomenon that needs all the spectrum we can provide it. Maybe I’m missing something, but I don’t really see why we need OTA TV broadcasting ten years from now, except for the people who can’t afford cable.

    • steve_wildstrom

      We’re going to end up with some sort of lifeline broadband service for low-income people (this already exists for landline phones and is being extended to wireless phones) and since television is moving from conventional cable to over-the-top anyway, this can double as lifeline TV service.

      The regulatory issues are harder. A whole regulatory structure is built on the elaborate legal fiction that the airwaves are merely lent to broadcasters who are required, in the words of the 1927 Radio Act, to use them for “the public convenience and necessity.” This gives the government power to regulate broadcast content that it does not have over any other media and limits the first amendment rights of broadcasters (Red Lion v. FCC). Because of this situation, if the government loses its regulatory hooks over broadcasters, it cannot simply reestablish them with new legislation.

      In most contexts, broadcasters will argue that they really do own their licenses because almost no license holders are the same entities who originally received the free use of the spectrum. In fact, the fiction serves the interests of both broadcasters and government and I expect them to fight to preserve the status quo even as it becomes increasingly wasteful and irrelevant. (For a lesson in how this works, see the history of how broadcasters delayed the digital transition, hung on to the extra spectrum they were granted for far longer than necessary, and more recently have effectively gutted the incentive auctions.)

      • Rich

        The Internet is such an inexorable force for change that I think eventually most content will be consumed online, independently of laws and contracts from the past. What happens then, with the situation you described?

        • steve_wildstrom

          As long as the content is broadcast over the air–even if no one watches it–the government retains its regulatory authority. As it is, probably less than 20% of the broadcast audience is watching over-the-air. If they give up their broadcast licenses, though, the control ends.

      • Rich

        To put it another way, the broadcasters represent the past, and one thing I’ve observed is that no one can stop technological change. The most they can do is delay it.

        The movement online has already started.

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