California’s Shining Path to Internet Regulation

Leave it to California to blaze new trails, overcome obstacles, and show the rubes the way. Its political process may be buffeted by an initiative process controlled by Big Money interests, but there’s so much wealth in the Golden State that every point of view has its day.

Like the rest of the Marijuana Belt, California is pushing the boundaries of federalism, testing the limits of states’ rights on multiple of fronts. While the Internet is clearly bound up with interstate commerce, the California Legislature wants to see how far it can go in seizing the FCC’s regulatory power.

In recent weeks, California has passed its own consumer privacy regulations and has pushed two bills on Internet Service Provider regulations through at least one house of the legislature. They prevent the state from contracting with ISPs that don’t conform to its version of net neutrality, and also impose regulations on all consumer-facing ISPs more severe than any the world has ever seen outside of Saudi Arabia, Russia, and China.

The de León Bill

The privacy bill is pretty much a disaster meant to prevent a debacle. Wealthy real estate developer Alastair Mactaggart heard a shocking story at a San Francisco cocktail party and decided to write a ballot initiative. The story is too long for this post, so I’ll deal with it in another post.

The first of the net neutrality bills, Sen. Kevin de León’s (D, East LA) SB-460 (Communications: broadband Internet access service), has two parts. The first defines net neutrality and applies it to residential broadband plans; the second applies the same definitions and restrictions to state-purchased broadband. The sections are separable because the first runs afoul of the Commerce Clause while the second is less blatantly unlawful.

The  de León bill has serious problems with its definition of net neutrality. It would ban the sale of services conforming to Internet Quality of Service standards that have been in place since the 1990s. Like the FCC’s 2015 Title II order, it exempts ISP services that are not marketed as reaching all Internet sites. It also bans zero rating; essentially, it’s a price control bill on steroids.

It’s an odd disconnect to ban the use of the totality of Internet standards unless the ISP refrains from serving all sites. But that’s California, and de León is running against Senator Feinstein for a US Senate seat this year.

The Wiener Bill

It’s unclear what’s in the bill authored by Sen. Scott Wiener (D, SF), SB-822 (Communications: broadband Internet access service) any more. Its original drafting was quite broad, banning all of the things the current de León bill does except government contracting with non-neutral ISPs. Its ban on zero rating (unmetered Internet to certain sites) was more specific.

It was heavily amended in the Assembly, with the paid prioritization and zero rating features stripped out. But Sen. Wiener, Sen. De León, Assembly Communications Committee Chairman Miguel Santiago (D, LA), and Assemblyman Rob Bonta (D, Oakland) held a press conference on July 5th in which they promised that all differences had been resolved.

The press conference suggested that the new Wiener bill will focus on regulations for Internet interconnection, presumably applying de León-style prohibitions. This is troublesome because interconnection has always been a free market that functions quite well.

The Long and Winding Road

The original Larry Lessig concept of net neutrality – before it was called by its current name – required ISPs to treat each packet of information the same as all others.

Like a daydreaming postal worker, the network simply moves the data and leaves interpretation of the data to the applications at either end. This minimalism in design is intentional. It reflects both a political decision about disabling control and a technological decision about optimal network design.

Journalists still use this definition, but it was actually upended by Tim Wu in his original net neutrality paper.

Wu recognized that the Internet is inherently biased in favor some applications – he called them “data applications” – and against others, the real-time applications. He wanted to ensure that each provider of each application had a fair chance of competing against other providers without compromising application needs.

We now tend to think of net neutrality in terms of pricing and regulatory authority, however. Lessig and Wu were followed by Barbara van Schewick at the Stanford Center for Internet and Society; she’s now the left’s main oracle on Internet regulation.

Far Worse than the FCC’s Old Title II Order

A muted form of Van Schewick’s version of net neutrality is visible in the FCC’s Title II order. In short, she claims to be in favor of allowing ISPs to treat each stream of data according to consumer preference, but opposes all practical means for communicating such preferences. This is what “reasonable network management” is about: a mysterious process driven by secret knowledge.

This produces an effect very much like Lessig’s naïve  Internet model while pretending to favor the kind of innovation Wu appears to support. The California legislators consulted with van Schewick, and she’s generally regarded as the true author of SB 460 and SB 822.

