Cities ask Netflix, Hulu and streaming services to pay cable fees

The Ohio Supreme Court is debating whether Netflix and other streaming services should pay local governments the same fees they charge cable operators.

COLUMBUS, Ohio — Should Netflix and other streaming services pay local governments the same fees they charge cable operators?

That was the question before the Ohio Supreme Court during a hearing Wednesday, as the court debates whether streaming services like Netflix and Hulu are covered by a state law that would require them to pay to play.

The argument is similar to that in several other states, where cities are trying to force streaming service companies to pay cable operators’ fees.

At issue in Ohio is the state’s Video Services Authorization Act of 2007, which directed the state Department of Commerce to determine which entities must obtain permission to physically install cables and wires in a public right-of-way. Companies considered video service providers must pay a fee to local governments under that law.

Officials in Maple Heights in suburban Cleveland maintain that streaming services are subject to the fee because their content is delivered over the Internet via cables and wires.

In Tennessee, the state Supreme Court is scheduled to hear arguments brought by Knoxville against Netflix and Hulu next month. A similar case brought by the city of Creve Coeur is pending in Missouri. In 2020, four Indiana cities sued Netflix, Disney, Hulu, DirectTV, and Dish Network to require them to pay the same franchise fees to local governments that cable companies are required to pay.

In related lawsuits filed in Arkansas, California, Nevada and Texas, Netflix and Hulu won their arguments last year that they cannot be treated the same as video providers.

The streaming companies argue that their method of distribution is different from that of traditional video providers. They also say that in the case of Ohio, it is up to the Commerce Department to label them as video service providers, a process they say cannot be done through a lawsuit.

The state sides with the transmission companies, claiming that Ohio law only covers companies that build infrastructure to carry cables.

“This is about those who dig, they should pay,” Mathura Sridharan, Ohio’s deputy attorney general, told justices on the state Supreme Court during oral arguments Wednesday. “If they don’t dig, then they don’t pay.”

A court decision is not expected for months.

Maple Heights attorneys argue that nothing in the 2007 law requires a video service provider to own or physically access landline telephone facilities on public rights-of-way to be subject to the video service provider’s fees.

Without that equipment, streaming services “would not be able to deliver their video programming to their subscribers,” Justin Hawal, an attorney representing Maple Heights, said in a December court filing.

The “modest 5% video service fee” is not a burden but represents a small return on the billions of dollars in profits that streaming services receive across the country from network infrastructure, he said. Hawal.

The justices seemed skeptical of the Maple Heights arguments, in particular questioning whether the argument was even for the court to decide.

“Shouldn’t you be at the Statehouse a block and a half away instead of in a courthouse trying to change the law?” Judge Pat Fisher asked Hawal on Wednesday.

Hawal said Maple Heights is trying to apply existing law to new technology.

Netflix’s lawyers say the company has no physical wires or cables and doesn’t need them under its streaming business model.

Unlike streaming TV stations, “users can watch content anywhere, anytime, and in any amount, as long as they have an Internet connection,” Amanda Martinsek, an attorney representing Netflix, said in a filing. of November.

Netflix argues that a growing number of courts nationwide have concluded that companies like Netflix and Hulu should not pay provider fees because they are not video service providers.

New Technology Era

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