ATLANTA—The fight to make streaming video companies like Netflix pay the same local 5% regulatory fees already paid by cable companies still in the TV/video business is picking up steam.
Three Georgia municipalities have sued Netflix, Hulu and Disney, seeking to collect millions of dollars in fees dating back several years.
The suit, first reported by the Atlanta Business Journal, and filed by the counties of Gwinnett and Athens-Clark, as well as the city of Brookhaven, also names satellite TV operators DirecTV and Dish Network as defendants.
The federal lawsuit alleges that the defendants violated a 2007 state law called the Georgia Consumer Choice for Television Act. That law stipulates that companies supplying video services to local residents have to pay quarterly franchise fees to local governments.
Nationally, a number of similar lawsuits are ongoing. In August, four Indiana cities, including Indianapolis, jointly filed suit in a local state court against the same defendants, seeking payment under Indiana’s Video Services Franchise Act of 2012.
And in 2018, the city of Creve Coeur, Mo., filed a similar suit against Netflix under its state’s Video Services Providers Act. As The Hollywood Reporter noted earlier this month, a Missouri judge refused Netflix’s request to have the case tossed.
At the heart of the franchise fee burden is the notion that cable operators pay municipalities in order to have the right to festoon their jurisdictions with wires. And big video operators also do use infrastructure like content delivery networks (CDNs), the judge noted. She also rejected that the federal Internet Tax Freedom Act provides blanket protection to streaming companies.
The possible impact from all of these relatively small suits are huge. Gwinnett County estimates that Netflix has generated $103 million in revenue over the last five years streaming video to the county with just over 1 million residents. That video franchise bill alone would come to $5.15 million for just one supplier.
Most cable companies don't include these costs in their advertised price, but rather consign them to the dreaded realm of hidden fees.
“These cases falsely seek to treat streaming services as if they were cable and internet access providers, which they aren’t,” a Netflix spokesperson told The Verge. “They also threaten to place a tax on consumers that the legislature never intended, and we are confident that the courts will conclude that these cases are meritless.”
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