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FCC Commissioner Rosenworcel penned an article this week on the doublespeak coming out of the current administration with respect to trade and telecom policy. On one hand, she argues, the administration has proclaimed 5G to be an essential part of our future commercial and defense interests. But, she tells us, the administration has, on the other hand, imposed tariffs on Chinese products that are important for the development of 5G infrastructure, thereby raising the costs of roll-out. This is a sound critique: regardless where one stands on the reasonableness of tariffs, they unquestionably raise the prices of goods on which they are placed, and raising the price of inputs to the 5G ecosystem can only slow down the pace at which 5G technology is deployed.

Unfortunately, Commissioner Rosenworcel’s fervor for advocating the need to reduce the costs of 5G deployment seems animated by the courageous act of a Democratic commissioner decrying the policies of a Republican President and is limited to a context where her voice lacks any power to actually affect policy. Even as she decries trade barriers that would incrementally increase the costs of imported communications hardware, she staunchly opposes FCC proposals that would dramatically reduce the cost of deploying next generation networks.

Given the opportunity to reduce the costs of 5G deployment by a factor far more significant than that by which tariffs will increase them, her preferred role as Democratic commissioner is that of resistance fighter. She acknowledges that “we will need 800,000 of these small cells to stay competitive in 5G” — a number significantly above the “the roughly 280,000 traditional cell towers needed to blanket the nation with 4G”.  Yet, when she has had the opportunity to join the Commission on speeding deployment, she has instead dissented. Party over policy.

In this year’s “Historical Preservation” Order, for example, the Commission voted to expedite deployment on non-Tribal lands, and to exempt small cell deployments from certain onerous review processes under both the National Historic Preservation Act and the National Environmental Policy Act of 1969. Commissioner Rosenworcel dissented from the Order, claiming that that the FCC has “long-standing duties to consult with Tribes before implementing any regulation or policy that will significantly or uniquely affect Tribal governments, their land, or their resources.” Never mind that the FCC engaged in extensive consultation with Tribal governments prior to enacting this Order.

Indeed, in adopting the Order, the Commission found that the Order did nothing to disturb deployment on Tribal lands at all, and affected only the ability of Tribal authorities to reach beyond their borders to require fees and lengthy reviews for small cells on lands in which Tribes could claim merely an “interest.”

According to the Order, the average number of Tribal authorities seeking to review wireless deployments in a given geographic area nearly doubled between 2008 and 2017. During the same period, commenters consistently noted that the fees charged by Tribal authorities for review of deployments increased dramatically.

One environmental consultant noted that fees for projects that he was involved with increased from an average of $2,000.00 in 2011 to $11,450.00 in 2017. Verizon’s fees are $2,500.00 per small cell site just for Tribal review. Of the 8,100 requests that Verizon submitted for tribal review between 2012 and 2015, just 29 ( 0.3%) resulted in a finding that there would be an adverse effect on tribal historic properties. That means that Verizon paid over $20 million to Tribal authorities over that period for historic reviews that resulted in statistically nil action. Along the same lines, Sprint’s fees are so high that it estimates that “it could construct 13,408 new sites for what 10,000 sites currently cost.”

In other words, Tribal review practices — of deployments not on Tribal land — impose a substantial tariff upon 5G deployment, increasing its cost and slowing its pace.

There is a similar story in the Commission’s adoption of, and Commissioner Rosenworcel’s partial dissent from, the recent Wireless Infrastructure Order.  Although Commissioner Rosenworcel offered many helpful suggestions (for instance, endorsing the OTARD proposal that Brent Skorup has championed) and nodded to the power of the market to solve many problems, she also dissented on central parts of the Order. Her dissent shows an unfortunate concern for provincial, political interests and places those interests above the Commission’s mission of ensuring timely deployment of advanced wireless communication capabilities to all Americans.

