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March 2015

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • Deceptive Practices Yield Multi-Million Dollar Fines for Telephone Interexchange Carriers
  • LPFM Ads Cost $16,000
  • Multiple TV Station Licensees Face $6,000 Fines for Failing to File Children’s TV Programming Reports

Interexchange Carriers’ “Slamming” and “Cramming” Violations Yield Over $16 Million in Fines

Earlier this month, the FCC imposed a $7.62 million fine against one interexchange carrier and proposed a $9 million fine against another for changing the carriers of consumers without their authorization, commonly known as “slamming,” and placing unauthorized charges for service on consumers’ telephone bills, a practice known as “cramming.” Both companies also fabricated audio recordings and submitted the recordings to the FCC, consumers, and state regulatory officials as “proof” that consumers had authorized the companies to switch their long distance carrier and charge them for service when in fact the consumers had never spoken to the companies or agreed to the service.

Section 258 of the Communications Act and Section 64.1120 of the FCC’s Rules make it unlawful for any telecommunications service carrier to submit or execute a change in a subscriber’s selection of telephone exchange service or telecommunications service provider except with prior authorization from the consumer and in accordance with the FCC’s verification procedures. Additionally, Section 201(b) of the Communications Act requires that “all charges, practices, classifications, and regulations for and in connection with [interstate or foreign] communications service [by wire or radio], shall be just and reasonable.” The FCC has found that any assessment of unauthorized charges on a telephone bill for a telecommunications service is an “unjust and unreasonable” practice under Section 201(b), regardless of whether the “crammed” charge is placed on consumers’ local telephone bills by a third party or by the customer’s carrier.

Further, the submission of false and misleading evidence to the FCC violates Section 1.17 of the FCC’s Rules, which states that no person shall “provide material factual information that is incorrect or omit material information . . . without a reasonable basis for believing that any such material factual statement is correct and not misleading.” The FCC has also held that a company’s fabrication of audio recordings associated with its “customers” to make it appear as if the consumers had authorized the company to be their preferred carrier, and thus charge it for service, is a deceptive and fraudulent practice that violates Section 201(b)’s “just and reasonable” mandate.

In the cases at issue, the companies failed to obtain authorization from consumers to switch their carriers and subsequently placed unauthorized charges on consumers’ bills. The FCC found that instead of obtaining the appropriate authorization or even attempting to follow the required verification procedures, the companies created false audio recordings to mislead consumers and regulatory officials into believing that they had received the appropriate authorizations. One consumer who called to investigate suspect charges on her bill was told that her husband authorized them–but her husband had been dead for seven years. Another person was told that her father–who lives on another continent–requested the change in service provider. Other consumers’ “verifications” were given in Spanish even though they did not speak Spanish on the phone and therefore would not have completed any such verification in Spanish. With respect to one of the companies, the FCC remarked that “there was no evidence in the record to show that [the company] had completed a single authentic verification recording for any of the complainants.”

The FCC’s forfeiture guidelines permit the FCC to impose a base fine of $40,000 for “slamming” violations and FCC case law has established a base fine of $40,000 for “cramming” violations as well. Finding that each unlawful request to change service providers and each unauthorized charge constituted a separate and distinct violation, the FCC calculated a base fine of $3.24 million for one company and $4 million for the other. Taking into account the repeated and egregious nature of the violations, the FCC found that significant upward adjustments were warranted–resulting in a $7.62 million fine for the first company and a proposed $9 million fine for the second.

Investigation Into Commercials Aired on LPFM Station Ends With $16,000 Civil Penalty

Late last month, the FCC entered into a consent decree with the licensee of a West Virginia low power FM radio station to terminate an investigation into whether the licensee violated the FCC’s underwriting laws by broadcasting announcements promoting the products, services, or businesses of its financial contributors.

LPFM stations, as noncommercial broadcasters, are allowed to broadcast announcements that identify and thank their sponsors, but Section 399b(b)(2) of the Communications Act and Sections 73.801 and 73.503(d) of the FCC’s Rules prohibit such stations from broadcasting advertisements. The FCC has explained that the rules are intended to protect the public’s use and enjoyment of commercial-free broadcasts in spectrum that is reserved for noncommercial broadcasters that benefit from reduced regulatory fees.

