Cities sue Netflix, Hulu, Disney+, claim they owe cable “franchise fees”
arstechnica.com
arstechnica.com
Listen, I get it. They want some compensation from Netflix, Hulu and Disney+ eating up all their local bandwidth. But that's where the money was.
They need to skate where the money is going, not where it was. The money was in broadcast TV and cable. And most of it is still there. But it's rapidly being sucked away by individual creators.
And at some point advertisers are going to wake up and realize the premium that broadcast and cable operators are charging per 1000 viewers is not really worth that much more than what YouTube pays Jake Paul.
I don't get it. Presumably the companies involved are already paying for the bandwidth they're using, as are their customers. How are they any different from other internet users sending around video?
It wasn't saying that the reasoning is actually sound. It's just, can be comprehended.
Also, an interesting twist to ponder: arguably the data packets "belong" to Netflix and the customer.
Arguably, it's the empty "capacity" that's being owned and rented by the Internet carrier and its customer, who can then have pricing discussions around how much capacity.
Welcome to being an ISP.
Would me demanding money from you and, if you don’t pay, punch myself and your neighbour in the face, make you more or less likely to pay me?
Netflix etc don’t own the last mile fiber. Cities taking out their own utilities impacts them, their residents, and the ISPs operating them. Hulu and Disney are none of those entities.
Population of local Indiana city as a % of Netflix global consumer base?
What would Netflix's response likely be?
> the residents may have little recourse
What would you do if Netflix increased your subs, because your municipality told Netflix that they need to charge you 100% sales tax?
What would you do if Netflix didn't even give you the option, and just cancelled your account for you, and gave you your local officials name, telephone, address and email?
What would you do if Netflix didn't even give you the option, and just cancelled your account for you, and gave you your local officials name, telephone, address and email?<<
this would encourage me to find NETFLIX somewhere else
Arguably Netflix is structurally and goal wise closer to any traditional TV station (who would owe that taxes) than to any individual using the internet.
The biggest point IMO is that they sell stuff film producers make to show ads — which is precisely the same thing TV stations did for decades.
A cable provider who lays physical cables in the ground pays a franchise fee to the community for the right to lay those cables on public land. The justification for this fee was that it increased community costs (it's more expensive to lay and maintain water and sewer pipes, for example, and digging up part of the road to lay the lines will result in the roads needing to be redone sooner even if they're patched).
Netflix, Hulu, and satellite providers do not use public right of ways. Sure, you may watch Netflix over DSL provided by your cable provider, but the cable provider has already paid the fee.
They paid for (read, "bribed politicians to give them", but that's beside the point) exclusive use of particular RF spectrum, which then cannot be used for other purposes. Netflix routes over existing common-carriage infrastructure, and so does not impose any costs on people who don't use Netflix (assuming non-corrupt management of said infrastructure, but y'know, caveats, caveats, caveats...).
I don’t think that’s strictly true, since the available bandwidth on that infrastructure is not infinite.
That’s why Netflix supplies CDN appliances free of charge to ISPs - both to improve customer speeds, but also reduce bandwidth across the entire network.
That is a difference (of course) — however from a film makers perspective they are still trying to sell my film to the audience.
I am just sick of modern silicon valley companies doing the same thing as traditional companies while additionally deploying "one crazy trick" that let's them argue they are exempt to all existing regulations.
Tangential: I was watching free to air last night with my 7 year old (we both never watch TV) and she innocently asked “does everyone watching this show see the same ad”. I said yes and the look on her face said it all. Even at 7 she knew that non-targeted ads are stupid
Did you duly educate her that she already has a user profile being built within whatever apps and services you allow her to use?
There's surely a middle ground, but where we are ain't it.
Edit: I see you've already answered the similar reply. In that case, you're saying that non-targeted ads are stupid, but you're educating your children to input fake data. That doesn't compute...
Edit 2: First sentence should read "as a result of targeted advertising" rather than "to avoid targeted advertising". Sigh.
