grimesProfessor Warren S. Grimes, who helped write an amicus brief in support of defendant Aereo in American Broadcasting Cos. et al v. Aereo Inc., kindly  followed up on his recent Q-and-A with  Biederman Blog editor Brittany A. Stone about the U.S. Supreme Court ruling in this much-watched, much-discussed case:

BB: I understand you were involved in filing an amicus brief in the Aereo case, on the side of Aereo.  Were you surprised at the result?

WG: As part of the Southwestern Amicus Project headed by Prof. Michael Epstein, I assisted third-year law student Andrew Pletcher in drafting an amicus.  Pletcher was the primary draftsman, but he received guidance from me, from Prof. Epstein, and from others. [See video below] 

We were disappointed in the result, but there is never any certainty in litigation, particularly in a hotly contested case of this sort.  One surprise for me was that in the 6-3 decision, the three justices who dissented were [Antonin] Scalia, [Samuel] Alito, and [Clarence] Thomas, justices that I would not necessarily have predicted would side with Aereo.  Both the majority and the dissent, however, were focused on a narrow textual analysis of copyright legislation, not on the broader competition and policy issues addressed in our amicus brief. Essentially, the majority opinion conceded some ambiguity in the statutory language, but sought to discern what Congress would have intended had they confronted the precise issue raised in the Aereo case.  The dissent took a narrower view of the language, with Scalia suggesting that what is not expressly addressed in the statute is not covered.  

BB: What were the issues addressed in the amicus brief?

WG: We addressed a couple of key policy issues.  One was that the roll out of digital TV broadcasting left a lot of Americans without any access to over-the-air TV.  Digital broadcasting signals do not reach as many households as the old analog signals did.  My own home in Glendale, for example, cannot receive broadcast digital signals, even with the help of a roof antenna.  That leaves my family with no alternative to the expensive cable service or cutting the cord and relying on video programming transmitted through the Internet.  The amicus brief stressed that the Aereo service provided many Americans an inexpensive alternative for receiving over-the-air TV channels in line with congressional and FCC intent when the roll out of digital broadcasting occurred.  

A second point was that Aereo was a natural and beneficial competitive response to the current dysfunctional system for delivering pay television to American homes.  Right now, consumers are forced to purchase elephantine and expensive bundles of TV channels, regardless of the distributor they patronize (traditional cable, satellite, or telephone fiber optic distributors).  Had Aereo won this case, I think there would have been additional pressure on TV programmers and distributors to get rid of the forced bundles and give consumers meaningful choices.    Roughly half of the average consumer’s monthly cable bill (approaching $100) goes to pay for sports TV.  Yet, only twenty percent of households regularly watch sports programming.   Even among those who watch sports, many would like to pick which sports programming they pay for.  

Neither the majority nor the dissenters chose to address these policy arguments.  That’s unfortunate.  The ambiguity in the statute could have been resolved with some sensitivity to these policy issues.  

BB: So the broadcasters won.  Does this benefit them in maintaining the status quo?

WG: Absolutely.  The broadcasters make billions of dollars in overcharges to cable TV buyers.  I have estimated elsewhere (by comparing the US and Canadian systems) that these overcharges are in excess of $30 billion each year.  The broadcasters want to hold on to those huge revenue streams as long as they can.

Ultimately, I think the forced bundling will end, but it may take a number of years for that to happen.  Younger Americans are voting with their wallets by choosing not to subscribe to cable TV.  Internet streaming will become more and more common.  There is, however, a concern here as well.  A large firm such as Comcast owns programming, controls cable TV distribution in many areas, and also controls the Internet pipeline into many peoples’ homes.   If Comcast loses the ability to bundle large numbers of channels in its pay TV distribution, it may simply increase the rates charged for Internet access.

BB: Is there a possibility that the forced bundling could end sooner?

WG: It’s my view that the forced bundling is a violation of the Sherman Antitrust Act.  I was a consultant in a consumer class action that made that claim unsuccessfully.  Other litigation, however, is under way.  There is an active federal antitrust suit in the Southern District of New York that shows promise and could force a quicker end to the forced bundles.  Also, Sen. John McCain (R.-Ariz.) has introduced a bill to require a la carte distribution of cable channels.  So far, that bill has gone nowhere, but a consumer revolt may give impetus to that proposal.  The fight about the televising of L.A. Dodger games has certainly raised awareness of these issues in Southern California.

BB: So does Aereo have a future?

WG: It’s unclear.  The case was remanded for further proceedings.  Aereo has suspended its service but may look for a way to continue operating.  I don’t see how they can continue operating without a substantially different business model.  Probably, they are going to have to play ball with at least some of the big content providers if they have any chance of staying in business.  

BB: So this question goes well beyond Aereo, but what should an ideal telecommunications delivery system look like?

WG: Outside the United States, in a number of countries, you see government ownership or government regulation of a monopolist provider.  In those countries, consumers may get high speed Internet and cable connections for less.  Still, that’s not in our tradition and would not be my choice.  The United States is a large enough country with sufficient scale to allow competition to be the regulator.  Competition can work, but only if we place minimum ground rules on the participants in the system.  We have to ensure that (1) mergers do not limit the number of competitors to the point that competition will no longer be effective; and (2) vertical integration of content providers and distributors of Internet and cable do not create conflicts of interest that distort and undermine consumer choice.  And, of course, we have to end the forced bundling of cable channels.  For this to occur, the FCC and antitrust authorities have to have a clear vision and a will to implement it. 

I’d like to see this happen, but the programmers and distributors have a great deal of clout in Washington these days.  Consumers have to make their voices heard if there is any chance of this agenda being implemented.  

BB: Thank you, Professor Grimes, for your perspectives on this landmark case.

Grimes is a Professor at Southwestern Law School and co-author of a definitive antitrust law text for lawyers and law students, The Law of Antitrust: An Integrated Handbook with the late Professor Lawrence Sullivan. Grimes wrote a recent, on-line Forbes editorial Heel or Hero? Aereo and Television Distribution.

In a recent forum at Southwestern, conducted before the high court had ruled, Pletcher and others discussed the Aereo case: