California PUC Scheduled to Vote on Charter/Cox Transaction: Additional Bites at the "Conditions" Apple Shouldn't Be Allowed to Upset the Pro-Consumer Cart

Next Thursday, the California Public Utilities Commission (CPUC) at long last is poised to vote on the transfer of control of Cox Enterprises, Inc. (Cox) to Charter Communications, Inc. (Charter). And with little time to spare. The question is, will extra-legal attempts to saddle this pro-consumer transaction with unjustified conditions "jeopardize the Transfer's public benefits altogether"?

In comments filed with both the CPUC and the FCC, a June 2025 Perspectives from FSF Scholars, and a series of blog posts, Free State Foundation President Randolph May and I consistently have argued that the proposed combination of Charter and Cox is likely to generate clear consumer-benefitting efficiencies and, as a result of the de minimis overlap of their service territories as well as the impact of intense competition from Big Tech, no significant offsetting harms.

As we concluded in our submission to the FCC:

[T]he combination of Charter and Cox promises numerous consumer benefits. These include [(1)] lower costs, greater choice, and additional innovation in traditional cable offerings (broadband and video) fostered by an enhanced ability to compete with often much larger rivals, including Big Tech platforms with global reach; (2) the expansion of Charter's hybrid [mobile virtual network operator] offering into Cox's footprint combined with lower costs through greater scale; and (3) the "onshoring" of Cox customer-service jobs. And given the lack of any meaningful overlap in service territories, not to mention the high level of third-party competition in all three marketplace sectors, there appears to be little, if any, basis for concern that the transaction could result in significant harms.

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Regarding the state of play in California, the last hurdle that the transaction must clear, let's start with (potentially) good news: as I noted in my June 23 post to the FSF Blog, the parties expressed concern in a June 18 notice of ex parte communication that the CPUC's failure to act by August 13 – that is, the very day upon which the vote is scheduled – could result in the expiration of the Department of Justice's Hart-Scott-Rodino (HSR) approval. That "would cost the companies $2.5 million in filing fees and require them to wait at least another 30 days for DOJ clearance."

Should a vote to approve proceed as scheduled, those imminent instances of inefficiency and waste would be averted.

And now, let's turn to the (potentially) bad news: as I described in that same blog post, commenters, certainly aware of that looming deadline, had urged the CPUC to impose still more conditions – that is, on top of those agreed to by the parties in comprehensive settlements (Settlements) with the CPUC's Public Advocates Office and the California Emerging Technology Fund (CETF) and described in a May 18 notice of ex parte communication.

(Without getting too far into the weeds, there are two proposals before the CPUC: (1) the Proposed Decision of Administrative Law Judge Ormond (PD), to which Charter and Cox roundly object, and (2) the Alternative Proposed Decision of Commissioner Matthew Baker (APD), which is based upon the Settlements.)

In reply comments, CETF took issue with the PD, contending that "[b]ottom-line, a settlement agreement requires the assent of its parties" (emphasis in original).

Similarly, in their reply comments regarding the PD, Charter and Cox asserted it "deviates from longstanding Commission precedent, resulting in 'clear legal error and technical inconsistency,' by improperly superseding Settlement terms, and imposing extraneous measures with no record support. It would materially impede Charter's ability to compete and jeopardize the Transfer's public benefits altogether" (citations omitted).

By contrast, Charter and Cox noted approvingly in their reply comments on the APD that it "correctly finds that the Transfer, with the Settlements, serves the public interest, and, 'paired with the mitigations' that Joint Applicants accept (subject to modest revisions), also 'address[es] concerns raised by parties outside the [Settlement A]greement[s]'" (emphasis in original).

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The Settlements to which Charter and Cox – as well as the CPUC's Public Advocates Office – are a party appear to be more than sufficient to address any potential harms resulting from this transaction. The CPUC therefore should reject calls to unilaterally supersede those agreements and instead approve the APD at its meeting next week.

Is California Leveraging the Clock to Extract More Concessions From Charter and Cox?

In a March post to the FSF Blog regarding the merger between Charter Communications, Inc., and Charter Holdings, LLC (collectively, Charter) and Cox Enterprises, Inc. (Cox), I identified the California Public Utilities Commission (CPUC) as "the final, time-sensitive hurdle preventing the formation of a combined company better able to compete in broadband, mobile, and video." In recent days that time-sensitive hurdle has grown substantially.

In a video conference that took place on June 15 described in a June 18 notice of ex parte communication, representatives from Charter reiterated its concerns that the CPUC's timeline for action "would not sufficiently account for unforeseen or unanticipated delays that may occur, and that failure to complete the Transaction review prior to the [Hart-Scott-Rodino Act (HSR)] expiration would jeopardize the Transaction and the consumer benefits it would produce."

Meanwhile, Broadband Breakfast (subscription required) reports that "[s]ome advocacy groups in California want the state to tack on more conditions if it approves Charter's $34.5 billion acquisition of Cox Communications." Any such conditions would be in addition to commitments – including, among other things, a "$275 million investment over three years to upgrade Charter's network to support symmetrical gigabit service across its legacy service areas" – already agreed to in comprehensive settlements with the Public Advocates Office and the California Emerging Technology Fund described in a May 18 notice of ex parte communication.

Coincidence? Who can say.

