The major broadcast networks today sued the makers of Locast, a nonprofit organization that provides free online access to broadcast TV stations. The lawsuit filed by ABC, CBS, Fox, and NBC seeks financial damages and a permanent injunction that would shut Locast down.

Broadcast TV networks are available for free over the air with an antenna. But selling the rights to retransmit those signals in other ways is a big business. Broadcasters reportedly collected $10.1 billion in 2018 via retransmission fees they charge cable and satellite TV companies.

TV providers routinely pass this cost along to consumers in the form of "Broadcast TV" fees. Pay-TV providers use these fees to raise the actual cost of service above their advertised prices and to raise customers' prices even while they're under contract.

Pay-TV providers have also been refusing broadcasters' demands to pay even higher fees, and broadcast channels have frequently been blacked out on cable and satellite TV systems as a result.

Use an antenna—or Locast

TV subscribers can deal with blackouts by using an antenna—or a service like Locast. While Locast is a nonprofit, the broadcasters argue that it's actually bankrolled by the satellite TV industry. DirecTV owner AT&T notably donated $500,000 to Locast, and Locast's founder has ties to Dish Network.

Locast says it is on a mission to help TV viewers get easier access to channels that are supposed to be free:

Ever since the dawn of TV broadcasting in the mid-20th Century, non-profit organizations have provided "translator" TV stations as a public service. Where a primary broadcaster cannot reach a receiver with a strong enough signal, the translator amplifies that signal with another transmitter, allowing consumers who otherwise could not get the over-the-air signal to receive important programming, including local news, weather and of course, sports. Locast.org provides the same public service, except instead of an over-the-air signal transmitter, we provide the local broadcast signal via online streaming.

So far, Locast is available in 13 US markets, namely Baltimore; Boston; Chicago; Dallas; Denver; Houston; Philadelphia; Rapid City, South Dakota; Los Angeles; New York City; San Francisco; Sioux Falls, South Dakota; and Washington, DC. Locast intends to expand to new markets but solicits donations because it says it has "considerable costs for equipment, bandwidth, and operational support." Locast can be used on mobile devices, streaming boxes, and Web browsers; it detects your location and lets you choose from a selection of local TV channels.

Networks claim Locast isn’t really a nonprofit

Broadcasters fear that wider availability of free TV channels will make it harder to charge retransmission fees to cable and satellite companies. The networks filed their lawsuit in US District Court for the Southern District of New York against Sports Fans Coalition founder David Goodfriend and the New York chapter of his group, which created Locast. Goodfriend, an attorney and lobbyist, has been fighting TV blackouts for years on multiple fronts.

The lawsuit filed by ABC, CBS, Fox, and NBC says:

Plaintiffs, including their affiliated companies, collectively invest billions of dollars to create, acquire, and provide valuable television programming. That programming is broadcast to the public for free over-the-air viewing, but the overwhelming majority of households have elected the convenience and reliability of viewing Plaintiffs' copyrighted programming through services offered by cable, satellite, broadband, and mobile providers. By virtue of several Acts of Congress, those providers must have a license to retransmit copyrighted television programming, notwithstanding that the programming is broadcast over the air by Plaintiffs and their local affiliates, and must also secure the consent of the broadcasters to retransmit the broadcast signals.

Even though the TV channels are available for free, Locast can't retransmit them, the lawsuit said:

Locast captures over-the-air broadcast signals, strips critical data from those signals, and then retransmits those signals, and the copyrighted content that they carry, to registered users over the Internet. The catch is, unlike licensed cable, satellite, and streaming services, Locast neither obtains Plaintiffs' permission nor pays for its exploitation of Plaintiffs' exclusive rights to publicly perform their copyrighted content. Instead, Locast simply takes Plaintiffs' copyrighted content and retransmits it to its registered users at will over the Internet.

The broadcasters acknowledged that a 1976 copyright law allows nonprofits to boost local broadcast signals. But they argue that "Locast is nothing like the local booster services contemplated by Congress in creating this narrow exemption." In reality, the networks' lawsuit says that "Locast's founding, funding, and operations reveal its decidedly commercial purposes."

