Vermont follows Califorina into the dock over net neutrality

The State of Vermont has been hit with a net neutrality lawsuit after passing a Senate Bill and signing an Executive Order forcing ISPs to follow the banned principles for government contracts.

The lawsuit, filed by the CTIA, cable industry lobby NCTA, telco lobby USTelecom, the New England Cable & Telecommunications Association, and the American Cable Association (ACA), calls into question requirements for ISPs to follow net neutrality rules should they want to be considered for government contracts. The lawsuit follows the same argument as the California case; it contradicts the Communications Act, the ‘Restoring Internet Freedom’ rules and two clauses in the US Constitution.
“This case concerns two interrelated attempts by the State of Vermont to unconstitutionally regulate the provision of broadband Internet service” the filing states.
“As the FCC has repeatedly recognized, Internet traffic flows freely between states, making it difficult or impossible for a provider to distinguish traffic moving within Vermont from traffic that crosses stateborders. Both the Supremacy Clause and the dormant Commerce Clause protect broadband Internet service providers from a patch work of inconsistent regulations that are impossible for them to comply with as a practical matter. The Court should declare that the Executive Order and S.289 are preempted and unconstitutional, and should permanently enjoin the Defendants from enforcing or giving effect to them.”

Senate Bill 289 was signed by Governor Phil Scott on May 22, while the Executive Order from Scott was signed in February. The telco lobbyists might be a bit slow off the mark, but this is a bit more of a complicated matter.

In California, and Washington State for that matter, net neutrality rules are being applied to the ISPs in every context. This is a much easier position for the telcos to push back against, though in the Vermont case it is only conditions for public sector contracts. The argument here is relatively nuanced; organizations should be allowed to apply their buying power to place requirements on vendors competing for lucrative contracts, but it does contradict rules set forward by the FCC.

Because this is not a blanket approach to net neutrality regulations, as is the case in California and Washington State, there is a better chance of the rules standing. The rules are being applied to specific relationships which lean on conditional approval and benchmarks for applicability. These are not unusual concepts in the world of procurement, but the net neutrality seems to be too contentious for any exceptions to be considered. The court will be interferring with market dynamics in Vermont, it is a delicate matter.

Another interesting idea is that of precedent. States such as Hawaii, New Jersey, Montana and Rhode Island have all passed similar rules, dictating ISPs wanting to compete for public sector contracts would have to adhere to net neutrality principles, and will be watching the outcome of this case closely. If Vermont wins there is precedent to maintain their position, however a win from the telco coalition will destroy the foundations.

Both cases, California and Vermont, come down to the old state versus federal battle ground and the interpretation of clauses in the Communications Act and the US Constitution. This is the bueaty and beast of the legal world, interpretation of the law and its implications means so much. The telco lobbyists do have a strong position though, especially considering the potential for a constitutional crisis.

Finally, perhaps the most interesting aspect of this on-going saga are the lawsuits themselves. In searching for a more light-touch regulatory landscape, the telco lobbyists are, ironically, seeking state intervention to maintain their position.

Telco industry accuses California of violating US Constitution

It was only going to be a matter of time, but the telco industry is taking California to court over the decision to reinstate net neutrality rules.

While the rules prevent the telcos from making additional revenue through the creation of a two-lane communications highway, there is something bigger at stake here. In reinstating the net neutrality rules, California is not only questioning the validity of the Communications Act, the bedrock of regulations in the telco industry, but according to the coalition of associations suing the state, it is contradicting and undermining the US Constitution.

The American Cable Association (ACA), The Wireless Association (CTIA), The Internet & Television Association (NCTA) and USTelecom are the plaintiffs in the case, with California Attorney General Xavier Becerra is named as the defendant.

“This case presents a classic example of unconstitutional state regulation,” the filing reads. “The State of California has enacted SB-822, entitled the ‘California Internet Consumer Protection and Net Neutrality Act of 2018’, directly regulating the provision of broadband Internet access services (BIAS).

“This statute was purposefully intended to countermand and undermine federal law by imposing on BIAS the very same regulations that the Federal Communications Commission (FCC) expressly repealed in its 2018 Restoring Internet Freedom Order (and by adopting even more restrictive regulations), despite the fact that both the FCC decision and the federal Communications Act of 1934, as amended (Communications Act), prohibit states from taking such action with respect to jurisdictionally interstate services like BIAS.”

