The whirlwind of developments during 2021 on "net neutrality" rules that is probably inevitable given the change in administration gathered speed this week, when a federal district court in California denied an industry request to stay the effectiveness of California's net neutrality law, the California Internet Consumer Protection and Net Neutrality Act of 2018.

The ruling in American Cable Association et al. v. Becerra, No 2:18-cv-02684 (E.D. Cal.) is not a final holding that the California statute is legal—instead, in an oral ruling, Judge Mendez merely refused to enjoin the law pending final resolution of industry's challenges to it. But perhaps even more important than the fact that the California law is now in effect is what the ruling may foreshadow: The judge specifically called on Congress to weigh in on the net-neutrality debate, while Acting Chairwoman Rosenworcel of the FCC called the ruling "big news for #openinternet policy."

A Crash Course in Net Neutrality

First, a very quick reminder of how we got here, before turning to what happened this week and what is likely to happen in the near future: The FCC, under Chairman Wheeler during President Obama's tenure, enacted broad net neutrality rules in the Open Internet Order. To adopt those rules, the FCC had to reclassify mass-market broadband internet service as a regulated "Title II telecommunications service," rather than as a generally unregulated "information service."

The D.C. Circuit upheld that order against various court challenges, in an opinion DWT summarized here. But after President Trump took office and appointed then-Commissioner Pai—who had penned a vigorous dissent to the Open Internet Order—as Chairman, the agency reversed course in the Restoring Internet Freedom Order, reclassifying broadband service as an information service, repealing most of the Wheeler net-neutrality rules, and specifically prohibiting individual states from imposing net neutrality rules on broadband providers.

That FCC order was again challenged, and the D.C. Circuit largely upheld it—though the court struck down the FCC's effort to categorically bar states from imposing their own net neutrality rules.

In the meantime, shortly after the Restoring Internet Freedom Order was released, state-level net neutrality laws were introduced around the country, and several were enacted—most notably in California. Various industry groups challenged the law in court, as did the Trump Department of Justice, arguing that federal law preempted the California statute.

The parties agreed to delay the effectiveness of the statute pending resolution of the challenges to the Restoring Internet Freedom Order, but the litigation picked up last summer. At that time, industry and DOJ pressed the claim that the California law was preempted by federal law (for preemption aficionados: under theories of field, express, and conflict preemption), and would irreparably harm industry and the public.

The Past, Present, and Future Walk Into a Courtroom …

Fast forward to just days after President Biden took office, when the United States dropped its opposition to the California law. The challenge by industry remained, and the district court heard oral argument on the pending preliminary injunction motion on Tuesday, February 23, 2021. At the end of the argument, Judge Mendez denied the motion from the bench.

The court held that the plaintiffs had demonstrated neither a likelihood of success on the merits of their challenge to the law nor irreparable injury, noting that the California rules were similar to the 2015 Open Internet rules that industry had said would not change their business practices. Judge Mendez further stated that Congress, not courts, should decide questions of net neutrality.

On this last point, the industry groups have publicly agreed with Judge Mendez, arguing that "a piecemeal approach" varying from state to state "is untenable and that Congress should codify rules for an open internet." In the meantime, Public Knowledge (a public interest group) has asked the FCC to reconsider the Restoring Internet Freedom Order, presaging the possibility that the FCC itself may again change the classification of broadband and re-impose net neutrality rules.

Why Does This Sound So Familiar?

While Deputy General Counsel at the FCC, one of us (David Gossett) had the opportunity to help lead the successful defenses of both the Open Internet Order and the Restoring Internet Freedom Order, resulting in D.C. Circuit rulings that that the FCC could adopt either approach—treating mass-market broadband as a regulated telecommunications service, and treating it as an unregulated information service—within the scope of the agency's statutory authority.

It seems entirely possible that the new FCC will reverse course yet again, leading to another round of litigation—this probably depends on who President Biden names as permanent chair of the agency. On the other hand, Congress might agree with Judge Mendez and get involved—the support of industry groups might prompt Congress to act. One advantage of congressional action would be that Congress could address net neutrality issues without needing to categorize broadband service as either an information service or a telecommunications service.

There are many cogent reasons for industry to object to classifying broadband as a telecommunications service, but in the main those objections are only tangentially related to any actual net neutrality rules.

What will happen next? Time will tell. But DWT will be following these developments closely—and we will post again when interesting further developments unfold.