Locast, like Aereo and Ivi before it, has ceased streaming local, over the air television signals on a non-profit basis after a New York federal court judge ruled the service is violating U.S. copyright law by receiving more funding than it needs. But in developments this afternoon, there is word an appeal is planned.

Since January 2018, Locast has attempted to provide its service legally by operating as an independent “translator service,” extending streams of over-the-air signals to viewers within the acknowledged viewing range of the stations. Locast used geofencing technology to block more distant viewers, and sought support for its service with a suggested contribution of $5 a month. Non-paying viewers were nagged with donation request messages that interrupted each stream every 15 minutes.

Despite its limited service areas, Locast amassed over 3 million regular users in its 36 served TV markets over the last three years. That growth represented a threat to lucrative retransmission fee revenue collected by TV station and network owners, who promptly sued Locast in federal court in 2019. A part of that lawsuit was decided Tuesday in favor of the broadcasters.

Judge Louis L. Stanton rejected Locast’s claim it was exempt from Section 111 (a) (5) of the U.S. Copyright Act, which allowed it to stream over the air signals without getting permission from those stations in advance. That section of the Copyright Act was designed to provide a loophole for independent non-profit translator stations, which in some rural areas pick up difficult to receive TV stations and rebroadcast them locally on other channels. Some of these translator operations existed before the days of cable and satellite television, and well before the internet as we know it ever existed. But many of these services were provided through low-power transmitters operated inside large apartment complexes or hotels for the enjoyment of tenants or guests. The Copyright Act allowed groups to retransmit TV signals as long as they lacked “direct or indirect commercial advantage” and did not charge viewers in excess of the “actual and reasonable costs of maintaining and operating the secondary transmission service.”

What got Locast in trouble with the judge is the fact the service nagged viewers to make $5 donations if they wanted the nagging messages to end, and those contributions delivered healthy revenue to Locast of $4.51 million in 2020, while the costs to provide the service were just $2.43 million that same year.

“On those undisputed facts, in 2020 Locast made far more money from user charges than was necessary to defray its costs of maintaining and operating its service,” Judge Stanton wrote. Stanton also rejected arguments that excess revenue was used to expand Locast into new markets, claiming the law was quite clear limiting charges only to the “actual and reasonable costs” incurred providing the service, not for expanding it. Stanton ruled Locast could not charge viewers to raise funds to expand into new markets. Had Judge Stanton accepted Locast’s argument that it was pouring excess revenue into expanding its service, not to make a profit, the broadcaster’s legal case could have been seriously weakened and Locast would have continued operating pending the final disposition of the lawsuit.

Instead, perhaps bowing to the court’s judgment that Locast’s contribution system was hampering its case, last evening Locast notified users it was suspending requests for contributions aired every 15 minutes, and hoped supporters would continue contributions anyway. But early this morning, Locast went further and announced the immediate suspension of its video streaming service.

In an e-mail to supporters, Locast announced:

We are suspending operations, effective immediately.

As a non-profit, Locast was designed from the very beginning to operate in accordance with the strict letter of the law, but in response to the court’s recent rulings, with which we respectfully disagree, we are hereby suspending operations, effective immediately.

Thank you.

Judge Stanton

The Electronic Frontier Foundation (EFF), which has supported Locast with legal assistance in this case, criticized the judge’s ruling.

“We are disappointed that the court ruled against Locast on its copyright defense,” the EFF said in a statement. “The court interpreted the law in an artificially narrow way. Congress wrote copyright’s nonprofit retransmission exception to make sure that every American has access to their local broadcast stations, and expanding access is exactly what Locast does.”

The EFF said Judge Stanton’s ruling may not be the end of Locast, however.

“Locast has decided to suspend its operations. The case will continue, likely including an appeal, to resolve the remaining issues in the case. The problem remains: broadcasters keep using copyright law to control where and how people can access the local TV that they’re supposed to be getting for free,” a lawyer at the EFF said in a statement.

Theoretically, Locast could be restructured to spin off each of its markets into independent non-profit entities responsible for raising funds to maintain current operations and possibly be found “legal” under the U.S. Copyright Act provisions. New markets could be launched independently as well, starting with fundraisers to launch the service and then additional fundraising to maintain each operation.

Any legal appeal would likely be based on Stanton’s determination that “expansion” was disallowed under the Copyright Act, even though most non-profit entities raise funds to expand their operations all the time.

But for now, Locast will likely remain dark until the remaining legal issues are settled or determined.

Cuomo

As expected, New York’s efforts to lower broadband pricing through a state mandate has been effectively killed in a Brooklyn federal court, putting an end to Governor Andrew Cuomo’s efforts to require providers to offer a $15 broadband tier to income-challenged state residents.