While the Title II order failed to issue outright bans on zero-rating and paid interconnection, California appears to be moving in just that direction. It’s generally necessary for any state-level net neutrality to be more hard-edged than an FCC rule because states lack the expertise to engage in case-by-case assessment of nuanced, sophisticated practices.

While the FCC took the position that zero-rating offers had to be examined on an economic and innovation basis, California simply says: “No, you can’t shift consumer costs onto platform providers ever, for any reason; no, no, no.”

The same logic goes for interconnection and Quality of Service. The definitions are hard-edged and  only the consumer can pay, regardless of the price, the conditions of sale, or any other factor. This is not exactly a sophisticated use of economic analysis.

It’s also far from clear that any of this needs to be done, of course.

Does California Have the Skills to do This?

Given the state of California’s governmental apparatus and its political process, it would take a miracle for its legislature to write a reasonably good net neutrality law. Neither Congress nor the FCC has been able to produce one and they have resources that California can only wish for.

Washington has career lawmakers, deep regulatory talent, bipartisan dialog, and a 20 year head start. California is largely governed through the initiative process, has a term-limited legislature, a weak utility regulator, fanatic advocates for unworkable plans, and inordinately powerful digital platform providers with little interest in paving the way for the small players that will one day overthrow them.

The internet is a complex system, and it’s a lot easier to coin slogans than to describe its inner workings to the public. This is why journalists stick to their “equal treatment” simplifications instead of illuminating the fairness issues. It’s unfair to treat dissimilar things as if they were equal.

The goal of this exercise should be fair and sensible treatment of all consumer traffic, and that’s a much harder goal than arbitrary bans on practices that can be made to sound dubious. The logic of a ban on “fast lanes” is a lot like the anti-vaccination crusaders’ desire to ban “toxins” in medicine. Sounds good, adds up to lots of disease in practice.

The Cast of Characters

The cast of characters doesn’t inspire confidence. De León has spent his entire life in community organizing and politics. His legislative history includes standard fare of the California progressive: renewable energy, gun control, city parks, and single payer health insurance. He appears to have had no interest in the Internet before embarking on SB 460. A high profile bill is important now that he’s running against 85-year-old Sen. Feinstein for a seat in the US Senate, however.

Wiener has done even less in the legislature than de León. After jumping from the San Francisco Board of Supervisors (effectively, the city council) to the state Senate, most of his output has been San Francisco-centric: housing, drinking hours, and gay issues. This is his first Internet bill, and before his life in politics he practiced law. He’s quite bright, however, having graduated from Duke and Harvard Law.

Van Schewick is heavily credentialed: she has a policy-track Ph.D. in computer science and a law degree, both from Germany. She wrote a 2012 book on net neutrality, Internet Architecture and Innovation, that’s nearly 600 pages long and she’s had hundreds of meetings on Capitol Hill and at the FCC. She has encouraged international regulators to ban zero-rating, paid prioritization, and paid interconnection.  Unfortunately, van Schewick lacks any real-world experience in either business or network engineering.

The legislature also consulted with former FCC chief technologist Scott Jordan, a UC Irvine computer scientist (who I’ve worked with at BITAG and ITIF). Jordan’s involvement was not nearly as intense as van Schewick’s, unfortunately.

So what we have is a cast of inexperienced lawmakers taking directions from a rather rabid idealist whose ideas often seem to be contradictory and vaguely formed. Even with the best of intentions, the composition of the players doesn’t resemble a recipe for success.

Politics at its Worst

California doesn’t have an Internet problem that cries out for a legislative solution. Its startups are not dying on the vine, it hasn’t run out of venture capital, and its established players such as Apple, Google, Netflix, and Facebook aren’t being strangled by ISPs.

California simply has some motivated politicians seeking to capitalize on the state’s animus toward the FCC, Washington, the Red States, and the Trump Administration with a symbolic act of rebellion.  Net neutrality is a California export, so in some sense it’s fitting for it to come home.

But these bills are unlikely to withstand court challenge and even more unlikely to produce meaningful, positive results. California has perfectly fine Internet service in its urban areas, as we know from its success in taking over the world market for Internet-based services. Its dominant firms own their own networks and are not affected by net neutrality one way or the other.

Consequently, it’s on the brink of passing a symbolic bill that will be struck down by the courts without making any impact on Internet innovation. That defeat will be a weird kind of victory for California’s political left, however, as they will spin it as proof that the federal courts are corrupt.

Let’s get on with the show.