Opposition to Kansas Streaming Fees Bill Comes Under Fire
Kansas lawmakers Thursday challenged opposition to SB-144, which would explicitly exempt streaming services and direct broadcast satellite operators from video service provider franchise fees. The bill would amend the state's Video Competition Act, making clear that DBS and streaming providers don't need video service provider authorization from the Kansas Corporation Commission. House Energy, Utilities and Telecommunications Committee took no action on the bill.
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The proposed legislation comes as Fort Scott, Kansas, joined a coordinated effort that brought litigation in 13 states seeking franchise fees from streaming services, testified Sean Ostrow of Orrick Herrington, representing Dish Network and DirecTV. Fort Scott's suit was dismissed, but a win on appeal would mean every streaming service would have to charge an additional 5% per month, he said. He said that could potentially apply to an array of other content delivered online, such as remote learning and telehealth services. "Pretty far-reaching," said Republican Rep. Patrick Penn.
Four states passed similar bills and 12 others are considering, Ostrow said.
"We should let this matter play out in the courts first," testified Kapke & Willerth's Michael Fleming, representing Fort Scott in its litigation seeking franchise fees from Hulu and Netflix. The streamers use broadband infrastructure to provide their service, so they -- like cable companies -- "should pay their fair share" of the video service provider fee, he said. Fleming said the bill "picks winners and losers" among technology platforms, with cable operators and streamers "providing the exact same content" but streamers not subject to the fee. He said if lawmakers are concerned about the fee's impact on consumers, they could potentially mandate it be passed on to subscribers, or not allow it to be charged to cable subscribers either.
Multiple lawmakers raised hypotheticals and analogies with Fleming to pick apart the rationale for localities charging fees of streaming services, such as the fee also having to be paid by someone who watches Netflix wirelessly on a phone.
"We are against frivolous lawsuits," Penn said. Responded Fleming, "Respectfully, I resent if you describe our lawsuit as frivolous.”
"We are fine" if the legislature wants to codify the state court opinion that tossed out the Fort Scott suit, but SB-144 doesn't do that, said Michael Koss, Overland Park deputy city attorney. Its inconsistent language in exempting satellite providers and streamers opens the door to a broadband provider with infrastructure in the public right of way being exempt from franchise fees if it also provides its own streaming service on that infrastructure, he said.
No one in the pay-TV industry is reading the bill as exempting cable companies from the franchise fee status quo, Ostrow said. He said the bill would apply only to streaming services that use third-party internet lines, not their own infrastructure. He said other states haven't seen a need to make such a clarification.