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Can U.S. States Hang on to Net Neutrality?

As anticipated, the U.S. Federal Communications Commission voted late last year to scrap net neutrality regulations that required ISPs and telecommunications companies to treat all traffic equally (see “FCC to End Net Neutrality,” 28 November 2017), however, the battle for net neutrality is still raging in the United States, with many individual states both suing the federal government over the new regulatory framework and moving ahead with their own state-specific net neutrality legislation. Washington State — home to high-tech giants like Amazon and Microsoft — is the first out the door with new net neutrality laws.

Do these strategies stand a chance? Don’t federal regulations pre-empt state authority? Or are these lawsuits and state regulations essentially stall tactics, hoping to muddy the waters long enough for a possible shift in the balance of Congress or perhaps even a new presidential administration?

The Lawsuit Strategy -- The first major suit against the FCC over the new net neutrality framework was filed 16 January 2018 in the form of a protective petition for review from 21 states and the District of Columbia, which essentially is a fancy notification that a lawsuit is on the way. The states moved fast because federal law allows only a 10-day window for filing suits over new regulations as part of a multi-district lottery that determines which court handles a case when there are multiple challenges. The states (and I believe all other would-be plaintiffs) are aiming at the U.S. Appeals Court for the District of Columbia, which has heard previous net neutrality suits.

But — funny story — nobody really knows when that 10-day window starts. Is it when the new FCC regulations are adopted (which happened 4 January 2018) or when they’re published in the Federal Register (which didn’t happen until 22 February 2018)? So, everybody wanting in filed protective petitions for review around both those dates to make sure they had a foot in the door. Other petitions were filed by Mozilla and advocacy groups like New America’s Open Technology Institute and Public Knowledge. Other organizations like The Internet Association — basically Silicon Valley’s biggest lobbying group — aren’t suing directly but plan to participate as intervening parties.

The states’ lawsuit will probably make three arguments:

  • The FCC’s rollback of net neutrality is illegal because the FCC is prevented from making “arbitrary and capricious” changes to policy. The move is “arbitrary and capricious” because it fails to adequately justify breaking with the FCC’s previous decade-and-a-half of trying to defend net neutrality and (probably) because the FCC’s significantly flawed comment system meant that the rule-making process was subverted.

  • The FCC doesn’t have the authority to make sweeping pre-emption of state and local laws.

  • The FCC’s move to reclassify broadband Internet as a lightly regulated Title I “information service” rather than a Title II “communications service” subject to common carrier regulation is based on an incorrect and unreasonable reading of the Telecommunications Act.

That all makes sense on paper, but the effort is a bit of a Hail Mary pass. Broadband Internet was a Title I service up until a few years ago (see “FCC Goes All-In on Net Neutrality,” 7 February 2015), and courts have found the FCC has the authority to classify broadband Internet as it sees fit.

As for overriding state and local law, generally all the federal government has to do to make its policies preempt any state regulation is say “this policy preempts any state or local laws on this matter.” The FCC’s net neutrality rollback does exactly that (on page 194), and on several previous occasions, the FCC has exercised preemptive powers successfully to implement its policies. (The FCC’s preemptive power isn’t unlimited: it did get reversed on a municipal broadband case in 2016 but the legal basis was different. In that case, the FCC was essentially giving muni broadband providers powers the states did not grant.) So, the states have to successfully argue the rule change meets the legal standard of “arbitrary and capricious,” which is a fairly high bar.

The Legislative Strategies -- States aren’t pinning all their hopes on successfully suing the FCC: several are working to enact their own net neutrality laws, and this week Washington became the first state to put such a law in the books.

Washington State’s new law basically punches the new FCC regulations in the teeth. The FCC says things like fast lanes, rate limiting, and content blocking are now permissible? Well, not in Washington! This means the state is almost certainly headed to court, but only time will tell if it will take on the FCC directly or by proxy, perhaps instead being sued by one or more industry groups representing broadband and Internet operators. Washington State’s argument will likely be that, yes, the federal government can impose policy, but states have an absolute right to protect their citizens and the net neutrality rollback is a direct threat to consumers, especially in an era of giant media companies and ISPs being free to sell customers’ browsing histories (see “Congressional Republicans Kill FCC ISP Privacy Rules,” 3 April 2017). Consumer protection laws are pretty powerful.

So far, the FCC has not commented on Washington’s new law. However, the last thing broadband providers want is to shift from a world where they had to deal with one set of federal regulations to a world with 50 sets of inconsistent state regulations. So the agency will be feeling some pressure to get Washington State in line.