What we do know is that the parties to this transaction – which has obtained the approval of the FCC, the Department of Justice (DOJ), and every other state within which they operate – repeatedly have warned the CPUC that its failure to sign off on the deal by September 15 at a minimum "would cost the companies $2.5 million in filing fees and require them to wait at least another 30 days for DOJ clearance."

Accordingly, the parties have on numerous occasions urged the CPUC to act "promptly." Most recently, and as described in the June 18 notice of ex parte communication referenced above, Charter explained why CPUC action by August 13, rather than its next meeting scheduled for September 3 (that is, a mere 12 days before HSR clearance expires), is "necessary."

As Free State Foundation President Randolph May and I explained in comments submitted to the FCC, and as every other reviewing body has concluded, the combination of these two companies will benefit competition – and, in turn, consumers.

The time for regulatory arbitrage has run out.

The CPUC should act before the DOJ's HSR clearance runs out, too.

Charter/Cox Transaction, Approved by Federal Regulators, Awaits California OK

On March 19, the New York State Public Service Commission approved – with questionable conditions – the transfer of control of Cox Enterprises, Inc. (Cox) to Charter Communications, Inc. (Charter). Weeks before, the FCC signed off on this pro-consumer transaction with no strings attached. The Department of Justice (DOJ), for its part, cleared the deal in September 2025, thereby triggering a one-year countdown during which the transaction must close lest that approval expire.

The California Public Utilities Commission (CPUC) now stands as the final, time-sensitive hurdle preventing the formation of a combined company better able to compete in broadband, mobile, and video. The parties therefore requested on February 27 that, should the CPUC find it necessary to hold an evidentiary hearing, it do so "promptly" – specifically, at some point next week. However, on March 2, the CPUC announced that it would not hold evidentiary hearings until April 20-24.

In a June 2025 Perspectives from FSF Scholars, FCC comments coauthored with Free State Foundation President Randolph May, and a brief submission to the CPUC, I consistently have argued that this transaction likely would deliver tangible consumer benefits without imposing significant offsetting harms. For example, in those comments filed with the CPUC, I wrote that:

[T]he combination of these two companies promises to provide California consumers of broadband, wireless, and video services with cost savings, expanded choice, and accelerated innovation, particularly in Cox service areas. Moreover, potential concerns regarding transaction-specific harms are obviated by (1) the de minimis overlap between the parties' respective geographic footprints, and (2) the substantial competitive pressures cable operators face from Big Tech, rival distribution technologies, and over-the-top content providers.

In a February 27 order, the Chiefs of the FCC's Wireline Competition Bureau, Office of International Affairs, and Wireless Telecommunications Bureau agreed, concluding that there are "certain public interest benefits [that] are likely to be realized, including promoting competition and consumer benefits for broadband and other services the combined company will provide" – and not "a significant likelihood of any material transaction-related public interest harms."

But as these things go, Charter and Cox also must obtain approvals from the states within which they operate. As noted above, New York recently blessed the transaction – though not without first extracting a figurative pound of flesh in the form of commitments to (1) spend at least $100 million on network upgrades to deliver symmetric Gigabit per second broadband speeds (that is, speeds well above the FCC's definition of "broadband": 100 Megabits per second (Mbps) downstream and 20 Mbps upstream), (2) replace 500+ Wi-Fi access points and provide free Wi-Fi access to non-customers, and (3) "fund digital inclusion and community initiatives."

That leaves California.

At the Morgan Stanley Investors Conference earlier this month, Charter Communications, Inc. CEO Chris Winfrey acknowledged that, "[n]o secret, we're working through California as the big state that remains open." And as a Charter spokesperson was quoted in a recent Broadband Breakfast article, "[w]e are working with California state regulators to complete the transaction review soon so we can bring lower prices, higher wages, and our 100% US-based customer service to more communities across the country."

There is now widespread agreement, at both the federal and state levels, that the combination of Charter and Cox would net substantial consumer benefits. California therefore should conclude its review with all due speed. Specifically, it should do so with a watchful eye toward the September 15 expiration date associated with the DOJ's approval – a deadline that, if missed, "would cost the companies $2.5 million in filing fees and require them to wait at least another 30 days for DOJ clearance."

Tennessee Is State Number Eight to Pass a Privacy Law

On May 11, 2023, Governor Bill Lee signed the Tennessee Information Protection Act ("TIPA"). The Volunteer State is the third to adopt a comprehensive data privacy statute in 2023 (after Indiana and Iowa) and the eighth overall (joining the Golden State's California Consumer Privacy Act and California Privacy Rights Act and similar-yet-unique laws passed in Virginia, Colorado, Connecticut, and Utah).

As I cautioned in a March 2021 Perspectives from FSF Scholars, multiple, inconsistent state laws inevitably will lead to "[c]ounterproductive consumer confusion, along with unreasonably burdensome and unjustifiably costly compliance obligations." At that time, just two states – California and Virginia – had enacted legislation. Today, with that total rapidly approaching double digits, such concerns exponentially are greater.

Consumer rights established by the TIPA include the right to know that a covered entity is processing personal information; to access, correct, delete, and obtain a copy of that data; and to opt out of the sale of personal information. In addition, a covered entity must disclose, upon request, categorical information regarding personal information that was sold, and obtain a consumer's consent before processing "sensitive data."

Covered entities ("controllers") that share personal information with third parties ("processors") must include certain provisions in their contracts to protect these consumer privacy rights. Controllers also must conduct data protection assessments under certain circumstances (for example, if they engage in targeted advertising, process "sensitive data," or sell personal information).

