California Breaks the Internet

Gov. Jerry Brown last week signed “net neutrality” legislation reinstating the late Obama-era rules that the Federal Communications Commission reversed last year. Providers are prohibited from throttling, blocking or charging to prioritize content. California’s law goes even further than the Obama rules by banning “zero-rating” plans that exempt certain apps from consumer data limits.

The Justice Department immediately sued to enjoin the legislation, and telecom companies have followed. California’s rules patently violate the Constitution’s Supremacy and Commerce Clauses, and if allowed to stand would break the Internet.

Prior to 2015 the FCC classified broadband as an “information service.” Broadband providers don’t censor content, but they need to control the flow of content in order to manage growing traffic congestion. But Obama FCC chairman Tom Wheeler decided to restrict broadband providers’ ability to manage traffic on their networks by subjecting them to utility-style regulations, and thus to more political control.

In any other industry customers can pay a higher price for faster delivery. But Mr. Wheeler’s rules prohibited broadband providers from charging data hogs like Netflix orFacebook more for better performance. This would result in less efficient networks, slower speeds for all content and less broadband investment.

Last year the Trump FCC scrapped the Obama rules and substituted a requirement that broadband providers disclose their network management practices. The FCC also directed the Federal Trade Commission to police unfair business practices and explicitly pre-empted “any state or local measure that would effectively impose” the repealed Wheeler rules. Under the Supremacy Clause, federal laws and regulations generally pre-empt conflicting state laws.

California has told the FCC to take a hike. Its legislature asserts that the state can use its police powers to protect the “neutrality” of the internet. But its law isn’t necessary to protect public welfare and could harm consumers. Ask the National Association for the Advancement of Colored People (NAACP), which along with other low-income and minority groups opposed the law.

“Ending free Internet data is particularly harmful to younger, low-income, and minority Californians who are more dependent on their mobile devices to access the Internet,” the NAACP explained in a letter of opposition. California’s ban on zero-rating would forbid free data for apps like DirecTV or HBO that providers use to compete for consumers.

States have police powers under the Constitution that can’t be commandeered by the federal government, but states can’t invoke those police powers in ways that burden interstate commerce. The Constitution empowers Congress to regulate interstate commerce, and the 1996 Telecommunications Act grants the FCC authority over all “interstate and foreign communication.” The internet by definition is interstate communication.

The federal government has sometimes stretched its power too far under the Commerce Clause, as these columns have pointed out. But regulating the internet is clearly within the constitutional power of Congress. Three other states have enacted laws imposing net neutrality rules on broadband providers, and more than two dozen states are considering regulations. None are as sweeping as California’s.

A patchwork of state laws would create significant uncertainty and throttle innovation as providers build out their 5G networks. The so-called internet of things will make prioritizing data even more important for uses such as driverless cars, and variable pricing will be necessary. California is free to impose destructive and costly policies on its own citizens, but it can’t enforce them on the other 49 states.