Other states — like Oregon, New York, and Rhode Island — may swing for the wallet rather than the teeth. Bills up for consideration in these states — but not yet enacted into law — don’t try to impose state-wide net neutrality policy. Instead, they allow state and local governments to contract only with broadband operators that meet the states’ net neutrality criteria. This could mean that state and local governments won’t give direct business to broadband operators unless they’re net-neutrality compliant. However, the laws could also block broadband operators’ ability to use utility poles, access state- or city-owned land to run fiber, or install facilities.

Going for the purse strings is a nice idea — and very likely ducks under the FCC’s preemption authority — but broadband operators are already used to dealing with innumerable state and local utility commissions. It’s the sort of thing that can be sidestepped with shell companies and finagling — and in markets like New York, Texas, and California, there’s more than enough money at stake for broadband operators to do just that. In smaller markets, broadband operators may simply choose not to comply, effectively holding improved Internet service hostage until regulators relent. That too would hurt users — and, of course, state services like schools and educational institutions.

Look Who’s Not Talking -- Notice who isn’t participating in this debate? Major Internet companies like Google, Facebook, Amazon, and Apple. All these firms took public stances in favor of net neutrality — because it helps their businesses — but have been remarkably silent on state efforts to preserve some semblance of net neutrality.

In part, this is because they don’t want to deal with a morass of individual state regulations any more than broadband providers, but it’s also because most of them aren’t strongly in favor of consumer privacy laws. If states can successfully use consumer protection laws to preserve net neutrality, it might not be good news for companies whose businesses involve collecting and collating oceans of data about Internet users. So, expect most of the major Internet companies to sit this one out.

The bottom line here is that it’s unrealistic to expect states to neatly solve the net neutrality debate: it’s going to be a complicated and messy fight. If nothing else, though, the states’ actions may buy time, potentially allowing party balance to shift in Congress. And, who knows, one day Americans might get a president willing to stand up for net neutrality. Stranger things have happened.


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Comments about Can U.S. States Hang on to Net Neutrality?

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A very nice summary, Geoff. I really enjoyed reading.

One questions regarding your paragraph about "Google, Apple, Amazon, and Facebook". I absolutely buy your argument about not favoring strong consumer protection which could one day limit data collection for sale, but isn't that strictly speaking only valid in the case of Google and Facebook?

Apple does not make money by collecting and selling user data. Amazon is maybe borderline, but they too I believe do not make most of their profits from advertising and marketing (user data), but rather from actual product/services sales.

If you'd agree with that, what then could Apple's motivation be? Are they really just interested in talking the talk, but scared they could at some point on some issue actually end up being forced to walk it too? And what would that issue be? Is it really as serious a caliber as NN? I'd like to see them actually speak up and act now. Curious what's holding them back.
Geoff Duncan  An apple icon for a Friend of TidBITS 2018-03-10 12:04
That would be a whole different set of articles(s)! I was speaking in general terms: each company's situation varies, but, still broadly, each company treats customer data as an asset to be stockpiled, commodified, and monetized.

Google and Facebook do not (to my knowledge) directly sell user data. Instead, they collate it and sell advertisers access to it (e.g., enabling advertisers to target, say, urban professional who are likely to move soon). Facebook (and I believe Google) also purchase data from third-party data brokers for these and other purposes and innumerable third-parties link their data to both Facebook and Google identifiers. Both companies' reach extends much, much further than the online properties and apps they own directly, thanks to DoubleClick and Facebook Pixel: they're tracking their users (and to a slightly lesser degree, hundreds of millions of non-users) across many, many millions of sites across the entire Internet.

Amazon is similar (it collates significant amounts of information about its customers); however, Amazon's interest in customer data is still ( to my knowledge) primarily interested in boosting Amazon's own properties: those product recommendations that you see on Amazon pages (I call them "endcaps") are often paid advertising. Same with more-obvious examples like Kindle ads, etc. Things like Amazon Echo take data collection to a whole new level: since they're in living rooms, etc., they can listen to your television and movie habits and note what broadcast ads have been presented to you. And who's in the room to see/hear them. Etc.

Apple is the least involved in directly monetizing its user data. They have had forays into ad sales (remember iAd? Advertisers hated it because it doesn't expose user demographics and behaviors as deeply as other platforms) but don't think for an instant the recommendations on Apple Music, the App Store, iTunes, etc., aren't based on usage, browsing, and purchase information collected and linked to your Apple ID. Instead of focusing on selling that data (or access to it), Apple currently tries to use it to make services more compelling to users. To varying degrees of success.

I'm still peaking generally, but in all cases, if states manage to successfully protect net neutrality with a patchwork of legislation based on consumer protection laws, all these companies will have to put significant effort into how their uses of customer data intersect laws, determine their level of compliance, and make any necessary changes (perhaps on a state-by-state basis). It's a deep puddle they'd rather not wade into because it will be expensive.