The FCC snares broadband in web of regulation

In the children’s book Walter’s Wonderful Web, a determined spider builds webs that are too “wibbly-wobbly” to withstand the wind but perseveres until he constructs one that survives.  Like Walter, the FCC is busy spinning a web but its web of heavy-handed utility-style regulation will make broadband wibbly-wobbly. 

To apply utility-style regulation, the FCC will classify broadband as a telecommunications service under Title II of the Communications Act. A key implication of this classification is that states have jurisdiction over intrastate telecommunications services, risking entangling broadband in web of 50 different sets of state regulation.

To ameliorate this risk, the FCC proposes to exercise preemption to prevent “a patchwork that includes separate state and local requirements.” But preemption is not permanent.  It can be changed or removed completely by the FCC at any time, creating an investment and innovation-chilling regulatory overhang. 

Without clear and broad preemption, states can assert jurisdiction over broadband once it is classified as a telecommunications service. While the D.C. Circuit Court of Appeals found that the 2018 Restoring Internet Freedom Order (“RIF Order”) failed to lawfully ground its preemption doctrine and thereby opened the door for states to have a limited role in broadband, the RIF Order classified broadband as a Title I information service.  States do not have the same level of jurisdiction over information services that they have over telecommunications services.

To demonstrate the risk of a web of 50 different state regulations, in comments filed in the Title II proceeding, progressive tech policy group Public Knowledge, the New York State Public Service Commission (“NYPSC”), and the California Public Utilities Commission (“CPUC”) each call for the FCC to recognize a state regulatory role. 

Public Knowledge says that “[h]istorically, states have played a crucial role in regulating telecommunications services” and believes that state laws that go beyond a federal framework but are not inconsistent with it should remain in place. It also submits that on open internet rules, “states should be allowed to enact regulations that either go further than or offer more specificity than federal rules” (emphasis added).

On top of that, Public Knowledge believes that states should have a role in “ensuring affordable service,” effectively providing states the ability to determine pricing and engage in rate regulation.  Imagine broadband providers ensnared in a bureaucratic web of 50 different versions of rate regulation, all under the guise of affordability.

The NYPSC believes that “New York and other states should be recognized for their ability to regulate issues of state or local concern…”  Not to be outdone, the CPUC  proposes that “states may develop their own rules in recognition of state-specific issues, consistent with FCC rules.” 

The CPUC also offers that states should enforce rules against broadband providers through existing enforcement mechanisms because state commissions have been “handling slamming and cramming complaints,” as if that is remotely comparable.

State enforcement proceedings would create an uneven playing field for broadband providers.  Similar to the stacked deck that defendants encounter before federal administrative law courts (see, Ryan Young and Stone Washington, Conflict of Justice: Making the case for administrative law court reform), state enforcement proceedings allow state commissions to exercise their home court advantage. 

The CPUC process is illustrative. A typical enforcement proceeding would take place under the CPUC’s auspices in a CPUC hearing room, the administrative law judge (“ALJ”) is a CPUC employee, the CPUC’s Legal Division typically participates in the proceeding and the CPUC commissioners determine the final order. In addition, third parties, such as self-styled consumer groups, can intervene in the proceeding and receive intervenor compensation paid by the company that is the subject of the proceeding.  That’s right – the broadband provider would have to pay third parties who oppose it.

This web of 50 different sets of rules, processes, hearing forums and in-house adjudicators would strangle broadband providers in a morass of utility-style regulations. The focus of broadband providers will change from investment and innovation to regulatory defense.

The FCC’s proposed application of Title II and classification of broadband as a telecommunications service creates a risk of state broadband regulation that goes well beyond anything in place today. And it is being done with the full knowledge that whatever preemption the FCC exercises is not permanent and can be changed or removed at any time.

Trapped in this regulatory web, it is broadband that will go wibbly-wobbly.