`of Lancaster v. Netflix et al., Case No.: Defendant Defendants Hulu, LLC and Netflix, Inc.'s
`Demurrers are
`SUSTAINED, with 30
`days leave to amend.
`Plaintiff’s Requests for Judicial Notice are GRANTED
`(except for the truth).
`management review is set for October 29,
`2021, 8:30 AM, Department 9.
`This is a
`putative trade regulation class action.
`Plaintiff City of Lancaster
`alleges that Defendants Netflix,
`(Netflix) and Hulu, LLC (Hulu) provide video services
`throughout California using broadband wireline facilities
`located at least in part in public rights-of-way. Under the
`Digital Infrastructure and Video Competition Act of 2006
`(DIVCA), Plaintiff claim that Defendants must pay a video
`service provider fee of up to 5% of their gross income derived
`from providing video service in each city, county,
`in California.
`powers authority
`On January 15, 2021, Plaintiff filed its complaint
`causes of action:
`asserting the following
`(1) failure to pay
`video service provider fee (Public Utility Code § 5840); and (2)
`declaratory relief.
`On May 20, 2021, Netflix and Hulu filed the
`demurrers to Plaintiff's complaint.
`“[A] demurrer tests the legal sufficiency
`of the
`Lewis v.
`allegations in a
`(2015) 235
`A demurrer can be used only
`Cal.App.4th 385, 388.
`under attack or
`defects that appear on the face of the


`from matters outside the pleading that are
`See Donabedian v.
`Insurance Co.
`(2004) 116
`on a
`demurrer, a court may not
`Cal.App.4th 968, 994 (in ruling
`consider declarations, matters not
`subject to
`judicial notice,
`or documents not
`accepted for the truth of their contents).
`on a
`demurrer, all facts pleaded in a
`the purpose of
`are assumed to be true, but the
`court does
`not assume the truth of conclusions of law.
`2 Cal.4th 962, 967.
`for Judicial Notice
`Plaintiff requests judicial notice of the following
`Exhibit 1: An order filed on December 30, 2020 in the Circuit
`in the case
`of Creve Coeur v.
`Court: of St. Lowis, Missouri
`case no.
`Inc. et al.,
`18SL-CC02819; and
`Exhibit 2: A document filed in the United States District
`Court for the District of Massachusetts in the case National
`Association of the Deaf et al. v.
`Netflix, Inc., case no. 3:11-
`Courts may take judicial notice of court records, but not
`of the truth of matters asserted in such documents if those
`matters are
`reasonably disputable. Evid. Code,
`§ 452(d);
`Co. v. Fremont General
`(2007) 148
`Cal.App.4th 97, 113.
`Pursuant to Evidence Code § 452(d),
`Court will take judicial notice of Exhibits 1 and 2, but not of
`the truth of any reasonably disputable
`matters contained in the
`Meet and Confer
`Netflix’s attorney Robert C. Collins attests that on
`14, 2021, and May 15, 2021, his firm met and conferred with
`filing Netflix’s pending demurrer on
`Plaintiff’s counsel before
`May 20, 2021.
`Such meet and
`Code Civ. Proc.,
`§ 430.41(a).
`confer occurred more than five days before the demurrer was
`Code Giv.. (Prec,
`§ 4380741 (a) (2).
`attests that on
`Hulu’s attorney Ryan S.
`April 14,
`2021, he met and conferred with Plaintiff's counsel before
`pending demurrer on
`May 20, 2021.
`filing Hulu’s
`Similarly, such
`meet and confer occurred more than five days before the demurrer
`was filed.