U.S. District Judge Denis R. Hurley, who signed a preliminary injunction preventing the mandate from taking effect on June 15, signaled the concept was likely unlawful in a memorandum attached to the injunction. Several telecom companies challenged the mandate in a lawsuit heard in Hurley’s courtroom, claiming states have no regulatory authority to set broadband terms or pricing. Hurley was clearly persuaded in their direction, and was pessimistic the state could ever show a legal way to regulate internet pricing, something currently reserved to the FCC. As a result, a settlement has been proposed dropping the affordable pricing mandate.

Hurley was also moved by arguments from several smaller New York providers that claimed the new mandate would force them to sell service below cost. Empire Access, a fiber to the home overbuilder based in Prattsburgh, filed a declaration with the court threatening to cancel a major expansion project to wire customers in Livingston and Broome counties, including the city of Binghamton, if the mandate was implemented, because it would likely lose federal funding.

Because of the state’s definition as to who would have qualified for the affordable broadband tier, many smaller companies in rural, economically challenged area of upstate New York claimed they would face substantial economic losses to their businesses. Empire claimed it would lose “approximately $2 million per year,” Heart of the Catskills claimed top-line revenue would decrease $1,364,000 annually, Delhi Telephone claimed it would lose at least $90,000 per month, and the Champlain Telephone Company notified the court that “nearly half (48%) of its existing broadband customers will qualify for discounted rates,” causing the company to lose money on each customer.

“While a telecommunications giant like Verizon may be able to absorb such a loss, others may not,” Judge Hurley wrote in his order.

Gov. Cuomo bristled after learning of the lawsuit, threatening to revoke the franchise of any company that refused to implement the  state’s affordable broadband program. But the governor has made empty threats before, including a promise in 2018 to revoke the merger of Charter Communications and Time Warner Cable because the company failed to live up to the deal commitments it made to state regulators. A settlement was eventually reached between the cable giant and the state, and it appears a settlement between the plaintiff telecom companies and the state will also end this dispute and lawsuit. It appears the state has capitulated and plans to walk away from the affordable broadband proposal, although it reserved the right to appeal the case.

Stop the Cap! predicts the state will work with larger providers to increase public knowledge of the companies’ existing affordable internet programs, which usually have similar qualifications to the affordable internet law Cuomo proposed. Cuomo Administration officials will also likely lobby the Biden Administration to toughen federal oversight of broadband service and suggest a possible federal mandate for an affordable service tier and a return to net neutrality under a regulatory framework that opens the door for future price and service regulation.

The court decision signals states the solution to broadband affordability will not be found in state laws or mandates that attempt to regulate broadband pricing, at least until the current federal law changes.

Frontier is accused of not delivering the internet speeds it sells to consumers.

The Federal Trade Commission, along with law enforcement agencies from six states, today sued Frontier Communications, alleging that the company did not provide many consumers with internet service at the speeds it promised them, and accepted customer orders for internet speed tiers the company had no intention of actually providing.

In the complaint, the FTC and its state partners allege that Frontier advertised and sold internet service in several plans, or tiers, based on download speed. Frontier has touted these tiers using a variety of methods, including mail and online ads, and has sold them to consumers over the phone and online.

In reality, the FTC alleges, Frontier did not provide many consumers with the maximum speeds they were promised and the speeds they actually received often fell far short of what was advertised.

“When Frontier sends mail to a consumer’s residential address, or displays digital advertisements to consumers with residential addresses known to Frontier, Frontier has access to information indicating that it is unable to provide certain of its DSL Internet speed tiers to some consumers, based on factors such as the address’s distance from Frontier’s networking equipment, which Frontier can easily compute or estimate for many addresses,” the complaint stated. “In numerous instances, Frontier has sent consumers advertisements for DSL Internet service at speed tiers that Frontier could not provide to them.”

In early 2019, a management consulting firm analyzed, at Frontier’s direction and with Frontier’s participation, Frontier’s proprietary network data and internal records for nearly 1.5 million then-current DSL subscribers. This analysis found that approximately 440,000 of Frontier’s DSL subscribers, or nearly 30% of the population analyzed, were “potentially” “oversold” on speed tiers that
exceeded the actual speeds Frontier provided to them.

Frontier is also accused of violating Wisconsin state law by making demonstrably false statements about its service reliability. Frontier’s advertisements represent to consumers that they can receive uninterrupted “crystal-clear” phone service with “99.9% reliability.” But the lawsuit claims Wisconsin consumers routinely suffer from sound quality issues with their service. For example, consumers have complained that they experience a buzzing or static sound that makes hearing the other caller very difficult, if not impossible. The suit also claims that between 2018 and 2019, Wisconsin customers endured over 200,000 landline outages, with over 25,000 left unrepaired after 24 hours.

