FCC and 2nd Circuit Decisions Shift Landscape for Vt. Net Neutrality Case

The district court stayed litigation on Vermont’s open-internet law (case 2:18-cv-167) until the 2nd Circuit addressed New York’s Affordable Broadband Act (see 2204190072). On April 26, the 2nd Circuit decided that federal law didn’t preempt the ABA. But the appellate court reached its decision based on regulation of broadband as a Communications Act Title I service. Yet, one day earlier, the FCC had voted 3-2 to reimpose Title II regulation on broadband (see 2404250004). Industry groups are expected to challenge the FCC order, while at the 2nd Circuit, they sought -- and received -- a May 24 deadline to seek a rehearing or a rehearing en banc of the New York case (see 2405010005).

Timing for the Vermont case remains hazy while the FCC’s Title II order remains unreleased and the telecom industry weighs next steps at the 2nd Circuit, said Public Knowledge Legal Director John Bergmayer. Seth Cooper, Free State Foundation director-policy studies, predicted the Vermont case “will come out of deep freeze later this spring, but all eyes will be on precisely how the FCC addresses the matter of preemption of state net neutrality laws under the agency’s new Title II regulatory framework for broadband.”

The Vermont case plaintiffs are ACA Connects, CTIA, NCTA, USTelecom and the New England Connectivity and Telecommunications Association (NECTA). None commented for this story. Three of them -- ACA, CTIA and USTelecom -- are also complainants in the 2nd Circuit case. The Vermont attorney general's office also didn’t comment.

Industry doesn’t have "many good choices here" because the 2nd Circuit decision "is binding precedent in Vermont, so it's now established that the law is not preempted,” said Barbara van Schewick, director of Stanford University’s Center for Internet and Society. She noted that the district court’s most recent extension of the Vermont stay, from an April 2022 order, allowed the state net neutrality law to become enforceable.

Industry’s case against the Vermont law “was pretty thin to begin with,” especially after the D.C. Circuit’s 2019 decision in Mozilla finding that the FCC couldn’t preempt state laws and the 9th Circuit’s 2022 decision upholding California’s net neutrality law, said Tejas Narechania, law professor at the University of California, Berkeley. The 2nd Circuit decision “is exactly in line with those cases, and I suspect that that pretty much dooms their challenge to Vermont's law.”

Plus, the FCC draft order saw state net neutrality efforts as “complementary to its own regulations,” said Narechania. “The FCC goes out of its way to say that California's rules are largely consistent with its own, and that it welcomes having additional state-level enforcers to watch for violations,” said the professor: The agency probably will view Vermont’s law similarly.

“The legal landscape here will remain in flux until a final ruling is reached in the inevitable challenge to the” FCC’s Title II reclassification order, said Joe Kane, Information Technology and Innovation Foundation director-broadband and spectrum policy. The order “upends” the 2nd Circuit decision “by directly and broadly regulating broadband,” he said. “And the 2nd Circuit opinion admits that, in a Title II world, ‘If the FCC decides to forbear from imposing a common carrier obligation, the states are prohibited from imposing that same obligation on the telecommunications service.’”

FCC forbearance of rate regulation should preempt New York from regulating rates, but “the extent of preemption for other provisions in state laws” is debatable, said Kane. “The FCC seems to want to be permissive, explicitly labeling California's law safe and promising case-by-case review of other states,” at least in the draft order, he said. “Vermont's law appears to stop short of the explicit rate regulation of New York's, but the preemption analysis will have to be redone by the FCC, the court, or both, once the case resumes.”

“Vermont’s law is on firm ground” with the FCC draft’s stamp of approval on California’s law and the 2nd Circuit decision underscoring “Vermont’s ability to enact broadband consumer protection laws,” said Bergmayer. While the appeals court’s Title I discussion may have “a pretty short shelf life,” the Public Knowledge lawyer said the decision also contained “good analysis of how the Communications Act itself does not supplant the role of states.”

The 2nd Circuit’s ruling that federal law doesn’t occupy the entire field of interstate rate regulation “would appear to alleviate any field preemption challenge [to] Vermont’s net neutrality law,” said Cooper. But the decision also recognized that Title II grants the FCC authority to preempt state laws that conflict with its decisions, said the Free State Foundation official. "It remains to be seen" if the FCC "will exercise its conceded preemptive authority to preempt state laws like Vermont’s. Broadband providers likely should seek an FCC ruling on the preemption of conflicting state laws.” Cooper said it was a mistake for the FCC to reclassify broadband under Title II, but “it would be an even bigger mistake ... to not preempt state laws containing sector-specific regulation of broadband and subject broadband to dual layers of regulation.”