The FCC had received multiple complaints alleging that from August 2010 to October 2010, the licensee’s station broadcast advertisements in violation of the FCC’s noncommercial underwriting rules. Accordingly, the FCC sent a letter of inquiry to the licensee. In its response, the licensee admitted that the broadcasts violated the FCC’s underwriting rules. The licensee subsequently agreed to pay a civil penalty of $16,000, an amount the FCC indicated reflected the licensee’s successful showing of financial hardship. In addition, the licensee agreed to implement a three-year compliance plan, including annual reporting requirements, to ensure no future violations of the FCC’s underwriting rules by the station will occur.

Failure to “Think of the Children” Leads to $6,000 Fines

Three TV licensees are facing $6,000 fines for failing to timely file with the FCC their Form 398 Children’s Television Programming Reports. Section 73.3526 of the FCC’s Rules requires each commercial broadcast licensee to maintain a public inspection file containing specific information related to station operations. Subsection 73.3526(e)(11)(iii) requires a commercial licensee to prepare and place in its public inspection file a Children’s Television Programming Report on FCC Form 398 for each calendar quarter. The report sets forth the efforts the station made during that quarter and has planned for the next quarter to serve the educational and informational needs of children. Licensees are required to file the reports with the FCC and place them in their public files by the tenth day of the month following the quarter, and to publicize the existence and location of those reports.

This month, the FCC took enforcement action against two TV licensees in California and one TV licensee in Ohio for Form 398 filing violations. The first California licensee failed to timely file its reports for two quarters, the second California licensee failed to file its reports for five quarters, and the Ohio licensee failed to file its reports for eight quarters. Each licensee also failed to report these violations in its license renewal application, as required under Section 73.3514(a) of the Rules. Additionally, the Ohio licensee failed to timely file its license renewal application (in violation of Section 73.3539(a) of the Rules), engaged in unauthorized operation of its station after its authorization expired (in violation of Section 301 of the Communications Act), and failed to timely file its biennial ownership reports (in violation of Section 73.3615(a) of the Rules).

Despite the variation in the scope of the violations, each licensee now faces an identical $6,000 fine. The FCC originally contemplated a $16,000 fine against the Ohio licensee, as its guidelines specify a base forfeiture of $10,000 for unauthorized operation alone. However, after assessing the licensee’s gross revenue over the past three years, the FCC determined that a reduction of $10,000 was appropriate, resulting in the third $6,000 fine.

A PDF version of this article can be found at FCC Enforcement Monitor.

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As we posted earlier, the FCC voted at its February meeting to preempt state laws in Tennessee and North Carolina restricting municipalities from providing broadband service. The FCC has now released the text of its Order, and it reveals the expanse of the FCC’s concerns, filling in the details as to the types of state law provisions the FCC considers to be barriers to broadband competition and therefore subject to preemption. The Order furnishes critical guidance to other municipalities considering a challenge of laws in their own states. It also informs state legislators as to how they can modify existing state laws to avoid a future confrontation with the FCC.

In the Order, the FCC preempted a Tennessee law prohibiting municipal electric utilities from providing broadband service outside their service areas, and certain restrictions and requirements of a North Carolina law. The FCC did so under its asserted authority pursuant to Section 706 of the Telecommunications Act of 1996 to remove barriers to broadband investment and promote broadband competition. The specific restrictions the FCC found to constitute or contribute to such barriers are summarized below, and the breadth of the FCC’s preemption of these restrictions is substantial. As a result, no one should be surprised to see more preemption requests arriving at the FCC.

Tennessee Law

The Tennessee law was fairly straightforward. It prohibited a municipally-owned electric power system from offering internet or video services anywhere outside the geographic footprint in which it provides electric service. The FCC found that this territorial restriction was an explicit barrier to broadband investment and competition, and used its authority under Section 706 to preempt the restriction. This portion of the FCC’s decision offers no real surprises, and relies on a fairly basic view of what constitutes a barrier to growth in municipal broadband.

North Carolina Law

Far more interesting is the portion of the Order relating to North Carolina. The North Carolina law was more complex, containing a variety of restrictions and requirements for municipalities wishing to deploy broadband service. The FCC found that, taken in the aggregate, these portions of the law created a barrier to broadband investment and competition, leading the FCC to preempt them. While acknowledging that some of the preempted provisions in the North Carolina law might have been allowed to stand individually, the FCC concluded that the aggregate effect required their preemption. In taking this approach, the FCC left some uncertainly as to which provisions it would have preempted on even a stand-alone basis, but provided very helpful guidance as to both the nature and scope of the FCC’s concerns. As the list of provisions preempted by the FCC set forth below indicates, the FCC’s view of barriers to municipal broadband growth is quite expansive.
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Whenever we report on FCC indecency decisions, it is always an interesting test of our subscribers’ spam filters. I am betting today’s FCC enforcement action will trigger more than its share of spam alerts.

