Traditional cable TV providers are required to pay cities and counties what is known as a franchise fee in exchange for using local cable infrastructure. But streaming services like Netflix, Hulu, and Disney + don’t have to pay the same fees. So, as more and more people move away from traditional cable, cities are getting less revenue from license fees.

However, this arrangement is currently under review in court as cities in Texas including Grand Prairie, Dallas and Irving have all sued the streaming services in an attempt to collect franchise fees.

The Texas Standard learns more from John Bergmayer, legal director of Public Knowledge, a public interest group focused on the intersection of communication and technology. Listen to Bergmayer’s interview in the audio player above or read the transcript below to learn more about the importance of franchise fees and how laws may need to be revised to better suit industries. streaming and cable today.

This interview has been edited slightly for clarity.

Texas Standard: These kinds of franchise fee lawsuits have been filed in several states, not just Texas. So how widespread is an uprising here?

John Bergmayer: It’s pretty common, and it has been over the past few years. So we’ve seen cases in Ohio. Common knowledge: We recently filed a brief in Tennessee and a largely similar case. So yes, this is a very common thing. And that’s understandable because many cities depend on that franchise income. And as traditional sources start to dry up, it’s understandable that they are looking for ways to make up any shortfall.

It’s understandable that cities don’t want to lose a source of income, but how much income are cities actually losing?

That’s a good question, and I’m sure it varies from city to city depending on its size and nature. So I couldn’t talk about the numbers in particular. But I must stress that I think these lawsuits are probably misguided, and that is because of the cable franchise fees, I think they are a very justifiable practice. But it was really based on making sure that the cable companies that operate infrastructure, build infrastructure across a city, basically serve the entire city. They use public rights of way, so some public fees and benefits are quite reasonable in return for free access to things like utility poles and so on that they need to run their wires. .

But also a very big motivating goal of these franchising fees is to prevent digital redlining, where a cable company steps in and only serves profitable neighborhoods and not the least profitable ones. And then, frankly, if a competitor comes in, they might have the same incentive, leaving some areas completely underserved. So part of the franchise deal market is, it’s like you can come to our town, but we just want to make sure you serve the whole community. And I think there’s a lot of logic to that, and that sort of thing doesn’t apply to these online streaming services.

Instead I would say that, you know, we have to make sure that the ISPs [internet services providers], that broadband service providers actually provide the infrastructure to all aspects of the community the same way we did with cable TV in the past.

The other part can say that a lot of these streaming companies are big media conglomerates. They are making a lot of profit using the Internet, which relies on the infrastructure that has been put in place. Why shouldn’t they pay?

Yes, and it is absolutely true. And at the same time, it’s still not these companies that are building this infrastructure. If the concern is that we have to make sure that this infrastructure is built, that the broadband service is affordable for people, and that it reaches all aspects of a community, I mean you have to look to them. companies that actually build that infrastructure, not the various Internet services that people access once they have it.

Are you suggesting that no one should pay for this access? If you got something from Hulu or Disney +, shouldn’t cities be making revenue on that? Or will it all end up trickling down to the consumer who will pay more for the content?

First of all, yes, you are right. At the end of the day, consumers pay and it’s about structuring a system to make sure it’s done fairly and equitably. And in terms of who has to pay for who gets the revenue, I think cities should definitely get the revenue from the broadband providers – whatever revenue they lack. I’m just suggesting that the policies put in place regarding physical cable companies that drive trucks on the streets and physically access rights of way and physically use conduits and poles and stuff, I think it’s important to s ‘Sure that’s, like, OK, that’s the problem we were trying to solve with these laws. They were written in a way that just says “video providers,” so legal action – I’m well aware of that. But I think their motivating goal was infrastructure.

I think when Netflix started getting more mainstream – the online streaming version of Netflix, not just DVDs – people were like, oh, that’s gonna be that cable alternative. And really, as it’s developed, Netflix is ​​more akin to an HBO; it’s closer to a cable channel. I tend to think of Hulu and Disney + and all those other different services not as one-stop-shops to cable, which was, in part, a fact of technology – you can only have one set of wires, so you had to have a one-stop-shop – compared to now where it’s really a much more a-la-carte world where the nature of these services is much closer to cable add-ons.

For example, I would ask myself why should Hulu pay and not Facebook? OK, the law says “video”, but you know, there really isn’t any logic in that anymore. It’s just kind of passing the law and trying to apply it to the services you see out there with the law as it’s written, when, you know, sometimes it’s better to just review the policy behind the law. and update it to reflect the current reality better.

Litigation on this issue is not new, although many cities in Texas earlier appear to be taking the plunge. Given that we have seen these recent cases filed, are we seeing any trends in the rulings or are there any precedents that are being set or emerging so far for how these cases are decided?

I don’t think there was a final resolution one way or the other. Cases continue to be filed in different states and they continue to be defended in different states. And the very nature of our federal system is that even though two states have textually identical copy and paste laws, the courts of one state might read it one way and the courts of another state might read it one way. a different way. So I think it’s going to take a while to resolve.

And I would say that my concern on this issue is really not the legal question: does federal law prevail and everything – all of that is relevant. But really, I’m just trying to refocus people’s attention on why we have cable franchise rules. It’s really about preventing digital redlining and ensuring fair access to infrastructure, and hoping that as people think about it and lose income, maybe they try to look to these policies to find better ways to achieve the same longer-term goal. long term and sustainable fashion.