Why states might win the net neutrality war against the FCC

Can states force Internet service providers to uphold net neutrality? That’s one of the biggest unanswered questions raised by the Federal Communications Commission vote to repeal its net neutrality rules.

After the FCC vote, lawmakers in more than half of US states introduced bills to protect net neutrality in their states. The governors of five states have signed executive orders to protect net neutrality.

The major obstacle for states is that FCC Chairman Ajit Pai has claimed the authority to preempt states and municipalities from imposing laws similar to the net neutrality rules his FCC is getting rid of. ISPs that sue states to block net neutrality laws will surely seize on the FCC’s repeal and preemption order.

FCC’s preemption powers will be tested

The FCC says it can preempt state net neutrality laws because broadband is an interstate service (in that Internet transmissions cross state lines) and because state net neutrality rules would subvert the federal policy of non-regulation.

But the FCC’s preemption powers are limited, and not everyone is convinced the FCC can actually stop states from protecting net neutrality. Even among legal experts who support net neutrality, there is no consensus.

State laws that forbid all ISPs from blocking or throttling Internet traffic are “vulnerable to legal attack,” Electronic Frontier Foundation (EFF) Legislative Counsel Ernesto Falcon argued recently. We described Falcon’s argument in more depth in a previous article.

But another legal expert who also supports net neutrality is optimistic that state laws would be upheld in court. Harold Feld, a longtime telecom lawyer and senior VP of consumer advocacy group Public Knowledge, provided the optimistic case in a recent blog post.

Feld wrote:

The critical question is not, as some people seem to think, whether broadband involves interstate communications or not. Of course it does. So does ye olde plain old telephone service (POTS), and states regulated that up to the eyeballs back in the day (even if they have subsequently deregulated it almost entirely). The question is whether Congress has used its power over interstate commerce to preempt the states (directly or by delegating that power to the FCC), or whether Congress has so pervasively regulated the field so as to effectively preempt the states, or whether the state law—while framed as a permissible intrastate regulation—impermissibly regulates interstate commerce (aka the “dormant commerce clause” doctrine).

“[O]ne cannot be 100% sure of how a court will decide” on complicated legal questions such as this one, Feld notes. But after evaluating the FCC’s repeal and preemption argument, Feld says he is “reasonably confident that the states can pass their own net neutrality laws.”

FCC abandoned its authority over broadband

The key fact is that when the FCC did its repeal, the commission “did not merely choose to eliminate net neutrality rules as a matter of policy,” Feld wrote. “The FCC quite explicitly determined that Congress withheld authority over broadband from the FCC.”

The FCC’s repeal order agrees with an AT&T argument that Congress, in Section 230 of the Telecommunications Act of 1996, confirmed that “Internet access should be classified as an unregulated information service” under Title I of the Communications Act. It’s clear that “Congress did not intend the Commission to subject broadband Internet access service to Title II [common carrier] regulation,” the FCC also said.

According to Feld, this view “is a radical departure from the FCC’s previous determinations that it had jurisdiction and authority over broadband” and “has rather dramatic consequences.” Feld continued:

If Congress explicitly withheld authority over broadband from the FCC, it withheld from the FCC the power to preempt any “contrary” state authority. The relevant case on this is National Association of Regulatory Commissioners v. FCC (“NARUC II”). There, the FCC attempted to preempt state regulation of cable leased access channels under its general Title I authority (since Congress had not yet passed the Cable Act). The DC Circuit found that the FCC’s general power over “interstate communication” did not give it the authority to preempt state regulation.

Pai’s FCC is relying on other cases to support its preemption argument. But those cases “are distinguished by the fact that the FCC explicitly asserted jurisdiction to regulate the preempted services and that additional regulation by the states would therefore be inconsistent with the exercise of the FCC’s authority,” Feld wrote.

“Again, I don’t want to claim 100 percent certainty here,” he wrote. “But I have a lot of reason to be skeptical that Congress delegated the FCC extremely narrow regulatory power over interstate communications generally, but virtually unlimited preemption power. Absent an express delegation of preemption authority… the FCC’s preemption power is tied directly to its regulatory power.”

States still face legal obstacle

Falcon, the EFF lawyer, was persuaded by Feld’s argument as it relates to the FCC’s preemption powers in the Communications Act. But he still thinks states face an uphill battle and are more likely to succeed if they use indirect regulating methods.

“I wholeheartedly agree with Harold’s assessment that the FCC appears to have no preemption power under Title I of the Communications Act,” Falcon told Ars this week.

Falcon said he was previously certain that state net neutrality laws would not survive if they directly regulate all ISPs. Now he thinks states have about a 10 percent chance of making such net neutrality laws hold up in court.

The reason for his continued pessimism is the “dormant commerce clause,” which concerns “whether states can constitutionally reach beyond their borders for economic regulation when Congress is silent in its lawmaking role,” Falcon told Ars.

“When Congress has nothing really written in law, then it’s a dormant commerce clause question where states are restricted in two ways,” Falcon said. “1) They can’t discriminate against out-of-state economic actors in favor of in-state actors and 2) They can’t unduly burden interstate commercial activity and must have a strong state interest.”

Falcon and Feld “agree that Title I grants virtually no authority to the FCC over ISPs,” but they “part ways on how much direct regulation of ISPs would violate the dormant commerce clause’s prong of undue burden on interstate commercial activity,” Falcon said.

States can use purchasing power to protect net neutrality

There’s one other thing Falcon and Feld agree on. States can legally enforce net neutrality in their role as purchasers of Internet services, they say.

This indirect approach was taken by all five states whose governors issued executive orders, namely Vermont, Hawaii, Montana, New Jersey, and New York. Those executive orders will require ISPs to abide by net neutrality regulations if they contract with any state agencies.