According to the lawsuit, the State of California is not only violating the FCC’s 2018 Order, it is ignoring clauses in the Communications Act, which declare states cannot pass local regulations which contradict FCC rules, and also two important aspects of the US Constitution. Firstly,  article VI, clause 2, the Supremacy Clause which states the Constitution, federal laws made pursuant to it, and treaties made under its authority, dictate the supreme law of the US.

Secondly, the Commerce Clause declares no state can regulate conduct occurring outside of its borders. As California (or anyone for that matter) fully dissect what traffic originates, traverses and terminates in the state exclusively, California is indirectly imposing its own rules on other states, and potentially other countries.

In signing net neutrality back into the regulatory rulebook, Governor Jerry Brown has opened up a whirlwind of complications and consequences. As Chairman of the FCC, Ajit Pai has the authority to dictate the future of the telecommunications industry. This has been formalised in both the Communications Act and the US Constitution.

In splintering the rulebook, California is undermining the concept of US law and regulatory policy. Should the net neutrality rules be allowed to stand in California, the whole rule book and regulatory landscape could be shaken up; California would have set precedent in contradicting both the Communications Act and the US Constitution. This is of course dependent on whether you agree with the coalition’s interpretation of the documentation, but could this be the beginning of a constitutional crisis?

Of course, as we are in a time of incredibly combative politics in the US, the two parties could not be further apart. Pai is pushing for an internet which would be the digital equivalent of the wild-west, while California is promoting heavy handed regulation. The answer lies somewhere in the middle.

The telcos, remaining at arms-length from the conflict, are at the centre of this debate. Net neutrality prohibits the telcos from making money through prioritised traffic, and while we do not necessarily agree with this strategy, these are organizations which do need to be afforded the opportunity to make money. Regulating the industry as a utility won’t work, but neither will the hands-off regulatory position.

On one side, these are not utilities. Pricing regulations and strict practises can be imposed on other verticals, such as energy companies, because the vast majority of infrastructure has already been deployed. The world is expecting the telcos to spend billions deploying new infrastructure to enable the digital economy, though there are few opportunities to secure additional revenues outside of connectivity. The OTTs have destroyed revenue generators such as SMS and voice, but then lobbies government to block other means of making money. The balance of this ecosystem is not centred and it is only a matter of time before it cannibalises itself. How long will it be before the ability to rollout future-proof infrastructure gets scaled back due to a lack of revenue generation and profitability at the telcos?

However, the telcos are not exactly trust-worthy organizations. There are numerous examples were a lack of regulation or competition has led to higher prices for customers or monopolistic tendencies. These are companies which are under shareholder pressure to deliver on the promises of 5G and recapture the fortunes of yesteryear; the situation needs to be carefully managed to ensure the balance of power remains fair. Regulation is absolutely necessary in this industry.

Net neutrality over regulates the industry, while the Pai approach is not interventionist enough. There needs to be a middle ground, but it hasn’t been found yet. One thing is clear, the current climate of contradiction, undermining regulations and conflict is not healthy for the consumer in the US, or the US on the global stage.

State versus federal battle looms as California signs net neutrality into law

California Governor Jerry Brown has been busy; 31 state bills vetoed and 34 signed into law, including the controversial net neutrality rulings, kicking off another state versus federal battle.

State Bill 822, claimed to be the strongest net neutrality laws in the country, has officially been signed into law in the State of California, but it only took the US Department of Justice a few minutes to throw a wobbly. Before the army of busybodies and privacy advocates could even get their own press releases out, the Justice Department filed a lawsuit alleging that Senate Bill 822 unlawfully imposes burdens on the Federal Government’s deregulatory approach to the Internet.

“Under the Constitution, states do not regulate interstate commerce – the federal government does,” said Attorney General Jeff Sessions in the filing. “Once again the California legislature has enacted an extreme and illegal state law attempting to frustrate federal policy. The Justice Department should not have to spend valuable time and resources to file this suit today, but we have a duty to defend the prerogatives of the federal government and protect our Constitutional order.  We will do so with vigour. We are confident that we will prevail in this case – because the facts are on our side.”