`DIVCA Provides Local Entities Limited Private
`Action, Which Do Not
`to This
`. ..
`[a statute] provides
`right of action is a pure question of law that does not turn on
`disputed facts or evidence.” Noe v.
`(2015) 237
`“A violation of a state statute does not
`Cal.App.4th 316, 336.
`necessarily give rise to a
`cause of action.
`Instead, whether a
`party has a
`right to sue
`on whether
`Legislature has “manifested an intent to create such a
`cause of action” under the statute.
`Lu v.
`Hawaiian Gardens Casino,
`(2010) 50 Cal.4th 592, 596.
`if any,
`is revealed through the language of
`legislative intent,
`the statute and its legislative history.” Td.
`A statute may contain “‘clear, understandable,
`unmistakable terms,’” which strongly and
`indicate that the Legislature intended to create a
`cause of action.
`[Citation.] For instance,
`statute may expressly state that a person has or is
`liable for a cause of action for a
`[Citations.] Or, more
`a statute
`may refer to a
`or means of
`enforcing its
`substantive provisions, i.e., by way of an action.
`a statute does not contain
`[Citations.] If, however,
`such obvious language, resort to its legislative
`history is next
`in order.
`50 Cal.4th at 597.
`DIVCA'’s Provides No
`Express Private
`of Action
`The Court
`begins with DIVCA’s statutory language.
`parties dispute whether Public Utilities Code § 5860(i) provides
`for a
`private right of action by Plaintiff against Netflix and
`Hulu. With respect to
`underpayment of franchise fees,
`Section 5860(i) states, “[e]ither a local entity
`or the holder
`in the event of a
`dispute concerning compensation under
`an action in a court of competent
`this section, bring
`From its plain language, Section 5860(i) clearly
`private right of action to Plaintiff—"a local
`disputes with a franchise holder over
`entity”—with respect to
`of franchise fees.
`As Hulu correctly notes, Section 5860(i) provides only for
`a limited private right of action. First, any private right of
`is limited to
`action Plaintiff has under Section 5860(i)


`disputes with actual franchise holders. Non-franchise holders
`are not
`required to pay DIVCA franchise fees, and thus no
`underpayment of franchise fees would ever arise.
`Plaintiff concedes that Hulu does not hold a state franchise
`under DIVCA.

`Section 5860(i)’s plain language expressly limits any
`private right of action to “a
`dispute concerning compensation
`In its complaint, Plaintiff alleges that
`under this section.”
`Hulu failed to pay the required franchise fee. Complaint,
`J 22.
`as noted above, Plaintiff concedes that Hulu does not
`hold a franchise. Plaintiff also seeks to compel Hulu to comply
`with DIVCA by applying for and obtaining such a franchise. Yet
`Section 5860(i) does not contemplate any private right of action
`apart from “dispute[s] concerning compensation.”
`language in
`the Section 5860(i) authorizes a local entity
`an action
`a non-franchise holder to
`apply for a state franchise
`under DIVCA or to
`comply with its requirements.
`Elsewhere, DIVCA provides for limited private rights of
`example, Public Utilities Code § 5870
`provides that
`a state franchise holder must
`a sufficient amount of
`its network capacity to public, educational, and governmental
`access (PEG) channels.
`If a
`dispute under Section 5870 arises,
`A court of competent jurisdiction shall have exclusive
`to enforce any requirement under this
`section or resolve any dispute regarding the
`set forth in this section, and no
`provider may be barred from the provision of service
`or be
`to terminate service as a result of
`or enforcement action.
`Pub. Utal. Code,
`§ 5S870(p).
`In addition, Section 5890
`prohibits franchise holders from
`discriminating against customers based on
`income. Section 5890(i) expressly contemplates
`private right
`of action as to violations:
`If a court finds that the holder of the state
`franchise is in violation of this section,
`the court
`may immediately terminate the holder’s state
`franchise, and the court shall,
`in addition to any
`a fine not to
`other remedies provided by law,
`exceed 1 percent of the holder’s total gross revenue


`of its entire cable and service footprint in the state
`in the full calendar month
`immediately prior to the
`Furthermore, Section 5900
`requires state franchise holders
`comply with state and federal laws governing customer service
`privacy standards.
`Pub. Util. Code,
`§ 5900(a). Local
`entities may enforce Section 5900
`by setting penalties,
`notifying franchise holders of any material breach, and
`Pub. Util. Code, §§ 5900(d)-(g).
`collecting penalties.
`dispute under Section 5900 arises,
`the statute expressly
`provides for a
`private right of action:
`(h) Any interested person may seek judicial review of
`a decision of the local
`entity in a court of
`For this purpose, a court
`appropriate jurisdiction.
`of law shall conduct a de novo review of any issues
`(1) This section shall not
`party affected
`by this section from
`utilizing any judicial remedy
`available to that party without regard to this
`a local legislative body,
`section. Actions taken by
`a local
`franchising entity, pursuant to this
`binding upon a court of law.
`section shall not be
`a court of law shall conduct de novo
`this purpose,
`review of any issues presented.
`Pub. Utid-. Code, §§ 5S900(h),
`Thus, Sections 5870, 5890, and 5900
`expressly provide for
`limited private rights of action against franchise holders for
`PEG channel, redlining, and customer service and
`As these statutes
`to franchise holders,
`apply only
`non-franchise holders Netflix and Hulu need not
`none of these sections expressly authorizes actions to
`a non-franchise holder (1)
`for a state franchise
`comply with DIVCA’s
`to limit the remedies
`“[W]hen the Legislature want[s]
`.. .
`available in a
`private enforcement action
`it clearly
`[knows] how to do so.” Donovan v.
`Poway Unified School Dist.
`(2008) 167
`Cal.App.4th 567, 595
`Gov. Code § 11139).
`of the
`it appears that the
`restricted the
`private rights of action under Sections 5860,
`DIVCA state
`5870, 5890, and 5900 to (1) actions against
`franchise holders for
`disputes regarding (2) underpayment of


