Aereo Ruling Poised to Ignite Hill Lobbying Frenzy, Lobbyists Predict

"If Aereo wins, the broadcasters will definitely go to Congress,” said Computer & Communications Industry Association Vice President-Government Relations Cathy Sloan. “If Aereo loses, it really doesn’t have a plan B.”

"NAB is cautiously optimistic that SCOTUS will declare Aereo to be a copyright infringer,” said Executive Vice President Dennis Wharton. “If that does not happen, we will review our options, which would presumably include a Capitol Hill strategy.” Broadcasters have alleged that Aereo, which uses collections of dime-sized antennas to stream broadcast content to online subscribers without paying retransmission consent fees, is stealing their content. NAB spent $5.28 million lobbying Congress in Q1, more than any quarterly spending last year. Congressional Q1 lobbying disclosure forms from lobbyists representing NAB, Tribune and 21st Century Fox list Aereo as a priority.

"They'll run to the Hill with their hair on fire,” one media industry consultant said of broadcasters. The consultant told us the second half of 2014 is poised to be the most important legislative moment for the pay-TV industry since the 1992 Cable Act’s passage. Congress already is wrestling with video issues this year as part of reauthorization of STELA, which will expire at the end of 2014 unless reauthorized. Lobbyists still debate the exact broadcaster strategy if Aereo wins -- perhaps pressure on Congress to reclassify an online video distributor like Aereo as a multichannel video programming distributor, some suggested.

Expect “noise, angst, hand-wringing” on Capitol Hill if Aereo wins, said one broadcast industry lobbyist. But don’t expect anything to really happen on the legislative front in the short term, given the hurdles of passing anything in the Senate, he said. Broadcasters have no specific strategy in place now and are not in some room cobbling together secret legislative language for this scenario, he said.

Which Scenario?

In the most likely scenario, STELA would get an extension of six to nine months going into 2015 as Congress deals with the Aereo fallout, the industry consultant said. He described a possible ruling in which the Supreme Court does not go to one extreme or the other but signals Aereo may require a compulsory license and remands the case to the district court. Such a ruling would heavily affect the Hill but not with the same urgency as some other rulings. It would be a complicated scenario that both the broadcasters and the content creation industry, with heavyweight players such as the MPAA involved, would hate, rushing to the Judiciary committees seeking STELA extension. Slightly less likely, the consultant said, would be a complete Aereo victory, also igniting urgent and heavy lobbying efforts from broadcasters and content players, who would then go to Judiciary or Commerce. The Supreme Court could also, even less likely, throw Aereo under the bus but fail to protect the cloud computing industry, which may bring bigger technology players coming to lawmakers for changes. During oral argument, the justices raised the possibility of an overbroad ruling affecting the cloud computing industry, depending on how the court defines what a public performance right is. Broadcasters have claimed Aereo’s service is a public performance. The least likely ruling, with minimal legislative impact, the consultant believed, is an Aereo loss in which the Supreme Court makes sure to include cloud computing industry protections.

CCIA’s Sloan doubts the Aereo factor will ultimately disrupt STELA reauthorization, pointing to the court ruling expected in summer. “That’s too late to be messing with STELA,” she said. “It’s not a satellite issue.” Broadcasters may well try, she said. They have spent months advocating for a clean reauthorization, however. The broadcast industry lobbyist dismissed any concerns about reauthorizing STELA before it expires, saying broadcasters lack any vested interest in assuring it’s reauthorized at all.

Two-year-old Aereo lobbies the Hill now but is not considered a heavyweight on its own. It joined CEA and CCIA in the past year, bigger associations with their own lobbyists. “We are not engaged in the moment seeking any legislative change,” Aereo CEO Chet Kanojia said on C-SPAN’s The Communicators last month. “Our goal thus far has been to educate lawmakers in what we're doing.” Hill staffers often don’t have cable and can’t afford it, he said, saying the Aereo message “resonates.” Aereo paid law firm Bingham McCutchen $110,000 to lobby in Q1, with two lobbyists focused on “issues pertaining to antennas and broadcast television,” its disclosure form said. It spent the same amount on that firm every quarter last year and substantially less in the second, third and fourth quarter of 2012. Aereo had no comment for this story.