Is that a bad thing? I was perfectly capable of understanding what a viagra ad is and ignoring it when I was in elementary school. It doesn't take much. Imo all this parental control around sex is more about parents feeling uncomfortable than it is about kids being unable to understand it or somehow get "scarred" from it.
"A television re-broadcaster may sell local or regional advertising for broadcast only on the local transmitter. Rarely, they may air limited programming distinct from their parent station. Some "semi-satellites" broadcast local newscasts or separate news segments in part of a newscast."[0]
Usually they're the worst, and like the expenses associated with billing and hierocracy in the medical field, everyone would be better off with that bureaucratic effort not spent.
I'd say at best, they can inform you of something you need but didn't know existed, but even your "best" case is a valid use of advertising. And, yeah, a lot of advertising is noise. That's why advertisers are so interested in targeted advertising.
Advertisers don’t sell ads, they buy them.
Ask the company who uses lots of nails whether hammers work.
I mean maybe the purchaser employee at the company has some conflict of interest around the question -- if they're specialized in evaluating and negotiating hammer purchases they'll not want the company to switch to screws.
But the company as a whole seems to have no vested interest in promoting hammers. They presumably want to sell the stuff they make with hammers and may lie to you about how awesome those products are. But lie about hammers? Why?
Just because someone believes it works doesn't mean it does.
Ad companies sell ads.
Advertisers purchase ads.
Users see ads.
That’s it.
Let me see if I can punch through your reading comprehension issues.
Coca-Cola spent over 4 billion dollars in advertising in 2019 [1], I guess if you asked them if they believe in advertisement they will tell you that they do.
Coca-Cola doesn't rely on you *believing* that advertisement work, they *believe* advertisement works.
I do not know if advertisement works personally, I am guessing that Coca-Cola believes it does and that they have reason to believe so.
[1] https://www.statista.com/statistics/286526/coca-cola-advertising-spending-worldwide/This is the city governments suing, so I don't think they're concerned about the ISPs' bandwidth being used up. That's not really their problem.
I mean you don't get multiple water lines for different purposes... actually don't quote me on that, they could have a 'grey' water line to use for flushing toilets and the like. But my point is, you get a connection to the water mains, as long as you don't use excessive water (and even if you do, you "just" pay for your usage), what you do with it is nobody's business. Same with electricity.
I guess lots of European countries have a similar license.
They are phasing the license out in the next couple years, but it used to really piss me off because I never watched anything on DR but I still had to pay for it (ok I did accidentally see things if I was over at people's houses, it was nothing impressive). The assumption being of course that it was a public good.
Anyway - sub-regional pricing for Netflix etc.
It will only be an issue for people who watch it...
I'm heavily against the license fee, as the majority of content could be delivered commercially. I absolutely hate that i'm paying money towards soaps, cake shows, misses brown boys etc which I will never have an interest watching and get zero value from.
The small amount of state or non commercial stuff it produces could be paid for by tax or a much smaller license fee.
The money i save could be spent a couple of books or rentals instead which I would get value from.
I find the argument for purely commercial a selfish one as public broadcasting provides a lot of public good through educational means. I mean, just tune into The One Show or Spring Watch on an an evening and you'll get what I mean. Plus no ads!
That's as about as selfish of not wanting to pay for a gym membership i don't use.
I live in Japan, no tv and a phone that doesn't receive TV broadcast, but the nhk guys hastle us every month or two and almost convinced my wife to pay.
Some of the tactics I've heard of them using are quite scummy as well.
Edit:
Link to some information about the court case.
https://www.japantimes.co.jp/news/2020/06/27/national/crime-...
> The public broadcasting tax, also known as the Yle tax, replaced the license fee in 2013. The tax ranges from 50 euros to 140 euros per person and per year, depending on income. Minors and persons with low income are exempt from the tax.
https://en.wikipedia.org/wiki/Yle#:~:text=Yle%20tax,-Main%20....
Legally, you have to pay if you have a television in you home and you are subject to paying the residence tax (which will soon be applicable to less than 20% of homes anyway).
