DISH DISH Network Corporation

By Joe Flint and Drew FitzGerald 

The four major broadcast networks have filed a suit in federal court to shut down Locast, a nonprofit streaming service funded in part by AT&T Inc. and founded by a Dish Network Corp. lobbyist that offers their feeds to subscribers for no charge.

CBS Corp., Walt Disney Co.'s ABC, Comcast Corp.'s NBCUniversal and Fox Corp. argue that Locast is retransmitting the signals of their local TV stations without permission, in violation of copyright law. The fees that broadcasters receive from pay TV distributors have become crucial to their long-term survival, and there is concern that if Locast grows in popularity, it could cut into that revenue stream.

Locast has positioned itself as a free alternative to consumers who are tired of rising cable bills, in addition to serving as a distribution alternative for people who can't get local TV signals through their antenna. In the lawsuit, the broadcasters argue that Locast is a pawn for AT&T and Dish, two of the largest pay TV distributors in the country. The suit says Locast's primary reason for existence is to help them avoid paying to carry broadcast content.

"Locast is not the Robin Hood of television," said the lawsuit, which was filed in U.S. District Court in the Southern District of New York. "Instead Locast's founding, funding and operations reveal its decidedly commercial purposes."

Broadcasters also said when Locast retransmits their signals it strips out vital information including Nielsen codes that are used to measure ratings, according to the lawsuit. At the same time, Locast, a nonprofit, is gathering its own customer data and requiring registration, "even though there is no technological reason to do so."

Locast is the second major threat to subscription revenue that broadcasters have faced in the past decade. In 2014, Aereo, a similar streaming service whose backers included media mogul Barry Diller, was shut down after the Supreme Court found it violated copyright law.

Locast says it complies with the 1976 Copyright Act, which allows for nonprofits to operate so-called booster and translator stations that strengthen a TV station's signal to reach antennas that otherwise wouldn't receive the channel.

Launched in early 2018, Locast says it has signed up more than 250,000 users. The service isn't yet available nationwide but is present in many of the country's largest TV markets and reaches more than 30 million households.

While Locast markets itself as a free alternative, the broadcasters note that it seeks donations during its retransmissions and "promises that the commercials will abate if viewers commit to the recurring monthly 'donation.'

Locast relies on user donations and recently received a $500,000 contribution from AT&T. IOT Broadband LLC, a firm owned by former Dish executive Michael Kelly, has donated nearly $800,000 to Locast, according to a tax filing. Both DirecTV and Dish point their customers toward Locast on their set-top box menus.

The lawsuit said Locast provides commercial benefits to AT&T and Dish. "It is a strategic play funded by and functioning for the benefit of decidedly commercial interests," it said. Broadcasters also said Locast "collects commercially valuable data about its users' television viewing habits while offering that data as an enticement for other commercial players to support Locast with infrastructure or other assistance."

Locast attorney David Hosp, a partner at Orrick Herrington & Sutcliffe LLP, said early Wednesday he hadn't yet reviewed the broadcasters' specific allegations, though they "have been aware of Locast's activities for around a year and a half and have never made any claims."

Unlike Aereo and other commercial services, "Locast is in a fundamentally different position...in that it is a nonprofit," he added.

Founder David Goodfriend, a Washington attorney who has long ties to Dish, has said Locast is willing to share its viewership data with TV stations that request it.

Mr. Kelly didn't respond to requests for comment. Spokespeople for AT&T and Dish also didn't respond to requests for comment.

Locast is part of the nonprofit Sports Fans Coalition NY Inc., a group Mr. Goodfriend launched years ago to contest the National Football League's earlier practice of blacking out local broadcasts of games that didn't have full stadium attendance.

The broadcasters said the provision Locast is citing still required permission from the TV station owner. The suit noted that the service markets itself not as an answer to bad reception but "to users who already have access to broadcast television as a way to enjoy the added convenience of live mobile viewing over the internet without having to pay for it."

Write to Joe Flint at joe.flint@wsj.com and Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

July 31, 2019 14:56 ET (18:56 GMT)

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