
Cities sue Netflix, Hulu, Disney+, claim they owe cable “franchise fees” - pseudolus
https://arstechnica.com/tech-policy/2020/08/cities-sue-netflix-hulu-disney-claim-they-owe-cable-franchise-fees/
======
eric4smith
By that reasoning, I'm using the "Public right of way" to make this comment.
Therefore, I'm a defendant.

Listen, I get it. They want some compensation from Netflix, Hulu and Disney+
eating up all their local bandwidth. But that's where the money was.

They need to skate where the money is going, not where it was. The money was
in broadcast TV and cable. And most of it is still there. But it's rapidly
being sucked away by individual creators.

And at some point advertisers are going to wake up and realize the premium
that broadcast and cable operators are charging per 1000 viewers is not really
worth that much more than what YouTube pays Jake Paul.

~~~
TulliusCicero
> Listen, I get it. They want some compensation from Netflix, Hulu and Disney+
> eating up all their local bandwidth.

I don't get it. Presumably the companies involved are already paying for the
bandwidth they're using, as are their customers. How are they any different
from other internet users sending around video?

~~~
atoav
How are traditional TV Station different form Netflix and such?

Arguably Netflix is structurally and goal wise closer to any traditional TV
station (who would owe that taxes) than to any individual using the internet.

The biggest point IMO is that they sell stuff film producers make to show ads
— which is precisely the same thing TV stations did for decades.

~~~
a1369209993
> How are traditional TV Station different form Netflix and such?

They paid for (read, "bribed politicians to give them", but that's beside the
point) exclusive use of particular RF spectrum, which then cannot be used for
other purposes. Netflix routes over existing common-carriage infrastructure,
and so does not impose any costs on people who don't use Netflix (assuming
non-corrupt management of said infrastructure, but y'know, caveats, caveats,
caveats...).

~~~
objclxt
> Netflix routes over existing common-carriage infrastructure, and so does not
> impose any costs on people who don't use Netflix

I don’t think that’s strictly true, since the available bandwidth on that
infrastructure is not infinite.

That’s why Netflix supplies CDN appliances free of charge to ISPs - both to
improve customer speeds, but also reduce bandwidth across the entire network.

------
bryanrasmussen
This reminds me of the DR (Denmarks Radio - which is also a Public TV sort of
like the BBC) license, you used to have to pay it for TV. I didn't have a tv
so I stopped paying. Then a year or two later they passed a law that if you
had a computer you had to pay.

I guess lots of European countries have a similar license.

They are phasing the license out in the next couple years, but it used to
really piss me off because I never watched anything on DR but I still had to
pay for it (ok I did accidentally see things if I was over at people's houses,
it was nothing impressive). The assumption being of course that it was a
public good.

Anyway - sub-regional pricing for Netflix etc.

~~~
hkmurakami
NHK in Japan has a similar scheme. If you have a TV you have to pay. If you
have a phone that can receive TV signal, you have to pay. They'd even send
people in person to "check if you have a TV". I believe they recently lost a
court case on this.

~~~
predakanga
In Britain, the BBC uses vehicles fitted with equipment to detect TVs, though
who knows how effective they are.

[https://en.wikipedia.org/wiki/TV_detector_van](https://en.wikipedia.org/wiki/TV_detector_van)

~~~
cheerlessbog
It's unclear they even exist..or work..our could even theoretically work now
we have digital. Their true enforcement strategy is to harass the small
minority who don't pay the license fee.

~~~
UK-Al05
For young people it's not a small minority. Young people have gone off
transmitted TV and they havent adapted yet.

~~~
toyg
They have started to - they extended the relevant law to close loopholes about
“real time” vs “prerecorded” BBC broadcasts, now you need a licence if you use
the iPlayer for anything. Which is fair, even if it forced me to get a license
again. I expect at some point the law will either get more draconian (by
requiring a license for any broadband contract at home) or the BBC will become
an actual streaming service like Netflix, with regular subscription (which
would be a bit of a disaster, since it would basically mean the end of the BBC
as we know it).

~~~
UK-Al05
Most young people don't watch iPlayer either. It heavily tilted towards older
people.

