There’s a new internet startup called ivi TV that is streaming 27 over-the-air (OTA) channels from New York City and Seattle. It has only three downsides: it uses peer-to-peer technology, it costs $4.99 a month after a free trial, and it’s unlikely to survive into 2011. I’d say the odds are better than 50-50 that it’s gone before Halloween.

ivi is trying to dance on the edge of two different US laws. On one hand, it wants to be treated as a cable operator by relying on a piece of copyright law that allows cable systems to retransmit OTA signals so long as they pay statutory licensing fees. On the other hand, it doesn’t want to be subject to the FCC, which requires cable and satellite companies to negotiate retransmission fees for OTA channels.

In less than a week, ivi has received cease and desist letters from NBC-Universal, CBS, Disney, ABC, The CW Television Stations, Inc., Fox Television, Major League Baseball, Twentieth Century Fox Film Corporation, WGBH, WNET.org, and more. So yesterday, ivi filed a preemptive Complaint for Declaratory Judgment of Copyright Noninfringement in US District Court in Seattle.

Hardly anyone ever mentions this, but there is one way for viewers to pay for distant, out-of-market OTA stations, if only a few of them. The latest renewal of STELA, the legislation that enables Dish Network and DirecTV to retransmit local signals back to local markets, also renewed the old, odd grandfathered status of the five legally defined superstations: KTLA, Los Angeles; KWGN, Denver; WSBK, Boston; and WWOR and WPIX, New York. Dish viewers can pay a little to subscribe to any or all of these stations. In turn, Dish pays a set amount to a pool which is redistributed to copyright owners. Local stations who have exclusive rights within their markets to certain syndicated shows can ask Dish to block those shows on the superstations, but few stations bother, probably because so few Dish viewers subscribe to them.

Back to ivi. I’d dearly love to have out-of-market OTA channels available to me, and I think that ivi could pay a flat fee to the copyright office as described in the law. The superstations show that you can build a fair framework for this sort of thing. I could even point out the local broadcasters’ public service duty they owe for using scarce, valuable spectrum. But I don’t believe it’ll happen.

If you’ve been using the internet long enough, maybe you remember iCraveTV.com. That was a Canadian company that, in late 1999, wanted to take advantage of the law in Canada that allows anyone to retransmit any OTA signal in exchange for a small payment to a copyright pool. iCraveTV started streaming postage-stamp-sized Real Video feeds from its antennas in Vancouver and Toronto. Which could pick up all of the Canadian OTA stations, plus those from Seattle and Buffalo. The usual suspects in the US hit the ceiling and started suing. iCraveTV tried to restrict its viewers to Canadians, without much success. Eventually, despite having a good chance of eventually winning in Canadian courts, iCraveTV folded. (Cnet has a great postmortem interview with iCraveTV’s founder.)

It was a smart move for ivi to try to get that judgement of noninfringement. If it fails, the founders can cut their losses right away. If it succeeds, ivi may have a few months to build up some cash flow (at thousands of users x $5) to pay to defend the lawsuits that the deep-pocketed entertainment companies will surely rain down on them. If ivi continues to survive in court, those entertainment companies will turn to Congress to fix the copyright act, and that will be the end of that.

(Since I have an unusual interest in TV listings, I wonder whether someone might go after ivi just for its excellent program guide. Where does ivi get that information? There’s no way that all of those stations are cooperating. So either ivi has licensed the listings information from one of the large listing services or, well, they haven’t.)

Sadly, I can’t imagine that ivi will thrive in the long run. But as Keynes put it so well, in the long run, we’re all dead. We can enjoy ivi for as long as it’s legal and alive. No matter how short a time that is.

Update: Responding to this post, an ivi tv spokesman said that the iCraveTV legal battle doesn’t apply to ivi. I’d say there are obvious differences, but I expect the same kind of legal firestorm nonetheless. The spokesman also noted that just as satellite companies had to go through a legal process to eventually retransmit locals, this is the beginning of the same kind of process for internet-based OTA delivery. But I’d point out that with few exceptions, OTA channel rebroadcasts are still restricted to their local markets.

I sincerely hope that ivi is as legal as they say it is, and the TV revolution it could bring makes a fun thought experiment, at least. Is it possible for ivi to get so popular that Congress would refrain from killing it? Let’s see if we get that far.