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August 18, 2020 12:50 am

Cities Sue Netflix, Hulu, Disney, Claim They Owe Cable 'Franchise Fees'

Four cities in Indiana are suing Netflix and other video companies, claiming that online video providers and satellite-TV operators should have to pay the same franchise fees that cable companies pay for using local rights of way. Ars Technica reports: The lawsuit was filed against Netflix, Disney, Hulu, DirecTV, and Dish Network on August 4 in Indiana Commercial Court in Marion County. The cities of Indianapolis, Evansville, Valparaiso, and Fishers want the companies to pay the cable-franchise fees established in Indiana's Video Service Franchises (VSF) Act, which requires payments of 5 percent of gross revenue in each city. The lawsuit is based on an unusual legal argument and doesn't seem likely to succeed. Essentially, the cities are claiming that Netflix and similar providers use the public rights of way simply by offering video streaming services over the Internet: "Defendants transmit video programming to Indiana subscribers using Internet protocol and other technologies. When doing so, Defendants transmit their programming through facilities located at least in part in public rights of way within the geographic boundaries of Indiana Units, including public rights of way located within Plaintiffs' geographic boundaries. Therefore, Defendants are required by the VSF Act to pay the Plaintiffs -- and all other Indiana Units in which Defendants transmit video programming through facilities located at least in part in a public right-of-way -- "franchise fees." But streaming companies don't have to build physical infrastructure in each city to offer online video, so they aren't deploying their own wires on public rights of way. US law defines a cable system as "a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service." Local franchising rules and fees are based on cities' authority to manage their local rights of way. Netflix, Hulu, and Disney+ are Internet-only services. Dish and DirecTV are primarily satellite operators but also offer online access. The cities' lawsuit never mentions the word "satellite" and doesn't fully explain how DirecTV and Dish use the public rights of way.

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