This crafty tactic may let states get around the FCC on net neutrality

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State governments are becoming pivotal players in the battle over net neutrality. In recent weeks, legislatures from California to Massachusetts have introduced bills aimed at restoring the Federal Communications Commission’s broadband rules, which banned Internet providers from arbitrarily speeding up or slowing down websites.

The initiatives have put states on a collision course with the FCC. But now a new tactic gaining momentum among governors threatens to complicate the debate further. Their novel approach, analysts say, is largely untested in court — and it could drive the fight over the Internet’s future into hazy legal territory.

New Jersey Gov. Phil Murphy (D) this week became one of the latest to adopt the strategy, signing an executive order that effectively forces Internet service providers (ISPs) that do business with the state to abide by strong net neutrality rules.

Rather than directly regulating the broadband industry, the executive order imposes procurement obligations on state agencies. Under the order, state officials contracting with ISPs for service may do so only if the providers agree not to block or slow websites, or to offer websites faster delivery to consumers in exchange for an extra fee.

As a large consumer of Internet service, said Murphy, the state may be able to pressure ISPs into granting New Jersey residents the same equal-access protections afforded to the government.

“While New Jersey cannot unilaterally regulate net neutrality back into law or cement it as a state regulation,” Murphy said, “we can exercise our power as a consumer to make our preferences known.”

The decision comes weeks after Montana and New York officials signed virtually identical orders. The state of Hawaii this week also joined the group.

The orders could contradict the FCC’s new rules on net neutrality, which claim to “preempt any state or local requirements that are inconsistent” with the agency’s deregulatory agenda. (The FCC declined to comment.) But whether a court will agree with the FCC’s approach is unclear. The debate over net neutrality is headed into uncharted waters, analysts say.

“I really don’t know how the state spending case would turn out,” said Berin Szoka, president of the right-leaning think tank TechFreedom. “We’ve been looking into it. There isn’t much case law to look to as precedent. It will be a fascinating case.”

At the heart of a legal fight over the executive orders will be familiar constitutional questions — and some novel ones. Since the country’s founding, legal experts have clashed over where the federal government’s authority ends and state authority begins. From a basic perspective, the FCC enjoys the upper hand: Part of its reason for existence is to smooth over differences in state laws, said Jonathan Turley, a constitutional law professor at George Washington University.

“The overall case law supports the FCC in maintaining a consistent and coherent national policy for an interstate industry,” Turley said. “The states have a considerable burden to overcome.”

But despite the supremacy of the federal government in most matters, states still have broad leeway within their borders, other experts say.

“The states’ power to buy goods and services has nothing to do with the federal government,” said Andrew Schwartzman, a public interest lawyer at Georgetown University.

States are also allowed some regulatory flexibility even on certain matters that indirectly touch interstate commerce — a traditionally federal issue. For example, states can regulate car dealerships and supermarkets, even though the goods they sell may cross state borders, according to Harold Feld, senior vice president of the consumer group Public Knowledge.

Feld added that there is precedent for states using their purchasing power to advance social goals. For example, he said, Maryland has used its state contracting rules to effectively raise wages in the state.

Still, states may face other obstacles in implementing their executive orders, even if the orders are taken to court and survive. For example, ISPs could simply decide that they are willing to lose the state’s business over re-engineering their traffic policies.

Some state officials acknowledge that possibility.

“Nothing stops ISPs from selling dumpy Internet plans in Montana if they insist,” Montana officials stated in a fact sheet on their executive order.

States are betting that most ISPs will fall in line rather than risk giving up a major customer. But it’s a dangerous game that could end up with all of a market’s ISPs essentially calling the state’s bluff — leaving the government without any broadband provider, said Dan Lyons, a law professor at Boston College. And the move could even wind up costing state governments more money.

“Procurement law is premised on the idea that multiple bidders for a government contract [protect] taxpayer dollars,” said Lyons. “By adding conditions that might deter potential bidders, the state limits the number of competitors and might end up paying more.”


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