California Seeks To Regulate The Internet In A Drive To Resurrect Net Neutrality

California Democrats have drafted a bill to bar Internet service providers (ISPs) such as Comcast, AT&T, and Verizon from playing favorites with online content. Mirroring the 2015 net neutrality rule enacted under President Obama’s Federal Communications Commission (FCC), SB 822 was introduced in January, passed through three committees on strict party line votes with the unanimous support of Democrats, and was approved by the State Senate on May 30 on a 23-12 vote with all aye votes coming from Democrats and all nays from Republicans.

The bill’s author, Sen. Scott Wiener (D-San Francisco) said, “States are still relevant. California has the right under its police powers to protect the health and safety of the public…” It’s hard to imagine, however, how continuing to allow AT&T the right to negotiate streaming content speeds with Netflix has any bearing at all on the “health and safety” of Californians.

Rather than interfere in the ability of private companies to negotiate contracts between themselves as they compete for customers in a heretofore lightly regulated industry—the Internet—California ought to follow the lead of Ajit Pai’s FCC and just leave the Internet alone.

As is typical for California, big labor unions and nonprofits that push for heavy government regulation under the guise of consumer protection are urging the bill’s passage.  Google and Netflix are conspicuously absent from the list of the measure’s supporters, having confidence that their market share and loyal customer base would give them leverage in contract negotiations with the ISPs. Google, Netflix and other big tech firms were also absent during last year’s FCC deliberations that repealed net neutrality.

Arguing against the bill, the California Cable and Telecommunications Association, an ISP trade group, notes, “…state level policies regulating the Internet are pre-empted by federal regulations and are inappropriate for an inherently interstate service. It would most likely result in unnecessary and costly litigation.”

The Internet developed largely unhindered by federal or state regulations through the advent of net neutrality in 2015, providing increasing speeds and lower costs per bit of information transmitted. In this context, it is not surprising to see that the California State Conference of the National Association for the Advancement of Colored People (NAACP) has registered its concern that the bill’s provisions restricting interconnection and zero-rating agreements might result in “Ending free Internet data” which would disproportionately harm “younger, low-income, and minority Californians who are more dependent on their mobile devices to access the Internet.”

Sen. Wiener, supporters of his measure, and some analysts dismiss the idea that the bill might be successfully challenged in court under the basis that it violates the federal Constitution by interfering with interstate commerce. Instead, they cite the recent U.S. Supreme Court ruling earlier this month, Murphy v. National Collegiate Athletic Assn., that restored states’ powers under the Tenth Amendment by allowing them to legalize gambling on sports—other California legislators are looking into legalizing sports wagering—bolstering tax revenue would be the main interest of such a move.

However, proponents of regulating the Internet in California might want to take another look at the Supreme Court’s Murphy ruling that overturned the federal Professional and Amateur Sports Protection Act (PASPA). Rather than authorizing the states to regulate a vast industry, Murphy cited the federal anticommandeering rule that “Congress may not simply ‘commandeer the legislative process of the States by directly compelling them to enact and enforce a federal regulatory program.’” Elaborating, the 7-2 majority high court majority noted, “Congress cannot issue direct orders to state legislatures…”

But private companies are not state legislatures. Providing clarification, the court noted, “To preempt state law, it must satisfy two requirements. It must represent the exercise of a power conferred on Congress by the Constitution. And, since the Constitution ‘confers upon Congress the power to regulate individuals, not States,’ it must be best read as one that regulates private actors.”

Since AT&T and Comcast are “private actors” then the federal government, via Congress and the Executive can regulate them if they are engaging in interstate commerce. Congress cannot, however, “commandeer” any state government’s police powers and force them to regulate or not regulate private actors. Since the FCC already has jurisdiction over the internet and other interstate communications it would appear that SB 822 is a dead letter. The FCC’s return to a freer internet marketplace will stand.

That understood, its consideration by California lawmakers will result in hundreds of thousands of dollars of special interest fundraising by politicians as well as provide great fodder for campaign ads. Which is likely the point of the whole exercise in futility.