California Judge Allows State's Net Neutrality Law to Go Into Effect

California Governor Gavin Newsom - Getty -H 2020

Gov. Gavin Newsom

This month, Texas became a cautionary tale when upon a severe winter storm, the state’s power grid was knocked on its heels. Millions of residents there were left without electricity and heat for days while other citizens were hit with shocking five-figure electric bills. This happened in large part because Texas lawmakers have pursued energy deregulation for decades. The hope was that more competition in the energy sector would spur better pricing and more choice for consumers, and while there have been benefits to this approach, the huge winter storm in the state showed what happens at times of structural stress. Without cops on the beat, so to speak, perhaps few should count on the reliability of cheap energy.

The Texas energy crisis apparently caught the eye of U.S. District Court Judge John Mendez. On Tuesday, during a hearing over California’s net neutrality law, the George W. Bush appointee drew a straight line. “Let’s say SB-822 is enjoined,” he told an attorney for the telecom industry. “And [thanks to the recent repeal of federal net neutrality rules], there is no power by the FCC to regulate your clients. Why shouldn’t a court be concerned if there is no regulation over ISPs?”

By the end of the hearing, Judge Mendez had made up his mind. California’s net neutrality law would be allowed to take effect. The judge rejected a push for an injunction from a telecom association whose members included AT&T, Verizon and Charter.

California enacted SB-822 soon after the FCC during the Donald Trump years pulled back from classifying broadband as a "telecommunications service" subject to regulation under Title II of the Communications Act. The state decided to provide the country's strongest protection against ISPs blocking and throttling traffic while going even further than the FCC ever did by attacking a practice known as "zero-rating," whereby a telecom data provider doesn't count the consumption of its owned content against an individual subscriber's data plan. Meaning, if you’re an AT&T subscriber, you can watch as much HBO Max content as you wish without it counting toward your cap.

After SB-822 was enacted, the Trump administration went to court to stop it. So, too, did the telecom industry. But only the latter showed up at today’s hearing. That’s because this month, the Joe Biden-era Department of Justice decided to drop its own challenge to a California law that has been on pause for the past two years.

Judge Mendez’ hearing was a bit unusual. He began the proceeding today — and spent most of the time — on the issue of irreparable harm and the public interest. He made it pretty clear that he was concerned by what California had submitted in support of the need of the rules. The court papers included a declaration from a fire chief in Santa Clara who said his department had experienced ISP throttling during the California wildfires. (Verizon maintains it had nothing to do with net neutrality but rather was a result of the type of data plan maintained by the fire department.)

And the judge seemed less than impressed with how the ISPs patted themselves on the back for not engaging in throttling, blocking and paid prioritization of traffic. As the industry implicitly was asking: Was there really a need for net neutrality rules?

“I have heard that argument and I don’t find it persuasive,” said Mendez. “It’s going to fall on deaf ears. Everyone has been on their best behavior since 2018, waiting for whatever happened in the DC Circuit [weighing the FCC’s repeal of net neutrality]. I don’t place weight on the argument that everything is fine and we don’t need to worry.”

Matthew Brill, an attorney at Latham & Watkins representing the telecoms, argued that California’s law conflicted with both federal communications law as well as the FCC’s 2018 order rescinding Obama-era net neutrality rules. He further argued that a state’s enforcement of an unconstitutional law was presumptively irreparable harm. Brill also pointed to AT&T’s sponsored data plans as something that might have to be tossed aside without an injunction. That could mean breaching promises to customers.

But Judge Mendez ultimately disagreed with the assessment that California’s net neutrality rules were preempted by federal law and found that the telecom companies were unlikely to prevail on the merits of its claims that this amounted to impermissible regulation of interstate broadband. Much of his reasoning had to do with the specific way the FCC had disclaimed its authority to regulate broadband as well as the lack of preemption language in the 1934 and 1996 Telecommunication Acts.

Despite sounding off repeatedly to say that no net neutrality rules could entail harm, he ended the hearing with a cautious word about his approach in the case.

“I think all parties agree that from a legal perspective the [Biden DOJ] decision didn’t effect the issues in this case,” he said. “But what it made clear was the elephant in the room — there are political overtones to this case.”

Mendez soon added, “This decision today is a legal decision and shouldn’t be viewed in the political lens. I’m not expressing anything on the soundness of the policy. That might better be resolved by Congress than by federal courts.”