State-Level Rate Regulation of Broadband Faces Reckoning with Title II Preemption

On June 17, the U.S. Court of Appeals for the Second Circuit issued its mandate reversing and vacating the District Court decision that enjoined enforcement of New York's Affordable Broadband Act, a state law regulating the rates of broadband Internet access services. The New York law at issue requires broadband providers offering Internet access services in the state to make available plans that are subject to rate ceilings. Apparently, as many as one-third of New York households would qualify for such rate regulated plans. The law was challenged under the FCC's 2017 Restoring Internet Freedom Order.

In a May 10 Perspectives from FSF Scholars titled "Second Circuit Preemption Decision Won’t Save New York Broadband Rate Regulation Scheme," Law Professor Daniel Lyons – a member of the Free State Foundation’s Board of Academic Advisors – analyzed Second Circuit’s decision in NYSTA v. James. Prof. Lyons critiqued the court's narrow understanding of conflict preemption, while recognizing the court's acknowledgment that the decision would be short-lived because of a change in law. Just a day before the Second Circuit’s decision, the FCC's 2024 Safeguarding and Securing Order reclassified broadband Internet access service from a Title I "information service" to a Title II "telecommunications service." Prof. Lyons explained that the Commission's decision to forbear from ex ante and ex postrate regulation in its new Title II order preempts similar rate regulation at the state level. 

By a June 14 letter to the Second Circuit the broadband providers challenging the New York Affordable Broadband Act declined to seek a rehearing en banc. They similarly declined to file a motion to reconsider the court's decision based on the change in law from Title I to Title II. In his Perspectives, Prof. Lyons wrote that if a motion to reconsider proves unavailing that broadband providers "should seek relief from the Commission and hold it to its promise that it 'will not hesitate to exercise…authority' to preempt state laws that 'interfere or are incompatible with the federal regulatory framework' established under the order."

Will there soon be a petition filed at the FCC seeking a declaratory order preempting state-level rate regulation of broadband Internet access services under Title II? Whether it's the Commission or a future court decision, one should expect that the state-level rate regulation of broadband services will face a reckoning under the new Title II order. Stay tuned. 

For further background on the case and the likely bad effects of the FCC's new Title II order, see the summary of the Second Circuit's decision in NYTSA v. James in my May 3 Perspectives from FSF Scholars, "Second Circuit Rejects Preemption Challenge to New York's Broadband Rate Regulation" as well as my May 24 Perspectives, "The FCC's New Title II Order Allows Harmful Rate Regulation."