The TIPA does not create a private right of action. The Attorney General is responsible for enforcing its provisions. Covered entities have 60 days to cure an alleged violation.

Perhaps most notably, the TIPA requires that covered entities "create, maintain, and comply with a written privacy program that reasonably conforms to the National Institute of Standards and Technology (NIST) privacy framework entitled 'A Tool for Improving Privacy through Enterprise Risk Management Version 1.0.'"

The TIPA becomes effective on July 1, 2024.

Seven States and Counting: Indiana Passes Privacy Law

Activity at the state level continues to complicate further the overall privacy landscape. On May 1st, Indiana Governor Eric Holcomb signed into law Senate Bill 5 (S.B. 5), the Indiana Consumer Data Privacy Act (ICDPA). Indiana is the second state to pass a comprehensive data privacy law in 2023 (Iowa was the first, as I noted in a recent post to the Free State Foundation blog) and the seventh overall (after California, not once but twice, Virginia, Colorado, Connecticut, Utah, and the aforementioned Iowa).

Meanwhile, Montana and Tennessee could follow quickly: bills in both states have made it to their respective governor's desks.

Uniquely, and apparently to provide an opportunity to learn how similar (but by no means identical) statutes in other states fare, the ICDPA will not go into effect until July 1, 2026. (Currently, only the laws enacted in California and Virginia are in force. The big day in Colorado and Connecticut is July 1st of this year, in Utah it is December 31st, and in Iowa it is January 1, 2025.)

Based largely (though, again, not entirely) on the Virginia Consumer Data Protection Act, the ICDPA creates several consumer rights: to know, to access, to correct, to delete, and to port data, as well as the ability to opt out of its processing/sale.

And it requires businesses, among other things, to provide a privacy notice and other disclosures, to obtain affirmative consent before processing "sensitive personal data," to conduct data protection impact assessments, and to enter binding contracts with third-party data processors to ensure that they, too, respect consumer privacy rights.

The ICDPA will be enforced exclusively by the Indiana attorney general. (It does not establish a private right of action.) In addition, it provides businesses with a 30-day cure period.

At the federal level, the House Committee on Energy & Commerce's Innovation, Data, and Commerce Subcommittee held a hearing on April 27th titled "Addressing America's Data Privacy Shortfalls: How a National Standard Fills Gaps to Protect Americans' Personal Information." It was the sixth Committee hearing on the topic of privacy thus far this legislative session.

In a joint statement, Committee Chair Cathy McMorris Rodgers (R – WA) and Subcommittee Chair Gus Bilirakis (R – FL) wrote that "[t]he Energy and Commerce Committee is building momentum this Congress towards enacting comprehensive national privacy and data security legislation."

Fittingly, in his opening statement, Subcommittee Chair Bilirakis acknowledged that the data privacy picture "only gets more complicated as fifty different states move towards their own data privacy laws, meaning an increasingly complicated and confusing landscape for consumers and for business."

Iowa Is State No. 6 to Pass a Privacy Statute

On March 28, Iowa Governor Kim Reynolds signed Senate File (SF) 262, "an Act relating to consumer data protection, providing civil penalties, and including effective date provisions." Following in the footsteps of California (here and here), Virginia, Colorado, Utah, and Connecticut, Iowa has become the sixth state to pass its own unique take on a comprehensive data privacy law.

With Congress still unable to agree upon the details of a national privacy framework, this most recent addition to the steadily expanding list of inconsistent state statutes further exacerbates compliance headaches for companies and adds to consumer confusion.

Laws in California and Virginia already are in effect. The start date for those in Colorado and Connecticut is July 1, 2023. Utah's statute becomes valid at the end of this year. And Iowa's SF 262 kicks in on January 1, 2025.

In other state-level privacy news, both California and Colorado recently finalized rulemaking proceedings arising from their respective comprehensive data privacy statutes:

• On March 29, the California Office of Administrative Law approved the initial set of rules implementing the California Privacy Rights Act, also known as Proposition 24. Adopted by the California Privacy Protection Agency (CPPA), the first-of-its-kind state agency specifically dedicated to privacy, the rules became effective immediately. By statute, however, California's Office of Attorney General cannot initiate enforcement efforts until July 1. (Once officially processed, those rules, which substantively are unchanged from the drafts voted on by the CPPA in February, will be available here.)
• On March 15, the Colorado Attorney General's Office announced that it had filed with the Colorado Secretary of State's Office final versions of its rules implementing the Colorado Privacy Act. Like the statute itself, those rules will go into effect on July 1.

At the federal level, meanwhile, the American Data Privacy and Protection Act, the first bill of its kind to make it out of congressional committee, remains in limbo. However, there have been two House Commerce Committee hearings on the topic of privacy thus far in 2023.

The first, entitled "Promoting U.S. Innovation and Individual Liberty through a National Standard for Data Privacy," was held by the Innovation, Data, and Commerce Subcommittee on March 1.

The second, a full Committee hearing entitled "TikTok: How Congress Can Safeguard American Data Privacy and Protect Children from Online Harms," took place on March 23.

In a media appearance shortly thereafter, Chair Cathy McMorris Rodgers (R-WA) stated that the testimony of TikTok CEO Shou Chew puts "more urgency on us passing a national data privacy law to protect [America] from the next technological tool or weapon that China may put together'" and that "[w]e need a national data privacy standard … and that's what Ranking Member Pallone and I have worked on and we're going to introduce this Congress because we need to take action."

