In less than two weeks the FCC is expected to make public its highly anticipated Net Neutrality Order in which it is expected to both reclassify broadband Internet access service (BIAS) as a Title I information service and eliminate most if not all of the existing net neutrality rules. ISPs are ready to rejoice. They have spent the last two years loathing and trying to overturn the strict rules established in 2015 and are finally about to get their wish. They face one problem however, many state commissions are poised to write their own net neutrality rules, many potentially in conflict with the upcoming Order. This is especially true in states led by Democrats who are adamantly opposed to any changes to the existing rules.

To be clear, a state like New York cannot just create its own rules directly in conflict with rules propagated by the FCC. Courts have historically declared that the Commission has the right to preempt states when a state provision conflicts with a lawful FCC action. Moreover, the FCC has historically declared BIAS as primarily an interstate service and this too has been ratified by the courts.

The real danger for ISPs appears to be in states that work around the margins of the Commission's rules, creating rules that may appear competitively neutrality but instead hamper ISPs by raising their costs and mandating certain requirements which (not coincidently) work to backdoor net neutrality rules. One example is in the area of Internet privacy. Earlier this year the FCC (and Congress) killed the previous Commission's attempts to impose strict privacy rules in which ISPs would have to get affirmative approval from customers before using their Internet history to market to them. Although the current Commission never let those requirements take effect, approximately 30 states have developed their own version of Internet privacy rules.

Naturally, ISPs will not simply allow states to establish their own rules. To preempt any such state attempts, Verizon and Comcast have begun lobbying the FCC to stop states in their tracks. For example, on October 25, 2017, Verizon produced a white paper urging the Commission to not permit states and localities to stop the upcoming Internet deregulation.  

Congress and the Federal Communications Commission...have recently made great strides toward restoring the light-touch regulatory approach that had successfully applied to Internet Service Providers ... for most of the last two decades. Unfortunately, even as Verizon and other providers seek to develop a reasonable and sustainable federal framework to protect the open Internet, some supporters of stringent regulation of ISPs are now looking to States and localities to frustrate these achievements. State and local laws governing broadband Internet access service (“state broadband laws”) pose a real and significant threat to restoring a light-touch, uniform regulatory framework for broadband service. (Verizon White Paper, "FCC Authority to Preempt State Broadband Laws," Docket 17-108, filed October 25, 2017 at p. 1.).

Verizon claims the Commission has three legal justifications for preempting states:

First, Section 706(a) of the Telecommunications Act1 expressly directs the Commission to promote the deployment of broadband. If Section 706(a) can reasonably be interpreted to provide an independent source of rulemaking authority, as the D.C. Circuit has found, then it would clearly allow for the preemption of state broadband laws. But even if Section 706(a) does not confer such rulemaking authority, it certainly imposes a mandatory legal obligation upon the Commission to advance the cause of broadband deployment, and thus allows the Commission to preempt state broadband laws that undermine its efforts to achieve that goal.

Second, Section 153 of the Communications Act codifies the original regime of light-touch regulation for “information services,” including broadband Internet access service, and thus further buttresses the Commission’s authority to preempt state laws—like state broadband laws—that interfere with the Act’s rule of light regulation for information services.

Third, with respect to mobile broadband operators, Section 303 of the Communications Act authorizes the Commission to “[p]rescribe the nature of the service” provided; this provision, whatever its ultimate scope, enables preemption of state broadband laws that affect “the nature of the service” that mobile broadband providers in ways that run counter to federal policy. (Id.).

No matter how one feels about the upcoming Net Neutrality Order, it must be acknowledged that 50 individual state Internet rules are not a viable solution toward increased investment and employment (other than for lawyers). Therefore, we believe in leu of continued Congressional inaction, when it comes to Internet regulation, a court-based outcome is better than either federal deregulation or state overkill.  

By Andy Regitsky, CCMI