To prove that Locast has "commercial purposes," the lawsuit points to AT&T's $500,000 donation and the fact that Goodfriend is a paid lobbyist for Dish. AT&T and Dish have both fought broadcasters over retransmission fees, leading to blackouts.

The lawsuit says:

These two for-profit businesses [AT&T and Dish] provide Locast with valuable nationwide distribution of the Locast app on the Internet-connected set-top boxes of their subscribers. At the same time, Locast provides these two major distributors with commercial benefits that include the ability (a) to avoid obtaining retransmission consent from local stations to include local stations in their pay-TV offerings by integrating the Locast app into their customers' set-top boxes; (b) to gain leverage in negotiations with broadcast stations over retransmission consent rights to offer their subscribers access to broadcast channels; and (c) for Dish, to promote a version of its Sling TV Internet television service that does not carry local broadcast channels by telling potential customers that they can "supplement" Sling TV by getting the broadcast channels via Locast. Locast is not the noncommercial, community public service it purports to be. It is a strategic play funded by and functioning for the benefit of decidedly commercial interests.

AT&T released a statement saying that "Locast offers consumers an innovative new way to access free over-the-air signals. We support technologies that give consumers more choices and better access to this local content."

Founder ready for legal fight

Will that argument convince a judge or jury? Goodfriend was eager to find out even before he got sued, according to a New York Times article in January titled "Locast, a Free App Streaming Network TV, Would Love to Get Sued."

"I ask people all the time, 'Do you know you're supposed to get television for free?'" Goodfriend said, according to the Times. With Locast, "We are operating under parameters that are designed to be compliant within the law," he also said.

Goodfriend also told the Times that he tried to get funding from Dish Chairman Charlie Ergen but wasn't able to. Goodfriend wasn't drawing a salary from Locast and had taken out a loan to fund the operation, which cost more than $700,000 as of January, the Times article said. AT&T's donation came several months later.

We contacted Goodfriend about the lawsuit today and will update this story if we get a response.

Colorado Law professor Blake Reid thinks the broadcasters' lawsuit has some holes.

"The broadcasters are in a bind here because they could have argued that Locast is a cable system, but they pushed to shoot down that argument back when Aereo made it after losing on fair use in the Supreme Court," Reid told Ars today. "Basically, they want to have their cake and eat it, too—they don't want an Internet-based system to be able to pay for retransmission as a cable system, but that opens up [the possibility] that a non-profit organization like Locast can be eligible for this exemption."

Proving that Locast violates the copyright law's nonprofit exemption will be hard, but maybe not impossible, Reid said.

"The complaint makes some extremely incoherent arguments about Locast somehow gaining commercial advantage as a non-profit," Reid said.

Still, Reid wouldn't rule out the chance of broadcasters succeeding in their argument that Locast's ties to AT&T and Dish undermine its nonprofit status. But winning on that point could be a Pyrrhic victory because it wouldn't stop future services from providing the same service Locast does.

Locast's funding is "a complicated factual issue that I'm not sure we know all the facts about yet, but the best that does for the broadcasters is stop Locast specifically and create a blueprint for another nonprofit to step up and do the same thing," Reid said.

Aside from the funding question, the plain language of the statute seems to support a nonprofit retransmitting TV signals over the Internet, Reid said. The nonprofit exemption says, "The secondary transmission of a performance or display of a work embodied in a primary transmission is not an infringement of copyright if... the secondary transmission is not made by a cable system but is made by a governmental body, or other nonprofit organization."

To qualify for that exemption, the law says an organization must not have "any purpose of direct or indirect commercial advantage." The broadcasters' argument that Locast is basically a front for AT&T and Dish would thus be a problem for Locast if it can't provide a convincing counter-argument.

But other parts of the statute are probably easy for Locast to satisfy, Reid said. The statute says retransmissions must be made "without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service." While Locast solicits donations, it isn't charging users for its service, and so it wouldn't run afoul of that provision.

"This part's very easy for Locast to satisfy as a nonprofit," Reid said.

Locast isn't the only threat to broadcast networks' retransmission fees. A bipartisan bill filed in the House last week seeks to end the current retransmission consent system and "allow free-market contract negotiations to happen under traditional copyright law."