Recently, a new company called Aereo was announced. Backed by Barry Diller’s IAC group, the company has sound funding and will launch in New York City.

Basically, it allows NYC viewers to watch over the air television wherever they want ala Slingbox and wherever they want ala DVR.

The legal basis for the service is fairly clear. The courts have ruled that people can watch television they are entitled to watch, like off-air TV, when they want, wherever they want to. This is called timeshifting or placeshifting. Extensive use of DVRs and Slingbox devices are all based on these rulings.  Keeping the recording “in the cloud” is has also been ruled on before. Known as a Network DVR, the idea that a service provider can store a television recording on your behalf as long as you are legally entitled to it was made clear in the Cablevision case.

So the two main features of the service are perfectly valid as long as one small point of fact is ensured. A user of these services needs to be legally entitled to view them. In the case of a NYC resident viewing NYC off air television, all this means is proving they live in New York City.

This is where that tiny antenna comes into play. Now my formal training in antenna theory was about 20 years ago, but I don’t think physics has changed too much since then, so I think I’m safe to say that a thumb sized antenna will get exceedingly poor reception of HD UHF channels. Especially in NYC where the problems with multi-path are legendary. But in this case, that’s OK.

My guess is that all the antenna has to do be able to show that the person using Aereo can actually receive a TV signal from NYC stations. All they need is proof that the viewer’s antenna is physically in the NYC area and the rest is easy. Even if the antenna is rented (like a satellite receiver or cable set-top box), the legal precedent applies.  Aereo is able to create the legal fiction necessary to fall within the confines of the previous rulings.

This legal argument is quite different than the one attempted by Ivi to provide a similar product.  Aereo is completely avoiding the rules of retransmission consent and must carry since they are not a cable company.  Positioned as a personal service based on the rental of an antenna, it’s legally more similar to apartment renters paying to share a common antenna on top of a building.  No one would suggest that renters in an apartment are not allowed to record their TV shows because they share an antenna.

I’m speculating here that the Aereo folks put up some very nice UHF antennas to pull down all the channels cleanly. Maybe they use a large array of small antennas to get the same result. Next, they convert the baseband video into a streaming video feed that they can rebroadcast over the internet to validated customers. This is fairly trivial stuff today. Next, they built a system that records every TV show that airs on each channel. Again, not hard to do these days.

When a viewer tells Aereo that they want to record/DVR a show, all Aereo does is make a note that a particular viewer has access to that particular show. The key point being that the viewer is requesting the show first. The playback technology is the same as what Netflix, Hulu, and others use. Again, not rocket science.

Slap a billing system, authentication, a channel guide front end in place, build an iPad app, and you have Aereo.

The platform is perfect to make beachhead in the Over The Top marketplace so that the addition of cable channels becomes a trivial expansion. $12 for local TV channels, $30 for local TV plus basic cable will be the next likely step.

I have to say, it’s a smart plan.

The studio and cable attorneys are likely trying to come up with some justification for a court order to stop, but the Aereo and IAC attorneys probably have the rebuttal justifications already written citing all the precedents that allow it.  They likely have more attorneys on staff than engineers at this point.

Moving to another city is fairly easy. Install another set of antennas in a new town, backhaul the feeds to a central data center, and immediately they can bring up another city without any truck rolls, set top boxes, or even offices in that city. DirecTV did a similar thing when they began to offer local channels, by building these exact type of antenna and backhaul systems.  Avoiding all the infrastructure costs that cable and satellite providers carry when adding customers will be key to offering a comparable, but lower cost product.

All of the basic technology has been tested and proven by others and Aereo is putting it together in a new way that is scalable, low cost, and in the long run, profitable.

When it comes to Los Angeles, I’m definitely giving it a try.