Preemption of State Internet Regulation Matt Murchison Latham & Watkins LLP December 6, 2018

Transcription

1 Preemption of State Internet Regulation Matt Murchison Latham & Watkins LLP December 6, 2018 Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in France, Hong Kong, Italy, Singapore, and the United Kingdom and as an affiliated partnership conducting the practice in Japan. Latham & Watkins operates in South Korea as a Foreign Legal Consultant Office. Latham & Watkins works in cooperation with the Law Office of Salman M. Al-Sudairi in the Kingdom of Saudi Arabia. Copyright 2018 Latham & Watkins. All Rights Reserved.

2 Preemption by FCC on a Bipartisan Basis As the federal net neutrality regime has changed over time, one important principle has been consistently reaffirmed by the FCC on a bipartisan basis: the preemption of state and local net neutrality measures Order 433: Finding that broadband is an interstate service and confirming the FCC s preemption authority to preclude states from imposing obligations on broadband service that are inconsistent with the [FCC s] carefully tailored regulatory scheme Order 194: Concluding that regulation of broadband Internet access service should be governed principally by a uniform set of federal regulations, rather than by a patchwork that includes separate state and local requirements, and deciding to exercise [the FCC s] authority to preempt any state or local requirements that are inconsistent with the federal deregulatory approach adopted in that order. 2

3 Preemption in the 2018 Order Paragraph 195 of the 2018 Order includes a broadly worded preemption provision: We therefore preempt any state or local measures that would effectively impose rules or requirements that we have repealed or decided to refrain from imposing in this order or that would impose more stringent requirements for any aspect of broadband service that we address in this order. Among other things, we thereby preempt any so-called economic or public utility-type regulations, including common-carriage requirements akin to those found in Title II of the Act and its implementing rules, including, among other things, requirements that all rates and practices be just and reasonable; prohibitions on unjust or unreasonable discrimination; tariffing requirements; accounting requirements; entry and exit restrictions; interconnection obligations; and unbundling or network-access requirements. We [also] preempt... other rules or requirements that we repeal or refrain from imposing today because they could pose an obstacle to or place an undue burden on the provision of broadband Internet access service and conflict with the deregulatory approach we adopt today. 3

4 State Measures in 2018 After the FCC s adoption of the 2018 Order, a handful of states have sought to adopt their own net neutrality measures. Statutes in California, Vermont, Washington, and Oregon Executive Orders in Vermont, Hawaii, Montana, New Jersey, New York, and Rhode Island Some states, like California, have sought to impose requirements in the form of direct regulation on ISPs. Other states, like Vermont, have sought to condition broadband procurement contracts with the state on ISPs compliance with net neutrality obligations for all customers in the state. On substance, these state measures differ from one another in various respects, creating a patchwork of inconsistent requirements for broadband Internet services that, by their very nature, traverse state lines. 4

5 Litigation Challenging State Measures United States v. California and ACA v. Becerra (E.D. Cal.) DOJ and a coalition of ISP associations have sued to enjoin California s SB-822, which not only re-imposes the rules repealed by the FCC s 2018 Order but also establishes restrictions that go considerably further than the repealed rules (including bans on zero rating and paid interconnection). Plaintiffs argue that SB-822 is invalid on express preemption, conflict preemption, and dormant Commerce Clause grounds. California quickly stipulated that it would not enforce SB-822 pending ongoing appeals of the 2018 Order, and litigation is now stayed. 5

6 Litigation Challenging State Measures ACA v. Scott (D. Vt.) ISP associations have filed suit in Vermont challenging a statute (S. 289) and an executive order (EO 2-18) that re-impose the rules repealed by the FCC s 2018 Order in the form of procurement conditions. Here, too, Plaintiffs contend that S. 289 and EO 2-18 are invalid on express preemption, conflict preemption, and dormant Commerce Clause grounds. Plaintiffs explain that, where a state seeks to use its spending power to regulate indirectly what it cannot regulate directly, through conditions that reach activities beyond the scope of the contract, the state acts as a regulator rather than as a market participant, and its action is subject to preemption under well-established Supreme Court precedent. See, e.g., Chamber of Commerce v. Brown, 554 U.S. 60, 69 (2008) (explaining that, when a state cannot directly regulate activity due to federal preemption, [i]t is equally clear that [the state] may not indirectly regulate such conduct by imposing restrictions on the use of state funds ). See also Wis. Dep t of Indus. v. Gould, Inc., 475 U.S. 282, 287 (1986) (rejecting the state s argument that its statutory scheme escapes pre-emption because it is an exercise of the state s spending power rather than its regulatory power ). 6