Over the past two decades, the Federal Communications Commission has taken a mixed approach towards internet regulation.
At the dawn of the internet, the FCC under the Clinton Administration believed that a “light touch” approach was appropriate. As such, the FCC laid down the marker that that IP-enabled services should be classified as an “information service” under Title I of the Communications Act rather than be regulated as a common carrier “telecommunications service” under Title II of the Act.
The Bush Administration agreed. Building on the policy of its predecessor, the Bush FCC formally classified IP-enabled services such as cable modem, DSL, wireless broadband, and even broadband over powerlines as information services under Title I.
But in 2015, the FCC under the Obama Administration radically reversed course. With its 2015 Open Internet Order—using questionable economics and a dubious legal theory—the Commission reclassified broadband internet access as a Title II common carrier service.
Three years and one presidential election later, the Trump Administration—relying upon peer-reviewed evidence that the costs of reclassification far outweighed the benefits—returned to the bi-partisan policies of the past by opting again for a light touch approach with its 2018 Restoring Internet Freedom Order.
Which brings us to the new Biden Administration.
While the Commission is temporarily tied at two Democrats and two Republicans, it is widely expected that once a third Democrat commissioner is confirmed the net neutrality pendulum will aggressively swing back the other way. Except this time, there will be one additional wrinkle that raises the potential for even more economic damage than that caused by the Obama-era rules.
For the last twenty years, regardless of which political party was in power and regardless of whether the internet was to be regulated under Title I or Title II, it was bi-partisan canon that IP-enabled services are an interstate service subject to exclusive federal jurisdiction. Uniformly, the Commission believed that the individual states had no business regulating the rates, terms, and conditions of service of Internet Service Providers (ISPs). But that canon was shattered this week when the Biden Administration’s Justice Department voluntarily moved to dismiss its challenge to block California’s statutory effort to impose net neutrality regulations on ISPs—statutory requirements that, in fact, go even farther than the rules the Obama Administration imposed in 2015. In so doing, the Biden Administration has now opened the door to subjecting the internet to a “Death by Fifty State Cuts.”
How this plays out is anyone’s guess, but it is likely the outcome will not be good.
First, although the U.S. government has voluntarily dismissed its case against California, it is important to recognize that a private suit brought by an assortment of ISPs remains. Yet while the ISPs’ arguments for an injunction are compelling, it is unclear how receptive a reviewing court (the current district court, the Ninth Circuit, or even the Supreme Court if the case ever gets that far) will be to arguments that federal law preempts state law when the federal government is not actively supporting the claim. Potentially making matters worse, it is not out of the realm of possibility in these hyper-partisan times that the Biden Administration sometime in the near future will formally switch sides and actively endorse dual federal/state regulation of the internet.
Second, as noted above, it is widely expected that as soon as the Democrats gain full majority control of the FCC, they are going to move aggressively to again reclassify broadband internet access back to a common carrier telecommunications service under Title II and reinstate in whole or in part the 2015 Open Internet Order. But with the Biden Administration’s withdrawal from the California case, doing so would raise a host of unanswered questions.
In the 2015 Order, the Commission announced its “firm intention to exercise our preemption authority to preclude states from imposing obligations on broadband service that are inconsistent with the carefully tailored regulatory scheme we adopt in this Order.” Will the Biden Administration follow the Obama Administration’s lead and claim conflict preemption with California (and other states attempting to do the same), or will they attempt to harmonize federal and state regimes in a “belt and suspenders” approach to internet regulation? If Acting Chair Jessica Rosenworcel gets the permanent appointment, based on her comment that the DOJ’s withdrawal from the case is “charting a course to once again make net neutrality the law of the land,” it is more likely the latter.
For nearly twenty years, the FCC has consistently believed that subjecting IP-enabled services to a hodgepodge of different state regulations is a demonstrably bad idea. When state law applies to a product or service that is national in scope such as telecommunications or the internet, even if each state acts with the purest of intentions to protect their respective constituents’ interests, there will be harmful conflicts in the assorted rules. That is, there are extra-jurisdictional effects whereby one state’s policy spills over to other states. In the presence of such spillovers, as is the case with communications regulation, society is typically better off with a single national regulatory framework. This is precisely why Congress gave the FCC—and not the individual states—exclusive jurisdiction over interstate communications. Like it or not, firms are not passive recipients of regulation. Broadband firms will not invest aggressively under a heavy-handed regulatory assault on their business, especially when that assault comes from both the federal and state governments.
The Biden Administration’s actions are even more confusing given that expanding broadband deployment is supposedly a top priority and that such expansion will have to rely heavily on private investment. Perhaps tacitly recognizing the investment-deterring effects of aggressive federal and state regulation, the Democrats believe that massive government spending can make up the shortfall.
Last year the Democratic-controlled Congress passed a bill allocating a staggering $100 billion towards broadband expansion—a price tag that which would essentially impose a tax of nearly $1,500 on every taxpaying American household—and it is widely expected that this number will resurface when an infrastructure bill is taken up in the spring. Yet this bill also reveals a stunning paradox in the Democrats’ thinking vis-à-vis preemption. Despite the Democrats’ new-found belief that the federal government should not preempt state net neutrality laws, the Democrats also believe that it is perfectly acceptable to give the FCC the broad authority to preempt state laws protecting consumers from improper cross-subsidization from municipal broadband providers, even though such authority is unlikely to pass constitutional muster.
For all the Democrats’ talk of the importance of expanding broadband deployment, one might expect the Biden Administration to have a sensible, coherent plan towards net neutrality and investment incentives generally. But in light of what we have seen in just the first couple of weeks, it clearly does not.