Streaming Internet Video Taxes (OTT)
What is OTT?
Over-the-top or “OTT” refers to the delivery of audio or video content over the Internet without the involvement of a cable or satellite provider controlling or distributing the content. In other words, “streaming”. Consumers stream content through any Internet-connected device including a desktop and laptop computers, gaming consoles (PlayStation, Nintendo Wii, and Xbox), set-top boxes (e.g. Roku or Apple TV), smartphones, smart TVs, and tablets.
Most streaming services like Sling or DIRECTV Stream do NOT own or operate the cable or fiber lines that provide internet access, these lines are typically owned or operated by Internet Service Providers (“ISP”)
Streaming services such as Sling and DIRECTV don’t pay franchise fees because, as discussed below, they don’t have any infrastructure (e.g. physical cable or fiber lines) in the public right of way.
Some entities, such as community access TV stations, want every streaming customer in the state to pay for their services, even if the customer doesn’t have access to the station, or doesn’t watch the programming. The community access TV stations want to force every streaming customer to pay regardless!
Discriminatory Taxes
Satellite customers have seen attempts to pass unfair taxes on satellite TV services for more than a decade. These taxes include:
- taxing satellite at a different rate than cable;
- allows cable but not satellite to take a credit against taxes due, or exempts cable but not satellite property from taxation; or
- Imposes a new tax or extends an existing tax to satellite but not cable.
Discriminatory taxes are designed to raise the price of satellite TV and unfairly discriminate against satellite providers and their customers.
Why?
Because cable and telecom companies typically pay a “Franchise Fee” to local governments and some believe satellite should have to pay that fee as well, or an equivalent amount in other taxes, so they can get more money from satellite customers.
But what exactly is a Franchise Fee?
It is not a tax on providing TV services, it is actually a type of rent that a company pays to local government for the right to run cable under public streets and sidewalks, or hang wire from utility poles. Cable companies voluntarily undertake to pay these fees as part of a negotiated contract.
The Courts have addressed at every level, going back to an 1893 case concerning right of way fees for telegraph cables, and state and federal courts classifying Franchise Fees are in fact a rent paid to use public land for a private use. They are not a tax.
In fact, Franchise Rights are at the core of a cable or telecom provider’s business value. The more cable they lay, the more customers they can reach, the more Franchise Fees they pay. Cable and telecom companies’ largest assets are their Franchise Rights, and are even listed as assets, to the tune of tens of billions of dollars, on the balance sheet.
In short, Franchise Fees are a cost of doing business for cable and telecom companies; the same way launching a satellite into space is the cost of doing business for DISH and other satellite TV providers.
Requiring satellite providers to pay a Franchise Fee, or an equivalent tax, is like asking cable and telecom companies to pay for launching satellites into orbit.
Discriminatory taxes harm consumers by burdening the only major alternative to cable and specially burden consumers who rely on satellite, like rural residents and foreign-language speakers.
Since 2009, there have been attempts to impose a Discriminatory Tax on satellite customers 75 times in 25 states! Despite these efforts – in part due to YOUR HELP contacting your legislators — NO STATE HAS ENACTED A DISCRIMINATORY TAX ON SATELLITE TV!
For more detailed information on this issue, click here.