Democrat FCC Commissioner Jessica Rosenworcel is clearly excited despite the legal complications:

After being passed back in February 2015, the appointment of FCC Chairman Ajit Pai saw a Republican led assault, with the telcos playing a supporting roles in the wings, on the rules. It didn’t take long for Pai to dismantle net neutrality, the vote to repeal the rules was won on 14 December 2017, though the backlash was almost immediate. Washington State was the first to pass local net neutrality rules, though with 23 Attorney Generals throwing their weight behind the cause it was only going to be a matter of time before other got involved. California is a different beast however, a worthy opponent of the US government.

With a population of roughly 39 million and a gross state product (GSP) of roughly $2.6 trillion, it is the largest in the US in terms of population and economic output. Globally, the economy is only smaller than the GDP of the US, UK, China, Germany and Japan. It is also home to Silicon Valley and the lobby power of the likes of Facebook, Google and Twitter.

While we do have sympathy with California and the internet giants, we do not feel net neutrality is the right way to go. Pai’s approach, reinstating the wild-west internet with the telcos as the tyrants of terror, is equally wrong. Both approaches are too extreme, the right answer lies in the middle, with the telcos afforded the opportunity to make money but still held accountable ensuring the consumer and businesses are not held to ransom. Taking the sensible, middle-ground is the logical approach, but set against the backdrop of such a combative political environment, it will be some time before fairness sets in.

But why is this such an important battle?

In its law suit, the Department of Justice is completely correct in stating California has overstepped its jurisdiction. No state should have the right to impose its own rules on another and the internet by definition is an interstate (international would be more accurate) playground. For these rules to be accepted on a legal basis in the US, California would have to ensure it was only applying the rules to traffic which originated, remained and terminated in California. Not only would this be pretty much impossible, but it would likely only account for a very small percentage of the total.

The stickiness is the clauses in the Communications Act, the piece of legislation which acts as the foundation of all communications orientated rules and precedents in the US. One clause dictates a state is entitled to draft its own rules, assuming it does not contradict that of the federal government. This is the very scenario which California has crafted. If SB 822 is allowed to stand it undermines the whole Communications Act; who is to say other states, businesses or advocacy groups could not use this example as a means to ignore other clauses, aspects of the Communications Act or precedent which has been set. In legalising the contradiction, the risk is to undermine the very basis of the communications industry across the country.

With California retaliating against the FCC’s decision to reverse net neutrality, the consequences are much more significant than they appear on the surface. This is now much more than a battle of technology regulations.

Pai declares California resistance to net neutrality demise as illegal

Speaking to an audience at the Maine Heritage Policy Center, FCC Chairman Ajit Pai has slammed California for even thinking about going against his holier-than-thou word on net neutrality.

It’s a divisive topic which doesn’t seem to want to go away, but Pai and his cronies can’t have imagined there would be this much of a backlash against the demise of federal net neutrality rules. Resistance was bound to be expected, though it now appears the disagreement is about to escalate into another state versus federal battle ground.

“The broader problem is that California’s micromanagement poses a risk to the rest of the country,” said Pai. “After all, broadband is an interstate service; Internet traffic doesn’t recognize state lines. It follows that only the federal government can set regulatory policy in this area. For if individual states like California regulate the Internet, this will directly impact citizens in other states.”

While this statement reeks of PR, Pai is not incorrect. The internet industry is a beast which rarely recognises international borders, take the Silicon Valley approach to taxes as an example, so how destructive will it be if all states take their own approach to regulating the digital highway? This is not to say Pai is correct in creating a digital wild west where the FCC has as much influence over the telcos as a dog over its tail, but in protesting the FCC’s position California is creating an immensely complicated landscape.

This will be of little concern to the righteous individuals leading the net neutrality charge, though the state versus federal undertone seems as if it is about to bubble to the surface.

“Among other reasons, this is why efforts like California’s are illegal,” said Pai. “In fact, just last week, the US Court of Appeals for the Eighth Circuit reaffirmed the well-established law that state regulation of information services is pre-empted by federal law. Last December, the FCC made clear that broadband is just such an information service.”

