State Lawmakers Eye New Paths to Counter FCC’s Net Neutrality Move

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By Tara Jeffries and Aaron Nicodemus

Democratic state lawmakers around the country are responding to the Federal Communications Commission’s rollback of net neutrality rules with legislation that would mandate similar requirements.

The GOP-controlled FCC Dec. 14 eliminated rules barring ISPs such as AT&T Inc. and Comcast Corp. from blocking data traffic on their networks or charging for faster speeds. The commission included language in its order pre-empting states’ regulation of broadband.

Some state lawmakers are trying to skirt that preemption by focusing on state authority over their own contracts, or writing new rules under their own consumer protection authority. Such efforts, if successful, could spark new legal clashes between states and the FCC over who has the authority to regulate broadband.

“There haven’t been a lot of court cases that have tested this sort of route-around,” Will Rinehart, director of technology and innovation policy at the nonprofit American Action Forum, told Bloomberg Law regarding the state contract approach. “This isn’t an easy win for ISPs, considering just how extensive the contracts really can be.”

It’s too early to tell whether any state will enact such legislation. An FCC spokeswoman declined to comment. NCTA—The Internet & Television Association, an ISP trade group, declined to comment on the state proposals.

Leveraging Contracts

A New York bill introduced Dec. 20 by Assemblywoman Pat Fahy (D) would embed net neutrality requirements—no blocking, no slowing, and no paid internet fast lanes—into state government contracts. Fahy told Bloomberg Law Dec. 20 she hopes the “side-door approach” will circumvent the FCC’s pre-emption language.

“We’re trying to get around this federal pre-emption and make sure that we can pass constitutional muster as well,” Fahy said. New York would use the “power of the purse” to preclude ISPs that engage in such practices from doing business with the state, she said.

The bill’s fate in the New York legislature is unclear, particularly in the Republican-controlled state Senate.

California State Sen. Scott Wiener (D) is working on a bill that may include language to enshrine net neutrality requirements into that state’s contracts. California is “a massive entity with massive contracts,” which could make that approach a compelling deterrent to ISPs, Wiener told Bloomberg Law.

The FCC draws its pre-emption power partly from the federal government’s authority to regulate interstate commerce. “We have to be very mindful of interstate commerce,” Wiener said. “But we do have levers.”

A state government opting to do business only with an ISP that agrees to not block or slow traffic is not a regulatory act, Tom Struble, technology policy manager and policy counsel with the R Street Institute, a libertarian think tank, told Bloomberg Law. “It’s just the government acting as a consumer,” he said. “You could do that today.”

But if a state passes a law mandating such language in state contracts, ISPs can sue state governments to claim that such terms and conditions violate federal law, Struble said.

State Agreements

Wiener is also weighing whether to include language in his bill that would mandate net neutrality in right-of-way infrastructure agreements or in cable franchise agreements, which grant cable companies the right to operate in certain areas.

But those methods might yield messier legal outcomes, telecom analysts said. Cities like Portland, Ore. have tried to tighten their grip on what telecom and cable companies can do through such methods and failed in court.

“Cities have tried to regulate broadband by imposing conditions on those rights of way and franchising agreements, and those have been challenged and struck down in court,” Struble said.

Wiener plans to introduce a bill between January and mid-February and hopes it will get bipartisan support. But telecom companies have a lot of influence in California’s legislature, he said.

“We have various points of leverage over the broadband industry, and we’ll come up with a good mix of approaches,” Wiener said.

Consumer Protection

Hawaii State Rep. Kaniela Saito Ing (D) wants his state to take ownership of its broadband, not simply regulate it. His proposal would explore the possibility of public or community-owned broadband, potentially modeling the system on rural electrical co-ops. “We’re going to have to eventually treat internet like a utility, because it is becoming an essential human need,” Ing told Bloomberg Law.

In its rollback, the FCC also reclassified internet as an information service, changing it from its Obama-era designation as a utility-like telecom service.

In Massachusetts, state Sen. Barbara L’Italien (D) filed a net neutrality bill earlier this week attempting to establish network management rules in that state. The bill aims to “protect consumers from blocking, throttling, or paid prioritization in the provision of internet service.”

The bill’s language was modeled on a similar Democratic bill filed in Washington state, she said.

“I have heard from many people, and the sheer number of people responding on social media show me there are grave concerns about what the FCC did last week,” she told Bloomberg Law Dec. 20. “We are doing what we can to preserve net neutrality for Massachusetts.”

L’Italien acknowledged it remains to be seen if her proposal holds up in court in the face of FCC pre-emption. But about 30 state legislators from both parties have signed on as co-sponsors in just two days, she said. It’s “a pretty robust sign of its support” in the legislature.

The bill will head to the Massachusetts legislature’s Joint Committee on Consumer Protection and Professional Licensure. L’Italien, who is chairperson of the committee, expects to hold a hearing on the bill early in 2018.

An emergency provision placed on the bill “will hopefully get it moved along with a higher priority,” she said.

State lawmakers’ urgency reflects a groundswell of popular support for net neutrality principles. Their efforts and the FCC’s insistence on preempting state broadband regulation may be on a legal collision course.

“It’s one battle in a larger fight over regulatory supremacy,” Rinehart said.

To contact the reporters on this story: Tara Jeffries in Washington at tjeffries@bloomberglaw.com; Aaron Nicodemus at correspondents@bloomberglaw.com.

To contact the editor responsible for this story: Roger Yu at ryu@bloomberglaw.com.

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