Commissioner Rosenworcel’s concern about the Wireless Infrastructure Order is that it would prevent state and local governments from imposing fees sufficient to recover costs incurred by the government to support wireless deployments by private enterprise, or from imposing aesthetic requirements on those deployments. Stated this way, her objections seem almost reasonable: surely local government should be able to recover the costs they incur in facilitating private enterprise; and surely local government has an interest in ensuring that private actors respect the aesthetic interests of the communities in which they build infrastructure.

The problem for Commissioner Rosenworcel is that the Order explicitly takes these concerns into account:

[W]e provide guidance on whether and in what circumstances aesthetic requirements violate the Act. This will help localities develop and implement lawful rules, enable providers to comply with these requirements, and facilitate the resolution of disputes. We conclude that aesthetics requirements are not preempted if they are (1) reasonable, (2) no more burdensome than those applied to other types of infrastructure deployments, and (3) objective and published in advance

It neither prohibits localities from recovering costs nor imposing aesthetic requirements. Rather, it requires merely that those costs and requirements be reasonable. The purpose of the Order isn’t to restrict localities from engaging in reasonable conduct; it is to prohibit them from engaging in unreasonable, costly conduct, while providing guidance as to what cost recovery and aesthetic considerations are reasonable (and therefore permissible).

The reality is that localities have a long history of using cost recovery — and especially “soft” or subjective requirements such as aesthetics — to extract significant rents from communications providers. In the 1980s this slowed the deployment and increased the costs of cable television. In the 2000s this slowed the deployment and increase the cost of of fiber-based Internet service. Today this is slowing the deployment and increasing the costs of advanced wireless services. And like any tax — or tariff — the cost is ultimately borne by consumers.

Although we are broadly sympathetic to arguments about local control (and other 10th Amendment-related concerns), the FCC’s goal in the Wireless Infrastructure Order was not to trample upon the autonomy of small municipalities; it was to implement a reasonably predictable permitting process that would facilitate 5G deployment. Those affected would not be the small, local towns attempting to maintain a desirable aesthetic for their downtowns, but large and politically powerful cities like New York City, where the fees per small cell site can be more than $5,000.00 per installation. Such extortionate fees are effectively a tax on smartphone users and others who will utilize 5G for communications. According to the Order, it is estimated that capping these fees would stimulate over $2.4 billion in additional infrastructure buildout, with widespread benefits to consumers and the economy.

Meanwhile, Commissioner Rosenworcel cries “overreach!” “I do not believe the law permits Washington to run roughshod over state and local authority like this,” she said. Her federalist bent is welcome — or it would be, if it weren’t in such stark contrast to her anti-federalist preference for preempting states from establishing rules governing their own internal political institutions when it suits her preferred political objective. We are referring, of course, to Rosenworcel’s support for the previous administration’s FCC’s decision to preempt state laws prohibiting the extension of municipal governments’ broadband systems. The order doing so was plainly illegal from the moment it was passed, as every court that has looked at it has held. That she was ok with. But imposing reasonable federal limits on states’ and localities’ ability to extract political rents by abusing their franchising process is apparently beyond the pale.

Commissioner Rosenworcel is right that the FCC should try to promote market solutions like Brent’s OTARD proposal. And she is also correct in opposing dangerous and destructive tariffs that will increase the cost of telecommunications equipment. Unfortunately, she gets it dead wrong when she supports a stifling regulatory status quo that will surely make it unduly difficult and expensive to deploy next generation networks — not least for those most in need of them. As Chairman Pai noted in his Statement on the Order: “When you raise the cost of deploying wireless infrastructure, it is those who live in areas where the investment case is the most marginal — rural areas or lower-income urban areas — who are most at risk of losing out.”

Reconciling those two positions entails nothing more than pointing to the time-honored Washington tradition of Politics Over Policy. The point is not (entirely) to call out Commissioner Rosenworcel; she’s far from the only person in Washington to make this kind of crass political calculation. In fact, she’s far from the only FCC Commissioner ever to have done so.

One need look no further than the previous FCC Chairman, Tom Wheeler, to see the hypocritical politics of telecommunications policy in action. (And one need look no further than Tom Hazlett’s masterful book, The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone to find a catalogue of its long, sordid history).

Indeed, Larry Downes has characterized Wheeler’s reign at the FCC (following a lengthy recounting of all its misadventures) as having left the agency “more partisan than ever”:

The lesson of the spectrum auctions—one right, one wrong, one hanging in the balance—is the lesson writ large for Tom Wheeler’s tenure at the helm of the FCC. While repeating, with decreasing credibility, that his lodestone as Chairman was simply to encourage “competition, competition, completion” and let market forces do the agency’s work for it, the reality, as these examples demonstrate, has been something quite different.

The Wheeler FCC has instead been driven by a dangerous combination of traditional rent-seeking behavior by favored industry clients, potent pressure from radical advocacy groups and their friends in the White House, and a sincere if misguided desire by Wheeler to father the next generation of network technologies, which quickly mutated from sound policy to empty populism even as technology continued on its own unpredictable path.

* * *

And the Chairman’s increasingly autocratic management style has left the agency more political and more partisan than ever, quick to abandon policies based on sound legal, economic and engineering principles in favor of bait-and-switch proceedings almost certain to do more harm than good, if only unintentionally.

The great irony is that, while Commissioner Rosenworcel’s complaints are backed by a legitimate concern that the Commission has waited far too long to take action on spectrum issues, the criticism should properly fall not upon the current Chair, but — you guessed it — his predecessor, Chairman Wheeler (and his predecessor, Julius Genachowski). Of course, in true partisan fashion, Rosenworcel was fawning in her praise for her political ally’s spectrum agenda, lauding it on more than one occasion as going “to infinity and beyond!”

Meanwhile, Rosenworcel has taken virtually every opportunity to chide and castigate Chairman Pai’s efforts to get more spectrum into the marketplace, most often criticizing them as too little, too slow, and too late. Yet from any objective perspective, the current FCC has been addressing spectrum issues at a breakneck pace, as fast, or faster than any prior Commission. As with spectrum, there is an upper limit to the speed at which federal bureaucracy can work, and Chairman Pai has kept the Commission pushed right up against that limit.

It’s a shame Commissioner Rosenworcel prefers to blame Chairman Pai for the problems she had a hand in creating, and President Trump for problems she has no ability to correct. It’s even more a shame that, having an opportunity to address the problems she so often decries — by working to get more spectrum deployed and put into service more quickly and at lower cost to industry and consumers alike — she prefers to dutifully wear the hat of resistance, instead.

But that’s just politics, we suppose. And like any tariff, it makes us all poorer.

The FCC’s blind, headlong drive to “unlock” the set-top box market is disconnected from both legal and market realities. Legally speaking, and as we’ve noted on this blog many times over the past few months (see here, here and here), the set-top box proposal is nothing short of an assault on contracts, property rights, and the basic freedom of consumers to shape their own video experience.

Although much of the impulse driving the Chairman to tilt at set-top box windmills involves a distrust that MVPDs could ever do anything procompetitive, Comcast’s recent decision (actually, long in the making) to include an app from Netflix — their alleged arch-rival — on the X1 platform highlights the FCC’s poor grasp of market realities as well. And it hardly seems that Comcast was dragged kicking and screaming to this point, as many of the features it includes have been long under development and include important customer-centered enhancements:

We built this experience on the core foundational elements of the X1 platform, taking advantage of key technical advances like universal search, natural language processing, IP stream processing and a cloud-based infrastructure.  We have expanded X1’s voice control to make watching Netflix content as simple as saying, “Continue watching Daredevil.”

Yet, on the topic of consumer video choice, Chairman Wheeler lives in two separate worlds. On the one hand, he recognizes that:

There’s never been a better time to watch television in America. We have more options than ever, and, with so much competition for eyeballs, studios and artists keep raising the bar for quality content.

But, on the other hand, he asserts that when it comes to set-top boxes, there is no such choice, and consumers have suffered accordingly.

Of course, this ignores the obvious fact that nearly all pay-TV content is already available from a large number of outlets, and that competition between devices and services that deliver this content is plentiful.

In fact, ten years ago — before Apple TV, Roku, Xfinity X1 and Hulu (among too many others to list) — Gigi Sohn, Chairman Wheeler’s chief legal counsel, argued before the House Energy and Commerce Committee that:

We are living in a digital gold age and consumers… are the beneficiaries.  Consumers have numerous choices for buying digital content and for buying devices on which to play that content. (emphasis added)

And, even on the FCC’s own terms, the multichannel video market is presumptively competitive nationwide with

direct broadcast satellite (DBS) providers’ market share of multi-channel video programming distributors (MVPDs) subscribers [rising] to 33.8%. “Telco” MVPDs increased their market share to 13% and their nationwide footprint grew by 5%. Broadband service providers such as Google Fiber also expanded their footprints. Meanwhile, cable operators’ market share fell to 52.8% of MVPD subscribers.

Online video distributor (OVD) services continue to grow in popularity with consumers. Netflix now has 47 million or more subscribers in the U.S., Amazon Prime has close to 60 million, and Hulu has close to 12 million. By contrast, cable MVPD subscriptions dropped to 53.7 million households in 2014.

The extent of competition has expanded dramatically over the years, and Comcast’s inclusion of Netflix in its ecosystem is only the latest indication of this market evolution.

And to further underscore the outdated notion of focusing on “boxes,” AT&T just announced that it would be offering a fully apps-based version of its Direct TV service. And what was one of the main drivers of AT&T being able to go in this direction? It was because the company realized the good economic sense of ditching boxes altogether:

The company will be able to give consumers a break [on price] because of the low cost of delivering the service. AT&T won’t have to send trucks to install cables or set-top boxes; customers just need to download an app. 

And lest you think that Comcast’s move was merely a cynical response meant to undermine the Commissioner (although, it is quite enjoyable on that score), the truth is that Comcast has no choice but to offer services like this on its platform — and it’s been making moves like this for quite some time (see here and here). Everyone knows, MVPDs included, that apps distributed on a range of video platforms are the future. If Comcast didn’t get on board the apps train, it would have been left behind at the station.

And there is other precedent for expecting just this convergence of video offerings on a platform. For instance, Amazon’s Fire TV gives consumers the Amazon video suite — available through the Prime Video subscription — but they also give you access to apps like Netflix, Hulu. (Of course Amazon is a so-called edge provider, so when it makes the exact same sort of moves that Comcast is now making, its easy for those who insist on old market definitions to miss the parallels.)

The point is, where Amazon and Comcast are going to make their money is in driving overall usage of their platform because, inevitably, no single service is going to have every piece of content a given user wants. Long term viability in the video market is necessarily going to be about offering consumers more choice, not less. And, in this world, the box that happens to be delivering the content is basically irrelevant; it’s the competition between platform providers that matters.

Yesterday, the Supreme Court released its much-awaited decision in ABC v. Aereo. The Court reversed the Second Circuit, holding that Aereo directly infringed the copyrights of broadcast television program owners by publicly performing their works without permission. Justice Breyer, who wrote the opinion for the Court, was joined by five other Justices, including Chief Justice Roberts, Justice Kennedy, and the liberal-leaning bloc. Interestingly, Justice Scalia dissented on textualist grounds, joined by his conservative-leaning colleagues Justice Thomas and Justice Alito.

As this split illustrates, debates about intellectual property often don’t break down along partisan or ideological lines, and the division between the majority and the dissent in Aereo focused entirely on how to interpret the copyright statute, not on the underlying philosophical merits of property rights or policy judgments regarding the costs and benefits of stronger or weaker IP.

The majority, relying on both the legislative history and the text of the Copyright Act of 1976, emphasized that the Act sought to foreclose the workaround by cable companies of broadcasters’ copyrights that the Supreme Court had previously sanctioned in a duo of cases—and that Aereo’s conduct was functionally almost identical to the unauthorized retransmissions by cable companies prior to the 1976 Act.

Justice Scalia dissented on two grounds: first, that the majority based its reading of the statute on legislative history, a practice he opposes as a means of divining a statute’s meaning; and second, that the majority relied on a vague and inapt comparison between Aereo’s allegedly infringing conduct and cable companies’ pre-1976 retransmissions of broadcast network programming.

We argue here, building on our amicus brief and our previous blog post on Aereo, that, regardless of which test applies, Aereo infringes on television program owners’ exclusive right under the Copyright Act to publicly perform their works. Moreover, we argue that the Court’s test in Aereo is far less ambiguous than its critics assert, and that it does not endanger cloud computing services like so many contend.

The Court Adopts (Some of) Our Arguments

In our brief, we reviewed two key Supreme Court rulings that influenced how Congress rewrote the Copyright Act in 1976. As we explained:

In the 1960s, two owners of programming aired over broadcast television separately brought copyright infringement suits against cable companies that—like Aereo—retransmitted television broadcasts of the plaintiffs’ works without compensating the owners. Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968); Teleprompter Corp. v. CBS, Inc., 415 U.S. 394 (1974). In both cases, this Court found for the defendants, holding that a cable company’s retransmission of a television broadcast signal did not constitute a “performance” of that program under the Copyright Act in force at the time. Dissatisfied with these rulings, Congress effectively abrogated Fortnightly and Teleprompter in the Copyright Act of 1976, defining a transmission of a performance as a performance itself. 17 U.S.C. § 101. Although Congress’s immediate reason for making this change was to bar cable companies from retransmitting broadcast television programs without compensating their owners, the law was written so as to be as future-proof as possible.

We argued that for the Court to find that the Copyright Act does not reach Aereo’s conduct would run contrary to the law’s text and purpose, for Aereo designed its system to evade copyright in much the same way as cable companies operated prior to 1976. The Court agreed with this analogy, holding that:

By means of its technology (antennas, transcoders, and servers), Aereo’s system receives programs that have been released to the public and carries them by private channels to additional viewers. It carries whatever programs it receives, and it offers all the programming of each over-the-air station it carries [alterations, citations, and quotation marks omitted].

Furthermore, in our April essay on these pages, we identified several reasons why the Court could and should rule against Aereo without exposing innovative cloud computing firms to copyright liability:

  1. Both fair use and the DMCA’s safe harbor likely protect cloud hosting services such as Dropbox so long as they respond to takedown notices and are not otherwise aware of the nature of the content uploaded by their users;
  2. Cloud computing services typically lack the volitional conduct necessary to be considered direct infringers; and
  3. If consumers acquire licensed content from cloud services such as Amazon or Google, and stream themselves that content from the cloud, the services’ privity with rights holders should render them safe from copyright infringement liability.

The Court explicitly endorsed our privity argument and implicitly acknowledged our point about DMCA and fair use. As the Court wrote:

[A]n entity that transmits a performance to individuals in their capacities as owners or possessors does not perform to ‘the public,’ whereas an entity like Aereo that transmits to large numbers of paying subscribers who lack any prior relationship to the works does so perform.

What about Dropbox and similar services? The Court took pains to note that its opinion does not consider “whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.” The Court also cited the Digital Millenium Copyright Act of 1998, observing that “to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.”

Below, we first discuss Justice Scalia’s dissent, and explain why Aereo’s volitional conduct with respect to copyrighted works sufficed to render the company directly liable for infringement, even under Scalia’s standard. We next discuss the implications for cloud computing, and explain why the Court’s test may in fact be clearer than the volitional conduct test, actually offering more legal protection for cloud computing than the dissent’s standard would.

Aereo Is Liable for Copyright Infringement Under the Volitional Conduct Test

Scalia, ever the critic of judges relying on legislative history and exercising too much discretion over substantive law, rejected what he called the majority’s “looks-like-cable-TV” standard. Instead, he argued that the Court should adopt the volitional conduct test used by various federal appellate courts, writing that “[a] defendant may be held directly liable only if it has engaged in volitional conduct that violates the Act.”