In the latest version of the Communications Act, the legislation which is the bedrock for all telecommunications regulation in the US, there is a clause which dictates any state-level rules which contradicts the position of the FCC are invalid. This is not to say states cannot put forward their own rules, but these rules can only impact activity in the state. As the internet is borderless, and it is almost unthinkable to contain traffic in an individual state, California cannot pass any new rules without undermining this clause.

And while California has received the attention of Pai in this speech, it is not the only state providing resistance. Washington is another which has passed its own regulation, though California’s hasn’t been signed into law just yet. California Governor Jerry Brown is reportedly yet to sign on the dotted line, perhaps delaying the state versus federal clash.

One question which is yet to be answered is what will happen if California is allowed to pass its own net neutrality laws. As it directly undermines the Communications Act, does that not invalidate the rest of the legislation? Will it open the door for a colourful quilt of dozens of different interpretations of different internet regulations? Precedent is a powerful trend in the legal community; if this contradiction is allowed, why shouldn’t other states have a go at creating localised laws in other areas?

This might be a net neutrality argument right now, though it has the potential to undermine the FCC authority everywhere else. Pai needs to tread carefully here.

California defies FCC and Trump by passing tough net neutrality laws

The state versus federal argument looks like it is heading towards full-throttle as California passes what it describes as the toughest net neutrality laws in the country.

The FCC and President Trump’s administration are seemingly set on creating a regulation-free USA, though some states are not having it. California is the latest to demonstrate its mistrust of the US telcos, passing its own net neutrality laws.

“We passed the strongest net neutrality standards in the nation,” said State Senator Scott Wiener, who authored the bill alongside Senator Kevin de León. “The internet is at the heart of 21st century life – our economy, our public safety and health systems, and our democracy. So when Donald Trump’s FCC decided to take a wrecking ball to net neutrality protections, we knew that California had to step in to ensure our residents have access to a free and open internet.”

Looking at the broadest of explanations, Senate Bill 822 prohibits blocking websites, speeding up or slowing down websites or whole classes of applications such as video. Certain aspect of zero rating will also be banned, unfortunately this is where the bill becomes a bit more complicated. Zero rating services, applications or content will be allowed, providing ‘no consideration, monetary or otherwise’ is paid to the ISP by third parties. This is the sort of grey area which lawyers dream about, and will encourage the creative thinkers of the judiciary community to hunt down the loop holes.

While the Trump administration and the FCC have been consistently moving to eradicate every aspect of net neutrality from the rule books, this move from California could threaten to fuel the state versus federal jurisdiction arguments and power plays which we have seen in years gone. In the latest version of the Communications Act, the legislation which underpins all telecommunications regulations in the US, states any state-level rules which contradicts the position of the FCC are invalid. This would suggest Senate Bill 822 will have a short lived life, though should the dominos start to fall who knows what could happen. How many states would have to pass laws contradicting the Communications Act for something to be done?

Privacy-advocacy groups, coalitions of private businesses, attorney generals and more have been challenging the FCC dismantling of the rules, and the escalation of this saga seems to be entering into uncharted territories. We have been talking about a need for an opposition win in the net neutrality resistance, but whether this can topple some dominos remains to be seen.

This is not the first state wide resistance to the FCC’s attack on net neutrality, with Washington State passing House Bill 2282 in March, with the rules coming into effect on June 6. While there has been a lot of posturing and promises about defying the FCC position, that is until Wiener and his meaty balls stepped up. Perhaps this might encourage other states to move forward with their own ambitions.

That said, the telco lobbyists and supporter of more light-touch regulatory environments are powerful. Over the last couple of years, dozens upon dozens of proposed laws to increase user privacy and scale back the untouchable power of the telcos have been defeated by money. In Kentucky for instance, House Bill 332 failed. This bill proposed no telco or ISP would collect personally identifiable information from a customer as a result of the customer’s use of the telecommunications or internet services without the customer’s approval. In Nebraska, LR 453 would have allowed for an interim study to examine the impact of net neutrality, though this failed.

There are countless examples of the sticky telco fingers prodding various bills, which perhaps make the passing of both the Washington and California bills a bit more impressive. With the net neutrality debate continuing to rumble on, the conflict between the states and the White House will only escalate. If more states start passing net neutrality laws, ignoring federal guidance and the chain of command, what will be the reaction of central government?

California to ban zero-rating in net neutrality mission

In what has been described as the ‘strongest net neutrality policy proposal in the country’, Senator Scott Wiener has tightened up his proposed bill to reinstate net neutrality in California, with the updated version banning zero-rating.

While the net neutrality debate has been quite effective at gaining the support of the general public in the US, perhaps this updated version of SB 822 will catch some by surprise. Up until now legislators and advocates have drummed up backing by focusing on how the big, bad internet companies will dictate experience and service to you and will take away your freedom of choice, but it hasn’t mentioned banning zero-rating initiatives. These are offerings which consumers like and will probably want to have in the future. It’ll be interesting to see whether consumers are still as supportive when they realise net neutrality has its downsides as well.

The general public is a very fickle beast. There is certainly a better-than-thou attitude when it comes to certain issues which only have an indirect impact on the consumers life. Many will support initiatives to make the world a better place, assuming it does not hit them in the pocket. For example, many will say they support farmers or sustainability or animal welfare, but the more expensive, corn-fed, free-range organic Chicken does not fly off the shelves.

People are social warriors for positive change and fairness, until it effects their wallet. It is highly cynical of us to say and some might protest at the statement, but it is true. Most people reading this article will probably admit, if they are being completely honest with themselves, the vast majority of decisions are made with personal benefit in mind not for the benefit of society. Wiener might well find this is the case after explicitly banning a feature which benefits the consumer.

Looking specifically at zero-rating, Weiner highlights the practise is distorting and manipulating consumer choice by subsidizing favoured content. It is one way in which the telcos are influencing consumer behaviour based on commercial relationships. The important thing about net neutrality is the second word. Telcos are supposed to remain neutral when delivering the internet to the consumer.

“An open internet is essential to maintaining our democracy, growing our economy, protecting consumers, and preserving critical health, safety, and energy services,” said Senator Scott Wiener. “Internet service providers play a key role in allowing people to access the internet, but ISPs must not be allowed to decide who can access what websites or applications.

“Without net neutrality, ISPs have the power to manipulate which business, media, non-profit, or political websites are accessible and by whom. SB 822 contains strong, comprehensive, and enforceable policies that will position California as a leader in the fight for net neutrality.”

Of course, zero-rating is only one of the rules which are being discussed in the bill. After being initially introduced in January, Weiner has taken a couple of weeks to redefine the language and create a more comprehensive set of rules. We’ve outlined below the main points Weiner would like to enforce:

  • Prohibits blocking, throttling, or interfering with any content, service, or device
  • Requires that all data traffic be Application Agnostic
  • Prohibits charging access fees to services to reach consumers
  • Prohibits engaging in paid prioritization
  • Prohibits offering economic discrimination practices such as zero-rated data

This is not to say that the ISP would not be able to prohibit or prioritize traffic, but there would have to be some serious justification. There will of course be some technical reasons some traffic might have to be interfered with and this might be the make or break of the bill. Weiner will have to be very careful to build in suitable justification, accountability and transparency measures to allow for this. The language will have to be very clear and considered, as any contradiction or confusion will immediately be jumped on by ISP lawyers, possibly leading the bill to the scrap heap.

As mentioned in previous articles, we are not too sure whether such a heavy-handed approach is appropriate for the successful future of the internet and its delivery. Such comprehensive legislation doesn’t offer the ISPs the opportunity to make additional revenues. The last couple of years have demonstrated that simply being a company which delivers data plans is not enough for the telcos, which will not be a good thing.

The telcos have to be given the opportunity to make money, not because the fat-cats have got used to bonuses, but because cashflow directly impacts the amount which is allocated in the CAPEX column. The less money the telcos make, the less will be directed towards CAPEX, which will potentially impact the performance of the network. If the telcos are making less money, they are spending less on tackling the increased consumption of data. This is a net loss in the long-run and we do not think this is a nuance of the argument which has been considered by Weiner and his army of preachers.

We’ve said this numerous times, but the partisan nature of US politics is its own worst enemy. Left-sided regulation is going too far to limit the activities of the telcos, while the right-sided wild west would not be healthy for the ecosystem. The pendulum is swinging too aggressively, and we hope it won’t be too long before the fair, responsible and appropriate middle-ground is found.