On February 22, 2024, a California Court of Appeal held that the Digital Infrastructure and Video Competition Act of 2006 did not provide the City of Lancaster with a private right of action to pursue franchise fees from non-franchise holder streaming video providers.

The Act regulates all “video service providers” and directs the Public Utilities Commission to issue state franchises authorizing the provision of video services in California.  The Act requires video service providers to pay a franchise fee to local governments for use of the public rights-of-way to construct and maintain their networks.  The City argued that the streaming video providers are video service providers under the Act and must obtain a franchise and pay the resulting franchise fees.

The Court of Appeal held that the Act did not provide a right of action for local governments to pursue franchise fees from non-franchise holders.  The court found that the Act only expressly authorizes a local government to bring an action concerning the underpayment or nonpayment of franchise fees against franchise holders.  Additionally, the court held that the legislative intent did not indicate the creation of an implied right to bring a legal action against any company the City believes should, but does not, hold a franchise.  Thus, the Court of Appeal concluded that the City was not authorized, expressly or impliedly, to bring action against the streaming video providers because they were not franchise holders.

City of Lancaster v. Netflix, Inc., et al., 99 Cal.App.5th 1093 (Cal. Ct. App. 2024).