California's New Net-Neutrality Law Hurts Consumers
It isn’t difficult to determine whether provision of the internet qualifies as interstate commerce. The internet isn’t bound by any state or local boundaries, and it’s a truly global medium of communication. As such, only Congress has authority to regulate it under the Constitution’s Commerce Clause. Even so, California Governor Jerry Brown just declared war on the Constitution by signing into law the strongest net neutrality bill (SB 822) in the country — a move that ought to worry everyone. The Department of Justice has already filed suit against the Golden State, arguing that only federal government can regulate the internet.
SB 822 draws inspiration from the “Open Internet Order,” a 2015 mandate passed by the Obama-era Federal Communications Commission (FCC) which classified the internet as a “common carrier” under Title II of the Telecommunications Act of 1934. That sweeping act was designed to regulate the telephone monopoly — not an internet that didn’t yet exist. Nevertheless, the FCC used this broad grant of authority to ban blocking, throttling, and paid prioritization of content via the Open Internet Order.
Two of those bans are uncontroversial, as both Republican lawmakers and Internet Service Providers agree that blocking and throttling of lawful content should be illegal. However, paid prioritization of content — favoring some content from some websites over others in exchange for fees paid to Internet Service Providers (ISPs) — can have some positive effects in certain cases.
As David Lyons, professor at Boston College Law School, points out: Paid prioritization shouldn’t be framed in terms of fast and slow lanes. All internet traffic on a network moves at the same rate; prioritization isn’t about creating a fast or slow lane for certain types of websites or applications. It is, however, a way to manage traffic congestion at peak usage times. Ideally, ISPs would increase traffic capacity in general, but that’s not always economically feasible or efficient since the extra capacity is required only for short periods of time.
In this situation, it is best to prioritize certain data as some applications or websites are more sensitive than others to “latency” — the delay before the transfer of data begins. For instance, video calling and online video gaming require low latency to avoid delays or time lag. On the other hand, email isn’t particularly sensitive to latency because a delay of a few milliseconds when you receive an email doesn’t really matter.
But net neutrality advocates would rather have ISPs randomly drop packets of data when there is congestion instead of prioritizing one type of traffic over another. This approach is simply inefficient and bad for consumers. Instead, allowing for prioritization is a legitimate pro-consumer practice. It would increase overall welfare by prioritizing services that require low latency and delaying non-sensitive services by tens of milliseconds.
Aneesh Chopra, President Barack Obama’s former chief technology officer, agreed with this sentiment in 2014. Paid prioritization can enable activities like telemedicine — clinical health-care delivery from a distance to rural areas — which are latency sensitive. Rural areas are typically bandwidth constrained, so allowing for arrangements between ISPs and health providers to prioritize telemedicine over other services would help deliver sorely needed aid.
Furthermore, the California bill clearly goes against the FCC’s latest order on net neutrality — the Restoring Internet Freedom Order (RIFO) — which was passed in late December last year. This order repealed the Title II classification of the internet and restored the same light-touch regulatory approach to internet regulation that allowed the internet to flourish — from the law’s inception in 1996 up to 2015. During this period, ISPs cumulatively invested $1.5 trillion in networks, and the number of fixed and mobile connections increased from 50.2 million to 355.2 million.
The FCC order is meant to prevent state and local authorities from passing mandates that “are inconsistent with the federal deregulatory approach we adopt today.” There’s no question that SB 822 conflicts with this “deregulatory approach.” For instance, it bans paid prioritization and condemns zero-rating, the practice of exempting some content from a customer’s data usage allowance. RIFO, by comparison, only requires disclosure of these arrangements. That order gave the Federal Trade Commission (FTC) discretion to decide what’s anticompetitive — as opposed to outright banning them as this bill does. The bill, therefore, is clearly a stand against the FCC’s approach and the federal government’s constitutional mandate. As Attorney General Jeff Sessions said in announcing the Federal Government’s suit, “Under the Constitution, states do not regulate interstate commerce — the federal government does.”
The California bill is also weak on other merits. The current FCC utilizes a transparency rule that mandates disclosure of Internet Service Provider practices. This allows the FTC, Department of Justice, state attorney general and private plaintiffs to police the internet and protect consumers from harm under existing competition and consumer protection laws. At the same time, pro-consumer arrangements don’t face scrutiny and consumers win.
SB 822 simply can’t replicate this careful and pro-consumer approach. This is something even the bill’s co-author, State Senator Scott Wiener, acknowledges. In a committee hearing late-April, he noted that the legislation doesn’t allow for such discretion and is in need of clear-cut rules.
The bill would also be hard for providers to comply with. Since it’s impossible to keep the internet within state boundaries, it doesn’t make sense to regulate it on a state-by-state basis. This bill, combined with other state net neutrality bills that are in the works, would create a nationwide patchwork of regulations. Given the boundless nature of the internet, an environment with many different regulatory regimes would place an undue burden on interstate commerce. From the standpoint of internet service providers (ISPs), it would simply be impossible to cooperate with so many different laws.
California is actively taking another step away from the Constitution and is failing to protect “free and open” internet, despite what the bill’s authors claim. Instead, it’s barring ISPs from engaging in efficient network management practices that would benefit consumers. And consumers deserve an internet that works for them, no matter where they are.
Pranjal Drall is a math and economics student at Grinnell College. He is a Young Voices contributor and specializes in technology and innovation policy. You can find him on Twitter @PranjalDrall.