Charter Points to FCC's Net Neutrality Repeal in Lawsuit Alleging Netflix Throttling

The cable giant is arguing that a lawsuit from the New York attorney general is preempted by federal law.

The FCC hasn't quite finalized the repeal of net neutrality rules, but Charter Communications is hoping the federal agency's move means it will be allowed to escape a lawsuit over promises of fast internet speeds and reliable access to Netflix and other apps.

Charter is set to appear in court on Tuesday in a bid to dismiss claims of false advertising and deceptive business practices by New York Attorney General Eric Schneiderman. In advance of the hearing, the company's lawyers pointed the judge's attention to the FCC's proposed order, widely expected to be adopted at a meeting on Dec. 14.

"Of particular relevance here, the Draft Order includes an extensive discussion of the interplay between federal and state law, including with respect to the transparency rule on which Charter has relied in arguing that federal law preempts the Attorney General’s allegations that Time Warner Cable made deceptive claims about its broadband speeds," writes Charter attorney Christopher Clark, from Latham & Watkins. "Consistent with the FCC’s statements in prior orders and enforcement advisories, the Draft Order 'conclude[s] that regulation of broadband Internet access service should be governed principally by a uniform set of federal regulations, rather than by a patchwork of separate state and local requirements.' ”

Since the case returned to a New York Supreme Court after taking a detour at the federal level, Charter has been arguing that claims are preempted by a federal regulatory regime governing broadband speed disclosures and interconnection practices. Charter also contends that Schneiderman has failed to allege facts plausibly indicating that Charter's Spectrum service misled consumers.

Charter says it obeyed FCC guidelines when characterizing the speed of its internet service, and as far as the company's advertisements pledging "blazing fast, super-reliable connection" and the ability to "stream Netflix and Hulu movies and shows effortlessly," Charter's legal briefs describe this as "prototypical instances of non-actionable puffery."

Schneiderman, of course, disagrees.

"Spectrum-TWC failed to maintain enough network capacity in the form of interconnection ports to deliver this promised content to its subscribers without slowdowns, interruptions, and data loss," stated an opposition brief. "It effectively 'throttled' access to Netflix and other content providers by allowing the ports through which its network interconnects with data coming from those providers to degrade, causing slowdowns. Spectrum-TWC then extracted payments from those content providers as a condition for upgrading the ports As a result, Spectrum-TWC’s subscribers could not reliably access the content they were promised, and instead were subjected to the buffering, slowdowns and other interruptions in service that they had been assured they would not encounter."

Will the debate be mooted by the FCC's net neutrality repeal? 

In its letter to the judge, Charter discusses how the FCC will be keeping its transparency rule while rescinding other net neutrality rules such as those forbidding paid prioritization. Charter also seizes on how FCC chairman Ajit Pai is proposing to establish rules that would foreclose state interference with federal regulatory objectives. Charter's attorney tells New York Supreme Court Justice Peter Sherwood that it intends to address the FCC's draft order at today's hearing. If the judge won't dismiss the case, Charter has been pressing for a pause in the proceedings to await the FCC's resolution of what it considers to be threshold issues.

Assuming the FCC adopts the net neutrality repeal, the issue of federal preemption will likely be one that is litigated and taken on appeal, along with a challenge over whether FCC decision-making was arbitrary and capricious or rather grounded upon evidence and reason. The Schneiderman case already has a bit of a head start, so it wouldn't be terribly surprising if it becomes the vehicle for exploring the dynamic between state and federal law with regard to core net neutrality principles.

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