It will only be an issue for people who watch it...

I'm heavily against the license fee, as the majority of content could be
delivered commercially. I absolutely hate that i'm paying money towards soaps,
cake shows, misses brown boys etc which I will never have an interest watching
and get zero value from.

The small amount of state or non commercial stuff it produces could be paid
for by tax or a much smaller license fee.

The money i save could be spent a couple of books or rentals instead which I
would get value from.

~~~
Hamcrest
I'm also for getting rid of the licence fee but instead increasing taxes by
equal measure and funding it that way. Hopefully enshrine that funding into
law. The license fee is just too easy to attack nowadays.

I find the argument for purely commercial a selfish one as public broadcasting
provides a lot of public good through educational means. I mean, just tune
into The One Show or Spring Watch on an an evening and you'll get what I mean.
Plus no ads!

~~~
UK-Al05
And those are the minority of shows. So in reality i'm paying a lot of money
for things that are commercial quality and not educational and don't use.

That's as about as selfish of not wanting to pay for a gym membership i don't
use.

------
Keverw
Kinda reminds me a bit of how Milwaukee wanted money from Pokémon Go because
the players was playing in the local park and some even went off the path so
they were arguing the app is responsible for plants and stuff being damaged.
The city lost but had to pay $83,000 in attorney fees. I think it's a bit of a
overreach that a city in Indiana is trying to regulate a company in
California.

I know Ohio cities can have franchise fees for cable too, wonder if the
regulation is city by city or all based around the same state law... If
Netflix had to follow that, I guess they'd have to have a army of lawyers
review each city one by one keeping a database, filing paper work, etc. 50
states, multiplied by hundred of cities. Sounds like a massive mess. Maybe if
you are the only person in a town of a few thousand watching Netflix, wouldn't
be worth all the extra administration work. So wonder if maybe only the big
cites would get Netflix then?

Satellite has also faced the problem of being treated differently too. I know
in Florida Satellite they charge a higher tax rate compared to cable but
that's state wide from my understanding, since they don't have the local
equipment and as many employees to maintain the infrastructure. Well both
cable and satellite has installers, etc but they could very well be
contractors but still putting people to work locally.

Then I know some areas try to require a permit for satellite TV and the FCC
sued cities over that because of the Over-the-Air Reception Devices (“OTARD”)
rule or limit the number of satellites to 1. I have Dish at home and for some
reason they installed 2 satellite dishes pointing at a slight different angle
than the other one. I guess some cities and HOAs think satellites are ugly
too. Some still have these ordinances on the book, so surprised cities haven't
removed them... Then again in some states same sex marriage is still illegal
on the books too like Ohio and Tennessee, but you know they can't enforce that
anymore either because of the supreme court. I guess the problem is in Ohio
marriage is defined in the state constitution, so it'd take a convention to
change it but I guess not a priority even though it's kinda symbolic even if
no longer law. Virginia did the same, but 2020 they passed updates at least -
5 years after the ruling.

~~~
Cthulhu_
That's a BS ruling; it's the people that would be responsible for damages, and
only if they moved into areas they're not supposed to.

Parks are public spaces and they should both applaud and put a bit more money
into them for what Pokemon Go managed to achieve.

~~~
rocqua
The ruling was in favor of Pokemon Go.

I kinda see the argument of the city. But only if organizing an event in the
park would normally have cost a fee. Because then pokemon go organized an
event in the park, but because the organizers did not have a physical
presence, they didn't need to pay.

------
mvn9
This can only be the first step. Since this is a political move, why not
change the law and restructure taxes? It's difficult for cities to tax value
creation if that value is created globally, in a data centre, somewhere on the
planet.

Why should the city that just happens to host the data centre be able to tax
the profits that are created in that data centre? Or worse, why should a
company choose any city for its headquarters and pretend that the value is
created there?

On a global scale, which society or political entity should have the right to
tax profits that are created on the internet? How should cities be financed if
most of the commerce in the city happens on the internet, outside of the city
limits?

~~~
shidima
But if not this way, then should every city in the world get a cut of the tax?
Can a tiny place in Holland then get a cut of the taxes?

