Net Neutrality: How Recent Developments Could Affect Content Companies and Other IP-Intensive Businesses
“Well over half of states have introduced some version of net neutrality rules. Thirty-four states had bills or resolutions introduced in their 2018 legislative sessions and 29 had bills or resolutions introduced in their 2019 sessions. These rules and proposals have varying degrees of similarity to the Obama-era FCC net neutrality regulations.”
Net neutrality is the idea that all internet service providers (ISPs) should provide equal access to content, at an equal speed, without discrimination against particular sources. Net neutrality prevents broadband providers from blocking, slowing down or charging money for specific content, which results in favoring some internet content over others, and is particularly important to intellectual property-intensive industries and businesses. Proponents of net neutrality point out the importance of equal access to consumers on the internet for companies creating content and intellectual property on the internet. If ISPs can prioritize some websites over others then it has the potential to stymie development of intellectual property because consumers will not choose companies and websites based on their content or products, rather they will choose based on who their ISP favors. Those opposing net neutrality viewed Federal Communication Commission (FCC) regulations as overreaching and unnecessary, while supporters argued that it kept the internet on an even playing field. The Obama-era FCC passed net neutrality regulations. These regulations were challenged in court and upheld, but then in 2017, the Trump-era FCC, in a quick about-face, reversed those regulations.
A Setback for Net Neutrality Champions
In October 2019, proponents of net neutrality were delivered a blow when the D.C. Circuit Court of Appeals ruled that the FCC could legally repeal the net neutrality regulations put forth by the Obama administration. The D.C. Circuit remanded the rules to the FCC to consider any public safety implications, what reclassification would mean for regulation of utility pole attachments and to address concerns about how broadband reclassification would impact the Lifeline Program, which extended Reagan-era subsidies to low-income households for landline telephone service to stand-alone broadband service. These issues were not, and are not, large hurdles for the FCC to overcome to end net neutrality regulations.
A more far-reaching provision the court rejected relates to the FCC’s attempt to prevent states from passing their own net neutrality rules. The FCC’s proposed “Preemption Directive” would have prevented states from imposing rules that the FCC repealed or decided to refrain from imposing on a federal level. The D.C. Circuit ruled that the “Commission ignored binding precedent by failing to ground its sweeping Preemption Directive—which goes far beyond conflict preemption—in a lawful source of statutory authority. That failure is fatal.”
The D.C. Circuit did not rule that state regulations could not be challenged once passed, only that the FCC could not preemptively halt states from passing their own regulations. If a state chooses to make their own net neutrality rules, then those laws or regulations could be challenged based on the actual content of the rules, not on the broad idea of states having their own rule. This effectively only delayed the fight against net neutrality and slightly changed the context. The D.C. Circuit also denied rehearing its decision in February 2020. It remains unclear whether the plaintiffs will seek review by the Supreme Court of the United States, but if they do not, then after the FCC reviews the limited issues it was ordered to review, the next stage of the fight appears to be headed solidly into litigation regarding state regulations (unless the FCC changes its regulations again).
States Seek to Replicate Obama-Era Rules
State regulation and related litigation is already well underway. Well over half of the states have introduced some version of net neutrality rules. Thirty-four states had bills or resolutions introduced in their 2018 legislative sessions and 29 had bills or resolutions introduced in their 2019 sessions. Some states have regulations proposed and some have already passed laws or regulations. These rules and proposals have varying degrees of similarity to the Obama-era FCC net neutrality regulations. Some are arguably more restrictive, some less, and others are designed to mirror as closely as possible the Obama-era regulations.
California’s act, the Internet Consumer Protection and Net Neutrality Act , prohibits broadband providers from blocking or slowing any lawful traffic, participating in paid prioritization, getting paid for zero-rating, selectively zero-rating content in a given category, preventing users from using their own devices and hiding details regarding network management practices, performance or commercial terms. Oregon prohibited public entities from contracting with any broadband providers that engaged in any paid prioritization, blocking content or discrimination. Vermont also required broadband providers to certify that they comply with consumer protection and net neutrality standards to get any state contracts. Similarly, the governors of Montana, New York, Hawaii, New Jersey and Rhode Island have all issued executive orders requiring broadband providers contracting with any of their state agencies to comply with net neutrality rules. Washington state’s law, which was the first neutrality law passed in 2018, requires providers to disclose information regarding network management practices, performance characteristics and terms of services to consumers. It also prohibited blocking and slowing traffic or paid prioritization. Washington made any violations of its net neutrality law actionable and enforceable as violations of the Washington Consumer Protection Act. Other states have also passed or proposed laws that restrict how broadband carriers disclose information about subscribers, including browsing history.
DOJ and Broadband Industry Fights Back
Soon after California’s law was passed, the Justice Department and multiple broadband lobbying groups sued the State of California to stop the implementation of the law. Broadband providers also challenged Vermont’s law in court. California and Vermont agreed to delay enforcing their laws until the appellate process ended, which is now getting closer.
Lawsuits against these laws were in part based on the Preemption Directive that the D.C. Circuit struck down, so the lawsuits will likely need to be amended and proceed with slightly different arguments. The D.C. Circuit’s opinion may also make it more difficult to receive a preliminary injunction against the state laws, unless the lawsuits are amended. Therefore, these lawsuits are likely to resume and move forward as soon as the federal case challenging the FCC’s elimination of net neutrality regulations becomes final. The D.C. Circuit’s opinion left open the possibility that state laws could still be struck down through traditional conflict preemption principles, but these will likely be fact intensive inquiries examining each state law in comparison to the FCC regulations. The threat of additional lawsuits has also been cited by lawmakers in other states, such as Maryland, as a reason not to pass their own net neutrality laws until the lawsuits against other states’ net neutrality rules have a chance to play out.
These state issues are all in addition to proposals in the United States Congress, one of which previously passed in the House of Representatives but was not taken up by the Senate. A bipartisan effort in the Senate is underway to craft different net neutrality regulations.
Whether through national legislation, a change in FCC position or state laws and the accompanying lawsuits, the debate regarding net neutrality is not over yet and the year ahead will likely hold many new developments.