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Originally published Monday, April 8, 2013 at 7:20 PM

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Exec threatens to pull Fox signal in Aereo dispute

Internet startup Aereo won an appeals-court ruling saying it doesn’t have to pay retransmission fees because it relies on thousands of tiny antennas.

The Associated Press

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LOS ANGELES — A top executive with the owner of the Fox broadcast network on Monday threatened to convert the network to a pay-TV-only cable channel if Internet startup Aereo continues to “steal” Fox’s over-the-air signal and sell it to consumers without paying for rights.

Anyone with an antenna can pick up a TV station’s signals for free. But cable and satellite companies typically pay stations and networks for the right to distribute their programming to subscribers.

Industrywide, those retransmission fees add up to billions of dollars every year.

Last week, that business was shaken after Aereo won an appeals-court ruling saying it doesn’t have to pay those fees because it relies on thousands of tiny antennas.

News Corp. Chief Operating Officer Chase Carey said that not being paid by Aereo jeopardizes the economics of broadcast TV, which relies on both retransmission fees and advertising.

“This is not an ideal path we look to pursue, but we can’t sit idly by and let an entity steal our signal,” Carey said at the annual gathering of broadcasters, called NAB Show, in Las Vegas. “If we can’t do a fair deal, we could take the whole network to a subscription model.”

If realized, Carey’s proposal would amount to a sea change in how Fox does business. Currently, Fox sends its signal to TV station affiliates, including 27 that it owns directly.

Those stations relay Fox programming such as “Glee” and “Family Guy” for free over the airwaves in local markets, and add their own local news and other programming.

While most people get Fox through a pay-TV provider anyway, millions of other Americans rely on the free signal coming over their own antennas.

Carey didn’t explain how TV stations would be affected if Fox shut off the signals it sent to broadcasters and went straight to a pay TV model.

Later, the company said in a statement that any change would occur “in collaboration with both our content partners and affiliates.”

Gordon Smith, president of the National Association of Broadcasters, was interviewing Carey onstage when he made the comments.

Smith said he hopes that the courts will eventually rule against Aereo, and force it to get in line with other pay-TV operators.

“We think in the end, we’ll be on the right side of the law and we will never get to the ‘what-if’ scenarios,” Smith said.

Aereo takes broadcast signals for free from the air with thousands of little antennas, recodes them for Internet use and feeds that to subscribers’ computers, tablets and smartphones.

Plans start at $8 a month, which is much cheaper than a cable package, though the service is mostly limited to broadcast channels.

Last week, the 2nd U.S. Circuit Court of Appeals in New York said that Aereo could continue its service despite a legal challenge by broadcast networks Fox, ABC, NBC and CBS. In a sharply divided ruling, the court accepted Aereo’s position that having individual antennas meant that Aereo wasn’t retransmitting signals.

Rather, the appeals court said that Aereo enabled its subscribers to do what they already could on their own with their own antenna and video recorder.

Aereo, backed by billionaire Barry Diller, was limited to New York City when it debuted early last year, but has since expanded to the New York City suburbs, including parts of New Jersey and Connecticut. It has plans to expand to 22 cities this year, none farther west than Salt Lake City.

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