Ninth Circuit Upholds California LifeLine's $0 Rate Requirement

On January 31, the U.S. Court of Appeals for the Ninth Circuit upheld a 2020 order by the California Public Utility Commission' (CPUC) that required all wireless provider participants in the state's LifeLine Program to offer at least one plan with a $0 co-payment to low-income subscribers. In National Lifeline Association v. Batjer, the Ninth Circuit reversed a lower court had ruled that the CPUC's order conflicted with Section 332(c)(3)(A). That section bars states from regulating rates for wireless services. But the Ninth Circuit concluded that the CPUC's $0 co-payment requirement did not amount to rate regulation; instead, it was a condition for a wireless provider's voluntary participation in the California LifeLine Program.

According to the Ninth Circuit's opinion: 

California is not engaged in rate regulation within the meaning of § 332(c)(3)(A) because service providers may leave and set their own rates if they do not wish to comply with the California LifeLine's subsidy requirements. The 2020 Rule sets requirements for voluntary participation in California LifeLine to advance universal service…

 

[T]he 2020 Rule does not require all California service providers to offer certain services to consumers at specific rates; the rule applies only to those that desire a state subsidy. That some NLA members might lose money providing affordable plans to low-income consumers because they cannot charge a co-pay for certain plans is of no moment under § 332(c)(3)(A): service providers may forgo the state subsidy and set their own rates if they do not wish to comply with the 2020 Rule's eligibility conditions. The rule therefore does not directly control—and thus does not impermissibly regulate—the rates that providers may set. 

My December 13, 2022 Perspectives from FSF Scholars, "The Ninth Circuit Should Uphold Preemption of State Controls on Wireless Services" analyzed the legal issues raised in Batjer. In that Perspectives, I suggested that the court reach a conclusion that is contrary to the one that it ultimately handed down on January 31. But given the voluntary nature of the California Lifeline Program, the court's decision is understandable. Underscoring the limited applicability of its decision, the court designated its opinion as "not for publication," meaning that it will not be a precedent that may be cited as binding authority in future federal court cases. 

 

Notwithstanding the Ninth Circuit's decision in Batjer, Section 332(c)(3)(A)'s express preemption provision remains an indispensable part of federal policy for wireless services. Barring state regulation of wireless rates and entry has fostered a pro-market environment in which investment, innovation, and competition in wireless services continue to thrive and to benefit consumers with a variety of advanced service options, including 5G. 

Privacy Recap: Regulatory Developments in California, Colorado

As the promising-but-flawed American Data Privacy and Protection Act awaits a House floor vote and the revised deadline for comments on the FTC's highly problematic privacy Advance Notice of Proposed Rulemaking looms, state activity continues to fill the federal void.

In California, the only state where a comprehensive data privacy law has gone into effect, enforcement is underway – while, simultaneously, efforts to adopt rules implementing the Golden State's second privacy statute near the finish line. And in Colorado, the rulemaking process relating to its privacy law is just getting started.

In August, California Attorney General Rob Bonta announced a $1.2 million settlement with Sephora, Inc. regarding several alleged violations of the California Consumer Privacy Act (CCPA), which became valid law at the beginning of 2020.

According to the complaint, Sephora "did not tell consumers that it sold their personal information," "did not provide consumers with an easy-to find 'Do Not Sell My Personal Information' link," and did not configure its website "to detect or process any global privacy control signals, such as the 'Global Privacy Control' (GPC)."

As explained in the GPC website FAQs, the GPC "is a proposed specification designed to allow Internet users to notify businesses of their privacy preferences, such as whether or not they want their personal information to be sold or shared. It consists of a setting or extension in the user's browser or mobile device and acts as a mechanism that websites can use to indicate they support the specification."

Under the CCPA, the enabling of a universal opt-out mechanism such as the GPC has the same legal effect as clicking on a "Do Not Sell My Personal Information" link.

While the Sephora settlement is the first of its kind, it is by no means the only enforcement action undertaken by the California Attorney General's office. As noted in the Press Release, "[s]ince July 1, 2020, the Attorney General has issued notices to a wide array of businesses alleging noncompliance with the CCPA. Notices to cure have been issued to major corporations in the tech, healthcare, retail, fitness, data brokerage, and telecom industries, among others."

In addition, and as I detailed in "California Voters Approve the California Privacy Rights Act: A Detailed Analysis of Its Requirements and Impact," a November 2020 Perspectives from FSF Scholars, the Consumer Privacy Rights Act of 2020 (CPRA), which builds upon and modifies the CCPA, created the California Privacy Protection Agency (CPPA), the nation's first (and, at present, only) state agency dedicated to consumer privacy.

Once established, the CPPA assumed privacy-related rulemaking responsibilities from the office of the Attorney General. On May 27, 2022, the CPPA released draft CPRA regulations. Publication of a Notice of Proposed Rulemaking on July 8, 2022, formally started the process. The comment period closed on August 23, 2022.

On October 17, 2022, the CPPA released a modified draft of the CPRA regulations, as well as an explanation of the modified text. The CPPA Board will discuss, and potentially adopt some or all of the proposed rules, at virtual meetings this Friday and Saturday.

Per the CPPA's website, "[t]he proposed regulations (1) update existing CCPA regulations to harmonize them with CPRA amendments to the CCPA; (2) operationalize new rights and concepts introduced by the CPRA to provide clarity and specificity to implement the law; and (3) reorganize and consolidate requirements set forth in the law to make the regulations easier to follow and understand."