`franchise fees, designation of PEG channels, redlining, and
`customer service and
`privacy, respectively.
`Although DIVCA limits local entities’ private rights of
`the statute also grants exclusive enforcement rights to
`the Public Utilities Commission (PUC).
`In 2006, AB 2987 enacted
`primary provisions of which are codified at Public
`Utilities Code § 5800 et seq. Legis. Counsel’s Dig., Assem.
`Bill No. 2987 (2005-2006 Reg. Sess.) Stats. 2006, c. 700 (A.B.
`AB 2987 also enacted Public Utilities Code § 444,
`§ 3.
`which addresses defaults in payment of state franchise fees
`under DIVCA.
`Unlike Sections 5860, 5870 and 5900, Section 444 is
`directed not
`at franchise holders, but more
`“video service provider[s]” under DIVCA as defined in
`If a video service
`Section 5830(t).
`Pub. Util. Code,
`§ 444(a).
`provider defaults on its franchise fees,
`the PUC “may suspend
`revoke the state franchise of the video service provider or
`to cease and desist from
`order the video service
`conducting all
`to the
`operations subject
`franchising authority
`of the commission.”
`Pub. Util. Code,
`§ 444(a)
`(emphasis added).
`a situation where a
`Thus, Section 444
`expressly contemplates
`already hold a state franchise.
`video service provider does not
`In such a
`in the alternative, order a
`the PUC may,
`video service provider to “to cease and desist from conducting
`to the
`all operations subject
`franchising authority” of the PUC.
`Section 444 also expressly provides that “[t]he [PUC] may
`in its own name or in the name of the people of
`in any court of competent jurisdiction, for the
`the state,
`collection of
`fees estimated under this article,
`for an amount due, owing, and unpaid
`as shown by report
`to it,
`together with a
`filed by the commission,
`penalty of 25 percent
`for the
`Pub. Util. Code,
`§ 444(d). Thus,
`plain language of Section 444,
`the Legislature knew how to
`authorize a
`a “video service
`private right of action against
`to DIVCA but that may not yet hold a
`provider” that is subject
`state franchise. Section 444(d) also clearly grants only the
`and not local entities
`of action against
`franchise holding video service providers subject to DIVCA’s
`In other words, under a
`plain reading of the
`relevant statutory provisions, only the PUC can
`an action
`compel non-franchise holders such as Netflix and Hulu to
`comply with the DIVCA. Plaintiff's contentions to the contrary
`do not


`Relevant case law supports this conclusion.
`Each of the
`DIVCA cases reviewed by the Court
`involved a local entity suing
`a DIVCA franchise holder.
`See, e.g., Comcast of Sacramento I,
`LLC v. Sacramento
`Cable Television Commission (9th
`Cir. 2019) 923 F.3d 1163 (local entity sued franchise holder) ;
`Cable Television Commission v. Comcast
`Cable Communications
`LLC (E.D. Cal. 2020) 507
`of Del Mar v. Time Warner Cable
`F.Supp.3d 1226 (same); City
`LEG (Sop areal, Aug. 28, 2017) 2017 WL 3705833
`v. Time Warner NY Cable LLC (C.D.
`of Los
`(same); County
`Cal., July 3, 2013) 2013 WL 12126774 (same); accord
`Glendale v. Marcus Cable Associates, LLC (2015) 235 Cal.App.4th
`344 (same); City of Glendale v. Marcus Cable Associates, LLC
`(2014) 231
`Cal.App.4th 1359 (same). Plaintiff cited no
`authority holding that a local
`entity may sue a non-franchise
`holder for non-compliance with DIVCA.
`of Action in DIVCA.
`provides for an
`Plaintiff contends that DIVCA
`private right of action. Not so.
`private right of action
`may inhere within a statute, otherwise silent on the point, when
`such a
`private right of action is necessary to achieve the
`statute’s policy objectives.” Mabry
`example, “the presence of a
`185 Cal.App.4th 208, 217.
`comprehensive administrative means of enforcement of a statute”
`of action to enforce a statute.”
`may suggest “no
`private right
`(citing Moradi-Shalal v. Fireman’s Fund Ins.
`at 218
`(1988) 46 Cal.3d 287
`private right of
`action under Insurance Code provision where statutory scheme and
`legislative history provide only for administrative
`enforcement) ).
`If the Legislature intended a
`private right of action,
`that usually ends the
`If the Legislature
`intended there be no
`private right of action,
`If we determine the
`usually ends the
`no intent on the matter either
`Legislature expressed
`there is no
`way, directly
`private right
`of action [citation], with the possible exception that
`reasons of public policy might require
`of such a
`judicial recognition
`Animal Legal Defense Fund v. Mendes
`(2008) 160
`Cal.App.4th 136,
`only find an
`In short, courts will
`implied private right
`the statute is silent as to direct or
`of action if (1)