In recent years, the FCC has been less active in issuing indecency fines as it struggles to draw a line between permissible and impermissible broadcast content that the courts will support. As a result, it has been relying more heavily on consent decrees, in which the alleged violator agrees to make a payment to the government and institute a compliance program in return for the FCC agreeing to terminate its investigation. By pursuing this path, the FCC avoids having to defend its indecency rules in court, and the alleged violator can sidestep a costly and uncertain appeal process.

Sometimes, however, the FCC channels Justice Potter Stewart in his famous view of obscenity: “I know it when I see it.” Today was just such an occasion, where the FCC proposed the maximum statutory fine of $325,000 for a station that appears to have unintentionally crossed the FCC’s indecency line.

WDBJ(TV), Roanoke, Virginia, aired a story in its newscast about “a former adult film star who had joined a local volunteer rescue squad.” To illustrate the story, the photojournalist preparing the report included a video screen grab of an adult website showing the subject of the report (who was neither nude nor engaged in sexual activity).

In the analog small-screen world of a prior generation, that would have been the end of it. However, living in a big-screen, high definition world, viewers noticed something that the station had missed. According to the FCC, “[t]he website, which was partially displayed along with the video image, is bordered on the right side by boxes showing video clips from other films that do not appear to show the woman who is the subject of the news report.”

Unfortunately for the station, one of those boxes showed “a video image of a hand stroking an erect penis.” As an aside, the decision is worth reading purely to see the variety of ways the FCC finds to describe this content.

The licensee of the station noted that “the smaller boxes, including the image of the penis, were not visible on the monitors in the Station’s editing bay, and therefore, the Station’s News Director and other management personnel who had reviewed the story did not see the indecent material prior to the broadcast.” It also noted that the video appeared for less than three seconds of the three minute and twenty second story.

The FCC apparently had no trouble seeing it, however, finding that the video met the definition of “indecency” in that it was “material that, in context, depicts or describes sexual or excretory organs or activities in terms patently offensive as measured by contemporary community standards for the broadcast medium.” Because the content aired in the newscast at approximately 6pm, the FCC found that it did not fall within the 10pm-6am safe harbor in which indecent material may normally be aired, and therefore merited enforcement action. While the base fine for indecency is $7,000, the FCC found that “the patently offensive depiction of graphic and explicit sexual material obtained by the Station from an adult film website–is extreme and grave enough to warrant a significant increase from the $7,000 base forfeiture amount.” Building up steam, the FCC proceeded to throw more adjectives at it, finding that the content was “extremely graphic, lewd and offensive, and this action heightens the gravity of the violation and justifies a higher forfeiture.”

In proposing, for the first time ever, the maximum statutory fine of $325,000, the FCC added insult to injury, accusing the station of having a small monitor:

We also consider WDBJ to be sufficiently culpable to support a forfeiture. As discussed above, WDBJ broadcast material obtained from an online video distributor of adult films but failed to take adequate precautions to prevent the broadcast of indecent material when it knew, or should have known, that its editing equipment at the time of the apparent violation did not permit full screen review of material intended for broadcast. In addition, the indecent material was plainly visible to the Station employee who downloaded it; he simply didn’t notice it and transmitted it to Station editors who reviewed the story before it was broadcast.

While it’s clear the FCC didn’t have any qualms in pursuing this particular case, it does raise practical questions for broadcasters in less unusual circumstances. For example, might the FCC find a station airing crowd shots at a live sporting event guilty of willful indecency because its monitoring equipment was not large enough to detect that a few members of the crowd were being over-enthusiastic in trying to draw the attention of the kiss-cam? Stations in an analog world could usually rely on the low resolution of the medium to solve “background problems” like adult magazines in the background of a bookstore interview. Similarly, small images in a panning shot of the bookstore would be off the screen so quickly that viewers wouldn’t notice them or couldn’t be sure of what they had seen. In a hi-def world where DVRs make it possible for viewers to replay and analyze video frame by frame, stations must be conscious of every corner of every frame. It’s admittedly not an intuitive response at a time when broadcast stations are increasingly focusing on reaching the mobile audience watching tiny screens rather than on big-screen home viewers.

