The U.S. Ninth Circuit Court of Appeals dealt ISP groups a blow, as a three-judge panel upheld the state of California’s right to implement its own net neutrality rules. Analysts at New Street Research tipped the decision to prompt more state action on the issue.
At the heart of the case is a 2018 law that the state passed to codify net neutrality regulations after the Federal Communications Commission (FCC) repealed its own open internet rules in late 2017. The California law was promptly challenged in separate lawsuits by industry groups and the Department of Justice. The latter withdrew its case in February 2021. A district court judge ruled against the ISP groups that same month, prompting them to appeal to the Ninth Circuit.
The industry groups had argued that California’s law was superseded by federal regulations from the FCC. But the Ninth Circuit judges determined that by classifying broadband internet services as information services in the repeal order, the FCC forfeited “the authority to regulate in the same manner that it did when these services were classified as telecommunications services.” Thus, the FCC “could not preempt state action, like SB-822, that protects net neutrality.”
In a joint statement sent to Fierce, ACA Connects, CTIA, NCTA and USTelecom said they were “disappointed” by the ruling and would review their options. The groups added “a piecemeal approach to this issue is untenable and Congress should codify national rules for an open internet once and for all.”
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Blair Levin of New Street Research argued in a note to investors the ruling opens the door for states with similar views on net neutrality to pass their own regulations.
While some states might continue to follow the FCC's lead, "other states might act on the theory that more state action puts pressure on the industry to accept an FCC reclassification,” he wrote. “Thus, we think that in the short-term, ISPs may be subject to multiple legal frameworks on net neutrality related issues.”
However, Levin noted the FCC, which is now led by net neutrality proponent Jessica Rosenworcel, is likely to act on the issue as soon as a fifth commissioner is installed to give the chairwoman’s political party a 3-2 voting majority. The FCC is currently deadlocked 2-2, with the fifth seat vacant. Gigi Sohn has been nominated to fill the empty post, but has not yet been confirmed by the Senate.