States CAN impose net neutrality! FCC finds out how it screwed up

On Oct. 1, the Washington DC circuit court of appeals rejected arguments to reinstate net neutrality protections repealed last year by the Republican-led US Federal Communications Commission (FCC). Telecom companies will now only be subject to “light-touch” federal regulation and are free to block, slow, or otherwise discriminate against content and services. FCC Chairman and ex-Verizon lawyer Ajit Pai welcomed the ruling (pdf) as a “victory for consumers, broadband deployment, and the free and open Internet.”

Yet his counterpart, FCC commissioner Jessica Rosenworcel, declared just the opposite. The FCC was “on the wrong side of the American people and the wrong side of history,” Rosenworcel said in a statement (pdf). “Today’s court decision shows that the agency also got it wrong on the law.” While the court did uphold most of the FCC’s decision, it rejected the agency’s right to strip US states’ of their power to regulate net neutrality as they see fit. That may make all the difference.

The case, filed last year by a consortium of online advocacy groups and 22 states’ attorneys general against the FCC, is the latest skirmish in more than 20 years of fighting over how to regulate the internet and telecoms industries since the passage of the 1996 Telecommunications Act. The act created two potential classifications for broadband internet: “information services” under Title I and “telecommunications services” under Title II, a common-carrier standard with stricter regulation. Democrats have historically wanted to regulate telecoms as utilities under Title II to enforce the FCC’s stated principles of a fair and open internet: the freedom to access any lawful internet content and to use any online service or application in a competitive market of providers.

This eventually led to the 2015 Internet order under president Obama, formalizing those as principles as rules under Title II. The Trump Administration, arguing this was inhibiting innovation and investment, succeeded in repealing this order by a 3-2 vote in 2017.

This victory for the telecoms industry may have just actually delivered them into a hell they’ve tried to avoid for decades: a balkanized regulatory landscape even more restrictive than the one they just escaped. In its repeal, the FCC preempted states from imposing their own net neutrality laws. “No dice,” the majority opinion responded. If the US government chooses to abdicate regulatory authority, the judges argued, it can’t simultaneously take that authority from states.

“As a practical matter, the ISPs are going to have to abide by net neutrality,” argued telecommunications lawyer Gary Resnick at the law firm GrayRobinson, as states begin enforcing their own net-neutrality laws. “If [telcoms] can’t do it in half the country, they can’t do that anywhere,” he added. Abiding by net neutrality rules in California, but not for information sent to Ohio, will prove, to say the least, challenging (see carmakers’ adoption of California’s stricter fuel efficiency standards nationwide). ”The FCC,” Resnick argued, “lost.”

The epic ruling, which runs nearly 200 pages (and is still subject to appeal) not only allows states to re-regulate the internet as they wish (34 states have passed or proposed regulation to do so), but it appears to have invalidated lot of federal laws tied to treating the internet as a telecom service not an information service as it is now defined.

A host of critical laws may no longer apply. “The Commission must have seen this problem coming,” wrote the judges, “[but] the Commission seemed to whistle past the graveyard, implying without reasoned basis that [existing rules] would continue to govern reclassified broadband.” Two issues—the Lifeline program subsidizing low-income citizens’ access to the internet and rules allowing new internet companies to challenge local monopolies of companies like AT&T by using their poles— were remanded to the FCC to ensure they still comply with existing laws.

The legal strategy was always risky. It relied on everything breaking in the industry’s favor. After losing the fight to stop net neutrality at the FCC in 2015, lobbyists doubled down on repealing the national rules. They had to not just overturn the FCC’s decision on net neutrality, but ensure no states could step into the void. If they did, the US regulatory landscape would fragment into competing jurisdictions and ISPs would face a costly war on multiple fronts with left-leaning states such as New York, New Jersey, and California empowered to impose even stricter standards on ISPs such as the California Consumer Privacy Act due to go into effect January 2020.