So what should broadcasters take away from this? Well, as station engineers head to the NAB Show in Vegas in a few weeks, they have a great story to tell their General Managers as to why they need to buy newer and bigger 16:9 studio monitors. As for me, media lawyers are often called upon to assess broadcast content for indecency, so I’m polishing my “guess we need a bigger TV” pitch for my wife. She’s a communications lawyer; she’ll understand.

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By Lauren Lynch Flick and Scott R. Flick

March 2015
The staggered deadlines for noncommercial radio and television stations to file Biennial Ownership Reports remain in effect and are tied to each station’s respective license renewal filing deadline.

Noncommercial radio stations licensed to communities in Texas and noncommercial television stations licensed to communities in Delaware, Indiana, Kentucky, Pennsylvania, and Tennessee must electronically file their Biennial Ownership Reports by April 1, 2015. Licensees must file using FCC Form 323-E and must also place the form as filed in their stations’ public inspection files. Television stations must assure that a copy of the form is posted to their online public inspection file at https://stations.fcc.gov.

In 2009, the FCC issued a Further Notice of Proposed Rulemaking seeking comments on whether the Commission should adopt a single national filing deadline for all noncommercial radio and television broadcast stations like the one that the FCC has established for all commercial radio and television stations. In January 2013, the FCC renewed that inquiry. Until a decision is reached, noncommercial radio and television stations continue to be required to file their biennial ownership reports every two years by the anniversary date of the station’s license renewal application filing deadline.

A PDF version of this article can be found at Biennial Ownership Reports are due by April 1, 2015 for Noncommercial Radio Stations in Texas and Noncommercial Television Stations in Delaware, Indiana, Kentucky, Pennsylvania, and Tennessee.

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March 2015
This Broadcast Station Advisory is directed to radio and television stations in Delaware, Indiana, Kentucky, Pennsylvania, Tennessee, and Texas, and highlights the upcoming deadlines for compliance with the FCC’s EEO Rule.

April 1, 2015 is the deadline for broadcast stations licensed to communities in Delaware, Indiana, Kentucky, Pennsylvania, Tennessee, and Texas to place their Annual EEO Public File Report in their public inspection file and post the report on their station website.

Under the FCC’s EEO Rule, all radio and television station employment units (“SEUs”), regardless of staff size, must afford equal opportunity to all qualified persons and practice nondiscrimination in employment.

In addition, those SEUs with five or more full-time employees (“Nonexempt SEUs”) must also comply with the FCC’s three-prong outreach requirements. Specifically, Nonexempt SEUs must (i) broadly and inclusively disseminate information about every full-time job opening, except in exigent circumstances, (ii) send notifications of full-time job vacancies to referral organizations that have requested such notification, and (iii) earn a certain minimum number of EEO credits, based on participation in various non-vacancy-specific outreach initiatives (“Menu Options”) suggested by the FCC, during each of the two-year segments (four segments total) that comprise a station’s eight-year license term. These Menu Option initiatives include, for example, sponsoring job fairs, participating in job fairs, and having an internship program.
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March 2015
The next Quarterly Issues/Programs List (“Quarterly List”) must be placed in stations’ public inspection files by April 10, 2015, reflecting information for the months of January, February and March 2015.

Content of the Quarterly List

The FCC requires each broadcast station to air a reasonable amount of programming responsive to significant community needs, issues, and problems as determined by the station. The FCC gives each station the discretion to determine which issues facing the community served by the station are the most significant and how best to respond to them in the station’s overall programming.

To demonstrate a station’s compliance with this public interest obligation, the FCC requires the station to maintain and place in the public inspection file a Quarterly List reflecting the “station’s most significant programming treatment of community issues during the preceding three month period.” By its use of the term “most significant,” the FCC has noted that stations are not required to list all responsive programming, but only that programming which provided the most significant treatment of the issues identified.
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March 2015
The next Children’s Television Programming Report must be filed with the FCC and placed in stations’ public inspection files by April 10, 2015, reflecting programming aired during the months of January, February and March 2015.

Statutory and Regulatory Requirements

As a result of the Children’s Television Act of 1990 (“Act”) and the FCC rules adopted under the Act, full power and Class A television stations are required, among other things, to: (1) limit the amount of commercial matter aired during programs originally produced and broadcast for an audience of children 12 years of age and under, and (2) air programming responsive to the educational and informational needs of children 16 years of age and under.

