You’re reading the Benton Foundation’s Weekly Round-up, a recap of the biggest (or most overlooked) telecommunications stories of the week. The round-up is delivered via e-mail each Friday.

Round-Up for the Week of October 1-5, 2018

On September 30, 2018, Gov. Jerry Brown (D-CA) signed SB 822, California’s net neutrality law -- the strictest in the nation and widely seen as a challenge to the federal government. The Department of Justice quickly sued the state to block enactment of the rules. Two days later, lobbyists for broadband service providers filed their own suit. Everybody seems to be suing everybody in the latest chapter of the net neutrality saga.

California's SB 822

The California law is not the first state net neutrality legislation since the FCC, under Chairman Ajit Pai, repealed its 2015 rules in 2017. Thirty legislatures have considered bills, four states have passed laws, and six governors have issued net neutrality executive orders. But the California law provides the strongest consumer protections.

California Senate Bill 822:

The “selectively zero-rating certain content” clause means SB 822 actually goes further than the FCC’s 2015 net neutrality rules. The law specifically calls out the discriminatory tactic called ‘zero rating.’ Under zero rating schemes, mobile users may access content from select sources without it being counted against their data cap. AT&T, for example, uses zero rating when it allows its DirecTV Now customers to watch video programming without cutting into customers’ data plans.

The law also polices the kind of interconnection interference that resulted in Netflix users seeing streaming slowdowns back in 2014. Under the California law, broadband providers may not attempt to evade net neutrality protections by slowing down traffic at network interconnection points.

Enter the DOJ

The Department of Justice (DOJ), within hours of Gov. Brown’s signature, sued California, saying that the law “is attempting to subvert the Federal Government’s deregulatory approach by imposing burdensome state regulations on the free internet, which is unlawful and anti-consumer.”

“The Justice Department’s case boils down to one central point,” wrote Brian Fung. “Under the Constitution, it’s the federal government whose policies must take priority over state law.”

The DOJ’s case rests on the notion of preemption. The DOJ and the Pai FCC believe the FCC has the authority to preempt state regulation of what the FCC calls "information services" including BIAS. 

The DOJ is asking for a preliminary injunction that would block the California law from taking effect on January 1, 2019. The DOJ noted that BIAS providers “cannot realistically comply with one set of standards in this area for California and another for the rest of the Nation—especially when Internet communications frequently cross multiple jurisdictions.” The suit goes on: “The effect of this state legislation would be to nullify federal law across the country.”

U.S. Attorney General Jefferson Beauregard Sessions III said when announcing the suit: 

FCC Chairman Ajit Pai agreed. “The Internet is inherently an interstate information service.  As such, only the federal government can set policy in this area.  And the U.S. Court of Appeals for the Eighth Circuit recently reaffirmed that state regulation of information services is preempted by federal law.”

Industry Opposes SB 822

On October 3, four lobbying groups also sued California:  USTelecom (telecommunications companies),  NCTA (large cable companies), the American Cable Association (small and mid-size cable companies), and CTIA (wireless carriers).

The industry suit attacks SB 822, claiming the rules seek to regulate broadband providers beyond state lines, in violation of the Constitution. "This case presents a classic example of unconstitutional state regulation," the complaint says. “SB-822 violates the ‘dormant’ or ‘negative’ Commerce Clause of the United States Constitution by regulating conduct occurring wholly outside California’s borders.”

The DOJ and industry arguments are similar. Speaking of the industry’s suit, Benton Senior Counselor and lecturer in public-interest law at Georgetown University Andrew Schwartzman said, “It’s the complaint stage, so [the lobbyists] have very little to lose by throwing everything in. It closely tracks the DOJ case, but they’re filing because they have their own interests that may run broader.”

Observers believe it is likely the industry suit will be merged with the DOJ’s challenge, and that the U.S. District Court for the Eastern District of California might issue an injunction against the state law until a number of other suits involving net neutrality are resolved.

Countering Preemption Claim

Supporters of the California law say the FCC’s 2017 Restoring Internet Freedom Order, which repealed the FCC’s 2015 net neutrality rules, contains a fatal flaw that undermines the DOJ’s federalism case: when the agency repealed Title II reclassfication, it explicitly determined that Congress withheld authority over broadband from the FCC -- a radical departure from the FCC's previous determinations that it had jurisdiction and authority over broadband. Without authority to regulate broadband internet access service, the FCC, therefore, also lacks the authority to preempt states from regulating the industry.

“Courts have consistently held that when the federal government lacks authority to regulate, it cannot preempt states from regulating,” said Schwartzman.

Barbara van Schewick, a law professor at Stanford University and an advocate for strong net neutrality rules, agreed:

[For more, see Harold Feld’s Can The States Really Pass Their Own Net Neutrality Laws? Here’s Why I Think Yes.]

What Will Happen with Preemption?

Ultimately, the question of whether the FCC's preemption of state laws is valid will be decided in a different lawsuit pending at the U.S. Court of Appeals for the D.C. Circuit. In that suit, state attorneys general and other litigants [including the Benton Foundation] sued to block the FCC's repeal of its net neutrality rules and decision to preempt state regulation of BIAS.

Some see the DOJ's suit as a way of stalling California's rules. “At best, DOJ may be looking at a short-term victory until the DC Circuit decides the merits of [that] lawsuit,” Gigi Sohn said. Meanwhile, “the California net neutrality law simply fills a gap in consumer protection that the FCC has willingly and happily created,” she added.