The FTC’s complaint was filed with the attorneys general from Arizona, Indiana, Michigan, North Carolina, and Wisconsin, as well as the district attorneys’ offices of Los Angeles County and Riverside County on behalf of the State of California. The plaintiffs seek court costs and restitution for consumers affected by Frontier’s allegedly deceptive behavior.

The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Central District of California.

Quibi is closing down its streaming service in the next several weeks, sources told the Wall Street Journal this afternoon, after spending $1.75 billion of investors’ money and attracting few subscribers and a lawsuit.

The service, founded by Hollywood mogul Jeffrey Katzenberg, never found a footing in the highly competitive streaming business, and has been plagued with problems since its April debut. Katzenberg envisioned the service as a home for short-form video entertainment — typically 5-10 minute chapters of professionally produced shows, designed to be watched by people on the go. Quibi was specifically developed for smartphone viewing, which meant producers had to create shows specifically for small screens. For technical reasons, Quibi was difficult to view in-home.

Katzenberg argued the service would fill a streaming niche for people looking for short video fixes instead of long form programming, arguing highly produced shows would attract a different audience than amateur short-form clips from services like YouTube.

Then the COVID-19 pandemic hit in March, forcing most would-be Quibi subscribers into home lockdown for school and work. It could not have come at a worse time for Quibi. Soon after debuting, scathing reviews about the quality of some Quibi productions were also published, further deterring would-be customers.

Quibi’s advertising partners, which included Pepsi and Walmart, were patient with the service, but after six months of low viewer numbers, many advertisers began deferring payments on their combined commitment of $150 million in advertising.

Also in early March, a patent infringement lawsuit over Quibi’s Turnstyle feature, which lets viewers watch video horizontally or vertically on their devices and rotate between those positions without disrupting the experience, was filed by Eko, which claimed it invented and patented the technology and saw its work stolen by Quibi employees. Although Quibi won a motion to limit the lawsuit, litigation was expected to continue in a California court.

Over the summer, media reports noted 90% of free trial subscribers canceled their subscription before charges began, revealing Quibi had just 72,000 paid subscribers willing to spend $4.99 a month, a fraction of the tens of millions of subscribers other streaming platforms have attracted.

The Journal reported on Wednesday that Quibi founder Jeffrey Katzenberg called investors to tell them he is shutting the service down. A restructuring firm hired to examine options for the streaming platform reportedly made several recommendations to Quibi’s board of directors, but it seems a complete shutdown was chosen as the best option.

Cricket Wireless and AT&T are being sued by Maryland Attorney General Brian E. Frosh for allegedly selling phones both companies knew would stop working on Cricket’s network a year after the two companies merged.

Frosh announced the lawsuit on Monday, claiming both wireless companies violated the Maryland Consumer Protection Act.

Cricket formerly operated its own mobile network, which relied on CDMA technology. Customers were required to use devices compatible with that mobile standard to access the Cricket network. In July 2013, AT&T agreed to acquire Cricket Wireless’ parent, Leap Wireless, for $1.2 billion. The FCC approved the acquisition in March 2014. Cricket, now under AT&T’s ownership, continued to sell CDMA mobile devices to consumers for the next year. Frosh contends both companies knew AT&T was planning to decommission Cricket’s cellular network and move customers to AT&T’s own network, which uses GSM technology incompatible with CDMA.

Frosh

That left customers with devices that stopped working with their Cricket service, requiring many to purchase new phones compatible with AT&T’s GSM network. Other customers discovered their Cricket phones were locked exclusively to Cricket’s network, and the company refused to unlock the phones so they could be used on a competitor’s network. Many customers complained their costly smartphones were less than a year old before they stopped working. Cricket’s only solution was to buy a new device, often costing hundreds of dollars.

“Cricket and AT&T continued to market and sell a product to consumers they knew wouldn’t work after their merger was complete,” said Frosh. “This practice, we allege, was undertaken to maximize profit from the sale of expensive smartphones without regard for the harm it would cause consumers.”

The lawsuit is seeking restitution, an injunction preventing Cricket and AT&T from engaging in unfair or deceptive trade practices, as well as civil penalties and costs.

A hearing on the matter is scheduled for Wednesday, September 9, 2020, at the Office of Administrative Hearings in Hunt Valley, Md. For more information, Maryland residents can call the Consumer Protection Division hotline at 410-528-8662 or toll free at 1-888-743-0023.