Colorado was the third state out of five so far – the others are California, Virginia, Utah, and Connecticut – to adopt a comprehensive data privacy statute. I summarized the major provisions of the Colorado Privacy Act (CPA) in an April 2021 post to the Free State Foundation's blog.

The CPA, which is scheduled to go into effect on July 1, 2023, authorizes the Colorado Attorney General to craft rules generally "for the purpose of carrying out" the CPA as well as a specific rule regarding "the technical specifications for one or more universal opt-out mechanisms that clearly communicate a consumer's affirmative, freely given, and unambiguous choice to opt out of the processing of personal data for purposes of targeted advertising or the sale of personal data."

On October 10, 2022, Colorado Attorney General Phil Weiser's office published a Notice of Proposed Rulemaking (NPRM). Comments are due on or before February 1, 2023 – but earlier deadlines apply if they are to "inform the stakeholder meetings" scheduled for November 10, 15, and 17, or are to be considered at the rulemaking hearing on February 1, 2023.

Specific topics addressed in the NPRM include: the substantive requirements for privacy notices, the scope of the consumer rights established by the CPA and the processes by which those rights are exercised, specifications for universal opt-out mechanisms, the duties of businesses ("controllers") that collect personal information, and the method by which consent is obtained ("including the prohibition against obtaining agreement through the use of Dark Patterns").

The Goal of Broadband Subsidies Should Be to Connect the Unserved, Not Promote Municipal Networks

As the states establish mechanisms for doling out billions of dollars in federal broadband subsidies, time is of the essence. Proposed legislation in California therefore would expedite the regulatory approval process via a 180-day shot clock.

A recent op-ed warns, however, that opposition from advocacy organizations more concerned with promoting municipal broadband than meeting funding deadlines threatens to leave significant amounts of money on the table – and, consequently, a significant number of Californians unnecessarily unserved.

"Welcome to California, Nevada-California Border, U.S. 95" by Flickr user Ken Lund is licensed under CC BY-SA 2.0.

In an August 4, 2022, opinion piece published by the Capitol Weekly, Jonathan Spalter, president and CEO of USTelecom | The Broadband Association, described $2 billion in last-mile subsidies from the Department of Treasury as "present[ing] a once-in-a-generation opportunity to expand the reach of affordable, high-speed broadband services throughout the Golden State."

Notably, however, the Treasury's Final Rule for the $350 billion State and Local Fiscal Recovery Fund (SLFRF) program clearly states that that $2 billion "may only be used for costs incurred within a specific time period, beginning March 3, 2021, with all funds obligated by December 31, 2024 and all funds spent by December 31, 2026."

Accordingly, Assembly Bill (AB) 2749 would require the California Public Utility Commission (CPUC) to "review each application and notify the applicant of its decision on or before 180 days from the date that the completed application was submitted." Should the CPUC fail to act within that timeframe or reach an agreement with the applicant to extend the deadline, after 180 days the "completed application shall be deemed approved."

But as Mr. Spalter wrote:

Unfortunately, some California advocacy organizations are attempting to stall the CPUC's broadband grant review process because they claim that the expeditious distribution of broadband funds disadvantages Government Owned Networks (GONs). These organizations are more concerned with supporting the creation of new GONs than getting the desperately needed, reliable infrastructure to underserved Californians.

Despite a well-documented track record devoid of financial viability, constitutional concerns, and countless other shortcomings, municipally owned-and-operated broadband projects undeniably have their champions. Here, however, it seems clear that those opposed to AB 2749 for reasons relating to the municipal broadband cause are missing the forest for the trees.

SLFRF money not spent by the end of 2026 must be returned, and an Assembly committee analysis reveals that, under normal circumstances, CPUC deliberations can drag on for up to a year and a half. AB 2749's 180-day shot clock would accelerate that decisionmaking process – and thereby decrease the odds that time runs out before federal subsidies can be leveraged to connect unserved Californians. On that basis alone, it warrants the backing of all who claim to support the goal of universal broadband access.

ISPs Drop Case Against California's Net Neutrality Law

On May 4, broadband ISPs challenging California's net neutrality law decided against taking further legal action in ACA Connects v. Bonta. Dismissal of the case followed the Ninth Circuit's denial of the ISPs' petition for rehearing en banc. Free State Foundation scholars supported the legal position of the ISPs that the FCC's 2017 Restoring Internet Freedom Order (RIF Order) preempts California's net neutrality law. And though that case is over in the Ninth Circuit, the Second Circuit may soon reach a different conclusion about the preemptive force of the RIF Order, creating a circuit split ripe for Supreme Court review.

In ACA Connects v. Bonta, a Ninth Circuit panel held that, as a result of the FCC's decision to classify broadband Internet access service as an "information service," the agency did not decline to exercise its authority to regulate broadband; instead, the agency lacked authority to regulate broadband. In other words, Ninth Circuit determined that the Restoring Internet Freedom Order resulted in a withdrawal of FCC jurisdiction over broadband Internet access services. And the court held that because the FCC lacks jurisdiction over broadband, it can't preempt state laws. The full Ninth Circuit declined to review this decision en banc and the ISPs will not ask for Supreme Court review.

