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COLUMBUS, Ohio — Should Netflix and other streaming services pay local governments the same fees as cable operators?
That was the question before the Ohio Supreme Court at Wednesday’s hearing as the court debated whether streaming services like Netflix and Hulu are covered by a state law that requires them to pay to play.
The argument is similar to that in several other states where cities are trying to force streaming service companies to pay cable operator fees.
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At issue in Ohio is the state’s 2007 Video Service Authorization law, which directs the state Department of Commerce to determine which organizations must obtain permission to physically install cables and wires in the public domain. Companies considered as video service providers have to pay a fee to local governments according to this law.
Maple Heights officials in suburban Cleveland allege that streaming services incur fees because their content is transmitted over cables and wires over the internet.
In Tennessee, the state Supreme Court is scheduled to hear arguments brought against Netflix and Hulu by Knoxville next month. A similar lawsuit filed by the city of Creve Coeur is pending in Missouri. In 2020, four Indiana cities sued Netflix, Disney, Hulu, DirectTV, and Dish Network, demanding that they pay local governments the same franchise fees that cable companies must pay.
In related lawsuits filed in Arkansas, California, Nevada and Texas, Netflix and Hulu won their claims last year that they could not be treated the same as video providers.
Streaming companies argue that their distribution methods are different from traditional video providers. Also in the Ohio case, they say it’s up to the Department of Commerce to label them as a video service provider, they say that action cannot be made through a lawsuit.
The state sided with streaming companies, claiming that Ohio law only covers companies that build infrastructure to carry cables.
“It’s about the boilers, they have to pay,” Ohio assistant attorney general Mathura Sridharan told judges in the state Supreme Court on Wednesday during oral discussions. “If they don’t dig, they won’t pay.”
Court decision is not expected for months.
Maple Heights attorneys argue that nothing in the 2007 law required a video service provider to have cable facilities with public transit rights or to be subject to video service provider fees.
Without this equipment, streaming services “would not be able to deliver their video programming to their subscribers,” Justin Hawal, an attorney representing Maple Heights, said in a December court filing.
“The modest 5% video service fee” isn’t burdensome, but rather represents a small return on the billions of dollars in benefits streaming services receive from nationwide network infrastructure, Hawal said.
Judges were skeptical of Maple Heights’ arguments, questioning in particular whether the argument was one for the court to decide.
“Shouldn’t you be at State Building a block and a half away, rather than in a courthouse trying to change the law?” Judge Pat Fisher asked Hawal on Wednesday.
Hawal said Maple Heights is trying to apply the existing law to a new technology.
Netflix lawyers say the company doesn’t have physical wires and cables and doesn’t need them as part of its streaming business model.
Unlike broadcast TV stations, “users can watch content anywhere, anytime and in any amount as long as they have an internet connection,” Amanda Martinsek, a lawyer representing Netflix, said in a November filing.
Netflix argues that a growing number of courts at the national level have concluded that companies like Netflix and Hulu do not pay provider fees because they are not video service providers.
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