Tennessee Supreme Court Holds Netflix, Hulu Need Not Pay Franchise Fees to Localities

11/22/22

Today, the Tennessee Supreme Court answered a question of law certified by the United States District Court for the Eastern District of Tennessee: whether two video streaming services—Netflix, Inc. and Hulu, LLC—provide “video service” within the meaning of the Competitive Cable and Video Services Act, a Tennessee law that requires certain providers to obtain a franchise and pay franchise fees to localities. The Court answered that question “no,” concluding that Netflix and Hulu do not provide “video service” under the Act.

The City of Knoxville sued Netflix and Hulu in the United States District Court for the Eastern District of Tennessee. Knoxville contended that Netflix and Hulu are “video service providers” as defined in the Act, meaning that they must apply for a franchise and pay franchise fees to Knoxville and violated the Act by failing to do so. Netflix and Hulu moved to dismiss, arguing that they do not provide “video service” under the Act.

Under Tennessee Supreme Court Rule 23, a federal court can ask the Tennessee Supreme Court a certified question if there are no cases to guide the federal court in applying state law.  The case remains in federal court and the Supreme Court only provides an answer to the question. In this case, the district court certified the question of whether Netflix and Hulu are video service providers under the Act to the Supreme Court, and the Court accepted the question.

Under the Act, Netflix and Hulu are “video service providers” if they provide “video service.” Knoxville argued that Netflix and Hulu are “video service providers” because they (a) provide “video programming” and (b) do so “through wireline facilities located, at least in part, in the public rights-of-way.” Netflix and Hulu countered that they do not provide “video service” because, among other things, they do not own, construct, or operate the wireline facilities that third-party internet-service providers use to deliver Netflix and Hulu content to end-users.

The Supreme Court agreed with Netflix and Hulu. An entity provides “video service” under the Act if it engages in the “provision of video programming through wireline facilities located, at least in part, in the public rights-of-way.” The Court explained that this language must be interpreted not in isolation, but in the context of the Act as a whole. The Act as a whole is focused on granting video service providers permission to physically occupy the public rights-of-way and ensuring that those providers adequately compensate localities for that privilege. Given this focus, the Court concluded that the Act should not be interpreted to apply to entities like Netflix and Hulu that do not construct or operate the wireline facilities that are used to transmit their content.

To read the Court’s unanimous opinion, authored by Justice Sarah K. Campbell, visit the opinions section of TNCourts.gov.

About Brad Jones

Brad is the Owner/Operator of BBB TV 12, and has been with the company since August of 1996. Brad is a 1987 graduate of Coalfield High School and a 1995 graduate of the University of Tennessee College of Communications. He won the 1995 broadcast production student of the year award. Brad worked at Shop at Home, Inc. a home shopping network that was located in Knoxville, TN from 1993 - 1995 and then at Via TV (RSTV, Inc.) from 1995 - 1996. After some freelance work in Nashville, Brad joined the BBB Communications staff in August of 1996. A short stint at WVLT TV as a news photographer was in 2001, but he continued to work at BBB TV as well. Brad is married to Nicole Jenkins Jones, a 1990 graduate of Oak Ridge High School, who works at Oak Ridge Gastroenterology and Associates in Oak Ridge. They have 3 kids, Trevor Bogard, 27, Chandler 22, and Naomi 13. On December 12, 2013 they welcomed their first grandchild, Carter Ryan Bogard. Brad is also the assistant boys basketball coach at Coalfield High School for the past 11 years. In 2013-14 the Yellow Jackets won their first district title since 1991 and just the 4th in school history.

Check Also

Governor Lee, Commissioner McWhorter Announce 64 Communities to Receive Community Development Block Grants

Grants will assist with local infrastructure, housing and safety improvements NASHVILLE, Tenn. –Tennessee Gov. Bill …

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: