2014 CNBC Disruptor 50

This Supreme Court decision could alter TV forever

Aereo's plans to disrupt TV viewing

Aereo founder and CEO Chet Kanoji told CNBC on Tuesday his company charges for technology not TV content, and therefore is not infringing on copyrights.

Launched in 2011 and backed by media mogul Barry Diller, the TV-over-the-Internet start-up has been embroiled in a fight with the broadcast networks that has gone all the way to the Supreme Court, with decision expected this month.

The ruling could alter TV forever.

In a "Squawk Box" interview, Kanoji refused to say what would happen if Aereo lost the case. "You sort of tune everything out and focus on what needs to happen."

Picked as No. 7 on CNBC's second-annual Disruptor 50 list, Aereo says it allows subscribers to watch and record their local, over-the-air broadcast channels via a tiny remote antenna and cloud-based DVR.

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Any customer can buy an antenna and DVR for their home and watch and record their local channels, said Kanojia—adding that his company is doing the same thing but with more modern technology.

Chet Kanojia, chief executive officer and founder of Aereo Inc.
Adam Jeffery | CNBC

"This came up in oral arguments. ... We rent you technology," he said. The length of the cord that connects a user's equipment should not be relevant, he added. "That's the crux of the case."

The networks including CNBC's parent NBC as well as ABC, CBS, and Fox say Aereo steals free, over-the-air programming and then transmits that content to its online customers, without paying retransmission fees to the broadcasters.

Kanojia said Aereo should not be subject to retransmission fees, because they have "nothing to do with copyright."

The Cable Television Consumer Protection and Competition Act of 1992 requires cable and pay-TV companies to get permission from broadcasters to show local and network programming. Part of that permission—designed at the time to protect the broadcasters—are those retransmission fees, which have grown into big business for the networks.

According to research firm SNL Kagan, retransmission fees paid by cable and other pay-TV services to broadcasters totaled $2.36 billion in 2012. That number is expected to nearly triple by 2018, accounting for 23 percent of total TV station revenue.

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Kanojia said Aereo should be treated like a tech company, not a cable operator.

"Where would you draw the line? Would you say Sony has to pay a carriage fee now because the [TV] signal is being rendered on their television set?" he asked. "I supply technology. Of course, I'm allowed to do that. There's no restrictions."

Aereo charges around $8 to $12 a month—a fraction of the cost of a typical monthly cable subscription. The service is available in about 11 cities, including New York, Miami, Boston, Atlanta, and Houston, with more on the way.

—By CNBC's Matthew J. Belvedere

Disclosure: CNBC and NBC are owned by cable company Comcast.