Netflix and Hulu sued for using the internet without permission
posted Saturday Aug 15, 2020 by Scott Ertz
Some of the regional laws governing media transmission are bizarre and made even more so in the ever-changing landscape of modern media. As appointment television slowly fades into a second-tier position and internet content takes over, cities with some of these strange laws are looking to implement those laws against the internet. And that is exactly what is happening in a town in Texas.
The town of New Boston, Texas has filed a class-action suit against Netflix and Hulu for violating one of these television transmission rules. The rule takes offense to the fundamental way that the internet works.
When a Netflix subscriber wants to view Netflix programming, the subscriber's Internet service provider will connect the subscriber to the closest Netflix Open Connect server offering the fastest speeds and best video quality. According to Netflix, that means that most of its subscribers receive Netflix's video programming from servers either inside of, or directly connected to, the subscriber's Internet service provider's network within their local region.
As video service providers, Defendants were required to file an application with the Public Utility Commission of Texas for a state-issued certificate of franchise authority prior to providing video service. Defendants failed to apply for and obtain a SICFA, and are, therefore, providing video service throughout Texas without authorization, and in contravention of the Texas Utility Code.
This could be an interesting case for a variety of reasons. Disney and Comcast, which own Hulu, both hold a SICFA license for the state of Texas, which seems to negate the basic premise of the lawsuit, at least as far as Hulu is concerned. In addition, Disney+ and Peacock, also owned by Disney and Comcast, respectively, are not named as defendants in the lawsuit, despite functioning the same way.
The other interesting aspect is that Texas is essentially attempting to bring an individual service which operates online under the umbrella of a regional utility. They are hoping to regulate Netflix in the same category as Charter and Comcast's cable operations, rather than the same category as Facebook and Twitter.
In the end, it seems unlikely that Netflix and Hulu will be classified by any court as a utility, as they own and operate none of the lines required for the transmission of their video content. This is yet another instance of a city not understanding the changing world of media content.
