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Rowlett

Multiple cities sue streaming services over franchise fees

This has been coming for awhile, it seems.

A lawsuit filed Thursday by 25 Texas cities claims that Disney, Hulu and Netflix have for years stiffed the cities out of dollars the streaming giants are required to pay under state law — and now cities are coming to collect.

Austin, Houston, Dallas and Fort Worth are among the cities that sued the streaming services in Dallas County to recover money they say they has been owed since 2007 and to require the services to pay each year going forward. Under state law, the services have to pay cities a franchise fee — which traditional cable providers also pay — in exchange for using communication lines over public rights of way to transmit their services into homes.

As more people abandon cable subscriptions in favor of streaming services, cities have lost franchise fee revenue — money that goes to fund city services like police and fire protection as well as roads, parks and libraries.

Cities haven’t made up that revenue with fees from streaming services, said Steven Wolens, a former Texas lawmaker and lead attorney for the cities. Even though state law classifies them as video service providers that must pay the fees, the major streamers haven’t paid cities a dime, Wolens said.

“They should have been paying this fee from the very beginning,” Wolens said. “Shame on them because they are using the public right of way that every other company pays the city to use.”

Exactly how much the streaming giants owe Texas cities isn’t known, Wolens said. For a smaller city, the losses could number in the hundreds of thousands of dollars, he said. For a larger city, that figure could be in the millions.

Other Texas cities that joined the lawsuit are Abilene, Allen, Amarillo, Arlington, Beaumont, Carrollton, Denton, Frisco, Garland, Grand Prairie, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, Rowlett, Sugar Land, Tyler and Waco.

The cities are seeking funds dating to when the services launched — Netflix in 2007, Hulu in 2008 and Disney+, The Walt Disney Co.’s streaming service, in late 2019.

The city of Beaumont, which as you can see is involved in this litigation, filed its own lawsuit against these three streaming services in February. I could not find any news about that lawsuit since then, so I don’t know if it has been dropped in favor of the current litigation or if there are now two separate actions. My searching did find that several cities were working on this at least as far back as last year. I’d sure like to see a more in depth story about this, but for now this is what we have. Any lawyers want to offer an opinion on their odds of success? The Chron has more.