In battle for the Internet, Aereo sinks, FilmOn shrugs, net neutrality holds fast

As predicted, this year has been a contentious one for both online video and the Internet. Aereo tested a new way to deliver broadcast content, and lost. ISPs and online video providers, meantime, struggle with meeting the demand for OTT content.

A recent op-ed by Sean Captain of Tom's Guide pointed out that the real problem for Aereo is not that it was violating copyright law or retransmission regulations: "The problem is not that Aereo shouldn't have to play by the rules and pay licensing fees. It's that there currently are no rules for a web-based broadcast company like Aereo," he wrote.

That idea is borne out by a couple of ongoing things.

First is FilmOn's continuing Bronx salute to the broadcast industry and federal courts. A federal judge ruled Alki David's company in contempt for continuing to stream broadcast video after an injunction against it, and fined FilmOn $90,000.  Its request to be licensed in the same way as a cable company was also unsuccessful, similar to the response given to Aereo in its last-ditch attempt following the Supreme Court decision for broadcasters.

It isn't the first time contempt of court has been leveled at David, though. And FilmOn remains stubbornly in business, relying on other "freemium," or ad-supported, streaming options for which it has permission of the content owners, while David figures out another way to bring broadcast content to the company's subscribers.

Second is the ongoing war of words between Verizon (NYSE: VZ), Netflix (NASDAQ: NFLX) and now Level 3 (which transports Netflix's streams up to the edge of Verizon's network). Why Netflix, after a relatively silent two-year argument with Comcast (NASDAQ: CMCSA), decided to make its unhappiness with Verizon's peering much more public isn't totally clear. But it's likely that with net neutrality rules going to a vote soon at the FCC, the online video provider decided this was the battle to pick.

Both situations are raising some uncomfortable questions, and laying bare a frightening truth about the government's inability to properly regulate both the Internet and many of the new technologies rising from it.

One could argue that this new market can regulate itself solely based on market demands and pressure to improve technology. But nothing is that easy. The sheer size of the industries built around the Internet demands that the government take a closer look at how businesses and individuals are conducting themselves--and how their customers are faring.

It leaves the FCC, charged with figuring out how the online world is progressing, with two choices in how to govern this new communications world. It can continue down the middle road with its "light touch" brand of regulation, where companies can bring grievances in front of the FCC and wait months or years for the commission to consider their cases. Or it can apply Title II regulations from the Telecommunications Act of 1996, effective defining ISPs as utilities, with much stricter rules as to how they conduct business.

Now, back to that other matter: live streaming broadcast content over the Internet.

The Supreme Court decided to cite copyright law and declare that Aereo's sin was that it was violating the "first performance" rule--a move many, like Sean Captain, saw as a way for the court to get around its lack of knowledge about, and unwillingness to study, how Aereo's technology worked. Others saw it as a way to keep critically important previous rulings, particularly the 2008 Cablevision decision, from being undermined--which in their view would be disastrous for the entire streaming industry.

Captain, in his article, said the problem lies in a do-nothing, care-nothing Congress.

"In a way, both the Supreme Court and the Copyright Office are right, and the fault for the confusion lies with Congress, which has ignored the phenomenon of Internet video for decades," he wrote. "In the process, it has entrenched established media companies like Comcast and Verizon and left innovative startups in limbo."

So how do the issues surrounding net neutrality and those surrounding broadcast streaming meet? Both are running headlong into that wall of government bureaucracy. For Aereo and FilmOn, the existing regulatory and legal structures have shattered the idea of streaming over-the-air broadcast transmissions to customers renting the equipment needed to do so. For the corporations and interest groups wrangling with the idea of a neutral, open Internet versus providers' bandwidth and transport needs, a resolution will not be so swift or easy.

Meantime, FilmOn's continuing slog forward inspires some grudging admiration. Alki David's brand of resistance has about as much chance of surviving as Blackbeard did against Robert Maynard's task force. But for now he's continuing to pose a nagging question to regulators and courts: Are current laws giving new technologies a fair chance to develop and compete?--Sam

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