Cities sue Netflix, Hulu, Disney+, claim they owe cable “franchise fees”

Discussion in 'Internet Streaming Services' started by Mark Holtz, Aug 18, 2020.

  1. harsh

    harsh Beware the Attack Basset

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    There are two kinds of fees defined by regulators:
    1. Fees that a company is required to charge and forward the money to the goverment
    2. Cost recovery fees that provide relief from certain expenses but are by no means mandated.
    A lot of companies like to blur the line between the two while others build the cost recovery into their published prices.
     
  2. James Long

    James Long Ready for Uplink! Staff Member Super Moderator

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    You make it sound like the second fees are optional! As far as the government is concerned their fees are all mandated.
     
  3. harsh

    harsh Beware the Attack Basset

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    Cost recovery fees are permitted but not mandated. The problem is that many "carriers" imply strongly that they are mandated.

    Here's how Comcast Business puts it:
     
  4. James Long

    James Long Ready for Uplink! Staff Member Super Moderator

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    The fee as paid to the government is mandated. How they get the money from the customer is not mandated. Please read and understand.
     
  5. wmb

    wmb Godfather

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    That’s cute. It’s like billing a separate line item for fringe benefits on top of labor. I see lost of cost build-up type of contracts. Those costs are there and real, and can’t be avoided by the customer. Ok, technically, they are not mandated, but they are they are the way that the provider chooses to bill their customers.

    My concern in all of this is that I am paying the appropriate fees. I don’t want to be double billed. The franchise fee may be best paid on the internet service, not a vMVPD. Fees for video delivery by the same firm as the internet provider can be designed in such a way that they aren’t double billed.


    Sent from my iPhone using Tapatalk
     
  6. James Long

    James Long Ready for Uplink! Staff Member Super Moderator

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    The trouble for the cities is that they are losing the fees. Valparaiso lost 10% of their income from the fee two years in a row. Their citizens are watching video programming without paying the fee.

    The horror! :)
     
  7. NR4P

    NR4P Dad

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    The problem with mandating fees on streaming services is because they are based upon your billing address (ok, sometimes billing address is different, so no nit picking). But what if I watch the streaming most of the time outside the city limits of where I live?

    Cable and satellite infrastructure has physical end point that aside from some remote features, can't be moved.

    5G replacing cable someday will be the interesting point. Old tax laws don't keep up with technology too well. Are you taxed by your home billing address or the local/closest 5G tower/lightpost? No easy answers.
     
  8. harsh

    harsh Beware the Attack Basset

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    The franchise fee (as the lawsuit names it) or entertainment tax (as you more accurately called it) that is the topic of this thread would be mandated (as well as arbitrary and unjustified) and I've not disputed that. That's the first class of fees that I referred to in my post #21.

    What I dispute is your statements about cost recovery fees (the second class of fees). Cost recovery fees are neither mandatory nor paid to a governing jurisdiction. The revenue from a cost recovery fee goes to corporate revenue. Cost recovery fees are a mechanism by which a carrier can hope to recover the costs of government regulation and reporting.

    I agree with others that this use of the right-of-way is really more of a sub-lease rather than an additional utility. Franchise fees are the equivalent of cost recovery fees for government jurisdictions and since the streaming content services create no additional costs for the governments (no additional occupation of the rights-of-way), they don't require cost recovery. If they want higher franchise fees, they need to tap the carriers but we can guess how that's going to play out.
     
  9. harsh

    harsh Beware the Attack Basset

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    The problem is with the way the franchise fees are structured and that should be addressed as part of a revised franchise agreement. The franchise fee needs to be based on the connections, not just the video subset of those connections as the video and broadband connections both use the same plumbing.

    HBO (and Showtime and ESPN et al) hasn't been hit for a franchise fee before so why should they now (or are they not going after DISNEY and HBO Max)?
     
  10. James Long

    James Long Ready for Uplink! Staff Member Super Moderator

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    The fee for those services were paid through the cable company delivering the service. OTT delivery doesn't pay the fee.

    The fees I am referring to ARE paid by the business and ARE mandatory. How those fees are passed on to a customer is not mandated (beyond what I have already explained). The "cost recovery fee" (or whatever title applied by a business) that appears on the customer's bill is not a government fee - they might as well list it as a "CEO bonus fee" or a "shareholder return enhancement fee". It just adds a little bit more to the bill and allows the company to spend the money to cover whatever expenses they have.
     
  11. harsh

    harsh Beware the Attack Basset

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    Were they?

    Comcast's franchise fees seem to be largely independent of the subscribed programming. In my case, 5% of the TV programming fees go to one of the two counties involved and 40% of that goes to the Cable Regulatory Commission. They are actively engaged in redoing this so that the percentage isn't based on programming fees.

    What money is left goes mostly to supporting the PEG facility (cable access) with its four TV channels.

    As my county wasn't involved in the franchise agreement, I technically must pay $150/year for PEG center usage.

    Much of the cable service in my county travels via utility pole contacts so that's a whole other can of worms that doesn't get its own line item on the bill.
     
  12. inkahauts

    inkahauts Well-Known Member

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    I agree, To bad. If they have an increased cost of some sort due to people using streaming then that increased costs are in relation to the internet provider not the streamers. Therefore they can adjust the internet provider fees accordingly.

    These kinds of fees aren’t meant to be taxes. They are meant to cover some sort of cost incurred by the company. Cities do not have any additional costs because I subscribe to HBO. The cities can pound sand imho.
     

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