Living in New York City and having cut the cord years ago, Aereo has been a terrific service for us. Yesterday the US Supreme Court started hearing arguments over whether the service is legal. Timothy B. Lee has an outstanding summary of the background of the case and what’s a stake over at Vox.

Based on the early reactions by Supreme Court justices it appears pretty clear that they don’t think Aereo is legal but want to come up with a narrow ruling that wouldn’t have implications for other cloud services. Even if they were able to come up with a narrow ruling, I still think it would be a bad outcome for consumers to have Aereo be illegal.

First, a narrow ruling that doesn’t have broader implications for cloud computing is possible. The judges could make the ruling specifically about the television broadcast signal and require that any enduser antenna equipment (Aereo’s argument) has to be within some very small distance of the premises of the recipient.

Second, it should be clear why any kind of broader ruling against re-transmission of content could be a nuclear bomb for the web and for cloud services. For instance, accessing the web through a proxy service might wind up being illegal, which includes any form of cloud browser.

Third, what’s really at stake here are the retransmission fees that existing cable systems pay to broadcasters. That whole market structure is antiquated and is harming innovation in the US. Even a narrow ruling against Aereo will keep that structure in place.

Fourth, there is an opportunity here – one that the Court is unlikely to address – to reclaim bandwidth which is a public resource. TV broadcasters could be allowed to make good on their threat to remove signal from the airwaves in return for giving up any rights to spectrum (which could then be used for data transmission).

Fifth, if the right market structure came to pass Aereo’s business would cease to exist purely by market forces. Imagine a situation in which you have high last mile bandwidth at a reasonable price and all TV content is available for streaming. In that world, why would anyone pay $8/month for a DVR? It would be called Dropbox or Google and either be free or part of a storage service you already pay for or would be provided as a value add by the broadcaster.

The bottom line then is that this whole case exists only because of an outdated industry structure. Any ruling against Aereo, however, narrow further entrenches that structure.