Will Aereo Expand the Potential of Spectrum? Atlanta Will Find Out

Will Aereo Expand the Potential of Spectrum? Atlanta Will Find Out


Last Tuesday, Aereo founder and chief executive officer  Chaitanya “Chet” Kanojia told Bloomberg West host Emily Chang that Aereo is the beginning of broadcast television being available everywhere and that Aereo’s technology will result in an expanded audience for broadcast television and audience  expansion is what spectrum is all about.

And on June 17th, Aereo gets another opportunity to put Mr. Kanojia’s pronouncement to the test as the service expands to the city of Atlanta.  Atlanta will be the third city in which the local television over the Internet service will be provided.  The service began in New York City and expanded to Boston last Wednesday.

Just what is Aereo?  Aereo captures broadcast signals with the use of a large number of very small antennas.  Consumers access these antennas through the Internet and watch local television programming via desktop, laptop, iPad, or smartphone.  Consumers can also record local programming and replay it at their convenience.

And how does the consumer benefit?  Consumers may benefit, by our analysis, in one of three ways.   First, the cost of accessing television services may fall, depending on the tastes of the consumer.  Assuming the same monthly rate for “premium” Aereo services in New York are also charged in Atlanta, a consumer can, with a broadband connection from her cable provider, watch local television, a few choice cable channels, such as Bloomberg Television, and movies via Netflix for about $70 or $80 dollars a month.

Compare this to a Comcast digital starter package that includes all local broadcast channels, premium channels such as FX, AMC, and TNT that show movies and high-speed Internet services, and you can pay between $60 and $75 a month for the first six or 12 months depending on the package.

While a cable package offers more channels (Comcast offers more than 80 in its basic digital services in Atlanta), Aereo’s advantage is portability.  A consumer can take the local news with them as they head to the grocery store to pick up ice cream.  Spectrum expanded everywhere.

Second, Aereo may provide the type of disruptive technology that forces broadcasters to change how they transmit their services.  For example, last Monday, The New York Times reported that ABC will offer an app that allows iPad and IPhone users to watch live local programming in New York City and Philadelphia, a probable response to Aereo’s expanding services.  ABC’s live streaming will only be available to consumers who subscribe to cable or satellite television services.

Finally, Aereo’s service may put pressure on broadcasters to get offer up their over-the-air licenses for auctioning by the Federal Communications Commission.  The FCC is putting together rules that will govern the voluntary auctioning of a television broadcaster’s access to spectrum, the necessary resource needed by wireless phone carriers to provide cellular phone services.  Should Aereo continue to expand and show success in garnering subscribers, and should broadcasters like CBS, Fox, or NBC follow ABC’s lead and broadcast near exclusively on the Internet, spectrum held by local television stations will see value erode.

The ultimate impact on urban consumers is difficult to gauge, but given the minority community’s disproportionate ownership and use of smartphones and other wireless devices, going mobile with local television broadcasts may be the next step by Black and Hispanic American consumers.  Let’s face it.  Who would pass up watching from anywhere in Atlanta meteorologist Markina Brown’s weather forecast on Channel 9?  I wouldn’t.