Scalia then asserted that Aereo is more like a copy shop than a video-on-demand service, because Aereo allows its customers to choose which programs they view and when to activate the copying function. Therefore, Scalia argued, Aereo “plays no role in selecting the content, [and] cannot be held directly liable when a customer makes an infringing copy.” Distinguishing Aereo’s conduct from that of Netflix, Scalia noted that the latter company’s “selection and arrangement [of content] constitutes a volitional act directed to specific copyrighted works and thus serves as a basis for direct liability” (or would so serve if Netflix lacked the requisite licenses).

Yet even if Justice Scalia is right that the volitional conduct test would be easier for courts to apply in future cases than the majority’s “looks-like-cable-TV” test—and, as we discuss below, we believe this widely-held view is incorrect—it does not follow that the dissent properly applied the volitional conduct test to Aereo.

First, Aereo does in fact “curate” the content it offers, in several respects. In its attempt to drive a Mack truck through the 2nd Circuit’s holding in Cartoon Network that a cable company doesn’t publicly perform works by offering its users remote DVR service, Aereo built a business model around over-the-air television content—which represents only a small fraction of the content Aereo could have obtained from free, publicly accessible sources (e.g, the Internet). Aereo also selected the cities in which it installed the dime-sized antennas that pick up over-the-air programming.

Perhaps most importantly, as far as we can tell, Aereo does not offer all the ATSC broadcasts transmitted over-the-air in the cities where the service is available. In New York, for example, Aereo claims to offer 16 channels (and several virtual sub-channels), but it doesn’t claim to offer such channels as WMBQ-CD, WDVB-CD, WNYZ-LP, or WASA-LD—all of which are broadcast over-the-air throughout central New York, according to AntennaWeb. Meanwhile, Aereo does offer Bloomberg TV—a non-broadcast channel for which Aereo voluntarily sought and acquired licenses to retransmit.

Second, evaluating whether Aereo’s actions to make available over-the-air programming embody sufficient volition to render the company itself—as opposed to its users—directly responsible for performing broadcast television turns on more than the extent to which Aereo curated its offerings. As the Court explained, Aereo built a complex system of “antennas, transcoders, and servers” for the sole purpose of monetizing broadcast television shows. In “providing this service,” the Court noted, “Aereo uses its own equipment, housed in a centralized warehouse, outside of its users’ homes.” If Aereo merely bought some office space near the top of a New York skyscraper, along with some general-purpose servers connected to the Internet via fiber-optic broadband, the company could certainly rent out these assets to the general public without facing any liability for directly publicly performing copyrighted broadcast programs. Even if some of Aereo’s subscribers placed tiny antennas in their allocated spaces and configured their server instances to stream broadcast television to themselves, Aereo would—at the very worst—face liability for vicarious copyright infringement. But this is not how Aereo operated.

Aereo has, in other words, actually taken numerous “volitional” steps to make available copyrighted content to its subscribers. And while it also offers some services ancillary to the transmission of content (most notably remote-DVR functionality), it offers those as adjuncts to its core function of transmission, not as standalone services.

Had Aereo prevailed, the company and its competitors would likely have pursued other technical workarounds to monetize other types of copyrighted works without their owners’ permission. Although Aereo chose to start with over-the-air broadcast programming—presumably because it could plausibly argue that its subscribers already had an implied right to view over-the-air broadcasts—broadcast television is hardly the only form of valuable content that the public can lawfully access free of charge in one way or another. What about cable television networks that stream some of their shows online for free? Or news websites that allow unauthenticated users to access a limited number of stories free of charge each month? If Aereo had convinced the Court to bless its business model, it would have sent copyright owners a very clear message: don’t publicly distribute your works in any format, or else.