~~~
mvn9
That's the question. The inhabitants of that place will use global services.
Should that tiny place get a cut or should it tax its inhabitants directly?

------
MattGaiser
Cities need to start using technology to constrain their costs rather than
just stabbing at anywhere that has revenue they can tax.

~~~
bleepblorp
Any specific suggestions for how technology can cut municipal costs?

Most of the fat in municipal spending tends to be political (pork) or criminal
(public corruption and/or organized crime), rather than due to process
inefficiencies that could be remedied through better use of technology.

Municipal spending tends to be dominated by the kinds of inherently labor-
intensive services that can't readily be automated. Automation isn't going to
have much of an impact in the number of people needed for firefighting,
garbage collection, or to run and maintain urban water, sewer, electrical, and
road networks anytime soon. Automation in policing is another huge civil
liberties problem best left untouched.

Urban government costs money and municipal tax grab attempts like this are
either evidence of greed (and/or corruption) or inadequate funding models.
These are political, rather than technological, problems.

~~~
Broken_Hippo
But so much can be automated to a point. For example, garbage collection:
Cities have already been saving money by putting in 'smart' cans/compactors
(that are solar powered). No one needs to check every can, they just go along
and get the ones that are full enough. Cities have also done things like
standardize trash can so the machine takes care of the dumping. So many places
now only have 2 people per truck instead of the 3 when I was younger.

We use sensors for water treatment plants (and possibly for water delivery),
software for some public transport when they do such a thing, devices to
measure road traffic, and machines that automate much of road building. I'm
going to guess that there are lots of these sorts of small things these.

You can also simply start doing more of it as a city instead of contracting it
out, but I suppose this isn't really technological.

------
koonsolo
It seems to me that government doesn't want you to figure out how much taxes
they are actualy charging, so they split it up as much as possible. Also, when
they want to increase taxes, they prefer to tax something new instead of
increasing existing percentages.

Here in Belgium it goes as far as taxing for "surface water". I'm waiting for
the day when they start taxing the air we breathe.

------
Solocomplex
Didn't striking down net neutrality rule that internet lines are NOT public
utilities?

------
chmod600
Simple: turn off the services for residents of those cities. The "public
servants" will need to find a new line of work.

~~~
boring_twenties
Why would you turn them off? Just make their prices 5% higher than other
regions.

~~~
kchoudhu
I don't think most people will notice an extra 48 cents on their bill every
month.

~~~
Mirioron
You could outline it in red with a note.

------
smabie
So according to them, they should get paid for any video watched in their
city?

Sounds kind of pathetic, tbh.

~~~
pankajdoharey
Yeah, what next Spotify tax for music broadcast? Freaking city mafias and the
politicians running them, tax anything that has revenues. A political upheaval
is impending.

~~~
Legogris
Several countries have a mandated tariff on any kind of digital media storage
(HDDs, memory cards, etc) and yes, there have been lobbying and talks on
imposing this on cloud services as well.

[https://en.wikipedia.org/wiki/Private_copying_levy](https://en.wikipedia.org/wiki/Private_copying_levy)

~~~
smabie
So nice to see companies offload their dirty work onto government. Crony
capitalism at its finest.

------
OldHand2018
I know this is not going to be popular, but...

Ars doesn't seem to have a good analysis on this. They have a quote from the
lawsuit that says nothing about Netflix being a cable operator. Then Ars goes
and says that Netflix is not a cable operator. They link to the relevant
Indiana law, which again, says nothing about cable TV.

Here is what the law in question says: > IC 8-1-34-14 "Video service" Sec. 14.
(a) As used in this chapter, "video service" means: (1) the transmission to
subscribers of video programming and other programming service: (A) through
facilities located at least in part in a public right-of-way; and (B) without
regard to the technology used to deliver the video programming or other
programming service; and (2) any subscriber interaction required for the
selection or use of the video programming or other programming service. (b)
The term does not include commercial mobile service (as defined in 47 U.S.C.
332).

So really, the question hinges on part (A). If Netflix delivers video to the
residents of these cities and at least part of it goes through a public right-
of-way, then Netflix provides a Video Service in the state of Indiana and is
subject to the taxes on video services. That's really it.

