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It was once a tradition that the FCC would release a pro-broadcaster rulemaking decision on the eve of the NAB Show to ensure a warm reception when the commissioners and staff arrived to speak at the Show. I say it “once” was a tradition because pro-broadcaster rulemakings are none too common these days, a point alluded to by Chairman Wheeler at the Show when he said “Now, I’ve heard and read how some believe the Federal Communications Commission has been ignoring broadcasting in favor of shiny new baubles such as the Internet.”

Still, it was in the spirit of that tradition that the Chairman posted a blog titled “Let’s Move on Updating the AM Radio Rules” two days before his NAB speech. In it, he stated his intent to call for a vote in the AM Revitalization proceeding, which then-acting-Chairman Clyburn launched at a different NAB convention in September of 2013.

The post was unavoidably sparse on details given its short length, but one detail leapt out at radio broadcasters. While signaling movement on smaller issues (“the proposed Order would give stations more flexibility in choosing site locations, complying with local zoning requirements, obtaining power increases, and incorporating energy-efficient technologies”), the post rejected what the industry sees as the real answer to revitalizing AM radio—opening a filing window for applicants seeking to build translators to rebroadcast AM radio stations on the FM band (a “translator” in the truest sense of the word).

Many see this as the most practical and consequential option since it would allow AM daytimer stations to serve their audiences around the clock, while overcoming many of AM radio’s worst obstacles—interference from appliances and electronics, as well as other AM stations, and AM’s limited sound quality. Most importantly, unlike a number of other potential solutions, FM translators avoid the need for everyone to buy a new radio in order to make the solution viable.

In his blog post, the Chairman gave two reasons for this surprising development. First, he questioned “whether there is an insufficient number of FM translator licenses available for AM licensees.” Second, he raised qualms about opening a window for only AM licensees, stating that “the government shouldn’t favor one class of licensees with an exclusive spectrum opportunity unavailable to others just because the company owns a license in the AM band.”

The first reason is, quite simply, factually unsupported by the proceeding record. In comments and reply comments filed just a year ago, the call for an FM translator filing window was deafening. It’s hard to believe the need for such translators has dramatically plummeted in just a year, or that the call for a window would have been so loud were there truckloads of FM translators already out there (in the right location) just waiting to be purchased. For anyone thinking that AM stations just want a “free” translator rather than buying one, applying for and building a translator is anything but free. In addition, the likelihood of mutually exclusive translator applications raises the specter of licenses being awarded by auction, ensuring that acquiring one from the FCC would hardly be “free”.

Of course, the oversupply argument is logically flawed as well. If a window is unnecessary, no one will show up with an application, and the only energy expended will be that of drafting a public notice announcing the window. In reality, however, few think that would be the result, as the FCC’s last general filing window for FM translators was back in 2003, long before AM stations were even permitted to rebroadcast on an FM translator. In other words, far from receiving preferential treatment, AM licensees have never even had an opportunity to apply for an FM translator to retransmit their stations.

All of which makes the second reason given in the Chairman’s post—avoiding an AM licensee-only filing window—even more curious. Under the current FM translator rule, Section 74.1232, applying for an FM translator license is not limited to broadcast licensees. The rule provides that “a license for an FM broadcast translator station may be issued to any qualified individual, organized group of individuals, broadcast station licensee, or local civil governmental body….”  A common example of this is a community with limited radio service that applies for and builds an FM translator to rebroadcast a distant station that is otherwise difficult to receive locally, providing that community a reliable information lifeline. Indeed, the FCC is finding out on the television side that many of the TV translators that might be repacked out of existence are owned by local communities rather than licensees.

So the FCC would not even need to revise its eligibility rules in order to open an “FM for AM” translator window for all comers. Under the existing rule, anyone is free to apply as long as they have “a valid rebroadcast consent agreement with such a permittee or licensee to rebroadcast that station as the translator’s primary station.” In terms of being limited to serving as a translator for an AM station, that is the nature of an FCC filing window, as the FCC always specifies the type of application it will accept in any filing window announcement, and has never opened a “file for whatever service you want” window.

Thus, the record amply supports the need for an “FM for AM” translator window, and the current rules preclude any concern that a window would offer preferential treatment, as anyone who wants one can apply for one.

So what is the FCC waiting for?

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It sounds like the setup for a joke: a broadcaster, a broker, a banker, a broadcast lawyer, and a backer all walk into a bar. There is no punch line, however, as that will happen innumerable times over the next week, and that just means it’s time for this year’s NAB Show!

What started as a simple gathering of broadcasters and broadcast equipment vendors has grown to mammoth proportions, now encompassing not just broadcasting, but every aspect of content and content delivery, as well as mountains of technology for creating and distributing that content. Billed as “the world’s largest media and entertainment event” with around 100,000 attendees, it is also one of the largest conventions in Las Vegas each year, nearly doubling the attendance (I kid you not) of February’s “World of Concrete” convention.

As it has grown, the NAB Show has become a magnet for those of us that work in and around the industry, as you can accomplish in an afternoon what would otherwise take dozens of plane trips. As a result, lots of transactions are launched or sealed in the confines of the hotels surrounding the Convention Center. While that may not be different from any other week in Vegas, these deals will often involve broadcast stations and program content.

The Great Recession battered all conventions, including the NAB Show, but pre-Show levels of activity seem to indicate that this year’s Show will be a return to form, bringing back people that may have skipped the past few years. Perhaps more important is an accompanying shift in attitude. It seems attendees are back to looking for ways to expand their businesses rather than just survive until economic conditions improve.

I will be there along with the rest of the Pillsbury contingent going this year—Lew Paper, Miles Mason, Lauren Lynch Flick, and our newest addition, David Burns. There will be much to see, and I know the other lawyers on Pillsbury’s Unmanned Aircraft Systems team are jealous, as the number of drones on display in the Convention Center will likely exceed that of both the CIA and the Air Force (minus the Hellfire missiles).

So we look forward to seeing you there, and if it isn’t everything you are hoping for, don’t worry; there’s another World of Concrete expo coming in 2016!

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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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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.