Battle lines take shape between California, DOJ over net neutrality

The battle over the future of the internet just got a little more complicated as the Justice Department sued California on Sunday to block the state's new law targeting internet providers and their treatment of Web content.

It's the first net neutrality case to involve the Justice Department directly. The outcome could affect not just how consumers experience the Web in the Golden State, but potentially across the entire country. Because of the high-stakes nature of the issue, analysts say that the latest move by the government may even wind up before the Supreme Court.

Here's what consumers can expect as the battle escalates.

The new California law is sweeping in its scope. It prevents companies such as AT&T and Comcast from blocking or slowing down websites — something the companies say they aren't interested in doing anyway — but it doesn't stop there. The law also prohibits carriers from demanding special new fees from websites, and it bars internet providers from selectively exempting their preferred apps from customer data caps.

The Justice Department is challenging the law on the grounds that it conflicts with the Federal Communications Commission's own recent efforts to deregulate internet providers.

In 2017, the FCC under chairman Ajit Pai voted to roll back its nationallevel net neutrality rules, and warned states not to defy the agency by writing legislation to circumvent the new policy. The new rules went into effect in June.

But dozens of states have done precisely what the FCC tried to prohibit, introducing bills meant to reinstate the Obamaera regulations. Three states have succeeded in passing legislation, while half a dozen other states have put executive orders on the books. California's legislation is considered the toughest in the nation, because its law goes further than the FCC's 2015 net neutrality rules.

The Justice Department's case boils down to one central point: Under the Constitution, it's the federal government whose policies must take priority over state law. In light of the FCC's more recent deregulatory order, federal officials are asking for California's net neutrality law to be invalidated, and industry groups are expected to join the effort. On Monday, AT&T said it supported the Justice Department effort.

"The fundamental issue here is that the internet and internet access is interstate commerce," said Jonathan Spalter, president of USTelecom, an industry trade group. "You cannot send packets of data to my family in California without traversing a number of states."

But supporters of the California law say the rule-change contains a fatal flaw that undermines the Justice Department's federalism case: The FCC's new rules have the agency explicitly giving up its own authority to regulate internet providers.

The FCC has said instead that other agencies, such as the Federal Trade Commission, should take a more active role in protecting the public from violations of net neutrality.

If the FCC is as powerless as it claims, the theory goes, then its attempt to ban states from regulating net neutrality is equally toothless.

"Courts have consistently held that when the federal government lacks authority to regulate, it cannot pre-empt states from regulating," said Andrew Schwartzman, a lecturer in public interest law at Georgetown University.

It's unclear how this argument might play out. According to Marc Martin, a telecom attorney at the firm Perkins Coie, there is precedent for the federal government to say it won't regulate a certain interstate commerce issue and then to seek to prevent states from filling the gap. In 1978, Congress deregulated the airline industry — eliminating the Civil Aeronautics Board and its rules governing airfare prices — and barred the states from enacting their own, state level replacements.

"That pre-emption of the states, despite the federal government relinquishing regulation itself, was upheld by the courts," Martin said, adding that it still was an act of Congress itself. The FCC is an independent executive agency that doesn't enjoy as much latitude.

Beyond the debate over pre-emption, California is also expected to justify its legislation under its legal mandate to protect the health and welfare of its residents, which is protected under the Tenth Amendment, Martin added.

Even as the two sides prepare to go to court, other lawsuits involving net neutrality — including a challenge to the 2017 order that weakened the federal rules — could complicate the litigation. Consumer advocacy groups, small tech companies and smaller telecom carriers have banded together in an effort to block the FCC from repealing its net neutrality regulations, and that case is still pending before the U.S. Court of Appeals for the District of Columbia.

It's possible that the case involving California could be subjected to a stay until the D.C. Circuit litigation works itself out. The Justice Department has asked the U.S. District Court for the Eastern District of California for a preliminary injunction of the new law.

"Whether or not it grants an injunction, I suppose the Court might stay further action on the case (i.e., hold it in abeyance) unless and until the D.C. Circuit reverses the FCC's decision," said Andrew Schwartzman, a lecturer in public interest law at Georgetown University.