Now, a quick web search shows me that at least one of the cities in this
lawsuit operates a municipal dark fiber network that businesses can rent
access to. So if I get my home internet from Comcast and Comcast uses this
municipal fiber network (why wouldn't they, if it's cheaper than doing it on
their own?), then all of a sudden Netflix is a Video Service. And if I'm
Comcast, I'm thrilled to stick it to them!

------
pankajdoharey
Is it like video watching tax? So what about people watching personal videos,
and those shared through messaging apps or any video. The cities are looking
for pathetic ways to tax its citizens, next what Anyone listening to music on
radio or Spotify would be taxed?

------
2squirrels
Good ol’ cable dying a slow painful death.

~~~
walrus01
Traditional cable TV you would sit on a sofa and flip through channels with a
remote control, yes, but your typical Comcast/Charter/Wave/RCN type cable
multiservice operator is morphing into a DOCIS3/DOCSIS3.1 or GPON fiber based
last mile DIA ISP.

The cable tv operators care about their municipal franchise agreements and
aerial pole+underground right of way very much, since it gives them an
incumbent ISP operating position over a large geographical area.

I should note that cable TV operators in a given city might have many
different types of last mile architecture. Some of which can be taxed by the
city, and some of which cannot. There's cable TV operators with their wholly-
owned wood utility poles installed in the ROW (right of way), there's
operators where they occupy a strand on a municipal electrical grid operator's
poles, there's operators which are on poles shared 3-way between electrical
grid operator, local telco, and cable TV. In newer housing developments some
might occupy their own fully underground ducts between handholes and manholes
with the ducts in the ROW. Or the ducts might be in land owned by HOAs. It
depends very much on the history of how the analog cable TV system in a city
got built out in the 1970s and 1980s and other factors.

In places that are unfortunate enough to lack real competition between the
cable TV operator and the local phone company for last-mile, it can give an
operator a near monopoly advantage. For instance you might be able to get 200
Mbps downstream service from Comcast while the local phone company can only
offer 10Mbps ADSL2+.

Some smart people at the local phone company probably have your area on a map
targeted for a single-strand to the home GPON FTTH overbuild, but
accomplishing that in the near future is either limited by budget concerns or
lack of manpower/bucket truck, lineman and splicer crews to accomplish it.

On the part of the city that might be bringing in 450,000 dollars a year in
cable TV franchise tax revenue, it's such a short sighted move. Yes, maybe
your cable TV franchise tax will continue to drop, as more people disconnect
cable tv (taxed) and move to pure internet services (not taxed).

But the economic benefit to a city of having multiple, overlapping competing
gigabit-class services to the end user is greater than the tax revenue. For
instance the parts of Seattle right now where you can work from home and have
your choice of centurylink (telco ILEC) GPON 1Gbps FTTH, or 1Gbps DOCSIS3.1 or
GPON from Wave or Comcast.

~~~
posguy
Centurylink has pulled quite a bit of fiber in Seattle over the last 3 years,
but their expansion plans are erratic (eg: putting a 12 port GPON aerial
terminal in the middle of blocks of 4 story MDUs that aren't allowed to use
it) and the serviceability database often has said GPON ports misallocated due
to incorrect identification of the number of units in a particular property.

I think Centurylink is hard up for cash at the moment, as they just dropped
gigabit fiber with a free modem & install down to $49 a month for life in most
areas. Frontier did similar offers for the 2 years prior to selling the
Pacific Northwest division to Ziply Fiber.

Ultimately the City of Seattle struck a bad franchise agreement with
Centurylink that didn't mandate universal fiber coverage like more sparsely
populated suburbs did (eg: Lynnwood, Kenmore, etc). The effectiveness of these
agreements was middling though, only the litigious cities were able to ensure
the franchise agreement was enforced.