The Court’s Holding Doesn’t Imperil Cloud Services

Many commenters lament that the Court’s decision leaves cloud computing in peril, offering no real limiting principle (as, they claim, applying the volitional conduct test would have). Vox’s Timothy B. Lee, for example, opines that:

The problem is that the court never provides clear criteria for this “looks-like-cable-TV” rule…. The Supreme Court says its ruling shouldn’t dramatically change the legal status of other technologies…. But it’s going to take years of litigation — and millions of dollars in legal fees — to figure out exactly how the decision will affect cloud storage services.

But the Court did articulate several important limits, as we note above. Most significantly, the opinion plainly excepts transmission of underlying works “own[ed] or possess[ed]” by subscribers from its definition of public performance. It also circumscribes what constitutes a public performance to transmissions from a person to large groups of people “outside of [her] family and [her] social circle,” and reinforces that fair use limitations continue to protect those who perform copyrighted works.

At the same time, the Court characterizes Aereo—and the aspect of the service that give rise to its liability—as “not simply an equipment provider…. Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, almost as they are being broadcast.”

Crucially, Aereo makes available to each of its subscribers copyrighted content that he or she does not necessarily otherwise own or possess—even if the company also offers its viewers “enhancements” much like a modern cable system. As we noted in our previous post, this distinguishes Aereo from the cloud computing services to which it is compared:

Cloud computing providers, on the other hand, offer services that enable distinct functionality independent of the mere retransmission of copyrighted content.

Even if the Court’s holding were applied in contexts beyond traditional television programming, how many cloud services actually deliver content—rather than just enhancing it, as a DVR does—that its user do not otherwise own or possess? Vanishingly few, if any. Most obviously, talk of the risks Aereo poses to cloud storage and digital lockers—services that, by definition, apply only to content provided by the user and thus previously “owned or possessed” by the user—is simply misplaced.

Insofar as the transmission of third-party content is the defining characteristic of a “looks-like-cable-TV” system, the Court’s test actually offers a fairly clear delineation, and one that offers no risk to the vast majority of cloud services. This may remind many of Justice Potter Stewart’s infamous “I know it when I see it” test for adjudging obscenity, but it firmly removes a large swath of cloud computing services from the risk of direct copyright liability under Aereo.

And to the extent that some cloud services might seem to fail this test—YouTube, for example—those services (like YouTube and unlike Aereo) routinely obtain performance licenses for the content they provide. Although some of YouTube’s content may not be legally provided to the service, that doesn’t affect its direct copyright infringement liability. Instead, it merely affects the indirect liability YouTube faced before Aereo and continues to face after Aereo. And any such providers that do not currently obtain public performance licenses can and will simply do so with small textual amendments to their existing content licenses.

In other words, the Court’s ruling boils down to this: Either get a license to provide content not already owned by your subscribers, or provide only that content which your subscribers already own. The crux of the Aereo ruling is remarkably clear.

Meanwhile, the volitional conduct test, like most legal tests, doesn’t offer a bright line, despite some commenters’ assertions that it would have been a better grounds for deciding the case. While the volitional conduct test is an imprecise, sliding scale—regardless of the type of service or the underlying relationship between end-users and content providers—the Court’s Aereo test offers relatively clear rules, imposing direct liability only on services that transmit without a public performance license content that its users do not already own or possess.

For the many cloud services we know and love—and for the cloud computing startups yet to exist—the Court’s decision in Aereo should be little cause for concern. Legitimate hand-wringing over potential threats to the cloud will have to wait until another day.

Conclusion

Strange bedfellows aside, the Supreme Court reversed the Second Circuit and adopted a rationale similar to the one we articulated in our amicus brief. Even under the volitional conduct test advocated by Scalia in his dissenting opinion, Aereo should lose, just as we argued in our previous post on the issue. This will not be the last time the Court wrestles with applying the nearly 40 year-old Copyright Act to novel technology, but Aereo stands little chance of undermining the cloud computing sector. Although the great IP debate will surely continue, this much is settled law: You cannot build a business model around the idea of rebroadcasting copyrighted network content without paying for it.