"For lobbying firms, a clean win by Aereo is a potential gold mine for lobbyists given Aereo’s disruptive potential,” said Guggenheim Partners analyst Paul Gallant by email. “That’s particularly true if broadcasters attack Aereo on copyright and communications grounds, which probably involve different sets of lobbyists. But if the Court is inconclusive, Congress’s role may depend on how worried -- or not -- broadcasters really are. Because any congressional debate around Aereo probably ropes in retrans, which is a discussion broadcasters would rather not have.”

Strategies, Allies Forming

"We would be quite involved,” predicted CEA Senior Vice President-Government Affairs Michael Petricone of his association’s involvement in any Hill fight. “We represent and we stand up for disruptive innovators.” CEA spent $570,000 and CCIA $230,000 on lobbying in Q1. Gallant called CEA and CCIA “experienced shops” that “will be a big help in amplifying Aereo’s views on the Hill."

Petricone framed the issue as “high priority” and scoffed at “politically connected incumbents” trying to “preserve their existing business models.” He did not flinch at the idea of a swarm of broadcast lobbyists, pointing to broadcaster attempts to stop cable TV, Betamax and TiVo, all unsuccessful, he said -- they “tried and failed to shut these new innovations down.” Lawmakers realize this, Petricone said. CCIA’s Sloan said broadcasters provide “the main conduit for political advertising, and this is an election year.”

No one seems to have mapped out any concrete lobbying strategy yet, said one media industry lobbyist, who disputed that any lobbyists truly think broadcasters will lose. If Aereo wins, the question would become what lawmakers may really help, she said. Certainly not Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., she said, also doubting much support from House Commerce Committee Chairman Fred Upton, R-Mich., and House Communications Subcommittee Chairman Greg Walden, R-Ore. The more complicated STELA gets, the harder it would be to pass, but given the timing of the court ruling, it wouldn’t make sense to press for legislation outside of STELA, she said. The big challenge would be hashing out a legislative compromise in which multiple stakeholders could get something, perhaps with an out for Aereo and with cloud computing as a factor, she said. Aereo lacks a big base of Hill support, she said.

Lobbyists and lawmakers are “holding their breath just waiting to see what will come out on that,” said Bruce Burton, a lobbyist for the International Brotherhood of Electrical Workers, which backs the broadcasters and spent $289,639 in Q1. His main lobbying concerns are retransmission consent rules and Aereo, which he sees as linked, he said. He is optimistic broadcasters will win the Supreme Court case but expects a full-on lobbying effort on the Hill if Aereo wins, he added: “We wouldn’t really have a lot of choice.”

"The challenges facing broadcasters in trying to convince Congress to change the law are the same they face in arguing before a court: How do you sweep in Aereo but exclude other services?” said Public Knowledge senior staff attorney John Bergmayer, acknowledging many possible roads for Congress. “Copyright law is generally applicable and, as we've consistently argued, changing the law to get at Aereo would likely have unintended consequences for several different industries.” It would “seem rash and premature to try to change the law on the basis of unfounded and unlikely arguments about harm to the broadcast industry,” Bergmayer said. “Aereo would at most marginally increase the number of cord cutters. Cable companies would not be able to just copy it, not unless they wanted to carry only broadcast channels.”

Rockefeller’s Consumer Choice in Online Video Act may play a crucial role, lobbyists said. S-1680, introduced last fall, proposes to level the playing field for online video distributors and includes provisions adding legal protections to Aereo. “We didn’t ask for it, but we're happy to acknowledge its presence,” Kanojia said of Rockefeller’s bill on The Communicators. Rockefeller signaled during a recent STELA hearing that he wants to attach his Online Video Distributor (OVD) legislation to STELA (WID April 2 p8). Rockefeller is retiring at the end of this term and may want to “make hay while the sun shines” in charging forward with the bill, CCIA’s Sloan said. Aereo is one example of an OVD, but the Supreme Court ruling could make it more attractive for tech giants like Amazon, Google and Netflix to jump into that arena if the ruling meant less risk in retransmitting broadcast signals, the media industry consultant thought. Their lobbying influence should not be discounted, and the court may end up setting the table for Rockefeller’s bill, the consultant said.

Virtually all lobbyists and observers warned it’s difficult to anticipate exactly what shape the Hill reaction will take. Some declined comment for precisely that reason. But expect the reaction to be strong, many assured us, and likely with impacts lasting well beyond this year. (jhendel@warren-news.com)