More Courts Agree Franchise Fees Unjustified: Netflix, Hulu

Arkansas' Video Service Act (VSA) doesn't apply to streaming services like Netflix and Hulu, and the U.S. District Court in Texarkana rightly threw out claims by the city of Ashdown that the streamers owe unpaid franchise fees, they told the 8th U.S. Circuit Court of Appeals in docket 21-3435 appellee answering briefs Tuesday. Ashdown is appealing a lower court's dismissal of its suit seeking franchise fees from the streamers (see 2202100004). The streamers said a growing number of courts reached similar conclusions about franchise fee suits brought under statutes they said were similar to the VSA, and made a similar argument Tuesday in federal court in New Jersey as they fight similar franchise fee litigation there. Hulu told the appellate court it doesn't install or build any facilities of its own in public rights of way and thus never sought a state certificate of franchise authority. It said its service predates the Arkansas VSA by five years, but there was no mention of it or other streaming services in the VSA's legislative history, and for years no state authority attempted to apply the law's requirements to it. Hulu said the VSA doesn't authorize a municipality suing a non-franchise holder for franchise fees. Netflix said subscribers access its content library over the public Internet, and therefore it doesn't need a franchise and has no obligation to pay franchise fees under the VSA. In a docket 2:21-cv-15303 filing Tuesday in U.S. District Court in Newark, the streamers cited a February decision by Gwinnett County, Georgia, Superior Court to bolster their argument for tossing out a pending suit by Longport and Irvington, New Jersey. The streamers said the Georgia court said Netflix content doesn't constitute video programming under Georgia law "that is substantially similar ot the New Jersey Cable Television Act." The Gwinnett County decision granted a Hulu, Netflix, Disney and Dish Network motion to dismiss litigation brought by several Georgia localities. Outside counsel for the Arkansas and New Jersey communities didn't comment.