Net Neutrality Setback in Mozilla Opens the Door for State Regulation
Although the cause of net neutrality suffered a setback at the federal level earlier this month with the decision by the U.S. Court of Appeals for the D.C. Circuit in Mozilla Corporation v. FCC, that decision also opens the door for state regulators to step in.
The D.C. Circuit generally upheld the Federal Communications Commission’s (“FCC”) January 2018 order in In the Matter of Restoring Internet Freedom ( the “2018 Order”), which eliminated common-carrier net neutrality rules for Internet Service Providers (“ISPs”). However, the court also struck down the 2018 Order’s Preemption Directive, thus effectively allowing states to impose their own rules. As a result, observers are turning their gaze to states, such as California, to see if their state net neutrality laws will stand.
Broadband Classification – a Competition Law Question
Net neutrality is a policy that bars ISPs from unreasonably discriminating against web content providers. Thus, it embodies traditional obligations for common carriers, such as railroads or ferries, that were required to serve all customers on reasonable and nondiscriminatory terms.[1]
Net neutrality supporters claim the policy is critical to an open and competitive internet. Because ISPs, such as Comcast, Verizon, and AT&T, act as middlemen between consumers and online content, ISPs can slow, block, or redirect consumers towards their own preferred websites. This redirection or blockage could stifle innovation by smaller online firms with fewer resources to deal with ISPs, and entrench the power of dominant online companies.[2] As ISPs vertically integrate into web content production, this concern has become more urgent.[3] In contrast, opponents claim that the regulations are largely unnecessary and disincentivize investment.[4]
Mozilla isn’t the first foray into the net neutrality debate by the FCC or the courts. Under the Telecommunications Act of 1996, a “telecommunication service” classification triggers common-carrier obligations, but a less regulated “information service” does not.[5] Soon after the Telecommunications Act was passed, the FCC classified broadband as a telecommunications service.[6] However, in 2002, the FCC reclassified cable broadband as an information service.[7] The Supreme Court affirmed that reclassification in Brand X, applying Chevron deference to the FCC’s decision.[8] In 2015, the FCC again changed course, classifying broadband Internet access as a telecommunications service. The D.C. Circuit upheld that decision, applying the Brand X framework.[9]
In the 2018 Order, the FCC once again reclassified broadband Internet as an information service, thus eliminating federal net neutrality rules. But, the 2018 Order went further than previous reclassifications, including a “Preemption Directive” that barred states from “imposing any rule or requirement that the Commission ‘repealed or decided to refrain from imposing’ in the [2018] Order or that is ‘more stringent’ than the [2018] Order.”[10] The Preemption Directive most directly affected California, which had passed its own net neutrality law, the most comprehensive in the country.[11]
Mozilla v. FCC – Second Verse, Same as the First
In Mozilla, the D.C. Circuit applied Brand X and largely upheld the 2018 Order. Because the federal statute left broadband classification “to the agency’s discretion,” the court applied Chevron deference and found that “classifying broadband Internet access as an ‘information service’” is “a reasonable policy choice for the Commission to make.”[12] Given that both the Supreme Court and the D.C. Circuit had previously okayed an FCC broadband reclassification decision, a different outcome was unlikely.
However, the court vacated the 2018 Order’s Preemption Directive, which had effectively stopped states from imposing their own net neutrality rules.[13] Although the court found that the FCC has the power to preempt state laws, the 2018 Order “goes far beyond conflict preemption”[14] and “meant for [the] preemptive effect to wipe out a broader array of state and local laws than traditional conflict preemption principles would allow.”[15] As a result, the FCC still has authority to preempt state net neutrality rules so long as “the FCC can explain how a state practice actually undermines the 2018 Order” under traditional preemption principles.[16]
Further, the court instructed the FCC to reconsider other portions of the 2018 Order, including how it will affect first responders, pole attachments, and low-income households that receive internet through Lifeline, an FCC subsidy program.[17]
Back to the States?
Neither party has announced whether it will appeal Mozilla. As the court gave both sides a mixed bag, both supporters and opponents of net neutrality are likely carefully weighing options, including possible review by the Supreme Court. Indeed, both Judges in the majority, Judge Millet and Judge Wilkins, wrote separately to suggest that the Supreme Court revisit Brand X.[18] But review by the Supreme Court would be risky for both sides, and would take at least another year.
