Non-profit’s app spreads to more markets, claiming an exemption in the Copyright Act allows it to offer consumers no-fee access to local signals.
For years, multichannel video programming distributors (MVPDs) of all sizes have seen retransmission consent fees render the subscription video market into a break-even prospect or money-losing business. As fees push up rates, consumers increasingly shave or cut the cord, relying more on over-the-top (OTT) video options.
Still, access to local broadcast stations that provide local news, weather, and live sporting events remain essential for many consumers. However, rigging an antenna to obtain over the air broadcasts is inconvenient, and is not even an option for many rural consumers who live beyond the range of local broadcast signals. With no end to retransmission consent increases in sight, both consumers and the MVPDs that serve them have been looking for viable alternatives.
A New Approach to Obtaining Local Broadcasts Over the Internet #
Several years ago, many hoped that retransmission fees might be circumvented by companies like Aereo and FilmOn. These businesses used various methods to transmit local broadcasts to customers online. However, their efforts were thwarted in 2014 when broadcasters prevailed in court.
In the past year, a non-profit called Locast has emerged, offering a new (and, it claims, legal) way for consumers to obtain broadcast signals via broadband. Local broadcasts are available online in select U.S. markets, allowing consumers to view local stations without an antenna, and without contending with the retransmission consent fees their cable, IPTV, or satellite provider must pay.
The difference that makes its service legal, according to Locast, is that it is a non-profit. Therefore, it is not subject to retransmission consent fees thanks to an exemption for government and non-profit entities found in the Copyright Act. Locast founder David Goodfriend provided details about the service during a December 2018 webinar from the American Cable Association.
Is It Legal? #
As noted above, methods to access local stations using broadband sounds similar to services such as those offers some years ago by Aereo and FilmOn, which, despite initial legal successes, ultimately did not survive court challenges. However, as explained in detail in a white paper posted on its website, Locast says that, unlike Aereo and FilmOn, it operates under Section 111(a)(5) of the Copyright Act. This section of the law states, in part, that there is no copyright infringement if a signal is retransmitted:
- by a government or nonprofit organization, “without any purpose of direct or indirect commercial advantage” and;
- without charge to the recipients, “other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.”
Locast says that this exemption has long been used to provide low-power television translator services, allowing customers to view local broadcasts which would otherwise be out of range. Instead of retransmitting the signals over the air, Locast uses the Internet. According to the white paper, the Copyright Act permits this, as it specifically provides for devices or processes “now known or later developed.” As the function is the same, Locast says the law accounts for future changes in technology. Therefore Locast, which characterizes itself as providing a digital retransmission service, fits all legal definitions.
The white paper also makes two additional important points. First, the Copyright Act’s exemption for government and non-profit entities explicitly does not apply to cable systems. (While it is not clear how the exemption might treat cable systems operated by municipalities or non-profit cooperatives that tried to replicate this service themselves, there seems to be nothing that bars consumers from obtaining the service from a non-profit like Locast.)
Secondly, the white paper also notes that in order to comply with the law’s definitions, retransmitted broadcasts must occur simultaneously with the primary broadcast. To preserve compliance with the Act, Locast does not offer a way for consumers to watch previously aired programming on a time-delayed or on-demand basis. This rules out Locast’s ability to provide DVR-like functionality to which many consumers have become accustomed.
This strict adherence to the Act’s language has, so far, appeared to have paid off. Goodfriend stated that he expected a legal challenge from broadcasters during 2018, but none has yet materialized. He also said that some smaller broadcasters are intrigued by the service, as it can provide them with analytics on viewership that complements Nielsen rating information. For now, at least, the service is operating without legal obstacles.
Functions, Funding, and Facilities #
Locast is operated by the Sports Fan Coalition, a non-profit group that has been active in supporting reform of sports blackout, retransmission consent, and other program access rules since its founding in 2009. Locast’s initial efforts have been funded into the six figures by a generous individual Goodfriend has not identified. As noted above, the service is offered at no charge, although it solicits contributions from users to sustain operations. Locast’s web page does note that Locast may need to charge users at some point in order to defray costs. Again, the Copyright Act’s exemption permits recovery of costs, which are markedly lower in the absence of retransmission consent fees.
Operational expenses, while significant, are still only a fraction of what many MVPDs pay in retransmission consent fees. Antenna placement to obtain signal, along with rack space for servers, power, cloud access, etc. have an initial cost of roughly $100,000 per market, according to Goodfriend. Ongoing monthly costs work out to less than $5.00 per user.
During the December webinar, Goodfriend stated that Locast launched in New York City one year ago, in January of 2018. Since then, it has spread to Boston, Chicago, Dallas, Denver, Houston, and Philadelphia. It hopes to continue reaching additional markets, pending sufficient funding. Notably, although Internet protocol is used to transmit the signals, the signals are geofenced. Consumers in a given market can watch the broadcasts from within their designated market area (DMA) only.
Goodfriend hopes to help spread Locast to additional markets through a combination of user contributions, underwriting from larger organizations that see the merits, and contributions of facilities from interested parties. With free or reduced cost access to antenna sites, servers, power, HVAC, and transport to cloud facilities, Goodfriend says that initial and ongoing costs could be reduced significantly.
Locast currently has plans to expand to a total of 50 markets. Yet there are 210 Designated Market Areas across the United States. Assuming the Locast model continues to operate unchallenged (or it can successfully stave off any legal opposition that may arise), how to efficiently spread to more markets and encourage consumer adoption may well be a major question for the industry in 2019.
What Does This Mean for Rural MVPDs? #
On their own, rural MVPDs are likely stuck with the current, broken retransmission consent regime for the foreseeable future. However, they might be able to suggest that their customers use the Locast app, or a similar service if other non-profits or government bodies choose to explore digital retransmission under the Copyright Act’s exemption. One might imagine a broadband provider offering to help customers select and set up a variety of OTT apps, including Locast or similar services, along with other established players like Netflix, Hulu, etc., perhaps as part of a Wi-Fi or home networking management package that many providers now feature.
Unjustifiable retransmission consent costs drive up rates, stifle entry into the video marketplace, and take valuable dollars away from investment in broadband infrastructure, with no end in sight. The inevitable consumer response has been to move away from the traditional linear video subscription model to over-the-top options. Yet even as technology and consumer demands have evolved, local broadcasters have retained a stranglehold on retransmission consent fees. Locast’s model has costs, yet they are minimal compared to what MVPDs, and ultimately their consumers, have to endure under the existing rules. With luck, and sufficient funding, perhaps this new approach could at long last alter the current dynamic, and help the outdated retransmission consent system to finally collapse of its own weight.
[Steve Pastorkovich is a Washington, D.C.-based consultant specializing in telecommunications, trade association operations, and public policy. LinkedIn https://www.linkedin.com/in/steve-pastorkovich-4a94412/]