Can the FCC Really Block California's Net Neutrality Law?

October 8, 2018 12:00 pm

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Within hours of California governor Jerry Brown signing a sweeping net neutrality bill into law, the US Department of Justice sued the state, sparking the latest battle in the long legal war over the ground rules for the internet. Groups representing broadband providers followed suit on Wednesday, with their own lawsuit arguing that California’s law was illegal.

The California law, set to take effect on January 1, will ban internet service providers from blocking or otherwise discriminating against lawful internet content. The rules are designed to replace similar regulations passed by the Obama-era Federal Communications Commission but jettisoned earlier this year by the now Republican-controlled agency.

Lawyers say the dispute raises novel questions about the relationship between the federal government and the states. First is whether California has authority to impose net neutrality rules at all. Both the DOJ and the broadband industry claim that the inherently interstate nature of the internet means that only the federal government can regulate broadband services. A second, even thornier question is whether the FCC was within its rights when it effectively banned states from adopting net neutrality rules earlier this year.

At its heart is this conundrum: In repealing the Obama-era rules, the FCC said it didn’t have authority to impose net neutrality regulations. But the agency now claims it does have the authority to ban states from adopting their own rules.

“It’s hard to find a case that’s perfectly, squarely applicable, where an agency says ‘we’re vacating the field, and we’re not allowing anyone else to enter the field,’” says Marc Martin, a former FCC staffer during the presidency of George H.W. Bush who is chair of law firm Perkins Coie’s communications practice.

The California net neutrality dispute is just one part of a larger struggle between progressive states and the Trump administration on issues including immigration bans, separation of families at the border, and vehicle emissions. On net neutrality, several states, led by New York, are suing the FCC, arguing, among other things, that its decision was “arbitrary and capricious” and therefore illegal. A few states, including New York and Oregon, have banned state agencies from doing business with broadband providers that don’t protect net neutrality. And Washington, like California, passed a law to protect net neutrality directly.

Supporters of the California and Washington laws say they don’t conflict with federal regulations because, well, there aren’t any federal net neutrality regulations to conflict with.

“Usually you have preemption where there is a federal rule and a state tries to enact an incompatible rule,” says Pantelis Michalopoulos, a lawyer with the firm Steptoe & Johnson who is representing net neutrality advocates in a federal lawsuit against the FCC. “You’re in a much weaker position when you try to preempt a state rule where there is no federal rule.”

It’s not unheard of for the federal government to preempt state or local regulations when those regulations conflict with federal policy, even when the federal policy is not to regulate. Martin, the former FCC staffer, points to the Airline Deregulation Act of 1978, which banned states from reimposing federal airline regulations.

But that was a decision by Congress, not a federal agency. More relevant to this case are court decisions upholding the FCC’s moves to block the state of Minnesota from regulating internet phone services like Vonage like traditional telephone carriers. But the Vonage cases differ from the California net neutrality case in that the FCC’s authority to regulate internet phone services wasn’t in doubt. It’s less clear that the FCC still has authority to regulate broadband in the same way.

The FCC spent years, under both the George W. Bush and Obama administrations, trying to enact net neutrality regulations, but was repeatedly shot down in court until the FCC reclassified broadband providers as “Title II” common carriers, not unlike traditional telephone services. When the FCC passed the Restoring Internet Freedom Order, which took effect earlier this year and repealed Obama-era federal net neutrality rules, the agency returned broadband to the less stringent “Title I” information service category. The agency also concluded that it doesn’t actually have the authority to ban broadband providers from blocking or discriminating against particular internet content.

In a lawsuit challenging the legality of the Restoring Internet Freedom Order, a coalition of state and local governments and technology companies argued in a brief that this admission by the FCC effectively undermines its ability to preempt state laws, pointing to a 1976 federal court decision striking down the FCC’s attempt to preempt state regulation of two-way communications over cable television connections. That case was primarily about intrastate communications, but highlighted what Judge Malcolm Wilkey called a “vital difference between a refusal to use granted power, and an attempt to prevent regulation by others in an area where no ordinary Commission jurisdiction appears to exist.” Combined with the earlier cases that blocked the FCC from imposing net neutrality regulations without classifying broadband providers as common carriers, net neutrality advocates argue that the FCC lacks the authority to preempt states.

The question that remains is whether having the option to classify broadband as Title II and refusing to do so helps the FCC’s case, because it clearly had the authority to regulate net neutrality at one point, or hurts it, because it has given that authority up.

Martin thinks the states that are trying to protect net neutrality through policies barring state agencies from using broadband providers that don’t respect net neutrality are on stronger footing than the California and Washington laws. States are typically allowed to make their own decisions about how they spend their budgets. But Thomas Nachbar, senior fellow for national security law at the University of Virginia, isn’t so sure. He says those rules go too far by dictating how broadband providers treat not just the state, but other customers.


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