When copyright rules lead to wasted innovation

Aereo is undoubtedly innovative. But it's a waste of effort nonetheless.

An interesting court ruling came out of America yesterday, as the Second Circuit court of appeals ruled that Aereo, an internet TV company, does not violate copyright by streaming TV programmes to users without the networks' consent. PaidContent's Jeff John Roberts reports:

Aereo captures over-the-air TV signals by means of tiny antennas and streams them to subscribers who watch and record shows on their mobile devices or computer browsers. Aereo’s antennas are not just a marvel of technology (see photos here) — they’re also the key to a legal strategy that helps the company avoid copyright infringement.

The trick that Aereo is using relies on the fact that, under American copyright law, it is legal to "shift" copyrighted material in a number of ways. So you can "time shift" (record it to watch later), "format shift" (rip a CD onto your computer), and "location shift" (use a service like Slingbox to watch your cable TV on the move), and, provided you do it only for your own consumption, no copyright infringement has occurred. Aereo, which has great banks of 5p-coin-sized antennas in a building in Brooklyn, is legally just providing the third of those services; except instead of plugging something in to your cable box at home, it basically moves your entire TV into its building, and broadcasts the whole thing back to you.

There's certainly some impressive technology being used. Aereo gets the antennas so small by only listening in on a tiny section of the TV spectrum with each one, and changing which part that is depending on what the viewer wants to watch. And the company is also using "major advances in transcoding technology and cloud storage" to make it affordable to stream the live TV, and let people pause, rewind, and record what they're watching.

But while it's fun to cheer Aereo's technological advances – and certainly a good thing for the US media economy to actually experience some competition for the first time in a while – they aren't, in themselves, a good thing.

All of this innovation – the tiny antennas, better transcoding technology, and office placed with line-of-sight to the Empire State Building for perfect reception – isn't being focused towards making life better for customers, or even just making money for Aereo. Instead, it's just being used to get around the law.

The government could render all that effort useless overnight by just allowing Aereo to stream signal from one aerial to all its users at once. That would let Aereo offer lower prices, or enable competitors who don't have access to the technology or location to set up too.

It's as though we lived in a world where the Government required all bikes to only have one wheel, and were praising a company which had made the easiest-to-ride unicycle ever. It would be a mean feat of technological innovation; but it would also be a largely pointless one.

An Aereo antenna. Photograph: Aereo

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR