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Locast Death Watch

9743 Views 221 Replies 29 Participants Last post by  NYDutch
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If there are 3 million donors, that's $15 million a month and that would seem to significantly exceed "non-profit" conditions.
Many failing commercial companies are non-profit, but the difference between "for profit" and "not for profit" is what matters. Locast claims they are "not for profit".
I understand why Broadcasters were against this type of product back 5 to 10 years but today, it could help them.
Broadcasters want to get paid. Most want $ per subscriber when someone rebroadcasts their signal. Even if refusing to have their signal carried loses viewers, they would rather be paid. The networks are pushing their affiliates to get paid more and give the networks a bigger cut. Paths that lead to not getting paid (other than their required OTA transmission) are not what most stations want.
The court found that Locast's policy of expanding into new markets runs contrary to the aim of a non-profit, where cash should be used to cover running costs only. Judge Louis Stanton said that the cash raised from Locast's $5-per-month (don't call it a) subscription was being used to bankroll further expansion and earned "far more money from user charges than was necessary."
I disagree with the concept that a non-profit cannot expand. As long as they were not repaying investors the financial argument seems weak.

I am surprised that it has taken this long for a court to rule against Locast. Especially with donations and other support from major players such as DISH and DIRECTV.
Actually, Locast would be completely within the law if they charged reasonable fee to support the operation and maintenance of the service rather than depending on donations. In my opinion, the donations always were voluntary. Want to use the service uninterrupted? Pay up. Don't want to pay up? Don't use the service or put up with the interruptions. Your choice...
I wonder if PBS would send me a tote bag if I didn't donate? Charging for access would be an issue in my "non-legal" opinion. But one could probably come up with a long list of not for profit companies where a donation is required prior to receiving whatever service they provide (or at least presented in a way similar to Locast where "if you donate, you get service").

In my non-legal opinion, the judge was wrong. His contention that the law doesn't specifically allow expansion of the service fails, I believe, since the law doesn't prohibit expansion either. Since the case is based on a US law, the 10th amendment to the US Constitution comes to mind: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." (emphasis added).
I agree with the decision but I don't agree with the logic presented (although all I have seen are media reports, not the actual judge's opinion). Copyright laws and using copyright to allow stations to withhold carriage without paid permission is a situation we are in due to a supreme court opinion that has not been overturned. The intent of the loophole that Locast claimed was not for a company to set up nationwide service (one market at a time) to millions of consumers. The intent was to allow true not for profit entities to provide service on a much smaller scale.

I'll let constitutional scholars fight the constitutional claims. SCOTUS says copyright applies to rebroadcasting TV signals. Congress wrote federal laws that control the rebroadcast of TV signals and allow rebroadcast on a limited basis. If prohibiting Locast from rebroadcasting without permission is unconstitutional then the existing laws preventing every MVPD from rebroadcasting without permission are also unconstitutional.

If this decision gets overturned it will probably be on some technicality (such as the "cannot expand" claim). Not for profits constantly use donations for expansion - adding new sites and services. The only way I see "expansion" as being a limit is due to being outside the intent of the law they are leveraging. The law was not intended to allow for a nationwide system of rebroadcasting local stations. That is what Locast was building, one market at a time.
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Seriously, I think if these OTA stations want to play hard ball like this, they need to meet the mission they agreed to when getting a license from the FCC for public airwaves; that is, to work to get their FREE OTA signal reachable to many more people without needing drastic measures (not always possible in apartments or condos, or in terrain).
Can you give a reference to exactly where in their license stations are required to do as you suggest? Stations are required to use their licenses (cannot be off air for more than a year) and are expected to use all of their license (full transmit power as licensed within 10% below or 5% above licensed power, IIRC) but OTA stations are not licensed or required to provide service to X number of people or X% of a defined area. They are licensed to transmit at a certain height and power. As long as they do that without interfering with other licensed services reception is the problem of the viewer. (There are other requirements, such as educational programming, political programming, etc. But I'll confine the statement to how a station is required to use their transmitter.)

Wishing it was different is common. Even I want it to be different. But wishing doesn't change the reality of the situation.

What I don't understand is how Locast adapted by saying the donation was now voluntary, which would seem to comply with the judge's orders assuming they did not use the donations to expand into new markets, and then suddenly stopped completely. Are they done for good now?
A cease and desist order (restraining order) needs to be followed. They can go back to the judge and say "hey, we have removed the nag screen and our signal is now freely available separate from donation". But they CANNOT continue to operate without the judge changing the order.

Think about it as being pulled over by a police officer for speeding. You're doing 55 in a 25, the police car pulls up behind you, the lights turn on. That tells you to STOP. You don't get to slow down to the speed limit and say "hey, I am now compliant". You STOP and stay stopped until the officer allows you to move again (with their choice of a warning or ticket or arrest - especially for 55 in a 25!). The judge says STOP ... you stop.
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17 U.S. Code Section 111 (a) (5)
[The secondary transmission of a performance or display of a work embodied in a primary transmission is not an infringement of copyright if-]
(5) the secondary transmission is not made by a cable system but is made by a governmental body, or other nonprofit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.