`private rights, and (2) compelling public policy
`a Coun Eo dose.
`Here, DIVCA
`statutory provisions expressly allow local
`entities such as Plaintiff limited private rights of action as
`disputes concerning (1) underpayment of franchise fees;
`designation of PEG channels;
`income discrimination against
`(3) customer service and privacy.
`Pub. Util. Code,
`§§ 5860(i), 5870(p), 5890(i), 5900(h),
`Public Utilities
`Code § 444 also expressly grants the PUC sole authority to
`a non-franchise
`holding “video service provider” to
`comply with DIVCA’s statutory requirements.
`Accordingly, because “the Legislature expressly intended
`[these] private rights of action,” the inquiry ends here:
`Court may not find an
`implied private right of action if the
`Legislature has
`already provided express private rights of
`action. Mendes, 160 Cal.App.4th at 142. Nor has Plaintiff
`reasons for
`to local
`provided any compelling policy
`entities the PUC’s authority
`compel compliance with DIVCA.
`Contrary to Plaintiff's contentions,
`this holding does not
`to “the absurd and bizarre result that a video service
`.. .
`comply with the law are immune.”
`that fail[s] to
`to Hulu Demurrer at 11. Plaintiff’s hypothetical
`the PUC may sue
`misses the mark. As Section 444
`clearly states,
`compel non-franchise holding video service providers to
`comply with DIVCA.
`DIVCA Does Not
`to Netflix or Hulu.
`a. Netflix and Hulu Do Not “Use” the Public
`of-Way Under DIVCA.
`Netflix and Hulu contend that DIVCA does not
`apply because
`they do not own or
`operate infrastructure in any public rights-
`The Court agrees.
`The “touchstone” of statutory interpretation is the
`[Citation.] When
`probable intent of the
`“‘we must ascertain
`legislative intent so as to effectuate the purpose of
`[Citation.]” [Citation.] Our first
`particular law.’
`that intent “is to scrutinize the
`step in
`actual words of the statute, giving them a
`plain and
`meaning.” [Citation.]


`22 223
`Service 2000 Com,
`(2004) 117
`franchise agreement is granted by
`agency to enable an
`provide vital public
`services with some
`degree of permanence and stability,
`as in the case of franchises for utilities.
`[Citation.] Examples of franchises granted by local
`governments in California are gas and electric utility
`franchises [citation] and cable television franchises
`[{] A franchise is a
`grant of a possessory interest in
`public real property, similar to an easement.
`Assn. v. Board of
`Santa Barbara
`County Taxpayer
`(1989) 209
`Cal.App.3d 940, 949.
`It is the intent of the Legislature that a video
`service provider shall pay as rent a franchise fee to
`the local
`entity in whose jurisdiction service is
`being provided for the continued use of streets,
`public facilities, and other
`of the
`in order to
`Legislature recognizes that local entities should be
`compensated for the use of the public rights-of-way
`and that the franchise fee is intended to compensate
`them in the form of rent or a
`toll, similar to that
`which the court found to be appropriate in Santa
`Barbara County Taxpayers Association v. Board of
`Supervisors for the County of Santa Barbara (1989) 209
`Cal. App. 3d 940.
`Pub. Util. Code,
`§ 5810(b)
`(emphasis added).
`allege that Netflix or Hulu owns or
`The complaint does not
`operates any facilities located in the public rights-of-way.
`to Netflix and
`Instead, Plaintiff contends that DIVCA
`Hulu because their subscribers obtain content
`through the
`network of their Internet Service Provider (ISP), which is
`located in the
`public rights-of-way. Complaint,