These two obligations, in turn, require broadcasters to comply with two paperwork requirements. Specifically, stations must: (1) place in their online public inspection file one of four prescribed types of documentation demonstrating compliance with the commercial limits in children’s television, and (2) submit FCC Form 398, which requests information regarding the educational and informational programming the station has aired for children 16 years of age and under. Form 398 must be filed electronically with the FCC. The FCC automatically places the electronically filed Form 398 filings into the respective station’s online public inspection file. However, each station should confirm that has occurred to ensure that its online public inspection file is complete. The base fine for noncompliance with the requirements of the FCC’s Children’s Television Programming Rule is $10,000.
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The FCC today released its much anticipated Open Internet Order. While it will take some time to digest the 313-page decision (though the new rules only total eight pages), here is a brief summary of the highlights:

  • No Blocking. The Order prohibits providers of broadband Internet access services (“broadband services”) from blocking lawful content, applications, services, or non-harmful devices, subject to reasonable network management.
  • No Throttling. The Order prohibits providers of broadband services from impairing or degrading lawful Internet traffic on the basis of content, application or service, or use of a non-harmful device, subject to reasonable network management. This includes no degradation of traffic based on source, destination, or content and prohibits singling out content that competes with the broadband provider’s business model.
  • No Paid Prioritization. The Order prohibits paid prioritization, which the FCC views as the management of a broadband provider’s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity.
  • No Unreasonable Interference. The Order also prohibits broadband providers from unreasonably interfering with or unreasonably disadvantaging (i) end users’ ability to select, access, and use broadband Internet access service or lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers’ ability to make lawful content, applications, services, or devices available to end users. The FCC indicates that reasonable network management will not violate this rule.
  • Reasonable Network Management. The Order defines reasonable network management as follows:

    A network management practice is a practice that has a primarily technical network management justification, but does not include other business practices. A network management practice is reasonable if it is primarily used for and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.

  • Enhanced Transparency. The rule adopted in 2010, and upheld on appeal, remains in effect. Specifically, broadband providers must accurately disclose information regarding network management practices, as well as performance and commercial terms sufficient for consumers to make informed choices regarding use of the service. The rule has been enhanced by: adopting a requirement that broadband providers always disclose promotional rates, all fees and/or surcharges, and all data caps or data allowances; adding packet loss as a measure of network performance that must be disclosed; and requiring specific notification to consumers that a “network practice” is likely to significantly affect their use of the service. The FCC granted a temporary exemption from these enhancements for small providers (defined for the purposes of this temporary exception as providers with 100,000 or fewer subscribers), and asked the Consumer & Governmental Affairs Bureau to adopt an Order by December 15, 2015 deciding whether to make the exception permanent and, if so, the appropriate definition of “small”.
  • Scope of Rules. The FCC clarified that the rules apply to both fixed and mobile broadband Internet access service. The focus is on the consumer-facing service which that FCC defines as:

    A mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service. This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this Part.

    The definition does not include enterprise services, virtual private network services, hosting, or data storage services. The definition also does include the provision of service to edge providers.

  • Interconnection. Because broadband service is classified as telecommunications, the FCC indicates that commercial arrangements for the exchange of traffic with a broadband provider are within the scope of Title II, and the FCC will be available to hear disputes raised on a case-by-case basis. The Order does not apply the Open Internet rules to interconnection.
  • Enforcement. The FCC may enforce the Open Internet rules through investigation and the processing of complaints (both formal and informal). In addition, the FCC may provide guidance through the use of enforcement advisories and advisory opinions, and it will appoint an ombudsperson on the subject. The Order delegates to the Enforcement Bureau the authority to request a written opinion from an outside technical organization or otherwise to obtain objective advice from industry standard-setting bodies or similar organizations.
  • “Light touch” Title II. While reclassifying broadband services under Title II of the Communications Act, the FCC forbears from applying more than 700 codified rules, including no unbundling of last-mile facilities, no tariffing, no rate regulation, and no cost accounting rules. The FCC also states that reclassification will not result in the imposition of any new federal taxes or fees; the ability of states to impose fees on broadband is already limited by the congressional Internet tax moratorium. The FCC, however, does not forbear from Sections 201 (prohibiting unreasonable practices), 202 (prohibiting unreasonable discrimination), 208 (for filing complaints), Section 222 (protecting consumer privacy), Sections 225/255/251(a)(2) (ensuring access to services by people with disabilities), Section 224 (ensuring access to poles, conduits and attachments), and Section 254 (promoting the deployment and availability of communications networks (including broadband) to all Americans; except that broadband providers are not immediately required to make universal service contributions for broadband services.

