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Judge rejects Arkansas city's bid for share of Netflix, Hulu revenues

by Jaime Adame | October 6, 2021 at 7:00 a.m.
A gavel and the scales of justice are shown in this photo.

A federal district court judge last week dismissed a lawsuit filed on behalf of the city of Ashdown seeking a share of Netflix and Hulu revenues.

The lawsuit claimed that the entertainment streaming services owed money to Ashdown because of their use of broadband infrastructure in public rights-of-way.

U.S. District Judge Susan Hickey in an order Thursday found that the Hulu and Netflix streaming falls within an exclusion for public internet that’s carved into a state law known as the Video Service Act.

In the lawsuit, attorneys representing the city claimed that Netflix and Hulu “should be and are required by the Arkansas Video Service Act to pay each of those municipalities a franchise fee of 5% of their gross revenue, as derived from their providing video service in that municipality.”

The attorneys for the small town in Southwest Arkansas stated in court documents that Arkansas Code Annotated § 23-19-202, requires a fee from a “video service provider” making use of “wireline facilities” such as “broadband” facilities located at least partly in public rights-of-way.

Similar lawsuits have been filed in other states over how streaming services make use of infrastructure, and Ashdown’s lawsuit sought class-action status on behalf of “all Arkansas municipalities in which one or more of the Defendants has provided video service.”

The lawsuit filed in U.S. District Court in Texarkana listed firms from Arkansas, Illinois, Texas and California as representing Ashdown and “the Proposed Class” of cities.

Hickey’s order described the 2013 Video Service Act as allowing “video service providers to avoid the need to negotiate separate authorization from every political subdivision served by their networks.”

Hickey’s order stated that the attorneys representing Ashdown had argued that streaming services offered only to paying customers are not offered over the “public” internet.

“The Court finds the analogy offered by Hulu on point: whether a driver locks the car doors while driving does not affect whether the road taken is a public road,” Hickey said.

James Sutton, the mayor of Ashdown, did not respond to an email seeking comment Monday. Neither Hulu nor Netflix responded to requests for comment Monday.

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