 
But the end of the ACA Connects litigation over California's net neutrality law does not definitively resolve the issue about the preemptive effect of the RIF Order. The Ninth Circuit's interpretation of the law is at odds with the June 2021 decision by the U.S. District Court in New York Telecommunications Association v. James. That case involves a legal challenge to New York's broadband price control law. The District Court in James determined that the New York law was preempted by the RIF Order. It recognized that the FCC has some, though limited, regulatory jurisdiction over information services under Title I of the Communications Act and can thus preempt state law on that ground. Free State Foundation Director of Policy Studies Seth Cooper explained and endorsed the District Court's reasoning in a June 2021 Perspectives from FSF Scholars.

The District Court's decision in James is now on appeal and the same preemption issue involving the Restoring Internet Freedom Order is pending before the Second Circuit. A prospective decision by the Second Circuit that recognizes the preemptive force of the RIF Order could create a circuit split with the Ninth Circuit.

Indeed, Free State Foundation President Randolph May believes the ISPs' termination of the ACA Connects litigation may be a strategic decision to prioritize the Second Circuit case. As quoted in the May 6 edition of Communications Daily:

ISPs might "think they have much better odds" in the 2nd Circuit case, emailed Free State Foundation President Randolph May. "The ISPs prevailed in the trial court on their claim that the New York law is preempted by the FCC's deregulatory policy established in the Restoring Internet Freedom Order," and have a good chance to win on appeal, he said. The New York law clearly involves setting rates, which "makes it an even easier preemption case for a court to understand than one" about net neutrality, said May: The possible circuit split would increase the odds of Supreme Court review. The continued litigation "highlights why it would be preferable for Congress finally to adopt a law setting forth an appropriate framework for broadband regulation," he added.

Ninth Circuit Denies En Banc Rehearing on California's Net Neutrality Law

On April 20, the U.S. Court of Appeals of the Ninth Circuit denied a petition for a rehearing en banc of the January 2022 decision by a 3-judge panel in ACA Connects v. Bonta. In that decision, the Ninth Circuit panel upheld California's 2018 law imposing public utility regulation on broadband Internet access services. The petition of broadband Internet service providers who were seeking an en banc rehearing was the subject of my blog post from February 25 of this year. Among other things, petitioning ISPs argued that the panel decision incorrectly interpreted the FCC's Restoring Internet Freedom Order as an act of surrender or abandonment of the agency's statutory authority over broadband that extinguished the agency's conflict preemptive authority.

The U.S. District Court for the Eastern District of New York reached a completely different conclusion on the issue of the preemptive authority of the Commission under the RIF Order. The District Court's decision in New York State Telecommunications Association v. James is analyzed in my June 2021 Perspectives from FSF Scholars, "Court Halts New York Price Controls on Broadband Internet Services: California's Net Neutrality Law Should Suffer Similar Fate." Here's the paper's key paragraph on this point:

As the District Court rightly recognized, "[t]he FCC’s affirmative decision" in its 2018 Restoring Internet Freedom Order to reclassify broadband Internet as a Title I information service "is different from an abdication of jurisdiction writ large." Pursuant to that affirmative determination, the Commission may still impose regulatory obligations on the service under its Title I ancillary jurisdiction. Drawing on D.C. Circuit precedents, the District Court observed that the Communications Act confers on the Commission "various bases of jurisdiction and various tools to protect the public interest," and the agency has discretion in selecting the basis and corresponding regulatory tools to best accomplish that objective. Thus, the court wrote that choosing Title I "does not tender jurisdiction to the states to regulate interstate broadband providers as common carriers." Instead, the Commission "cement[ed] its long-standing policy choice concerning the propriety of imposing common-carrier rate regulations upon broadband internet service." 

The District Court's decision in James is now on appeal to the Second Circuit, as I discuss in a January 2022 Perspectives.

 

Getting back to ACA Connects v. Bonta: The Ninth Circuit's April 20 order likely will be followed by a petition for certiorari to the U.S. Supreme Court. Expect to hear more from Free State Foundation scholars as the case involving California's broadband Internet regulation law continues. 

Rehearing Requested in Ninth Circuit on California's Net Neutrality Law

On February 11, a group of broadband Internet service providers (ISPs) filed a petition with the Ninth Circuit Court of Appeals, requesting a rehearing en banc of the court panel's January 2021 decision in ACA Connects v. Bonta. The panel upheld California's law imposing public utility regulation on broadband Internet service providers operating in that state.  

In their petition for rehearing, the ISPs argue that the panel decision wrongly characterized the D.C. Circuit's decision as holding that the FCC's Restoring Internet Freedom Order "surrendered" or "abandon[ed]" its statutory authority over broadband – and thereby eliminated the order's conflict preemptive power. As the petition points out, the D.C. Circuit expressly stated in Mozilla that the Commission "can invoke conflict preemption" when "a practice actually undermines" the order.

 

Additionally, the ISPs' argue that the panel decision's conclusion that California's law merely regulates intrastate communications that touch on interstate communications is in conflict with circuit court precedents. According to the ISPs, the Ninth Circuit as well as other circuits have recognized that Internet access is jurisdictionally interstate and that a state's authority over intrastate communications does not encompass regulation of facilities providing both intrastate and interstate service in conflict with federal law. 

 

In a press release on January 28 of this year, Free State Foundation President Randolph May responded to the news of the Ninth Circuit panel's decision in Bonta. For a legal critique of California's law imposing public utility regulation on Internet access services, see Prof. Daniel Lyons' Perspectives from FSF Scholars paper, "Day of Reckoning Approaches for California Net Neutrality Law." 