`DIVCA defines “public rights-of-way”
`upon any public road or
`as “the area
`along and
`or across any of the


`waters or lands within the state.”
`Pub. Util. Code,
`§ 5830(o).
`A “network” means “a component of a
`facility that is wholly
`partly physically located within a
`public right-of-way and that
`is used to
`or data
`provide video service, cable service, voice,
`“‘Franchise’ means an
`Pub. Util. Code,
`§ 5830(1).
`or renewal of an
`initial authorization,
`issued by
`.. .
`the construction and operation
`franchising entity
`of any network in the right-of-way capable of providing video
`service to subscribers.”
`Pub. Util. Code,
`§ 5830(f).
`shall allow the holder of a state franchise under
`this division to
`install, construct, and maintain a network
`within public rights-of-way under the same
`time, place, and
`manner as the provisions governing telephone corporations under
`applicable state and federal law.”
`Pub. Util. Code,
`§ 5885(a).
`Netflix contends that under DIVCA, “streaming of video
`content is not
`subject to the act unless the provider of
`content, not an unrelated
`owns or
`operates the
`facilities that occupy the public rights-of-way.” Netflix
`Demurrer at 14.
`Similarly, Hulu contends that DIVCA is
`as to the intended targets of the franchise—
`providers who construct and operate their own networks in the
`Hulu Demurrer at 11.
`In support, Netflix cites Section 5830(f), which defines a
`DIVCA “franchise” as
`authorizing “the construction and operation
`[a] network in the
`right-of-way capable of
`providing video
`service to subscribers.” Netflix also cites Section 5885(a),
`which provides that “[t]he local
`entity shall allow the
`to install, construct, and maintain a network
`[franchise holder]
`within public rights-of-way.” However,
`these statutory
`provisions merely authorize a franchise holder to construct and
`a network in a
`public right-of-way. These provisions do
`not mandate that only video service providers who construct and
`can hold DIVCA
`operate networks in public rights-of-way
`the plain language of Sections 5830(f) and
`is permissive. Under DIVCA, a franchise holder
`a network within public
`is not
`required to—construct and operate
`As Plaintiff notes, DIVCA
`providers “without regard to
`delivery technology,
`or other
`Internet protocol
`Pub. Util. Code,

`The plain language of DIVCA also suggests that DIVCA
`to video service providers who deliver video programming
`through third-party networks.
`Pub. Util. Code,
`§ 5840(q) (2) (B)
`to video service


`(contemplating video service providers who “leas[e] access to a
`a local
`network owned by
`Netflix also cites Section 5860(d), which defines “gross
`revenues” as “all revenue
`actually received by the holder of a
`State franchise
`that is derived from the operation of the
`provide cable or video service within the
`holder’s network to
`jurisdiction of the local entity.” Under DIVCA, a franchise
`holder must pay a state franchise fee that is a
`percentage of a
`franchise holder’s gross revenues.
`Pub. Util. Code,
`§ 5860(b).
`However, Section 5860(d) merely specifies that the state
`franchise fee is a
`percentage of gross revenues derived from
`provide cable or video service.
`Operation of its network to
`Presumably, under the plain language of Section 5860(d),
`a situation where a franchise holder has not yet
`could imagine
`In such a case,
`constructed and begun to operate its network.
`gross revenues and the state franchise fee would be zero.
`on AT&T Communications of the
`Netflix and Hulu further rely
`Inc. v.
`of Austin, Tex.
`(W.D. Tex. 1997) 975
`F.Supp. 928, vacated as moot sub nom. AT&T Communications of
`Inc. v.
`of Austin (5th Cir. 2000) 235 F.3d 241;
`AT & T Communications of the Southwest,
`Inc. v.
`of Dallas,
`F.Supp.2d 756, vacated as moot sub nom.
`(N.D. Tex. 1998) 52
`Inc. v. City
`AT&T Communications of the Southwest,
`of Dallas,
`(5th Cir. 2001) 243 F.3d 928; and Bell
`Inc. v. Prince
`(D. Md. 1999) 49
`George’s County,
`805, vacated sub nom. Bell Atlantic
`Inc. v. Prince
`George’s County, Maryland (4th Cir. 2000) 212 F.3d 863.
`as Plaintiff correctly notes, each of these cases was
`these cases are
`subsequently vacated. As such,
`only persuasive
`at best and may lack any precedential value at all. City of
`Santa Monica v. Stewart
`(2005) 126
`Cal.App.4th 43, 52 fn.2 (“The
`legally exist even
`Vista decision has been vacated and does not
`aS an
`unreported, nonbinding trial court decision.”).
`In addition, City of Austin, City of Dallas, and Prince
`factually and
`George’s County
`legally distinguishable.
`Those cases concerned the activities of telecommunications
`service providers and examined whether different local
`ordinances could be applied in light of Section 253 of the
`47 U.S.C.
`federal Telecommunications Act of 1996.
`§ 253(c)
`of a State or
`(“Nothing in this section affects the
`or to
`local government to manage the public rights-of-way
`require fair and reasonable
`compensation from telecommunications
`on a
`competitively neutral and
`for use of public rights-of-way
`on a


