A court battle may soon be looming between California and the FCC over the state’s proposed bill to restore net neutrality rules that were approved within the last month by the legislature but not yet signed into law by Governor Jerry Brown.  The bill is all encompassing, forbidding Internet blocking, throttling and paid prioritization, but also banning popular services such as zero rating of some traffic as part of customer data caps.  Here are some of the bill’s highlights.   

It shall be unlawful for a fixed Internet service provider, insofar as the provider is engaged in providing fixed broadband Internet access service, to engage in any of the following activities:

1. Blocking lawful content, applications, services, or nonharmful devices, subject to reasonable network management.
2. Impairing or degrading lawful Internet traffic on the basis of Internet content, application, or service, or use of a nonharmful device, subject to reasonable network management.
3. Requiring consideration, monetary or otherwise, from an edge provider, including, but not limited to, in exchange for any of the following:
   • Delivering Internet traffic to, and carrying Internet traffic from, the Internet service provider’s end users.
   • Avoiding having the edge provider’s content, application, service, or non-harmful device blocked from reaching the Internet service provider’s end users.
   • Avoiding having the edge provider’s content, application, service, or nonharmful device impaired or degraded.
4. Engaging in paid prioritization.
5. Engaging in zero-rating in exchange for consideration, monetary or otherwise, from a third party.
6. Zero-rating some Internet content, applications, services, or devices in a category of Internet content, applications, services, or devices, but not the entire category.
7. Unreasonably interfering with, or unreasonably disadvantaging, either an end user’s ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of the end user’s choice, or an edge provider’s ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be a violation of this paragraph.
   • Zero-rating Internet traffic in application-agnostic ways shall not be a violation of subparagraph (A) provided that no consideration, monetary or otherwise, is provided by any third party in exchange for the Internet service provider’s decision whether to zero-rate traffic.
8. Failing to publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of those services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.

While the FCC has not formally responded to the pending California net neutrality law, or any of the other 20+ states proposing their own variations.  It is clear that public access to the Internet could be harmed if ISPs are forced to tailor their Internet services to a mish mash of state rules.  Such harms could include higher prices, fewer services offered or even fewer ISPs in a state.

The intelligent way to handle this is with Congress developing sensible net neutrality rules that would not get bogged down with the correct classification of broadband Internet access service (BIAS) but would bar blocking and throttling of traffic and allow paid prioritization only in limited circumstances. Naturally, it appears at this time that Congress will do nothing.

Therefore, the FCC will have to face the apparently unavoidable task of opposing the various state laws in court.  A process that will take years to conclude.  FCC Chairman Ajit Pai made this clear in a speech last week:

Of course, those who demand greater government control of the Internet haven’t given up. Their latest tactic is pushing state governments to regulate the Internet. The most egregious example of this comes from California. Last month, the California state legislature passed a radical, anti-consumer Internet regulation bill that would impose restrictions even more burdensome than those adopted by the FCC in 2015. In a way, I can understand how they succumbed to the temptation to regulate. After all, I suppose a broadband pipe might look to some like a plastic straw. If this law is signed by the Governor, what would it do? Among other things, it would prevent Californian consumers from buying many free-data plans. These plans allow consumers to stream video, music, and the like exempt from any data limits. They have proven enormously popular in the marketplace, especially among lower-income Americans. But nanny-state California legislators apparently want to ban their constituents from having this choice. They have met the enemy, and it is free data. The broader problem is that California’s micromanagement poses a risk to the rest of the country. After all, broadband is an interstate service; Internet traffic doesn’t recognize state lines. It follows that only the federal government can set regulatory policy in this area. For if individual states like California regulate the Internet, this will directly impact citizens in other states. Among other reasons, this is why efforts like California’s are illegal. In fact, just last week, the U.S. Court of Appeals for the Eighth Circuit reaffirmed the well-established law that state regulation of information services is preempted by federal law. Last December, the FCC made clear that broadband is just such an information service. So, let me be clear: The Internet should be run by engineers, entrepreneurs, and technologists, not lawyers, bureaucrats, and politicians. That’s what we decided in 2017, and we’re going to fight to make sure it stays that way. (Ajit Pai, September 14, 2018 speech to Maine Heritage Policy Center).  

It is legally murky as to whether the FCC could initiate a court case directly against California since there is an appeal of the Restoring Internet Order already in the courts.  Instead, the Commission could preempt the California case with a declaratory ruling or intervene if an ISP files an appeal.  All methods would result in an FCC vs California court battle.

Some California lawyers believe that their state’s preemption of a federal rule will pass legal muster because the FCC washed its hands of Internet regulation when it passed off this authority to the Federal Trade Commission (FTC)) in the Restoring Internet Freedom Order.  Under this reasoning, the FCC lost all authority over the states once it gave up on Internet regulation.  However, a court is likely to find that the Commission’s decision to regulate the Internet (an interstate service) through another agency was not arbitrary or capricious but instead, just another form of regulation.  Moreover, the FTC has more than enough of its own lawyers to oppose any state attempts to circumnavigate the federal rules.  Therefore, in the long-run, states are likely to lose.  Perhaps, however, the fear of a long bitter court battle will bring Congress to its senses.