(Repeats to widen distribution and add PIX with story)
* Case pitting startup against major companies important to future of TV
* Aereo win could imperil billions in broadcasters' retransmission fees
By Lawrence Hurley
WASHINGTON, April 22 (Reuters) - U.S. Supreme Court justices appeared skeptical on Tuesday about online TV service Aereo Inc's position in a copyright dispute with major broadcasters, but several raised concerns about how a ruling against the startup could affect cloud computing services.
The case is important to the future of television, for media companies and consumers alike, in part because a win for Aereo could spur innovation in the industry by paving the way to new, cheaper ways for consumers to watch shows. It could also threaten the estimated $3 billion in so-called retransmission fees that broadcasters get from cable and satellite TV systems.
Some broadcasters such as CBS Corp have even threatened to cut off their free-to-air broadcast signals or create their own low-cost Internet feeds of the channel were Aereo to win. A loss for Aereo, backed by media mogul Barry Diller's IAC/InterActiveCorp, could force it to shut down.
Aereo charges users a low monthly fee to stream live broadcasts of TV channels on mobile devices using miniature antennas that the company hosts. Aereo, which is available in 11 U.S. cities and estimated to be tiny compared to 100 million paying TV customers, says its service does nothing more than what a personal TV antenna would provide.
Introduced in 2012, Aero has not disclosed its user base and does not pay the broadcasters.
Aereo's fate was placed in the hands of the high court when Walt Disney Co's ABC network, CBS, Comcast Corp's NBCUniversal and Twenty-First Century Fox Inc appealed a decision by the 2nd U.S. Circuit Court of Appeals in April 2013 that denied their request to shut down Aereo while litigation moved forward.
In court on Tuesday, several justices appeared troubled about a ruling that would deal a blow to increasingly popular cloud computing services in which personal files - including TV shows and music - are stored remotely on the Internet on servers from companies such as Google Inc, Microsoft Corp , DropBox Inc and Box Inc.
Aereo argues that cloud computing services use the Internet in the same way as it does to store and transfer copyrighted content. A ruling against Aereo could therefore raise legal questions about whether accessing material stored on a remote server such as Google Drive, could also violate copyright law.
Justice Stephen Breyer told the networks' lawyer, Paul Clement, that his legal argument "makes me nervous about taking your preferred route."
Justices Anthony Kennedy and Samuel Alito were among others who raised similar concerns. They cited a 2008 appeals court ruling that upheld Cablevision Systems Corp's cloud storage video recorder.
The decision by the 2nd U.S. Circuit Court of Appeals in New York was appealed to the Supreme Court but the justices declined to review the issue. The ruling therefore remains on the books, although the Supreme Court is not bound by it.
Aereo relies heavily on the Cablevision decision. Its service is no different to buying a song on iTunes and then listening to it later on a cloud storage service like Google Drive, the company says.
Alito questioned Clement about whether the Cablevision service at issue in 2008 was any different than Aereo. Clement said the court could rule narrowly and not reach the cloud computing issue.
"I don't find that very satisfying," Alito said in response.
Some justices seemed skeptical about Aereo's business model.
Chief Justice John Roberts questioned whether the technology used by the company had any purpose other than skirting copyright law. "I'm just saying your technological model is based solely on circumventing legal prohibitions that you don't want to comply with," he told Aereo's lawyer, David Frederick.
A decision is due by the end of June.
The case is American Broadcasting Companies Inc, et al, v. Aereo Inc, U.S. Supreme Court, No. 13-461 (Additional reporting by Liana Baker in New York Editing by Will Dunham and Grant McCool)