`if the compensation required is publicly disclosed by
`such government.”).
`Netflix’s reliance on In the Matter of: Entm’t Connections,
`(1998) 13 F.C.C. Red. 14277
`has merit.
`issue was whether ECI qualified for the private cable exemption
`of 47 U.S.C.
`§ 522(c), which provides that “a
`facility that
`serves subscribers without using any public rights of way” does
`not constitute a “cable system” under the Telecommunications Act
`of 1296.
`{ 62.
`The FCC ruled that because “ECI’s signal
`moves across
`to reach its subscribers does
`public rights-of-way
`the operator of a cable system.”
`by itself render ECI
`that uses the rights-
`Noting that “[i]lt is Ameritech, not ECI,
`of-way,” the FCC reasoned:
`Because Ameritech possesses the authority
`to operate
`or other
`in the
`and to transmit ECI’s,
`we conclude that the
`video distributors’, signals,
`the franchise
`underlying premise tying
`the use of
`is not
`present in
`public rights-of-way
`ECI’s circumstances, and that
`to obtain
`a_ franchise would be
`needlessly duplicative.
`a cable operator’s construction in
`discussed above,
`and use of public rights-of way is an
`factor, and advantage, underlying the Communication
`requirement that all cable operators be
`engages in neither of these
`on Ameritech’s authorization,
`activities, relying
`construction and maintenance of its
`-of -way
`facilities. We cannot conclude that ECI’s mere
`interaction with Ameritech’s authorized facilities in
`public right-of-way is the type of use to which
`what constitutes a cable
`Congress spoke in
`The Seventh Circuit Court of Appeals
`(emphasis added).
`affirmed ECI,
`We think it
`likely that when the average person thinks
`of the construction of a cable system, he thinks of
`the installation of cables, either on
`underground. That this sort of construction is highly
`intrusive on local governments is a
`large part of the
`reason for the local
`franchising requirement.
`In ECI’s system, construction of a cable system
`over the public right-of-way
`is not necessary.


`Ameritech had previously constructed its supertrunking
`It seems incontrovertible that in some
`and historical sense of the word, it is
`reasonable to conclude that ECI has not “used” the
`public right-of-way.
`(emphasis added).
`v. F.C.c.
`(7th Cir. 1999) 199 F.3d 424, 433
`opposition, Plaintiff contends that Netflix and Hulu
`operate “a network (its video servers), which are a
`component of
`facility (the infrastructure through which Netflix[/Hulu]
`delivers its content to subscribers),
`that is located in public
`rights-of-way, and is used to
`provide video service
`to Netflix
`(Netflix’s[/Hulu’s] programming).” Opposition
`Demurrer at 5; see also Opposition to Hulu Demurrer at 5;
`9YF-1, 11-15, 17.
`like ECI, neither Netflix nor Hulu constructed or
`asked for the construction of the ISP networks delivering its
`service to subscribers. Netflix and Hulu do not control where
`the ISPs’ network cables lines go or how its signal travels over
`the ISPs’ network. Under DIVCA,
`the Legislature intended the
`franchise fee to compensate local entities for “the continued
`use of streets, public facilities, and other
`rights-of-way of
`the local
`entity in order to
`Pub. Util. Code,
`provide service.”
`§ 5810 (Bb).
`as ECI’s use of Ameritech’s system did not
`constitute “use” under the Telecommunications Act,
`the Court
`holds that Netflix’s and Hulu’s use of ISP networks does not
`constitute “use” under DIVCA.
`To hold otherwise and require
`Netflix and Hulu to obtain a franchise
`in addition to whatever
`franchises are held by the owners and operators of the ISP
`as the FCC determined in ECI, be “needlessly
`8.C.c. Red, 14277,
`If Netflix and
`duplicative.” ECT,.13
`Hulu were
`to obtain a DIVCA franchise to deliver their
`then Plaintiff could presumably seek to
`require Disney
`Plus, Peacock, HBO Max, and Amazon Prime Video to also obtain
`of DIVCA, numerous
`DIVCA franchises. Under Plaintiff's
`franchise holders could “use” a
`single public right-of-way, and
`local entities would be allowed to collect a 5% franchise fee
`Such an
`from each franchise holder.
`interpretation would result
`in a financial windfall for local entities that the
`did not


