During the December 9th City Council meeting, the Irving City Concil approved an agreement for legal services with Mckool Smith, P.C., Korein Tillery, LLC, and Ashcorft Sutton Reyes, LLC to file litigation against Netflix, Hulu and Disney+ to attempt recovery of franchise fees.
The three law firms have also been hired by several cities filing similar lawsuits such as Dallas and Grand Prairie.
Traditionally, cable TV providers are required to pay franchise fees to cities for using lines that are located in the public right-of-way. Public right-of-ways are streets, alleys or easements that are owned or controlled by a government entity, in this case the City of Irving. Up to now, streaming services have not paid any franchise fees, even though they utilize the same lines used by cable providers.
The City of Plano filed a similar suit in June 2021. At that time, they issue the following statement, "The City Attorney’s office is asking the City Council to authorize Plano to join the City of Dallas and other cities in Texas in a lawsuit against streaming video services such as Netflix and Hulu to require them to pay a franchise tax of 5 percent of their gross revenue for use of the public rights of way which is the same fee imposed on cable video providers," the statement reads. "State law requires city contingency legal fee contracts to be authorized by the City Council and Texas Attorney General."
Irving will be seeking the same percentage of gross revenue.
Last year, New Boston, Texas, sued Netflix and Hulu, seeking to establish the streaming services as basically the same as any cable provider.
Because they utilize DSL or fiber optic cables to connect local customers to the internet, New Boston alleged the streaming services operate just like DIRECTV and should have to pay franchise taxes. Since they allegedly failed to obtain the authority to operate from the Texas Utility Commission, New Boston and other cities want Netflix and Hulu to get the same permits as traditional cable providers and pay each city a fee each quarter to continue operating.
Netflix obviously disagrees with the cities’ claims and argues that cities are simply looking to create a way “to tax digital video content provided over the Internet in violation of state and federal law,” according to a filing, as reported by the Dallas Business Journal in a Feb. 22 report.
The cost of suing the streaming giants will be reimbursed out of any money recovered.