Newsom Vetoes Small Cell Bill, Fumbles His Explanation

California Governor Gavin Newsom made confusing remarks while explaining his Monday veto of SB 556, a bill for streamlining small cell deployment in California. Newsom claimed, in one breath, that SB 556 would have severely limited local government authority, but said in another it contradicted federal law – presumably the FCC’s Small Cell Order.

Newsom's remarks made little sense because SB 556 mirrors current federal policy. The FCC's Small Cell Order prevents intentional, costly delays to broadband deployment that prolong the digital divide while also preserving local authority for aesthetic and safety reviews. It bans local authorities from charging discriminatory siting fees and siting fees above objective reasonable costs, and it implements shot clocks for small cell collocation and siting on new structures.

My description of SB 556 sounds quite similar. It bans local authorities from charging discriminatory and unreasonable siting fees above a reasonable estimate of actual cost, and implements shot clocks for small cell siting. The only difference between the Small Cell Order and SB 556 is that the Order places a 60-day shot clock on small cell collocation and 90-day shot clock for siting on new structures, while SB 556 has a 45-day shot clock for both, unless there are more than 300 poles involved, at which point the shot clock extends to 60 days.

But this faster timeline in SB 556 does not conflict with federal law, as Newsom suggests. The FCC derives its authority to implement shot clocks from 47 U.S.C. § 332 (c)(7). Section 332(c)(7)(A) expressly preserves local authority for siting decisions, subject to limitations found in the next section. One of these limitations, found in Section 332(c)(7)(B)(ii), is the requirement that local governments act on wireless siting applications "within a reasonable period of time after the request is duly filed with such government or instrumentality, taking into account the nature and scope of such request."

The Small Cell Order establishes that shot clocks of 60 days for collocation and 90 days for new structure siting are presumptively reasonable for meeting the "within a reasonable period of time" requirement in Section 332(c)(7)(B)(ii). Given that the purpose of shot clocks is preventing delay, state laws with faster shot clocks are presumptively reasonable too. Indeed, nothing in the Small Cell Order prohibits states from requiring cell siting permit decisions faster than the FCC's shot clocks. How could timelier decisions by local governments regarding cell siting pose a conflict with federal policy favoring timelier decisions?

Which brings us back to Governor Newsom's confusing remarks. I've established that SB 556 comports, not conflicts, with federal law. Newsom's other stated reason for vetoing SB 556 is that it's too restrictive on local authority. We can infer, then, that Newsom also thinks the Small Cell Order is too restrictive on local authority since it is barely different from SB 556.

Maybe his remarks aren't so confusing after all. Newsom could be hoping that a future FCC might repeal the Small Cell Order, and without SB 556 in place, California localities could once again use dilatory tactics and punitive fees to prevent or slow broadband deployment. Commissioner Carr wrote in the Bay Area outlet Mercury News about how San Jose's government did just this.

Local government policies that slow or stop broadband deployment are a serious contributor to the digital divide. The Small Cell Order discusses this phenomenon. Highly populated municipalities have an incentive to charge above-cost fees for siting and right-of-way access because broadband providers make the most money from densely populated areas. Absent regulation preventing these fees, incumbent broadband providers will likely pay them because they need to access the densest swaths of customers. But such excessive fees are a deterrent to new entrants. And in all cases, the fees drain broadband providers' funds for capital investment, slowing next generation broadband rollouts in smaller metros and especially rural areas, which are tougher to serve due to lower density. Meanwhile, smaller metros and rural areas don't have the incentive to charge high fees because they need more broadband. When fees are set to cover reasonable costs and no more, providers have more money to deploy better broadband to everyone at a faster pace.

Deployment delays also cause other economic harms. Boston Consulting Group's February 2021 report estimates that 5G infrastructure buildout will directly contribute $400-500 billion to U.S. GDP and create up to 1 million jobs over the coming decade. But it also estimates nationwide losses of $25 billion in potential benefits for every 6-month stall in 5G deployment. SB 556 would have usefully complemented the Small Cell Order, helping to ensure our country enjoys the full economic benefits of 5G.

Government Newsom's veto of SB 556 is disappointing, especially given that 32 other states have passed similar measures in bipartisan efforts, Pennsylvania being the most recent. This is now the second time a California governor has vetoed sound small cell legislation: former Governor Jerry Brown also vetoed a bill supported by Free State Foundation scholars. Hopefully the third time will be the charm.

California's Net Neutrality Law Threatens Veterans' Telehealth

On March 30, Free State Foundation President Randolph May and I published an op-ed in Real Clear Markets that calls attention to how  the VA Video Connect App is jeopardized by California's bad "net neutrality" regulation. The state's law flatly bans all "sponsored data" and "free data" plans that include specific websites or apps rather than to entire "categories." As we discuss in our op-ed, California's law jeopardizes the VA's app for providing telehealth to low income and rural veterans free of data usage charges. For more on the unwise and anti-consumer effects of California's law, be sure to check out our op-ed -- which has been republished at Multichannel News. 

