I agree with you (OP) philosophically, (paraphrased) "What's the diff if the transmission is via OTA or net? Transmission is transmission."
Well, as mentioned above, the difference is locality.
Now, the beauty of the internet is that it's largely location-indifferent (from a technical possibility standpoint... not necessarily a legal one). I also think that the current revenue models and legalities are woefully antiquated... and I'm certainly not an expert... but even I can see that much. The 1950's model of advertising is not too great for the 2010's. The networks know this. So do advertisers. So does Congress. So does the FCC and whomever else is involved.
What they don't know... is how to fix it IMO. Also, it serves to keep the "small fry" cut out of the market. I've been watching/looking at IPTV channels in general. A lot of them are gone. Many have "take downs" and even google searches blocked by DMCA... and I think that some of these may have tried to be "legitimate"... in other words, not (intentionally) pirated content. Some were advertised as "classic" TV shows.. ones assumed to be without copyright. Theoretically, they could have had an advertiser supported model. I don't know if they were taken down, (copyright trolls?) or couldn't sustain a revenue stream. But it looks like it's tough going. The experts here (I'm just an opinionated bloke) would know more. The Roku (and others) seem to have some of these advertiser supported types available. I'm betting the $$'s are "lite".
The "big guy" cable companies are looking at proprietary boxes for IPTV delivery. They know each box and it's location. They "own" the box.. you rent it from them. Basically switching cable->internet. Interactive TV and such is a possibility too. Some already use the scheme... UVerse maybe? Others? But that's the distributor locking in contest with a specific DTB.
I think that there's a lot of "future money" in this technology. Everyone is trying to be a player and "lock in" the subscriber/viewer. The more I look into it, the nastier it gets.
If "Home is where the heart is" then why can't we watch IPTV if we are traveling just as if we were local?
On the other hand, if "Home is where you hang your hat", it's (currently) totally based on where you are at the moment. And with the internet, IP-location-aware or not, it can be spoofed.
One thing you need to make this work... is campaign finance reform. The government isn't going to work for the people's rights over big business' rights, until the PAC money gets the heck out of congress. Until then, Congress will keep passing "perpetual copyright" laws, and protecting business over consumer rights IMO. They need to protect business rights too, but I think they need to pay attention to the consumer rights also.
You, as a resident of such-n-such-a-town, should be able to "dial in" to such-n-such-a-town's TV station and view it... no matter where you are, in town or not. YOU KNOW that the local advertising is local...but you're either in that location, or are traveling. Of course, a non-resident could view it too. Is it the "not from there" that's the problem? Is it because "Al's used car lot" wants and pays for viewers in a certain area.... in the "old" way of thinking (or is that "pricing').
But maybe, Al could get a smattering of word-of-mouth business by just having it opened up. How much of the internet is geo-locked? You can find web pages for "Al's used car lot" with a google search...no matter where you are. You may never go there. Then again, you may.
Yet with networks and advertising, it bass-ackwards. TV is based on a geo-locked model from the start. The internet is geo-unloced (mostly) from the start. Few people are thinking "outside the box". Most big ISPs seem to be insisting on a (geo-locked) box. External pressure, or internal desire?
The cable/network companies know this. That's one reason they want geo-locked boxes. They can offer services in the traditional model. I don't think they want to be 100% internet providers... and I don't know what it would cost if they were (since some internet costs may be offset by cable TV revenue or some such).
Even when pirating isn't an issue, locality still seems to be. There are a few Roku channels that are free and advertising supported. I hope that model continues to improve and succeed. I watch some shows on IPTV that are not OTA type shows (Tekzilla, for example). I'd like to continue to do so.
Lot's of big players in this. Networks (internet infrastructure), Networks (media), content producers, advertisers, copyright holders, patent holders (codecs!), courts, congress, and lastly.... you. I can't figure it out. I'm not surprised, since I'm not an "Industry Insider". However, my options are limited to say the least...both from a potential "channel creator" perspective and as a consumer.
Sorry for rambling. I hope I didn't hijack your post too much. I don't think we'll see a "proper" solution to IPTV for "local" channels... one that is location neutral... for quite a long while.
Please excuse the ramblings from a non-expert in these matters. Most of this is just guess work, so feel free to correct. I just don't see the light at the end of this twisted tunnel.