Are crafty tactics the way to make internet policy?

A recent Washington Post article touts the “crafty tactics” of many states to find workarounds in federal law so that they can make their own internet regulations — rules that require consumers to value all content the same and thereby prohibit large internet companies from sharing in the cost of broadband networks. While there are legitimate disputes between states and the federal government, it is neither lawful nor practical for states to create their own internet regulation.

This is girded by the Interstate Commerce Clause in the Constitution, the Communications Act, and the Federal Communications Commission’s (FCC) preemption authority. In its Restoring Internet Freedom Order, the FCC reiterated that “federal courts have uniformly held that an affirmative federal policy of deregulation is entitled to the same preemptive effect as a federal policy of regulation.” Just as it would have been illegal for a state to disobey the Title II order while it was in effect from 2015 to 2017, it is illegal for states to disobey the FCC’s new rules now. While states recognize this, here are the crafty tactics they try nonetheless.

Executive orders by governors

The governors of Hawaii, New Jersey, New York, and Montana have signed executive orders requiring internet service providers (ISPs) doing business with the state to adhere to internet regulations now vacated by the FCC. The crafty tactic is to require any ISP doing business with the state to retrofit all its other services to other customers. The orders might be credible if such requirements were made only for the provision of service to the state itself.

Indeed, institutions set up service-level agreements when buying broadband, typically requesting non-neutral traffic management to prioritize specific network functions and to block extraneous and harmful data. But the FCC’s rules never applied to business-to-business service anyway: They were always intended for mass market retail service, which is what the governors hope to change under the guise of procurement — indirectly regulating broadband so as not to violate the law on its face.

Just as companies can be prosecuted for crafty tactics, so can governments. Dominant players with essential patents using contracts to force behavior in the market can be considered anticompetitive. Consider Qualcomm’s “no license, no chips” policy, which refuses to supply chips to device makers that work with Qualcomm’s competitors. The FTC has sued the company over the practice, and the European Union slapped it with a $1.2 billion fine for a related offense. Governments have similar monopoly power in their ability to force behavior. Judicial precedent on the market-participant doctrine protects against such abuse and ensures that state governments cannot change the conduct of commerce to suit their pecuniary interest.

State legislation

States such as California, Oregon, and Massachusetts are considering similar workarounds, using legislation rather than executive orders, but the FCC’s preemptive authority still applies. Evidently these states forgot the 8^th Circuit’s ruling in 2007 against Minnesota’s effort to regulate Voice over Internet Protocol (VoIP), finding “. . .VoIP-to-VoIP communications originate and terminate at IP addresses which exist in cyberspace, but are tied to no identifiable geographic location.” The ruling demonstrates that states have no jurisdiction over cyberspace. Crafty residents could also evade state rules merely by going online to purchase mobile internet service from thousands of vendors and resellers across the country.

Lawsuits

All 21 states with Democratic attorney generals plus the District of Colombia have sued the FCC, saying that the removal of the Title II order is arbitrary, capricious, an abuse of procedure, and a violation of applicable laws. These were the same arguments made by petitioners when the 2015 rules were first imposed. Just as the FCC’s 2015 order was upheld, courts are likely to uphold the one from 2017, as the agency generally receives deference by the courts.

States have the right to bring lawsuits against federal government, but the question is whether they are right in this case. The internet’s vast economic and political significance demands greater care than crafty tactics. Indeed, TechFreedom’s petition awaiting review at the Supreme Court recognizes that whether to and how to regulate the internet is a major question that Congress did not intend to be left to the whim of political appointees.

Conclusion

Sadly, state-level efforts to regulate the internet continue even as ISPs offer to voluntarily uphold net neutrality principles. Empirical research demonstrates that voluntary net neutrality rules are more effective for promoting innovation, investment, and consumer choice. Countries praised for their broadband networks — South Korea, Japan, Switzerland, and until recently, the Nordics — all have voluntary rules.

This fall, two of the aforementioned governors and 12 of the attorney generals’ seats are up for election. Voters in these states can decide whether they prefer crafty tactics or thoughtful, evidence-based policy developed in a forthright, transparent fashion. Unless we want to live in a world of regulatory whiplash in which this policy shifts with every change in administration, the FCC’s authority needs to be clarified by Congress. Bills by Reps. Marsha Blackburn (R-TN) and Mike Coffman (R-CO) offer to codify “bright line rules.” It speaks volumes that regulatory advocates prefer crafty tactics over resolving the issue in the legislative body that certifies the will of the people.