That is the peg that Locast hung its hat on. A specific law referring to the specific act that they specifically performed. The charge to recipients is specifically limited. They would need to rely on separate donations for expansion or other costs.

"In 2020, Locast's operating costs were $2.436 million while revenue for the year totaled $4.372 million."
Well over the "actual and reasonable costs of maintaining and operating the secondary transmission service".
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I can't pick up ATSC on my car radio. I don't blame the stations (or the government, etc.).
So what is Locast's motive in providing this service? Are they really doing this out of kindness in their hearts for the poor souls who cannot obtain local broadcasts by any other means? I didn't get that impression during the incessant interruptions for donations during the broadcast.
I believe they were trying to help people get the signals. They probably could have scaled back the nagware. But I don't believe they were trying to get rich.
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If the Red Cross takes in more money than they need for actual expenses this year should they be shut down?
The Red Cross is not restricted by 17 U.S. Code Section 111 (a) (5) .... unless (of course) they decide to rebroadcast television stations.

The "narrow ruling" is focused on the law that Locast based their business on. 17 U.S. Code Section 111 (a) (5) does not prevent not for profits in general from collecting more money than they spend or stop not for profits from expanding. 17 U.S. Code Section 111 (a) (5) prevents not for profits from retransmitting television stations if they charge more than the expense of retransmission.

Locast received some donations from non-viewers. Those donations could be used for new markets. If Locast would have separated their fee for turning off the nag interruptions from donations to expand service they probably would still be retransmitting. But they chose to charge a fee that was more than their costs.
I have been thinking about it more. It seems to me that a nonprofit local co-op structure should pass legal muster. You could charge annual "dues" for operations (for example, $60 a year like Locast was charging) and members would receive a refund of excess revenues at the end of the year, or perhaps a credit toward the next year's dues. It would also be restricted to serving the local market (no expansion into other markets), so you would have one such organization per market. I would still expect the broadcasters to try to sue them out of business, but it seems to me that such a structure would pretty clearly pass muster in terms of meeting the intent of Congress in creating the law authorizing nonprofit retransmission.
There were fixed costs and variable costs to providing Locast service. Operating as one national not for profit allowed Locast to smooth out the costs over all users. In a market like NY the reception and backhaul costs would be easily covered and only bandwidth and server capacity would need to grow per simultaneous user. In a more rural market the reception and backhaul costs costs would be spread out over less users. (Backhaul is getting the signal from the receiver to the server.) One not for profit per market would not allow Locast to spread those costs across all users - they could end up with a collection of services where one market would be $1 or less per month and a smaller market would be closer to the $5 they requested. Multiple local Locasts would help burn through their overcharges in administrative costs since each market would have separate administrators.

Perhaps using excess donations to cover the cost of expansion will be overturned on appeal. The wording of 17 U.S. Code Section 111 (a) (5) is narrow, but seen as one service another judge could reverse the ruling.
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Why did none of the non-Big 4 stations join the lawsuit?
All four major networks were involved in the suit against Locast. That would include the stations that the networks own.
And that still leaves a lot of stations that could lose out if there was any financial settlement when this is all settled.
The goal is to PREVENT unpaid carriage of the signals. With Locast going out of business there probably won't be much of a financial settlement to share. Just a big warning sign to others that might have the same brilliant idea as Aereo and Locast to rebroadcast OTA TV stations (and their networks) without permission and without paying royalties.

Are they not allowed to maintain a fund for unexpected loss expenses? And a legal fund? Many non-profits do. Neither one of us has seen their financials to know how much money was allocated to what.
Per 17 U.S. Code Section 111 (a) (5) the money they collected for access to the service CANNOT be used for anything other than providing the retransmission. They are free to collect money from other sources (voluntary donations, corporate support, etc) for their legal defense fund. They are free to collect money from other sources for their expansion fund. They can maintain as big of a fund as they want for any purpose that doesn't violate other not for profit laws. The issue is that they used money collected in exchange for uninterrupted access for purposes other than providing retransmission.

The court saw their books, so I will defer to the court's judgement as to how their fees and donations were allocated.
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They've canceled donations for now. I expect the lawyers are going through their options at this point, to work out the strongest path forward.
In my opinion, they should charge a minimal access fee that would be close to or not cover the cost of retransmission ($1 per month, $10 per year ?) and solicit separate donations not tied to access to cover the expenses not covered by the minimal fee (or not allowed to be covered by the fee). The law allows a user fee. It just restricts how that user fee is spent.

