As California Goes on Regulation, so (Unfortunately) Goes the Nation

Last month, a federal judge upheld California’s net neutrality regulations. That led to AT&T’s announcement this week that they will no longer exempt the HBO Max streaming service from data caps. This is an unintended consequence of the state regulations that will hurt consumers in California and all across the country. Congress can and should act to fix this.

One aspect of net neutrality regulations is a ban on Internet service providers (ISPs)—like AT&T, Comcast or Verizon—treating any data differently than any other data moving across its network. Sadly, that makes “zero-rating,” a practice in which an ISP doesn’t count the use of a certain app or service against the customer’s monthly data cap—such as, for example, free HBO for AT&T customers—illegal. This rule may benefit content providers who don’t have telecommunications holdings to bundle with, but it hurts consumers by imposing higher costs.

And it’s not just Californians who will lose the savings. The Internet doesn’t recognize state lines, so the allowance will now be eliminated for customers across the country. AT&T doesn’t have a choice if it wants to avoid running afoul of the Golden State’s net neutrality regulations.

This is how state ceiling regulations become a regulatory national floor.  A populous and regulatory zealous state can set the de facto regulatory policy for the entire nation. That is unfair to citizens located outside of California who had no voice in instituting these net neutrality regulations, but who now have to bear the burden of their costs and unintended consequences.

So pervasive is the threat of states exporting their regulatory regimes to other states that the Founding Fathers wrote a precaution against it into the Constitution. The Commerce Clause prevents states from interfering with interstate commerce, a matter left exclusively to Congress. If the Internet is not interstate commerce, it is hard to imagine what is.

This is precisely why Congress must preempt state net neutrality regulations. In doing so, it should avoid making the same mistakes that have hurt consumers in California and all over the country.