Several cities across Texas have joined together in a lawsuit against Netflix and other major streaming sites. These cities, including some in North Texas, claim Netflix, Hulu, and Disney owe millions in franchise fees under the Texas Public Utility Regulatory Act (PURA), Spectrum News 1 reported.
This Act requires video service providers to pay a franchise fee of 5% when using utility poles and wirelines in a Texas city. Cable companies have paid these fees for years, but streaming services have managed to sidestep the requirement.
There are 25 Texas cities in total suing the streaming services for years of unpaid fees, according to KLTV. The plaintiffs in the lawsuit include larger cities, such as Dallas, Fort Worth, Austin, and Houston, as well as smaller communities, such as Tyler, Rowlett, and Nacogdoches.
Steven Kirkland, Nacogdoches City Attorney, told KLTV, “The purpose of this lawsuit is to make sure that everybody that uses our right of ways is paying their fair share.”
“The cable companies, the power companies, and all the other private entities that are operating facilities in the right of way actually pay a franchise fee to the city,” he said.
However, cities have lost some of these franchise fee revenues as residents increasingly turn to streaming services over cable services, according to KLTV. The plaintiffs hope to regain some of the lost income and increase future revenue by collecting fees from the streaming services.
Rowlett Mayor Blake Margolis shared with Spectrum News 1 that franchise fees make up important revenue for cities in the state.
“With this lawsuit, we hope to ensure streaming video companies’ compliance with their PURA obligations moving forward and also recoup unpaid franchise fees from the Disney, Hulu, and Netflix streaming services as follow-on relief,” Margolis said. “Franchise fees are an important source of city revenue. We have an obligation to our residents to ensure that these companies comply with state law and pay what is owed to the City of Rowlett.”
Steven Wolen, lead counsel for the plaintiffs, stated, “Disney, Hulu, and Netflix have long withheld statutorily required payments to cities throughout Texas, depriving them of fees that help fund essential city services.” He said the lawsuit was filed “to ensure future compliance with PURA and recoup significant fees owed by some of the nation’s largest streaming services.”
The lawsuit seeks compensation for the unpaid franchise fees for the 25 Texas cities dating back to 2007 when Netflix, the oldest streaming platform in the lawsuit, launched.
The exact amount owed by the streaming services is unknown. Steven Kirkland, attorney for the city of Nacogdoches, estimated that the amount the streaming platforms owe to his city could range from $50,000 to $100,000 yearly.
Keidric Trimble, chief financial officer for the City of Tyler, explained to KLTV, “The cable franchise fee is 5%. We believe that these companies are using the cable network and fiber network to stream these services. And those lines are located in a right of way that the city maintains and upkeeps, so we expect a 5% franchise fee.”
Wolens told ABC 7 News that larger Texas cities may be owed millions of dollars.
The 25 cities listed as plaintiffs in the lawsuit are Amarillo, Austin, Dallas, Houston, Fort Worth, Arlington, Tyler, Abilene, Allen, Beaumont, Carrollton, Denton, Frisco, Garland, Waco, Rowlett, Grand Prairie, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, and Sugar Land.
The streaming services have not responded to media requests for comments.