Court upholds FCC repeal of net neutrality but allows states to regulate internet
The FCC's broad effort to block state legislation was found to be illegal.
On Tuesday, the DC Circuit Court of Appeals upheld most of the FCC’s 2017 unpopular repeal net neutrality. However, the court ruled the agency’s attempt to preempt individual states from creating new rules to regulate ISPs and telcos was illegal.
The backstory. Net neutrality was passed during the second term of the Obama administration and basically prevented ISPs from creating fast and slow lanes to prioritize or discriminate against content types or publishers. FCC Chairman Ajit Pai, a former Verizon lawyer, had argued that net neutrality was stifling “innovation” and the rules were repealed on a straight, party-line vote in December 2017.
Since the FCC’s new rules went into effect last year, telecos started throttling YouTube and Netflix. However several states, including California, enacted legislation to effectively restore net neutrality or similar protections. The California law, in particular, prevents internet service providers from blocking or slowing traffic or extracting payments from content publishers for “fast lanes.”
FCC was sued immediately. Shortly after euphemistically labeled “Restoring Internet Freedom Order” was passed it was confronted by legal challenges, which reached their climax in the DC Circuit’s decision yesterday. A number of internet companies, including Mozilla, state attorneys general and non-profits had sued to stop implementation of the FCC’s Order on several legal grounds.
The court’s opinion (.pdf) upheld the agency’s broad authority to change the rules but remanded three specific issues for further consideration and clarification, including the impact of the FCC’s Order on public safety. Those issues are not material to net neutrality principles.
States allowed to regulate. While the FCC Chairman celebrated the victory, arguably the most significant part of the decision is that it found the FCC’s attempts to broadly preempt states and localities from making new laws to regulate the internet illegal. The court said, “We vacate the portion of the 2018 Order that expressly preempts “any state or local requirements that are inconsistent with [its] deregulatory approach.” (“Preemption Directive”). 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 state laws that have already passed or will be passed in the future could still face legal challenges to the extent they seek to directly invalidate or undermine the FCC Order. However, the DC Circuit opinion enables states to move forward with their own internet regulations.
Why we should care. Net neutrality as we knew it is dead. However, many states have passed or will pass legislation to restore some of the consumer protections that previously existed under net neutrality. This decision allows that. There will almost certainly be legal battles ahead has the FCC tries to prevent the states from effectively nullifying its 2017 rule changes.
When the net neutrality repeal happened there were concerns that the potential new “fast lane, slow lane” environment could disproportionately impact smaller publishers and marketers and favor deep-pocketed marketing platforms such as Google and Facebook that could afford to pay telcos for faster delivery of their content and services.
There were also fears that telcos might create new services and favor those over existing competitors in the market. So far those fears haven’t fully materialized but now that the FCC Order has been substantially upheld, the telcos may make more aggressive steps to increase revenues.