Ohio court rejects city cable fees for streaming services

COLUMBUS, Ohio (AP) — The streaming services Netflix and Hulu are not video service providers that would have to pay local governments in Ohio the same fees levied on cable operators, the state Supreme Court ruled Wednesday in a case similar to lawsuits filed by hundreds of other municipalities nationally.

At issue in Ohio is the state’s 2007 Video Service Authorization law, which directed the state Commerce Department to determine what entities must obtain permission to physically install cables and wires in a public right-of-way. Companies that are deemed video service providers must pay a fee to local governments under that law.

Officials with Maple Heights in suburban Cleveland contended that streaming services are subject to the fee because their content is delivered via the internet over cables and wires.

The Supreme Court said in its ruling that Netflix and Hulu aren't video service providers under the law because they provide streaming services over public internet.

“They do not need to place their own wires or equipment in the public rights-of-way to provide their subscribers with their programming, and the equipment used to access their services belongs to their customers, not to them,” the court noted.

Messages seeking comment on the decision were left Wednesday for the companies and for attorneys representing Maple Heights.

The argument before the Ohio court was similar to those in several other states where cities are trying to force streaming service companies to pay cable operator fees.

In Tennessee, the state Supreme Court last spring heard arguments brought by Knoxville against Netflix and Hulu. In July, a Missouri judge allowed more than 400 municipalities to join efforts in a lawsuit seeking similar fees against Netflix and Hulu. In 2020, four Indiana cities sued Netflix, Disney, Hulu, DirectTV and Dish Network to require them to pay the same franchise fees to local governments that cable companies must pay.

In related lawsuits brought in Arkansas, California, Nevada and Texas, Netflix and Hulu won their arguments last year that they can’t be treated the same as video providers. In September, a federal magistrate judge tossed a lawsuit by East St. Louis seeking fees from Netflix, Disney, Apple, Hulu and eight other streaming services, ruling that the state law didn’t apply.

Streaming companies argue their distribution method is different from traditional video providers. They also said that in the Ohio case, it’s up to the Commerce Department to label them a video service provider, a process they say can’t be done through a lawsuit. The court agreed.

Attorneys for Maple Heights argued that nothing in the 2007 law requires a video service provider to own or physically access wireline facilities in public rights-of-way to be subject to video service provider fees.

Without that equipment, the attorneys for the city argued, streaming services couldn't deliver their programming. The city contended the “modest 5% video service fee” is not burdensome but instead represents a small return on billions of dollars in benefits that the streaming services receive nationwide from network infrastructure.

Netflix argued that a growing number of courts nationally have concluded that streaming services don’t owe provider fees because they’re not video service providers.

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Welsh-Huggins, a longtime reporter at the Associated Press, retired this month.