More Cities Are Suing Netflix, Hulu Over Usage Fees

Last week we reported on a Texas town suing Netflix and Hulu for 5% utility fees. Now four Indiana cities are jumping on that same argument and filing lawsuits against streaming services saying they should be paying the same usage fees that apply to cable for using public rights of way to distribute video over the internet.

The cities of Indianapolis, Evansville, Valparaiso, and Fishers filed a lawsuit on August 4 against Netflix, Disney, Hulu, DirecTV, and Dish Network, presenting the case that the streamers should have to adhere to Indiana’s Video Service Franchises (VSF) Act, which requires payments of 5 percent of gross revenue in each city.

However, the case doesn’t seem likely to succeed since Netflix and the other streamers the case is filed against don’t use physical cables to distribute videos, therefore there is no infrastructure on public rights of way that should apply to the cities in which the streaming services have reach.

As ArsTechnica reports, “Netflix is clearly not a cable operator” and is not subject to local franchising rules, said Harold Feld, a longtime telecom attorney and senior VP of consumer-advocacy group Public Knowledge. “Furthermore, because broadband is not considered a cable service, Netflix does not offer video programming ‘over a cable system,’ which would be required to make it a cable operator.”

“I find it extremely unlikely this lawsuit will prevail,” Feld said to Ars, “The [federal] Communications Act defines terms such as ‘cable system’ and ‘cable operator’ in physical terms.”

These new lawsuits seem to be popping up as more and more customers ditch cable providers and are switching to internet-based streaming services, shrinking cable franchise fees paid to individual cities. Last year, Valparaiso Indiana received $446,000 in video franchise fees, down from $457,00 in 2018, and $476,000 in 2017 according to The Times of Northwest Indiana. This seems like cities are looking to capitalize on what they appear to be a loophole in the system that streaming services are using.

So far, Netflix, Hulu and the other streamers in the lawsuit have not responded to the case.

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