The Ohio Supreme Court is considering whether Netflix and Hulu should be covered by a 2007 state law that requires cable companies to pay franchise fees to cities.
A decision could have national implications in a class-action suit filed by 2,000 communities against those streaming services.
The city of Maple Heights filed a class-action lawsuit in the Northern District of Ohio in 2020, saying Netflix and Hulu should be authorized as video service providers under that 2007 law, which allowed video service providers to install lines on public owned rights-of-way and set up a fee totaling 5% of the gross revenues earned in each city.
The cities claim Netflix and Hulu should be authorized as video service providers by the Ohio Department of Commerce and pay those franchise fees.
The federal court asked the Ohio Supreme Court to settle the questions of whether they are video service providers under the 2007 law and whether Maple Heights can sue.
Justin Hawal with the city of Maple Heights said Netflix and Hulu are video service providers under that law, because they're using cables and wires in the rights-of-way to provide their content. And with many people "cord-cutting" and leaving cable, Hawal noted they are racking up subscribers.
“They’re going toward Netflix and Hulu, who are using the exact same infrastructure but aren’t being required to pay any fee," Hawal said.
Netflix and Hulu argued that they don't provide a video service as cable companies do but that the streaming services rely on others to get their content out.
“The person who is providing over the wires and cables is the ISP. Not Hulu, not Netflix. We don’t control it. We don’t dictate it. We simply make it available on the internet, like this court does this session," Hulu lawyer Victor Jih said, who also noted schools, churches and local governments provide livestreams, and even the Ohio Supreme Court shares live sessions on its website and the Ohio Channel.
And Mathura Sridharan of the Ohio Attorney General’s Office, which filed a brief in support of Netflix and Hulu, said video service providers are only those which built or own the cables and wires in the rights-of-way.
"This about those who dig. They must pay. If they don’t dig, they don’t pay," Sridharan said.
But Hawal said Hulu and Netflix are competing with cable companies, which pay the fees that allow for investment in the infrastructure that the streaming services use. And he said they're also competing with broadcasters with their variety of programming, while other entities that offer livestreams aren't.
Again noting the court's sessions are livestreamed, Justice Pat Fischer said, "These are pretty good broadcasts."
"I agree, Your Honor, but they don’t provide the same content, quality, genre entertainment that Netflix and Hulu do," Hawal said.
"Whoa, how do you know we don’t?" Justice Melody Stewart said, as those in the courtroom laughed.
Hawal was asked about other services such as Roku, Apple TV and YouTube, and said they weren't included, but acknowledged Netflix and Hulu aren’t the only entities that could be affected.
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