The new rules will not go into effect until they have been published in the Federal Register. That publication also starts the clock for parties that want to file petitions for reconsideration or appeals of this decision. With more than 4 million comments filed in the proceeding, you would have to think someone will not be happy with this Order.

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As Pillsbury’s 2015 Broadcasters’ Calendar indicates, new rules relating to closed captioning go into effect on March 16, 2015. The FCC adopted these rules in its February 24, 2014 Closed Captioning Quality Order . They generally concern a station’s “quality control” over its program captioning.

As a quick refresher, the Order adopted closed caption quality standards and technical compliance rules to ensure video programming is fully accessible to individuals who are deaf or hard of hearing. In April 2014, the FCC announced a series of effective dates for the requirements in the Order, and in December 2014, it extended a January 15, 2015 deadline for compliance with certain rules to March 16, 2015. The requirements that will go into effect on March 16, 2015 include:
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For a company that could always punch well above its weight in drawing press coverage, Aereo’s sale of its assets in bankruptcy last week drew surprisingly little coverage.

Less than a month before last year’s Supreme Court decision finding that Aereo’s retransmission of broadcast TV signals over the Internet constituted copyright infringement, a Forbes article discussing Aereo’s prospects in court noted the company had “a putative valuation of $800 million or so (that could vault up if Aereo wins).” The article went on to note that “It’s a tidy business, too, bringing in an estimated $40 million while reaping 77% gross margins ….”

Aereo made its case before a variety of judges and in the court of public opinion that it was an innovative tech company, with a growing patent portfolio and cutting edge technology. When broadcasters argued that Aereo was merely retransmitting broadcast programming to subscribers for a fee without paying copyright holders, Aereo doubled down, arguing before the Supreme Court that it was at the vanguard of cloud computing, and that a decision adverse to Aereo would devastate the world of cloud computing. In a blog post published the day Aereo filed its response brief at the Court, Aereo CEO Chet Kanojia wrote:

If the broadcasters succeed, the consequences to American consumers and the cloud industry are chilling.

The long-standing landmark Second Circuit decision in Cablevision has served as a crucial underpinning to the cloud computing and cloud storage industry. The broadcasters have made clear they are using Aereo as a proxy to attack Cablevision itself. A decision against Aereo would upend and cripple the entire cloud industry.

So Aereo’s narrative heading into the Supreme Court was clear: Aereo is a cutting edge technology company that is not in the content business, and a prototypical representative of the cloud computing industry in that industry’s first encounter with the Supreme Court.

As CommLawCenter readers know, the Supreme Court rejected that narrative, finding that a principal feature of Aereo’s business model was copyright infringement, and the Court saw little difficultly in separating Aereo’s activities from that of members of the public storing their own content in the cloud.

The results of Aereo’s asset sale reveal much about the accuracy of the Supreme Court’s conclusions, and about the true nature of Aereo itself. The value of Aereo’s cutting edge technology, patent portfolio, trademark rights, and equipment when sold at auction fell a bit short of last year’s $800 million valuation. How much was Aereo worth without broadcast content? As it turns out, a little over $1.5 million. But even that number apparently overstates the value of Aereo’s technology as represented by its patent portfolio.

Tivo bought the Aereo trademark, domain names, and customer lists for $1 million, apparently as part of its return to selling broadcast DVRs. Another buyer paid approximately $300,000 for 8,200 slightly-used hard drives.

And the value of the Aereo patent portfolio? $225,000.

To add insult to injury, the patent portfolio was not purchased by a technology company looking to utilize the patents for any Internet video venture. The buyer was RPX, a “patent risk solutions” company. The World Intellectual Property Review quoted an RPX spokesman regarding the purchase, who stated that “RPX is constantly evaluating ways to clear risk on behalf of its more than 200 members. The Aereo bankruptcy afforded RPX a unique opportunity to quickly and decisively remove risk in the media and technology sectors, thus providing another example of the clearinghouse approach at work.”

In other words, the Aereo patent portfolio was purchased for its nuisance value, which, having lost the ability to resell broadcast programming, turned out to be all the value Aereo had.