Poorer townships like Kenmore have universal fiber service available to every
property by 2005 written in as a hard requirement of their franchise
agreements with the telco, but without enforcement action the fiber will not
be built.

~~~
walrus01
One of the things that distinguishes the 1Gbps to the home market in Seattle
is the number of MDU specialists, and percentage of 35+ unit apartments or
condos that have at least one gigabit provider in the building. I'm thinking
of the AS54858 network (CondoInternet/WaveG), independent smaller player Atlas
Networks, in addition to Comcast and Centurylink.

The WaveG MDU network is in a lot of places in the city which are _not_ Wave
cable incumbent territory. It started as its own independent network in areas
that are traditionally Comcast/Centurylink territory around the core of
downtown, capitol hill, south lake union etc and was later acquired by Wave.
The Wave cable TV network was historically its own distinct thing in a
different set of franchise territories within the city boundaries.

The origins of what we would call Wave in the City of Seattle are with
Broadstripe. The same guys who acquired Broadstripe out of bankruptcy and
glued it together with a bunch of other acquired small to medium cable MSOs on
the west coast, are the ones who formed Northwest Fiber (now Ziply) to acquire
the PNW assets of Frontier.

[https://www.multichannel.com/news/broadstripe-writes-its-
las...](https://www.multichannel.com/news/broadstripe-writes-its-last-
chapter-327351)

Ultimately for a full understanding of what Clink and Ziply are doing and
where their last mile and midddle mile networks are the strongest, one needs
to have a historical understanding of the Pacific Northwest Bell network
(-->USWest-->Qwest-->Clink) and the areas that were historically GTE territory
(GTE-->Frontier-->Ziply).

On the topic of the city government of Seattle and its franchise agreement
with CenturyLink. I don't think a city government ever has much negotiating
leverage with an ILEC such as this. The clink network in Seattle is the result
of 100 years of incumbent copper phone line dialtone service, clink setting
its own poles in many places, and is a core part of municipal infrastructure.
The city can't reasonably force the company to vacate the right of way or
cease services without causing a severe impact on the residents of the city.
There's no plausible scenario in which a new franchise agreement won't put be
into place...

~~~
posguy
Centurylink did not have a franchise agreement with the city prior to them
offering TV service over fiber FYI

------
qppo
Are the cities charging the same taxes to ISPs carrying the actual data
delivered by these services?

If so the court is probably going to frown on double dipping.

~~~
Broken_Hippo
It probably depends on the type of ISP you have and whether or not they use
the public right-of-way. I'm going to guess that most ISPs pay it in the US
simply because most folks get their internet from the phone or cable company.
If you happen to have satellite internet of any sort, though, or another form
of wireless, probably not.

------
RcouF1uZ4gsC
It seems on HN, that a lot of people are in favor of municipal owned last mile
fiber as opposed to ISPs. However, this case makes me wonder if that becomes
the case, would we eventually see more shenanigans like this with cities and
towns trying to charge internet services for access to their citizens. Without
competition, I could see them becoming even worse than AT&T and Comcast.

~~~
BLKNSLVR
I guess it all comes down to the intention behind the action, and then what
opportunities are offered as a result of the action down the track. Do you
trust them now? Can you trust them in the future? Are they more or less likely
to screw you than the big comms mono/duo-poly?

Municipality A may have initiated ISP infrastructure contract for the actual
benefit of it's constituents against the comms mono/duo-poly. Hurrah for
Municipality A sticking it to the man and looking out for the constituency.

X years down the track, Municipality A needs funding for corrupt members yacht
or office chesterfield reupholstering. Hey, we're practically giving away
broadband compared to the comms mono/duo-poly and prices have increased way
below CPI the last few years, let's bump it up to (artificial) market-
competitive, woo!

------
amelius
Funny thing about net neutrality is that even the greatest propo

------
amelius
Funny thing about net neutrality is that even the biggest proponents of
laissez-faire capitalism think it's a great idea.

~~~
Cthulhu_
Citation needed; cable / internet companies LOVE the idea of them being able
to get money from both consumers and content providers like Netflix. Facebook
wanted to make its own internet in areas with low internet penetration where
people had to pay for non-Facebook traffic. I'm sure it's the same with a lot
of other tech companies.

~~~
amelius
It's kinda obvious that the few people who'd gain from net neutrality are
proponents of it. My point of course, was about the 99,999% (or so) other
people.

