Big Changes Looming for Broadcast Television

May 7, 2013

When full-powered analog television was phased out in 2009, a giant chunk of the frequency spectrum was opened up. The entire industry is currently shaped by government regulations that distort the airwaves. A startup firm, Aereo, is seeking to disrupt the cable and television industry with a new technology that could change broadcasters' business models, says Jerry Brito, a senior research fellow at the Mercatus Center.

  • Aereo offers a subscription service that costs $10 a month and provides a dime-sized antenna that picks up over-the-air signals just for that one customer.
  • Given the high price of cable subscriptions, many people have begun replacing their traditional cable box for on-demand services like Netflix, iTunes and Hulu.
  • Aereo is the first service that allows "cord-cutters" to watch live sports, news and award shows over the Internet.

Broadcasters have accused Aereo of stealing their signals and every major network has filed suit against the company. When cable companies retransmit signals, they typically pay the broadcaster a fee to do so. But just like the days of rabbit ears in the past, Aereo claims it shouldn't pay for retransmission because it simply rents antennas to individual consumers who then receive the over-the-air digital transmission.

  • So far, legal challenges to Aereo have failed in court, with the courts deciding that Aereo has broken no laws.
  • Broadcasters receive the airwaves they use for free, as dictated by the Federal Communications Commission, which makes other spectrum users, like mobile phone and wireless broadband providers, pay large sums to use the airwaves.
  • As part of the agreement for using the free airwaves, broadcasters have promised that they will operate in the public interest, which includes making their programming available for free over-the-air.

Without this agreement, local broadcasters would likely have become cable broadcasters many years ago, given that only 15 percent of households watch local broadcasts over-the-air and the majority of revenue for television comes from retransmission fees.  If Aereo stands up in court, other cable and satellite providers might attempt to provide their own antennas, which have led some broadcasters, like Fox and Univision, to threaten becoming subscription-only services.

If this happens, the result would be more open airwaves that could be put to better use and the end to government-mandated over-the-air transmission.

Source: Jerry Brito, "How Government Regulations Distort the Television Airwaves," Mercatus Center, April 26, 2013.

 

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