An Exercise in Futility: California’s New Net Neutrality Law is Preempted by Federal Actions

No sooner did California Governor Jerry Brown sign the state’s disastrous net neutrality bill into law than the Department of Justice filed suit against it. The suit will help lay the groundwork to determine the bounds of federalism versus localized control over the internet.

The DOJ’s suit argues that California’s law is at odds with the Constitution, at least one federal statute, and the 2017 Restoring Internet Freedom Order.

The Constitution provides that it, and laws made “in pursuance” of it are the “supreme Law of the Land.” The Constitution also vests the federal government with the authority to regulate interstate commerce.

Under the umbrella of these two Constitutional provisions, Congress enacted the Communications Act in 1934 and updated it in 1996. The Communications Act vested the authority to regulate interstate communications with the Federal Communications Commission. The 1996 update expressed a federal policy “to preserve the vibrant and competitive market… for the internet and other interactive computer services unfettered by Federal or State regulation.”

When the FCC passed the 2017 Restoring Internet Freedom Order, it not only repealed the then two-year-old Open Internet Order, it also exercised deregulatory authority pursuant to Section 230, expressly preempting any state laws that attempts to reinstate heavy-handed Title II regulations.

The 2015 Open Internet Order had four key provisions, including bans on throttling, paid prioritization, and what it called a “general conduct standard.” While there is little disagreement in principle—most parties on both sides of the debate believe that banning websites or content, throttling, and so on are improper—the way in which the FCC claimed authority was wrong. In 2015, the FCC sought to reclassify internet service providers as 1930s-era telecommunications services. This reclassification would subject ISPs to rate control, allow the FCC to direct investments, and much more. The reclassification also led to a significant drop in ISP infrastructure deployment.

California’s law seeks to reinstate the prohibitions against blocking content, throttling, and paid prioritization. The law also seeks to reinstate the general conduct standard. It goes beyond the 2015 Order, though, by also including a ban on zero-rating. Zero-rating is the practice of carriers to not count certain uses of data against a consumer’s cap. T-Mobile, for example, does not count videos streamed from YouTube or music from Pandora against its consumers’ data caps.

The law also misstates how internet technology works. The internet is not, and cannot be, wholly intrastate. An email from one neighbor to another neighbor may travel across the country before delivery. A website may be fragmented and stored in servers across the country. Mobile phone apps such as GPS may use data from servers across the country.

When states like California pass laws attempting to regulate the conduct of internet service providers, those laws end up establishing national policy. Because they establish national policy—forcing companies outside of the state to change their behavior—laws like California’s net neutrality law violate the Dormant Commerce Clause.

While violating the Dormant Commerce Clause is argument enough for federal courts to strike down the law, there is a much stronger ground: Preemption.

Preemption applies when the federal government has legislative jurisdiction over a topic and has acted on that prerogative or when an agency has exercised proper authority and “occupied the field” such that there is no room for state legislation.

In this case, both the 1996 update to the Communications Act and the text of the 2018 Restoring Internet Freedom Order preempts California’s efforts. As mentioned above, Congress stated a clear intent to preempt state regulation of the internet and providers of interactive computer services. The FCC acted within Congress’s intent both by reclassifying internet service providers under Title I where they were prior to 2015 and by preempting state regulations.

Because the 2018 Order reversed the 2015 rule change while preventing states from reimposing obligations found in the 2015 Order, the FCC has completely occupied the field. This occupation of the field, plus acting pursuant to Congressional authority, places the Department of Justice on solid footing. Sooner, rather than later, California’s net neutrality law will be struck down.