> And it's significant
No, it's not. It's like less than 0.5% of the tax you are paying (considering income tax, social tax, residence/homeowning tax, VAT...). They just keep it because they can rile up /distract people when they increase the TV tax by 5 euros.
And it is a way for the government to pressure public TV/radio into some obedience (since the government can basically cut a large part of their funding of these TV/radio by removing this tax).
You don't know my income,monthly expenses, how many kids I have to feed, whether I have a mortgage, an alimony to pay or not... You have no idea what my budget is.
So less than 0.5% of what disposable income I have exactly? Tell me.
I'm not paying a flat tax (the tax doesn't depend on household income as you are insinuating) for something I have no use for at first place.
It was completely ridiculous; after switching to a licensing model, DR’s costs for raking in money went up by about 15 million DKK just in fees to lawyers, if memory serves correctly.
I'm living in Germany and I'm not super happy about the TV tax but I suppose we haven't got a better solution.
Having a mix between private free press and publicly funded broadcasting probably creates some balance between the two worlds. I would expect the quality of the private press to decline (further), if we wouldn't have public broadcasting anymore.
In a similar vein, they simplified tax brackets for last year, instead of four brackets, there's now just two, and most people ended up paying less taxes (see https://www.rijksoverheid.nl/onderwerpen/belastingplan/belas... for an infographic; keep in mind that while the lowest incomes do pay a little more taxes, they also get more money back from the government in stipends and subsidies for e.g. rent, health insurance, and a fixed 'discount' on taxes)
Also note: technically we have, and have always had 4 brackets. They just merged the tax brackets by setting limits and rates weirdly.
I think everyone who was around then recognize the reference "Do you want a snail on your eye?"
As a student, unemployed or otherwise paid from the state it isn't a problem, you let them pay it. But if you are single, you have to pay the 210€/yr on your own.
Then they simply moved the collection of the license to your taxes so you don't see it explicitly, and of course now it does not matter if you don't have a TV.
Everyone pays the TV tax regardless, but it is somewhat progressive with low income residents paying somewhat less than higher income ones. I don't really mind paying for the public broadcaster as they serve as a guarantee for public, independent news.
What does annoy me is that they compete for the rights to broadcast super expensive sports and culture events (olympics, various football leagues, eurovision, etc). This greatly increases their budgets while not providing essential news value to the public not equally well served by private media broadcasters. Some of their own tv-series productions are well made and would not get the green light at private broadcasters and channels, so I would rather they focus on those.
I know Ohio cities can have franchise fees for cable too, wonder if the regulation is city by city or all based around the same state law... If Netflix had to follow that, I guess they'd have to have a army of lawyers review each city one by one keeping a database, filing paper work, etc. 50 states, multiplied by hundred of cities. Sounds like a massive mess. Maybe if you are the only person in a town of a few thousand watching Netflix, wouldn't be worth all the extra administration work. So wonder if maybe only the big cites would get Netflix then?
Satellite has also faced the problem of being treated differently too. I know in Florida Satellite they charge a higher tax rate compared to cable but that's state wide from my understanding, since they don't have the local equipment and as many employees to maintain the infrastructure. Well both cable and satellite has installers, etc but they could very well be contractors but still putting people to work locally.
Then I know some areas try to require a permit for satellite TV and the FCC sued cities over that because of the Over-the-Air Reception Devices (“OTARD”) rule or limit the number of satellites to 1. I have Dish at home and for some reason they installed 2 satellite dishes pointing at a slight different angle than the other one. I guess some cities and HOAs think satellites are ugly too. Some still have these ordinances on the book, so surprised cities haven't removed them... Then again in some states same sex marriage is still illegal on the books too like Ohio and Tennessee, but you know they can't enforce that anymore either because of the supreme court. I guess the problem is in Ohio marriage is defined in the state constitution, so it'd take a convention to change it but I guess not a priority even though it's kinda symbolic even if no longer law. Virginia did the same, but 2020 they passed updates at least - 5 years after the ruling.
