Engagement Needed: Video Franchise Fee Exemption for Streaming Services Heads to House Floor for Action

Posted on October 10, 2023 by Herasanna Richards

Today, the House Regulatory Reform Committee took action on House Bill 4965 from Rep. Joey Andrews with a 14-0-1 vote. HB 4965 would specifically exempt streaming and satellite services such as Netflix, Disney+, Hulu, YouTube TV, and others from the definition of video service. The practical effect is that they would be exempt from sharing the cost of maintaining local Right of Way (ROW), which they use to sell their video service. This matters because cities, villages, and townships are legally responsible for maintaining the ROW. Due to this responsibility, there is a long history of those who operate in the ROW that we own and are responsible for retaining a share in that cost.

This bill would also end local efforts in Michigan to seek franchise and PEG fees from “Over The Top” (OTT) video providers like Netflix. This is harmful because it allows an entire segment of the video service industry to access the local ROW for free, leaving the cost of maintaining that ROW to taxpayers.

HB 4965 would create an unlevel playing field since traditional cable pays 5% of gross revenue for Franchise Fees (plus PEG support), threatening those fees. This is because the FCC doesn’t allow for discrimination between services. A level playing field would require all video providers to pay their fair share of ROW, community services, and local video programming costs. Both streaming and satellite services use the ROW for internet backbone connections.

Not having a level playing field threatens current Cable/Video Service Franchise and PEG Fees that support local government efforts to maintain the ROW with tens of millions annually. If this bill passes, one could argue that if one video service provider doesn’t pay, then all don’t have to pay, and litigation would likely follow. A successful challenge to these fees would result in a significant revenue reduction at the local level.

As HB 4965 moves to the House floor, we anticipate a vote on the bill as soon as tomorrow. We’re encouraging our members to act swiftly by contacting their legislators and asking them to oppose this legislation. Let them know how franchise fees support ROW maintenance and local programming in your community and that this bill only jeopardizes the future capacity for these operations to continue.

Herasanna Richards is a legislative associate handling energy, environment, public safety, and technology for the League. She can be reached at [email protected] or 517-908-0309.

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