Regardless, with the Preemption Directive gone, states are now somewhat free to enact their own broadband internet rules. For example, although California passed its own net neutrality bill in 2018, it agreed to not enforce the law pending the D.C. Circuit appeal.[19] So far, California has continued to hold off enforcing its law, but it’s unclear how long that will remain.
Further, the Department of Justice and an industry trade group have brought lawsuits against California[20] and Vermont[21] to block their net neutrality laws. These cases will almost certainly address the preemption question again. Although the suits were stayed pending Mozilla, they are now likely to proceed.
Meanwhile, legislation has been introduced into Congress to restore federal net neutrality rules.[22] Although the bill passed the House earlier this year, it has faced opposition by Senate Majority Leader Mitch McConnell (R-KY), and so is unlikely to move in the Senate.[23] Similarly, 34 other states have introduced some sort of legislation on net neutrality.[24]
As a result, the net neutrality debate—in legislatures and in the courts—is unlikely to end anytime soon.
Edited by Gary Malone
[1] See Carrier, Black’s Law Dictionary (11th ed. 2019) (“A common carrier is generally required by law to transport freight or passengers without refusal if the approved fare or charge is paid”).
[2] See Issue Brief: Net Neutrality, Public Knowledge.
[3] For example, some commentators fear that AT&T could discriminate in favor of the content provided by its new subsidiary Time Warner, which owns HBO and CNN. See K. Bode, How the new AT&T could bully its way to streaming domination, The Verge (Dec. 18, 2018).
[4] See FCC, Restoring Internet Freedom.
[5] See 47 U.S.C. § 143(51).
[6] In re Deployment of Wireline Services Offering Advanced Telecommunications Capability, 13 FCC Rdc. 24012 (1998).
[7] In re Inquiry Concerning High-Speed Access to the Internet over Cable and Other Facilities, 17 FCC Rcd. 4798 (2002).
[8] See Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967, 980-81 (2005); see also Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984).
[9] United States Telecom Ass’n v. FCC, 825 F.3d 674 (D.C. Dir. 2016).
[10] Mozilla, slip op. at 13 (citing 2018 Order ¶ 195).
[11] S. Hussain, Upholding FCC’s repeal of net neutrality rules, court opens door for California to enforce its own, L.A. Times (Oct. 3, 2019).
[12] Mozilla, slip op. at 16 (citing Brand X, 545 U.S. at 997 and United States Telecom Ass’n, 855 F.3d at 384 (Srinivasan J., joined by Tatel, J., concurring in denial of rehearing en banc)).
[13] Mozilla, slip op. at 121.
[14] Mozzila, slip op. at 121.
[15] Id. at 122.
[16] Id. at 143 (citing Williamson v. Mazda Motor of Am., Inc., 562 U.S. 323, 330 (2011)).
[17] K. Griffis, DC Circ. Upholds Most of Net Neutrality Rollback, Law360 (Oct. 1, 2019).
[18] Mozilla, slip op. at 1 (Millet, J., concurring) (“Brand X was decided almost fifteen years ago, during the bygone era of iPods, AOL, and Razr flip phones. The market for broadband access has changed dramatically in the interim.”) and id., slip op. at 1 (Wilkins, J., concurring) (“But revisiting Brand X is a task for the [Supreme] Court – in its wisdom – not us.”).
[19] S. Hussain, Upholding FCC’s repeal of net neutrality rules, court opens door for California to enforce its own, L.A. Times (Oct. 3, 2019).
[20] United States v. California, No. 2:18-cv-02660 (E.D. Cal.) and American Cable Ass’n et al. v. Becerra, No. 2:18-cv-02684 (E.D. Cal.).
[21] American Cable Ass’n et al. v. Scott et al., No. 2:18-cv-00167 (D. Vt.).
[22] H.R. 1644, Save the Internet Act of 2019 (116th Cong.).
[23] E. Nilsen, Why the Senate is blocking a new net neutrality bill, a year after trying to save it, Vox (Apr. 10, 2019).
[24] H. Morton, Net Neutrality Legislation in States, Nat’l Conference of State Legislatures (last updated Jan. 23, 2019).