Parks are public spaces and they should both applaud and put a bit more money into them for what Pokemon Go managed to achieve.
I kinda see the argument of the city. But only if organizing an event in the park would normally have cost a fee. Because then pokemon go organized an event in the park, but because the organizers did not have a physical presence, they didn't need to pay.
Why should the city that just happens to host the data centre be able to tax the profits that are created in that data centre? Or worse, why should a company choose any city for its headquarters and pretend that the value is created there?
On a global scale, which society or political entity should have the right to tax profits that are created on the internet? How should cities be financed if most of the commerce in the city happens on the internet, outside of the city limits?
Most of the fat in municipal spending tends to be political (pork) or criminal (public corruption and/or organized crime), rather than due to process inefficiencies that could be remedied through better use of technology.
Municipal spending tends to be dominated by the kinds of inherently labor-intensive services that can't readily be automated. Automation isn't going to have much of an impact in the number of people needed for firefighting, garbage collection, or to run and maintain urban water, sewer, electrical, and road networks anytime soon. Automation in policing is another huge civil liberties problem best left untouched.
Urban government costs money and municipal tax grab attempts like this are either evidence of greed (and/or corruption) or inadequate funding models. These are political, rather than technological, problems.
We use sensors for water treatment plants (and possibly for water delivery), software for some public transport when they do such a thing, devices to measure road traffic, and machines that automate much of road building. I'm going to guess that there are lots of these sorts of small things these.
You can also simply start doing more of it as a city instead of contracting it out, but I suppose this isn't really technological.
Here in Belgium it goes as far as taxing for "surface water". I'm waiting for the day when they start taxing the air we breathe.
Followed to its proper logical conclusion, Wikipedia must pay a tax, Reddit must pay a tax, Imgur must pay a tax, and so on. This is extremely authoritarian in its nature.
Sounds kind of pathetic, tbh.
Ars doesn't seem to have a good analysis on this. They have a quote from the lawsuit that says nothing about Netflix being a cable operator. Then Ars goes and says that Netflix is not a cable operator. They link to the relevant Indiana law, which again, says nothing about cable TV.
Here is what the law in question says: > IC 8-1-34-14 "Video service" Sec. 14. (a) As used in this chapter, "video service" means: (1) the transmission to subscribers of video programming and other programming service: (A) through facilities located at least in part in a public right-of-way; and (B) without regard to the technology used to deliver the video programming or other programming service; and (2) any subscriber interaction required for the selection or use of the video programming or other programming service. (b) The term does not include commercial mobile service (as defined in 47 U.S.C. 332).
So really, the question hinges on part (A). If Netflix delivers video to the residents of these cities and at least part of it goes through a public right-of-way, then Netflix provides a Video Service in the state of Indiana and is subject to the taxes on video services. That's really it.
Now, a quick web search shows me that at least one of the cities in this lawsuit operates a municipal dark fiber network that businesses can rent access to. So if I get my home internet from Comcast and Comcast uses this municipal fiber network (why wouldn't they, if it's cheaper than doing it on their own?), then all of a sudden Netflix is a Video Service. And if I'm Comcast, I'm thrilled to stick it to them!
The cable tv operators care about their municipal franchise agreements and aerial pole+underground right of way very much, since it gives them an incumbent ISP operating position over a large geographical area.
I should note that cable TV operators in a given city might have many different types of last mile architecture. Some of which can be taxed by the city, and some of which cannot. There's cable TV operators with their wholly-owned wood utility poles installed in the ROW (right of way), there's operators where they occupy a strand on a municipal electrical grid operator's poles, there's operators which are on poles shared 3-way between electrical grid operator, local telco, and cable TV. In newer housing developments some might occupy their own fully underground ducts between handholes and manholes with the ducts in the ROW. Or the ducts might be in land owned by HOAs. It depends very much on the history of how the analog cable TV system in a city got built out in the 1970s and 1980s and other factors.
