NACOGDOCHES, Texas (KETK) — Austin is among 24 other Texas cities filing a lawsuit accusing Disney DTC LLC, Hulu, LLC and Netflix Inc. of failing to pay millions of dollars in municipal franchise fees as far back as 2007.

The lawsuit was filed in Dallas County on behalf of Abilene, Allen, Amarillo, Arlington, Austin, Beaumont, Carrollton, Dallas, Denton, Frisco, Fort Worth, Garland, Grand Prairie, Houston, Irving, Lewisville, McKinney, Mesquite, Nacogdoches, Pearland, Plano, Rowlett, Sugar Land, Tyler and Waco.

The lawsuit alleges the streaming services have not paid annual franchise fees required by the Texas Public Utility Regulatory Act (PURA) that are used to fund basic city services.

The PURA states a video service provider must pay a Texas municipality a 5% franchise fee if a video service’s programming is delivered “via wireline facilities located at least in part in the public right of way, such as utility poles over the streets or sidewalks or beneath the roads.”

A spokesperson for the City of Austin said it’s estimated the city “conservatively” lost about $9 million in unpaid fees dating back to 2007 though the end of 2021. The spokesperson said the franchise fees would have fed into the city’s General Revenue Fund.

Below is a full statement from a City of Austin spokesperson.

Under state law, private use of the City’s right of way requires compensation for the use. Since 2007, the video streaming companies such as Netflix, Hulu, and Disney have provided their video services to subscribing customers via broadband internet through wireline facilities located at least partially in the public right of way. Several other Texas cities (Abilene, Dallas, Fort Worth, Waco, Frisco, Plano, Carrollton, Garland, Mesquite, Sugar Land, Houston, Amarillo, Grand Prairie, and Arlington) seek to collect compensation from the video streaming companies for right-of-way use. Like the other cities involved in the legal challenge to the streaming services right of way compensation, the City has hired outside counsel on a contingency fee basis to represent the City.

According to a release from the city of Nacogdoches, the franchise fee funds city services including police, fire protection, libraries and road repairs.

“Disney, Hulu and Netflix have long withheld statutorily required payments to cities throughout Texas, depriving them of fees that help fund essential city services,” said McKool Smith principal Steven Wolens, who, along with co-counsel, represents the Texas cities in this lawsuit. “This case was filed on behalf of our municipal clients to ensure future compliance with PURA and recoup significant fees owed by some of the nation’s largest streaming services.”

Nacogdoches city officials said the city is seeking reimbursement of annual franchise fees, as well as interest, since Disney, Hulu and Netflix began streaming their platforms in Texas in 2007, 2011 and 2019, respectively.

“With this lawsuit, we hope to ensure streaming video companies’ compliance with their PURA obligations moving forward and also recoup unpaid franchise fees from the Disney, Hulu and Netflix streaming services as follow-on relief,” said Steven Kirkland, city attorney of the City of Nacogdoches. “If streaming companies refuse to pay these fees, the city has to cut services or seek alternate sources of revenue. We have an obligation to our residents to ensure that these companies comply with state law and pay what is owed to the city.”

Dallas-based McKool Smith is co-counsel on the lawsuit with Austin-based Ashcroft Sutton Reyes and St. Louis-based Korein Tillery. Additional cities are expected to join the lawsuit, according to the release.