There are other legal issues pending in the case. 17 U.S. Code Section 111 (a) (5) was the key piece of law that Locast was relying on. Fixing their violation of that law doesn't fix any other violations that may have occurred. I do not expect Locast to be able to return to service until ALL of the legal challenges have been settled. (Correcting their violation of 17 U.S. Code Section 111 (a) (5) would not be enough.)

Perhaps the next company to attempt such a service will do better.
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The paperwork filed with the court stated their revenue and expenses.
"Must carry", etc, are FCC rules for cable and satellite that have no bearing on this case. Any station management not asking the court to be included in the suit would be excluded from any settlement. This is not a class action suit.
As clearly stated, cease and desist is the goal. Stop people from rebroadcasting stations without permission or compensation. The settlement they seek is for Locast to be treated like a MVPD that needs to ask and pay for permission (which would help non-big 4 stations to the same extent that it helps big 4 stations).
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Lawyers can be expensive. These battles are typically fought by the big four networks or the big four networks and their affiliates. The "if" on the courts awarding a monetary fine is big. The "if" on Locast being able to pay any monetary damages is even bigger. $0 divided by hundreds of carried stations that were illegally carried is not a big number.
Cable is required to include locals in their lowest level (and all levels above). Satellite does not have that restriction.
The marketing could be better but the fees vary by market and Xfinity wants to have "national" prices like the other national providers.
As I recall, Dish broke out the locals as a separate line item on our bills so we could see what we were paying for them before they started offering the opt-out option.
DISH's breakout is a national rate. It costs the same for locals in NY and LA where there are multiple channels to uplink as it does in smaller markets where there are only five or six channels to carry, That does not show the cost of the locals on a per market basis. We can see what we are paying DISH for the locals but we cannot see what DISH is paying the stations for carriage rights.

The breakout has provided DISH the same benefit Xfinity and other providers have ... the ability to advertise a lower price. In DISH's case it is legal for them to make locals optional. Although they are required to offer carriage to all local stations in all markets, they are not required to force their customers to subscribe to local channels. They are required to sell the locals as a group (can't sell Sinclair separate from Gray separate from Tenga). Due to "lifeline service" laws passed decades ago, cable companies ARE required to force their customers to subscribe to local channels.

Neither cable or satellite are required to accept any carriage deal offered by a station that chooses "consent to carry". The station could request a penny per subscriber per year and could be refused carriage if the cable/satellite company does not want to pay. Based on industry reports it is more likely that most network stations are charging over $1 per month and looking to raise that fee as high as the market will bear. When a carriage agreement cannot be reached or expires carriage ends.

I *HOPE* that stations are not getting paid for DISH customers who opt out but I can see the major conglomerates asking for such a fee. Most stations do not care whether or not their signal reaches the subscribers - they just want to be paid for those subscribers so asking for a fee based on the total number of DISH subscribers in a market instead of the number of local channel subscribers in a market would not surprise me.
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OTA is the only way of receiving a station without worrying about a dispute. Nearly every other reception method requires agreement by the station to be carried, which opens the door to the station refusing to be carried if their demands are not met. Even Locast could be considered a carriage dispute. Locast believe that they met the legal standard for being able to retransmit the station's signals, the stations disagreed.

A complete reform of carriage laws is unlikely (in my opinion). Even more so after the changes last year that set non-expiring carriage rules for distants. The expiration of distant carriage laws became a trigger where Congress looked at other changes while doing the required "change the expiration date" needed to continue distant station. With distants no longer expiring there is no automatic trigger. Something else will be needed to get Congress interested in changing the laws.
The bigger change is that, after 42 months, the bill if enacted would repeal retransmission consent and allow free-market contract negotiations to happen under traditional copyright law. It would also strip government at all levels from being able to regulate cable rates. How that would transform the TV industry, and whether or not it would improve the situation for consumers, I don't know.
No, thank you. free-market rates would leave the door open for station groups to set extortionist level pricing ($5 per station per month anyone?). While there would be no collusion between stations (HA!) I'd expect the "free-market" rate to continue to grow as each station group leverages their exclusive content for just a little bit more.

What I would like to see is a statutory rate combined with "must carry" of all stations. If paying copyright is the issue then let it be paid the same way satellite has been paying for distants and superstations for decades. Set a rate, pay into a fund and let the true copyright holders claim from the fund whether their content is on one of the top rated stations currently charging high rates for carriage or a station that is currently "must carry". The current law discriminates against such small stations that still carry copyrighted content - but their copyright holders do not get any additional compensation for the retransmission via cable/satellite if they are "must carry".

Must Carry and a statutory rate would be better than consumers than any outcome that lets stations choose how much to charge (whether one claims it is market based or not).

Yes, IMO, the bigger question, which the recent ruling did not address, is whether a nonprofit organization can redistribute, without consent, OTA TV signals via a different transmission medium, such as the internet, instead of via OTA, as repeater towers do.
Locast failed at the first hurdle ... they court didn't need to look any further.
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