In places that are unfortunate enough to lack real competition between the cable TV operator and the local phone company for last-mile, it can give an operator a near monopoly advantage. For instance you might be able to get 200 Mbps downstream service from Comcast while the local phone company can only offer 10Mbps ADSL2+.
Some smart people at the local phone company probably have your area on a map targeted for a single-strand to the home GPON FTTH overbuild, but accomplishing that in the near future is either limited by budget concerns or lack of manpower/bucket truck, lineman and splicer crews to accomplish it.
On the part of the city that might be bringing in 450,000 dollars a year in cable TV franchise tax revenue, it's such a short sighted move. Yes, maybe your cable TV franchise tax will continue to drop, as more people disconnect cable tv (taxed) and move to pure internet services (not taxed).
But the economic benefit to a city of having multiple, overlapping competing gigabit-class services to the end user is greater than the tax revenue. For instance the parts of Seattle right now where you can work from home and have your choice of centurylink (telco ILEC) GPON 1Gbps FTTH, or 1Gbps DOCSIS3.1 or GPON from Wave or Comcast.
I think Centurylink is hard up for cash at the moment, as they just dropped gigabit fiber with a free modem & install down to $49 a month for life in most areas. Frontier did similar offers for the 2 years prior to selling the Pacific Northwest division to Ziply Fiber.
Ultimately the City of Seattle struck a bad franchise agreement with Centurylink that didn't mandate universal fiber coverage like more sparsely populated suburbs did (eg: Lynnwood, Kenmore, etc). The effectiveness of these agreements was middling though, only the litigious cities were able to ensure the franchise agreement was enforced.
Poorer townships like Kenmore have universal fiber service available to every property by 2005 written in as a hard requirement of their franchise agreements with the telco, but without enforcement action the fiber will not be built.
The WaveG MDU network is in a lot of places in the city which are not Wave cable incumbent territory. It started as its own independent network in areas that are traditionally Comcast/Centurylink territory around the core of downtown, capitol hill, south lake union etc and was later acquired by Wave. The Wave cable TV network was historically its own distinct thing in a different set of franchise territories within the city boundaries.
The origins of what we would call Wave in the City of Seattle are with Broadstripe. The same guys who acquired Broadstripe out of bankruptcy and glued it together with a bunch of other acquired small to medium cable MSOs on the west coast, are the ones who formed Northwest Fiber (now Ziply) to acquire the PNW assets of Frontier.
https://www.multichannel.com/news/broadstripe-writes-its-las...
Ultimately for a full understanding of what Clink and Ziply are doing and where their last mile and midddle mile networks are the strongest, one needs to have a historical understanding of the Pacific Northwest Bell network (-->USWest-->Qwest-->Clink) and the areas that were historically GTE territory (GTE-->Frontier-->Ziply).
On the topic of the city government of Seattle and its franchise agreement with CenturyLink. I don't think a city government ever has much negotiating leverage with an ILEC such as this. The clink network in Seattle is the result of 100 years of incumbent copper phone line dialtone service, clink setting its own poles in many places, and is a core part of municipal infrastructure. The city can't reasonably force the company to vacate the right of way or cease services without causing a severe impact on the residents of the city. There's no plausible scenario in which a new franchise agreement won't put be into place...
If so the court is probably going to frown on double dipping.
Municipality A may have initiated ISP infrastructure contract for the actual benefit of it's constituents against the comms mono/duo-poly. Hurrah for Municipality A sticking it to the man and looking out for the constituency.
X years down the track, Municipality A needs funding for corrupt members yacht or office chesterfield reupholstering. Hey, we're practically giving away broadband compared to the comms mono/duo-poly and prices have increased way below CPI the last few years, let's bump it up to (artificial) market-competitive, woo!
Yes, and this is really quite silly when an independent fiber co-op would serve the same function with a very similar governing structure and responsibility toward its members without the obvious conflict of interest that comes with having the municipal government as your ISP. The only "advantages" a government-run ISP has over a co-op have to do with abusing their monopoly over the local right-of-way and powers of taxation to favor their own service over any potential competition.