Do Netflix and other streaming services require local governments to pay the same fees as operators only?
That was the question before the Ohio Supreme Court during Wednesday’s hearing, as the court debated whether streaming services like Netflix and Hulu were covered by a state law that required them to pay for the game.
The argument is that, like many other states, cities are trying to force streaming service providers to pay only operator fees.
The issue in Ohio is the state’s Video Services Approval Act of 2007, which directs the state Department of Commerce to require that companies be allowed to physically install cables and wires in public right-of-way. Companies considered video service providers will have to pay a fee to the local government under that law.
Officials at Maple Heights in suburban Cleveland claim that streaming services are subject to a fee because their content is distributed over the Internet via cable and cable.
In Tennessee, the state Supreme Court is scheduled to hear arguments brought by Knoxville against Netflix and Hulu next month. A similar lawsuit was filed in Missouri by the city of Crawford. In 2020, four Indiana cities sued Netflix, Disney, Hulu, DirectTV and Dish Network to have their local government pay the same franchise fees that only companies have to pay.
In lawsuits brought to Arkansas, California, Nevada and Texas, Netflix and Hulu won their argument last year that they could not be treated as video providers.
Streaming companies argue that their distribution methods differ from those of conventional video providers. In the case of Ohio, they further say, their video service provider’s labeling depends on the Commerce Department, a process they say cannot be done through lawsuits.
The state has sided with streaming companies, claiming that Ohio law only covers infrastructure companies to carry cables.
Ohio Deputy Solicitor General Mathura Sreedharan told state Supreme Court justices during a verbal argument on Wednesday, “It’s about those who dig, they must pay.” “If they don’t dig, they won’t pay.”
The court’s decision cannot be expected for several months.
Maple Heights attorneys argue that the 2007 law does not require a video service provider to own or physically access a public rights-of-way wireline facility subject to video service provider fees.
Without those tools, streaming services “could not provide their customers with their video programming,” Justin Howell, an attorney representing Maple Heights, said in a December court filing.
Hawal said the “little 5 percent video service fee” represents not a burden but a small return on the billion-dollar benefit that streaming services receive nationwide from network infrastructure.
Judges seemed skeptical of Maple Heights’ argument, specifically questioning whether the argument was even one in favor of the court’s decision.
“Shouldn’t you be a block and a half away from the statehouse without going to the courthouse to try to change the law?” Justice Pat Fisher questioned Hawal on Wednesday.
Howell said Maple Heights is trying to enforce existing laws on a new technology.
Netflix attorneys say the company does not have the physical wire and does not need them under its Internet streaming business model.
Unlike broadcast TV stations, “users can view content anywhere, anytime and in any amount, as long as they have an Internet connection,” Amanda Martinez, an attorney representing Netflix, said in a November filing.
Netflix argues that a growing number of courts nationally have concluded that companies like Netflix and Hulu should not pay provider fees because they are not video service providers.