A small, Cleveland suburb has filed a lawsuit against Netflix and Hulu, trying to force the streaming companies to pay a franchise fee typically applied to cable providers.
The following article was originally published in the Ohio Capital Journal and published on News5Cleveland.com under a content-sharing agreement.The lawsuit is part of a growing national trend of cities in at least 13 states, often pinched by shrinking budgets, targeting the nascent streaming industry for new tax revenues.
Those cable providers must pay a tax of up to 5% of their gross revenue in an area as a “video service provider” fee. If cable companies must pay, Maple Heights argued, then so should Netflix and Hulu. The lawsuit comes as customers increasingly bail on cable and opt for streaming — a trend that’s costing cities money.
“Netflix has no wires, cables, or other infrastructure in any Ohio public rights of way,” the company’s lawyers wrote. The city argued the “public internet” exemption referred to internet service providers, not streaming services. And content behind a paywall, it said, isn’t public. As far as hardware: The law only requires the companies to use cables — not build or own them, the argument said.
A count from Bloomberg Law, current as of October 2021, identified 13 such lawsuits around the country. Four have been dismissed. Most the others are mired in procedural battles, including plaintiffs seeking to keep the cases in state court and the streaming companies seeking to transfer them to federal court.
Public Knowledge, a Washington D.C.-based think thank focused on tech policy, argued the state interest in franchise fees from cable companies don’t apply to streaming companies.
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