“What is happening in California is mostly about whether California is allowed to enforce its law before the D.C. Circuit rules,” Van Schewick said.

The D.C. Circuit Court of Appeals has scheduled a hearing in February 2019, and a ruling is expected later that year. 

Countering Commerce Clause Claims

The argument over the constitutionality of SB 822 could be a big deal. Some experts say a ruling on the Dormant Commerce Clause could have broad implications. “If that ... argument is right, it calls into question every state law that regulates the Internet,” said Jonathan Mayer, a former chief technologist in the FCC’s enforcement bureau.

But California is expected to argue that it is justified to protect the health and welfare of its residents, per the 10th Amendment.  

California Attorney General Xavier Becerra said, “California, the country’s economic engine, has the right to exercise its sovereign powers under the Constitution, and we will do everything we can to protect the right of our 40 million consumers to access information by defending a free and open Internet.”

The States’ Rights Debate

The role of Silicon Valley in the state’s economy helps explain why California would take the lead in crafting state-based net neutrality rules. “California has obvious reasons to want to protect an open internet: It is the land of the internet’s origin, and a place where tech entrepreneurship has thrived,” wrote Columbia law professor Tim Wu. 

But some in California are hoping that others states will follow. “I’m confident the FCC’s repeal of Net Neutrality last year will ultimately be overturned by the D.C. Circuit, but in the meantime, every single state should pass legislation similar to California’s to protect the free and open Internet,” said Rep. Anna Eshoo (D-CA). 

"California’s net neutrality bill is now the model for all future state and federal legislation,” said Benton Senior Fellow and Public Advocate Gigi Sohn. 

But the DOJ and FCC are claiming the federal government has the authority to preempt states rights -- which, to those who follow other communications policy issues, smacks of inconsistency. Chairman Pai has, for example, defended “state rights” when states pass laws that restricted local communities from building or extending their own broadband networks. 

Pai argues states rights when their rules are beneficial to industry, but argues for federal preemption when states act to protect consumers. 

In a New York Times op-ed this week, Tim Wu asserts that, with the GOP under new management and in control of every branch of the federal government, a profound transformation is underway. “The new reality is that we face a rising nationalist party, uninterested in local variation, aggressively devoted to molding the nation in the image of the party and its leader, Donald Trump, into one white-hot mass.” 

And the DOJ’s attack on California’s SB 822 is an example, says Wu:

Conclusion

Another chapter in the ongoing saga of net neutrality was written this week. It’s been exhausting, but some clarity could come from it. 

And, ya know, Congress could act and settle the matter. The Washington Post editorial board said it best: “The fight over net neutrality today can be reduced to a single sentence: Everyone is suing everyone else. Congress should step in.”

Rep. Mike Coffman (R-CO) introduced The 21st Century Internet Act, a bill to reinstate the 2015 net neutrality rules, back in July. Not much has happened to it since. 

Instead, the net neutrality debate is being played out it in courts. 

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Quick Bits

• Sen. Thune Slams FCC Over High-Cost Broadband Subsidies Shortfall (Multichannel News)
• Principles for an ‘Internet Bill of Rights' (Rep. Ro Khanna (D-CA))
• Facebook Is Breached, Putting 50 Million Users’ Data at Risk (New York Times)
• Facebook wins court battle over law enforcement access to encrypted phone calls (Washington Post)
• Trump officials vow ‘America first, 5G first’ at WH Summit (Fierce)
• Lifeline National Verifier Launch Public Notice (FCC)

Weekend Reads (resist tl;dr)

• FCC's Data Overstate Access, and Tribes Face Barriers Accessing Funding (GAO Report)
• Broadband subscriptions are up, but too many households are still disconnected (Brookings)
• Internet, social media use and device ownership in U.S. have plateaued after years of growth (Pew Research Center)
• USDA Invests $600 Million In Rural Broadband, But Farmers Still Struggle To Connect (Forbes)
• EducationSuperHighway 2018 State of the States report (EducationSuperHighway)

ICYMI from Benton

• What You Stand For, Adrianne Furniss
• The Media Democracy Agenda: The Strategy and Legacy of FCC Commissioner Michael J. Copps
• Touch, Trust, and Tech, Susan Benton and John Horrigan
• Senate Privacy Hearing: Apologies, Explanations, And Weak Support, Robbie McBeath

October 2018 Events 

Oct 10 -- Building the Future Bit x Bit, SHLB Coalition

Oct 10 -- Senate Commerce Committee hearing: Consumer Data Privacy: Examing Lessons from GDPR and California Consumer Privacy Act

Oct 11 -- Everett C. Parker Ethics in Telecommunications Lecture (Feat. Helen Brunner and Gigi Sohn)

Oct 12 -- Connecting Disconnected Communities: Insights on Building Networks and Policy Recommendations (NHMC)

Oct 12 -- Fake News or Free Speech: Is There a Right to be Misinformed? (Freedom to Read Foundation)

Oct 15 -- Digital Media and Developing Minds Conference

Oct 15-17 -- Competition and Consumer Protection in the 21st Century, (FTC & Global Antitrust Institute)

Oct 23 -- FCC October 2018 Open Meeting

Oct 30 -- Virginia Broadband Summit (NTIA)

Nov 1 -- FCBA Foundation Charity Auction

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