California Passes Net Neutrality Law, U.S. Department of Justice Promptly Files Lawsuit

On September 30, 2018, California governor Jerry Brown signed into law SB 822, the California Internet Consumer Protection and Net Neutrality Act of 2018. The provisions of California’s new law are roughly the same as the net neutrality rules adopted by the Federal Communications Commission in 2015 but repealed early this year. In general, the law prohibits fixed and mobile Internet service providers from blocking lawful content, applications, services, and nonharmful devices; impairing or degrading lawful Internet traffic on the basis of Internet content, application, or service, subject to reasonable network management; engaging in paid prioritization; and engaging in certain practices relating to zero-rating. California is the first state in the nation to adopt comprehensive net neutrality regulations since the repeal of the FCC’s open Internet rules.

Before the ink was even dry on Governor Brown’s signature, the U.S. Department of Justice filed a lawsuit against California to overturn the law. The DOJ’s lawsuit also seeks a preliminary injunction. The DOJ claims SB 822 “unlawfully imposes burdens on the Federal Government’s deregulatory approach to the Internet.” That “hands-off” approach, the DOJ will argue, is rooted in the ‘96 Act and the Restoring Internet Freedom Order. Let’s try and set the stage...

In December 2017, the FCC adopted the Restoring Internet Freedom Order,[1] which reclassified broadband Internet access service as an information service subject to Title I of the Communications Act. The FCC’s order repealed net neutrality rules created in 2015,[2] and once again deregulated broadband service.[3] The FCC also preempted any state or local measures that would effectively impose rules or requirements that it repealed or decided to refrain from imposing in the order or that would impose more stringent requirements for any aspect of broadband service that it addressed in the order.[4] Anticipating that states might get their own ideas about net neutrality rules, the FCC warned them that “[f]ederal courts have uniformly held that an affirmative federal policy of deregulation is entitled to the same preemptive effect as a federal policy of regulation.”[5]

Now, to be clear, the federal policy of deregulation concerns economic regulation, not consumer protection laws. Here’s how the FCC explains it:

This policy of nonregulation refers primarily to economic, public-utility type regulation, as opposed to generally applicable commercial consumer protection statutes, or similar generally applicable state laws.[6]

This is why, as careful readers may have noticed, the title of SB 822 is the California Internet Consumer Protection and Net Neutrality Act of 2018. That title, though, won’t fool the DOJ or any court of law. California may call its new law a consumer protection law, but it still looks like and smells like economic regulation. California’s law is nearly identical to the repealed FCC net neutrality rules, which were economic, public-utility type regulation based on Title II of the Communications Act. In other words, California is attempting to regulate broadband service in ways in which the FCC has said it cannot.

A Few Weeks Ago The Eighth Circuit Addressed a Situation Involving a Federal Policy of Deregulation and a Conflicting State Law

Just over three weeks ago the U.S. Court of Appeals for the Eighth Circuit ruled on a situation involving a federal policy of deregulation and a conflicting state law. In Charter Advanced Services (MN), LLC v. Nancy Lange, the Eighth Circuit declared Charter’s fixed, interconnected VoIP service to be an information service under the Communications Act. That decision resulted in preemption of the Minnesota Public Utilities Commission’s regulation of Charter’s VoIP service. The Court said this:

As we have noted, ‘any state regulation of an information service conflicts with the federal policy of nonregulation.”  Minnesota Pub. Utilities Comm’n v. FCC, 483 F.3d 570, 580 (8th Cir. 2007). We may therefore affirm the district court if Charter’s VoIP offerings are an information service under the Act.[7]

Net neutrality nerds went nuts over this opinion, not because they also love VoIP, but because of the decision’s impact on state net neutrality laws. FCC Chairman Ajit Pai issued an official statement calling the Court’s decision important and consistent with the FCC’s policy of nonregulation with respect to broadband services under “Democratic and Republican Administrations over the last two decades, including in last year’s Restoring Internet Freedom Order.” He said “federal law for decades has recognized that states may not regulate information services.” The Eighth Circuit’s opinion was cited by the DOJ in its motion for preliminary injunction.

So there you have it – one take on the background of the DOJ’s lawsuit. And even though this is just background, it seems to say that the odds of California successfully defending its new net neutrality law are slim to none...

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[1] See Restoring Internet Freedom, WC Docket No. 17-108, Declaratory Ruling, Report and Order, and Order, FCC 17-166 (rel. Jan. 4, 2018) (Restoring Internet Freedom Order).

[2] Protecting and Promoting the Open Internet, GN Docket No. 14-28, Report and Order on Remand, Declaratory Ruling, and Order, FCC 15-25 (Mar. 12, 2015), https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-24A1.pdf.

[3] Broadband service is subject to consumer-facing transparency requirements. The Restoring Internet Freedom Order imposes on broadband providers the transparency rule adopted by the FCC in the 2010 Open Internet Order with certain modifications. See Preserving the Open Internet, GN Docket No. 09-191, Broadband Industry Practices, WC Docket No. 07-52, Report and Order, FCC 10-201 (Dec. 23, 2010), https://apps.fcc.gov/edocs_public/attachmatch/FCC-10-201A1.pdf.

[4] Restoring Internet Freedom Order at ¶195.

[5] Restoring Internet Freedom Order at ¶194.

[6] Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order, FCC 04-267, 19 FCC Rcd. 22404, fn. 78 (2004).

[7] Charter Advanced Servs. (MN), LLC v. Lange, No. 17-2290, 2018 WL 4260322 (8th Cir. Sept. 7, 2018).