`as Hulu notes, Plaintiff’s interpretation of
`DIVCA cannot be squared with its plain language. Plaintiff
`interprets the phrase “provided through facilities” in
`(“Video service” means
`Pub. Util. Code,
`§ 5830(s)
`video programming services
`provided through facilities
`located at least in part in public rights-of-way without regard
`or other
`Internet protocol
`delivery technology,
`interpret DIVCA as a
`The Court, however, must
`“‘If possible, significance should be given to every
`word, phrase, sentence and part of an act in pursuance of the
`v. Stostad (1997) 16 Cal.4th 23,
`legislative purpose.’” Phelps
`“A court must, where
`reasonably possible, harmonize
`statutes, reconcile seeming inconsistencies in them, and
`construe them to
`give force and effect to all of their
`McCarthy (1960) 54 Cal.2d 273, 279.
`provisions.” Hough
`Plaintiff's interpretation of “provided through facilities”
`cannot be harmonized with the rest of the statute.
`defines the franchise as the authorization “that authorizes the
`construction and operation of any network in the
`Pub. Util. Code,
`§ 5830(f). Plaintiff's interpretation
`inconsistency: Netflix and Hulu would be required to obtain
`a “construction and operation” franchise even
`though Netflix and
`Hulu do not construct or
`operate facilities in the rights-of-
`to Section 5840(i) (1) requiring that the
`way. Plaintiff points
`franchise contain a
`“grant of authority
`provide video
`service” itself, but this just expands the
`inconsistency. Under
`Plaintiff’s view, Section 5840(i) (1) would conflict with
`Section 5830(f£), which still defines the franchise in terms of
`operation” of a network.
`“construction and
`If Plaintiff is right about DIVCA,
`then the following
`provisions in the statute would need to be revised to resolve
`inconsistencies or result in surplusage:
`Statutory Provision
`Inconsistency Requiring Revision
`Section 5810(a) (1) (C). “The
`The underlined phrase would need to
`be revised to cover franchise holders
`Legislature finds and declares
`who do not own or
`the state
`operate networks.
`[t]o promote competition,
`should establish a state-issued
`franchise authorization process that
`allows market participants to use
`their networks and
`video, voice, and broadband services
`to all residents of the state.”
`5840(q) (2) (B). “[T]he local
`The statutory language expressly
`entity may set a franchise fee for
`separate franchise fee
`access to the network different from
`existing network, as
`for access to an
`to a video
`the franchise fee charged


`service provider for access to the
`to install its own
`opposed to a franchise fee for
`a network.
`Section 5860(d). “‘[G]ross revenues’
`means all revenue
`actually received
`that is derived from
`of the holder’s network to
`provide cable or video service within
`the jurisdiction of the local
`“The holder of a
`Section 5870(a).
`state franchise shall
`on its
`sufficient amount of
`network to allow the provision of the
`same number of public, educational,
`and government access (PEG) channels,
`as are activated and provided by the
`incumbent cable operator”
`Section 5870(h). “Where
`the holder of a state
`franchise and an incumbent cable
`operator shall negotiate in good
`faith to interconnect their networks
`for the purpose of
`providing PEG
`The underlined phrase would need to
`be revised to cover franchise holders
`who do not own or
`networks. Otherwise, franchise
`holders who do not operate their own
`networks would not generate any
`“gross revenues” as defined by DIVCA.
`The underlined phrase would need to
`be revised to cover franchise holders
`who do not own or
`operate networks.
`The underlined phrase

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