Startup Telletopia believes that it can retransmit the broadcast signals on the Internet and avoid all copyright liability by operating as a nonprofit. It says it would pay broadcasters for their signals, but if the FCC doesn’t rule that Telletopia and other online video providers are subject to the same retrans obligations as cable and satellite operators, what’s to stop Charlie Ergen or others from setting up nonprofits to take station signals for free?
Big Retrans Downside To Telletopia Plan
Telletopia may not be the broadcasting utopia it first appears.
If you haven’t heard the pitch from the San Diego-based startup, here it is: We’ll build and launch an OTT service in each TV market offering the local broadcast signals to paying subscribers so they can watch on tablets, smartphones and connected TVs.
We’ll charged “less than $20 a month,” and pass along most of that revenue to you, the broadcasters, in the form of retransmission consent fees. Think of it as a virtual cable system dedicated to broadcasting. Think of it as a broadcaster-friendly Aereo.
That sounds simple enough, and, technically and operationally, I believe it is.
The problems are legal and regulatory.
Telletopia believes that it can retransmit the broadcast signals on the Internet and avoid all copyright liability by operating as a nonprofit.
That belief stems from language in the 1976 Copyright Act that exempts nonprofits if they operate:
- “Without any purpose of direct or indirect commercial advantage.”
- “Without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.”
I’m no lawyer, but I can see that there is plenty of squishy language in there for copyright holders — in this case, the big media conglomerates that own the broadcast networks and much of the programming — to challenge Telletopia’s legal theory for the exemption, which is laid out in a six-page 2013 legal memo by attorneys Eric Breisach and Lisa Chandler Cordell.
If the principals of Telletopia, a group of former cable and wireless executives, draw salaries, does that constitute “direct or indirect commercial advantage?” If Telletopia is paying substantial retrans fees to broadcasters, are they exceeding “actual and reasonable costs?”
Telletopia, of course, wants to avoid the courts. I suspect that is why it also wants the FCC to rule that it and other online video providers (OVDs) that carry broadcast signals are subject to the same retransmission consent obligations as cable and satellite operators. That is the broadcast-friendly way to go about this.
(Telletopia also needs some other things from the FCC in that proceeding. Among them, prohibitions against the broadcasters bundling non-broadcast signals in with their broadcast signals and against the networks’ interfering with the affiliates’ ability to cut deals with OVDs.)
The FCC led by Tom Wheeler was heading toward making such a ruling, but, for whatever reason, it’s not now. At an oversight hearing a couple of weeks ago, Wheeler said the proceeding had been shelved.
Unfortunately for Telletopia that puts the affiliates in the position of having to oppose Telletopia’s claims to a copyright exemption, despite its apparently sincere assurances that they want to fairly compensate the affiliates.
Why? Because Telletopia would be setting a terrible precedent. If one nonprofit can retransmit broadcast signals without having to worry about copyright then any nonprofit can.
And these other nonprofits might not be interested in compensating broadcasters and they wouldn’t have to. What’s more, they would not have to respect broadcasters’ local market exclusivity. They could distribute broadcast signals regionally or nationally if they wanted to.
As has been suggested to me by a couple of broadcast attorneys, long-time broadcasting nemesis Charlie Ergen could set up a nonprofit that would relieve him of having to deliver broadcast signals to his satellite subscribers and paying retrans for them. The big cable operators could do the same thing, of course.
The affiliates can rest assured that the networks would lead the legal fight to block anyone from claiming a nonprofit copyright exemption. And they may want to join the networks in that fight.
But the affiliates should also do what they can to resurrect the FCC proposal to impose retrans obligations on OVDs like Telletopia. By doing so, they would be creating a second line of defense against losing control of their broadcast signals in the broadband world.
It’s not just the threat of proliferating nonprofits that affiliates have to worry about.
FilmOn is a for-profit OVD that is waging a legal battle to carry broadcast signals under the compulsory license, which, for all intents and purposes, is the same as getting a full exemption from copyright liability.
So far, its argument that it is in essence a cable system based on and entitled to the license as one has been heard in three federal district courts.
Although it has lost two out of three cases, its argument is a legitimate one based on the Supreme Court’s 2014 Aereo decision that found little practical difference between a cable system and an OVD. If one is entitled to the compulsory license, so should the other be, or so the FilmOn argument goes.
If FilmOn continues to pursue the case in the appeals — it’s shown no signs of backing off — it could end up once again in the Supreme Court and it could ultimately win.
So, Telletopia and FilmOn represent two very good reasons to lobby for the FCC to impose retrans obligations on OVDs. The last thing any broadcaster would want is rogue nonprofits and for-profits like FilmOn set loose to redistribute their signals however they want without having to pay for them.
Plus, if the affiliates prevail on this issue at the FCC, the threat of the OVDs magically morphs into an opportunity for them. The OVDs — free of copyright liability, but not retrans obligations — would pump the affiliates’ signals into every digital device and become another source of revenue.
Of course, before getting into bed with the OVDs, the affiliates would have to placate the networks, which want to control all digital distribution of their programming. Either that, or, as Telletopia suggests, they need to convince the FCC to add a rule barring the networks from interfering with their OVD dealings.
Nobody ever said utopia was easy.