Four cities in Indiana are suing Netflix and others for 5% cable franchise fees

[thewayne]

This is absolute insanity and stands little hope of winning in court, or appeal. From the article:

Four cities in Indiana are suing Netflix and other video companies, claiming that online video providers and satellite-TV operators should have to pay the same franchise fees that cable companies pay for using local rights of way.

The lawsuit was filed against Netflix, Disney, Hulu, DirecTV, and Dish Network on August 4 in Indiana Commercial Court in Marion County. The cities of Indianapolis, Evansville, Valparaiso, and Fishers want the companies to pay the cable-franchise fees established in Indiana's Video Service Franchises (VSF) Act, which requires payments of 5 percent of gross revenue in each city.

Ignoring DirecTV, whose parent, AT&T, is hemorrhaging money on that purchase, they're stupid enough to sue DISNEY?! And note one name conspicuously absent: Amazon. Their Prime TV service uses the same cables. Again, Amazon has huge amounts of money - as do all of these defendants - to represent themselves in court. Probably more than the cities do. This is also extremely bad precedent because if they somehow win, then they've just destroyed the internet because every municipality can charge franchise fees: no more YouTube, taxes on everything at every level.

Internet services already pay connection fees to be carried over ISP services. Those fees are already paid in to city coffers. They do not add to infrastructure load. The cities are trying to double-dip. I understand and appreciate that cities are under tremendous financial burden, especially under these plague times: I've worked in city/state government almost my entire working life. But this is a monumentally stupid idea that is going to go down in flames.

https://arstechnica.com/tech-policy/2020/08/cities-sue-netflix-hulu-disney-claim-they-owe-cable-franchise-fees/

Comments

[dewline]

Well, this looks horrific.

[warriorsavant]

I doubt they'll win, but why should not internet companies pay the same licensing fees (and sales taxes) that local companies pay.

[thewayne]

Here, at least, you pay taxes to local layers of gov't through your bill with your ISP. The more services you buy, the more taxes you pay. The streaming services are also paying fees and thus taxes to their service providers where they connect to the internet. Taxes are being paid where appropriate.

The problem is that Indianapolis et al wants a bigger slice of the pie and thinks they can get paid for services that their tax code does not encompass. By their reasoning, an airplane flying above their state could get billed for road taxes. Bytes and bits flowing across wires does not damage infrastructure, thus incurring costs and requiring maintenance. When cable TV high-speed internet came in, it required cable to be run along utility poles owned by the City. The City charged these fees because the poles had to be maintained, it was a small rental fee because if they had to work on the poles, those wires sometimes had to be taken down and put back up. And it was a source of revenue for the City. Pretty much every City charges them. The Cable TV industry hates them, but they’re kinda stuck. Dish Network and DirecTV completely avoided them when they were satellite broadcast providers because they were beaming their content down from orbit, but now they’re streaming just like everyone else and are now part of the fray.

It’s complicated. But what it boils down to is that if these Indiana cities want a bigger slice of the pie, they have to revise their tax codes. This is the wrong code to try to enlarge their share because these services do not involve physical infrastructure. One commenter said “Netflix should tell Indianapolis ‘Go ahead and seize all our physical infrastructure.’” There isn’t any there. It’s all bits streamed from multiple Amazon Cloud data centers located throughout the country.

[warriorsavant]

Reasonable analysis

[silveradept]

This does not seem like the right way to indicate that there is a tragedy of the commons happening in these situations. If there were something other than the greed of corporations as a guiding principle, of course, there might be a good way of getting municipalities and the like a proper amount of resources through other levers. But that requires government that actually wants to succeed and be able to provide services, rather than government that wants to dismantle everything so that greedy corporations can profit more efficiently and totally.