Texas Municipality Accuses Netflix, Hulu of Violating Public Utilities Law

Netflix and Hulu are defying Texas public utilities law by running their streaming service through local servers and “broadband wireline facilities located at least in part in public rights-of-way” without proper state authorization and payment of quarterly franchise fees, alleged the city of New Boston, Texas, in a complaint (in Pacer) Tuesday in U.S. District Court in Texarkana. As video service providers, Netflix and Hulu were required to file for state-issued certificates of franchise authority through the state's Public Utility Commission, but didn’t do so, said the complaint, seeking class-action status on behalf of other Texas municipalities. The certificates would have freed them to use public ROWs in return for quarterly franchise fees equaling 5% of gross revenue to each city in which it provides service, “derived from their operations in that municipality,” it said. The complaint seeks the unpaid fees, plus declaratory judgment that Netflix and Hulu are violating the law. New Boston is about 20 miles west of Texarkana and 150 miles northeast of Dallas. Netflix and Hulu didn’t comment Wednesday.