Risks remain after Congress’s deregulatory net neutrality choice is affirmed

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This past decade’s net neutrality saga recently received much needed clarity thanks to the federal 6th Circuit Court of Appeals. Its decision rules on the divergent directions that have been debated for broadband internet access (BIAS) regulation and rests on the choice Congress clearly made.
When it drafted and updated the Communications Act, Congress had choices to make. As Dr. Seuss brilliantly observed, “You have brains in your head. You have feet in your shoes. You can steer yourself any direction you choose.”
One direction was light-touch regulation that prioritizes innovation and investment and provides internet service providers (ISPs) freedom to compete. The other was common carrier utility-style regulation used to enforce net neutrality and other mandates designed to limit ISPs’ competitive freedom.
The 6th Circuit affirmed Congress’s chosen direction and provided a clear victory for innovation, investment and freedom when it overturned the FCC’s net neutrality order that imposed common carrier regulation on ISPs.
Following Loper Bright, where the Supreme Court overturned the Chevron standard requiring courts to defer to the interpretation of the expert agency when applying an ambiguous statute, the 6th Circuit conducted its own review of the Communications Act. It found the FCC’s interpretation that ISPs are offering a common carrier service in error. Using “the traditional tools of statutory construction,” the 6th Circuit held that the best read of the statute is that ISPs offer an information service, one only subject to light-touch regulation and not common carrier regulation.
This should come as no surprise. For the first 20 years of the internet there was a bipartisan consensus that internet services such as BIAS were information services. It is also consistent with the policy prescription set forth in the Act. Sec. 230(b) states that “it is the policy of the United States” to preserve the vibrant and free market for the internet that is “unfettered by Federal or State legislation.” This is the direction Congress chose.
And that choice has been validated. Broadband thrived under years of light-touch regulation with US broadband providers investing $94.7 billion in infrastructure in 2023 and nearly $2.2 trillion since 1996. The US ranks 6th globally in fixed broadband download speeds, ahead of China, Japan, Canada, and almost every EU country.
A look at the states, however, shows that the pro-regulation impulse remains alive. Last year the 2nd Circuit Court of Appeals upheld a New York state law requiring ISPs to offer low-income households specific rates depending on download speeds. Mandating pricing is classic common carrier rate regulation. In 2022, the 9th Circuit Court of Appeals upheld California’s state net neutrality law that essentially codified the FCC’s 2015 Open Internet Order that imposed net neutrality and common carrier regulation.
The 6th Circuit’s decision makes it clear that under the Act, ISPs are information service providers and not common carriers. Conflicting with the Act itself, the New York and California laws treat ISPs as common carriers and impose regulation Congress specifically sought to avoid. They are contrary to the direction that Congress chose. If allowed to stand, states will operate in direct conflict with the Act and frustrate Congress’s expressed deregulatory policy. This will chill broadband network investment and impair the economic development and innovation that broadband networks enable.
While federal preemption of state common carrier BIAS regulation is therefore essential, it is unclear if that will happen.
The broadband industry has filed for cert at the Supreme Court seeking to overturn the 2nd Circuit’s New York decision, so there is a chance the Court could take up the question and reinforce the 6th Circuit’s information services decision. Otherwise, federal legislation preempting state common carrier regulation of BIAS would bring certainty. But the legislative process is unpredictable and there are many competing priorities in Congress.
While the 6th Circuit decision is a clear victory, one more step would ensure that states don’t steer broadband regulation away from the direction Congress chose.