Cablevision wins DVR appeal

A U.S. appeals court has sided with cable provider Cablevision in allowing the company to offer its network-based DVR service despite arguments from the movie and TV industry that it infringes on their copyrights.

On Monday, the U.S. Court of Appeals for the Second Circuit in New York, ruled that Cablevision's proposed new service that allows movies and TV shows to be recorded on remote storage servers in Cablevision's network "would not directly infringe plaintiffs' exclusive rights to reproduce and publicly perform their copyrighted works." The appeals court overturned a lower court's decision that was issued in March 2007.

The ruling could have a major impact on new entertainment services that cable companies and other video providers can offer customers, and it could also help reduce the price of DVR services.

Up until now, video providers have offered DVR services that allow people to record, store, and play back movies and TV shows on their set top boxes.

Cablevision's Remote Storage DVR or RS-DVR service would allow people to have all the same functionality they have with their existing DVRs, but it doesn't require them to have a special box to do it. Instead, all that functionality is in Cablevision's network rather than on a box sitting in the subscriber's home.

By putting the functionality in the network, Cablevision could reduce the cost of offering the service. Today, cable operators spend about 10 percent of their capital investment on providing DVR boxes to customers, according to Craig Moffett, an analyst at Bernstein Research. And if Cablevision can reduce its cost, it could offer the service at a lower price, which in turn could make the service appealing to many more subscribers. It also means that Cablevision can roll out the service to new subscribers much more quickly.

"This is a tremendous victory for consumers, which will allow us to make DVRs available to many more people, faster and less expensively than would otherwise be possible," Tom Rutledge, Cablevision's chief operating officer, said in a statement.

A networked DVR service, might also allow people to get rid of their set-top boxes altogether or at least get smaller devices that don't take up as much room as the bulky DVR boxes of today. And because the DVR function is housed in Cablevision's network instead of at home, consumers also won't have to deal with the hassle that often comes along with housing a relatively complex piece of networking equipment in their homes.

But the film studios and television networks that brought the suit against Cablevision, including Time Warner, News Corp., Walt Disney, and CBS, which owns CBS Interactive, the publisher of CNET News, argued that this remote storage infringed their copyrights. Specifically, they said that Cablevision's remote storage DVR operates more like a video on-demand (VOD) service than a DVR. Therefore, Cablevision should obtain licenses from content owners before people can record and store content on the remote DVR.

The appeals court didn't buy this argument. In fact, it saw no difference between the in-home DVRs and the ones that sit in the network to record and store TV shows and movies. In its written ruling, it also sent the case back to the U.S. District Court in New York for further proceedings.

"We appreciate the court's perspective that, from the standpoint of existing copyright law, remote-storage DVRs are the same as the traditional DVRs that are in use today," Rutledge said in his statement.

The court's decision could pave the way for other video providers to offer similar services. So far, none of the major players has said whether they plan to offer networked DVRs. But Verizon, which is building a new fiber-to-the-home network, could be in a perfect position to offer such a service, since its network is fast and has very low latency.

Joe Ambeault, director of consumer product development for Verizon, said Verizon might offer networked services in the future in addition to services that take advantage of hardware installed in the home.

"We are going to take advantage of both (centralized and distributed) approaches where it makes sense," he said. "We could develop a centralized service that is similar to Cablevision's. But it doesn't preclude us from also leveraging hard drives in the home to do other things."

But he emphasized that the company has not had to change any of its plans for new DVR services based on the legal dispute between Cablevision and the TV and movie producers.

"There isn't a service we've considered that couldn't be offered without the court's ruling (in the Cablevision case)," Ambeault said. "It's more a matter of it giving us more options as we go forward."