Palo Alto, CA
Yes, their argument is that they're simply renting an antenna and a cloud DVR to the customer. Every client has control of their own antenna to pick which channel to watch and recieves their own stream of the channel. They even require the customer to live/view the content in the area where they would have been able to receive the OTA signal. They check this via credit card billing address, IP, and GPS signal if available.
The difference with a cable company is that they receive one stream of a channel and then duplicate it to all of their clients.
So if 5 cable customers are watching Fox, the cable company is still receiving one Fox signal and retransmitting that signal to it's 5 customers. 1 in 5 out.
If 5 Aereo subscribers are watching Fox, they're each connecting to their antenna and tuning it to Fox. 5 in 5 out.