FSF's May & Cooper in @rc_markets: "CA's Net Neutrality Law Threatens Veterans' Telehealth"- "Net neutrality may sound superficially appealing...in reality they often harm consumers. In this instance, those harmed may include our veterans." @BrendanCarrFCC https://t.co/pHdK2SiRgn pic.twitter.com/ss5ZI8wARq

— Free State Foundation (@FSFthinktank) March 30, 2021

The borderless Internet + a Bad CA State Law = Harm to AT&T Consumers Nationwide

Earlier this week, in a Perspectives from FSF Scholars addressing the flurry of legislative activity on data privacy at the state level, I once again made the case for a preemptive federal law. One of the arguments I put forth was based on the fact that, "[b]y design, Internet traffic recognizes no political boundaries, national or international."

Yesterday's news that AT&T, in light of California's so-called "net neutrality" law (SB 822), no longer will "zero rate" access to HBO Max and its other streaming video services for all U.S. customers underscores this point in an unfortunate and anti-consumer fashion.

California hasn't just adopted SB 822, it also was the first state to pass comprehensive data privacy legislation, the California Consumer Privacy Act (CCPA). As I explained in "Inconsistent State Data Privacy Laws Increase Confusion and Costs," when the CCPA went into effect at the beginning of 2020, many businesses – 60 percent, according to one survey – made the rational decision "to comply with its provisions nationally rather than take on the risk associated with attempts to identify which of their customers are and are not California residents."

AT&T is taking a similar approach with respect to the data used by its customers to access its video streaming services, including HBO Max and AT&T TV.

Prior to the recent decision by a federal district court denying plaintiffs' request to stay the effectiveness of SB 822, AT&T did not count access to its video apps toward the data caps that apply to some of its service packages. This feature, which AT&T markets as "Data Free TV," clearly is pro-consumer.

SB 822, however, prohibits fixed and mobile broadband providers from (1) "[e]ngaging in zero-rating in exchange for consideration, monetary or otherwise, from a third party" and (2) "[z]ero-rating some Internet content, applications, services, or devices in a category of Internet content, applications, services, or devices, but not the entire category."

According to a press report, on Wednesday AT&T communicated to its customers that, because "the Internet does not recognize state borders," its new policy will apply nationwide. AT&T stated further that "[a] state-by-state approach to 'net neutrality' is unworkable" and "[a] patchwork of state regulations, many of them overly restrictive, creates roadblocks to creative and pro-consumer solutions."

Free State Foundation Director of Policy Studies and Senior Fellow Seth L. Cooper posted yesterday to highlight tweets that he and FSF President Randolph J. May authored regarding the consumer harm that will result from SB 822's zero-rating ban. Mr. May also co-wrote a Perspectives from FSF Scholars criticizing SB 822 shortly after it was passed by the California state legislature in 2018, making the point that:

Zero-rated services, or "free data plans," are popular, consumer-friendly offerings that allow consumers to have unlimited access to specific websites or applications without such access counting towards monthly data caps or thresholds. Consumers, and particularly low-income consumers, benefit from accessing "free data" without paying a monetary fee.

District Court Allows California's Net Neutrality Law to Go Forward

It has been reported in many outlets that the U.S. District Court for the Northern District of California has denied a motion to enjoin enforcement of California law mandating public utility regulation of broadband Internet services. Apparently, this will allow California's law – which goes beyond the FCC's now-repealed Title II restrictions – to go into effect. However, this is not likely the end of the litigation. Professor Daniel Lyons, a Member of the Free State Foundation's Board of Academic Advisors, made the case for why CA SB-822 is most likely preempted in his Perspectives from FSF Scholars paper, "Day of Reckoning Approaches for California Net Neutrality Law." 

Also, FSF President Randolph May and I appealed to a broader set of principles to make the case for why preemption of SB-822 is consistent with a constitutionalist outlook in our Federalist Society Review paper, "John Marshall's Jurisprudence Supports Preemption of California's Net Neutrality Law." And for more on these subjects, consult our book, A Reader on Net Neutrality and Restoring Internet Freedom. 

Leaving aside for now any future changes in federal broadband policy by the FCC, FSF scholars repeatedly have made the point that state-level regulation of broadband Internet access services is a bad idea. Broadband networks are interstate services. State and local restrictions effectively seek to regulate services that transcend state borders and run risk of conflicting with each other. And public utility regulation of broadband Internet services is harmful and justifiable. Policy for broadband Internet services should be set at the federal level, not the state or local level. 

Proposed Revisions to California's Privacy Law Create Additional Unwanted Uncertainty, Underline Need for Federal Legislation

The online privacy saga continues. The latest chapter: yet another round of proposed changes to the rules implementing the California Consumer Privacy Act (CCPA), an unprecedented and overreaching set of restrictions effectively imposed throughout the country by a single state.

Internet traffic is interstate. Rarely is it confined within the boundaries of any single state, even one that happens to be the largest by population, the fifth biggest economy in the world, and the home of many major online companies. Congress therefore is the appropriate legislative body to craft the privacy rules of the road for virtual interactions between consumers and businesses.

In the absence of federal action, however, California's privacy law as a practical matter has filled the void, as many companies find it easier and more cost-effective to comply with the CCPA nationwide than to try to implement processes to identify who is covered and who is not. Of equal concern, efforts to implement the CCPA have led to uncertainty and confusion. As a result, compliance has been rendered unnecessarily and unreasonably more difficult and expensive.

As I have explained in a series of posts to the Free State Foundation blog and in a number of Perspectives from FSF Scholars, federal Internet privacy rules ideally should include the following:

• Consistent treatment of all rivals irrespective of outdated regulatory classifications
• A national approach that preempts state laws
• Exclusive enforcement by a single agency (that is, the FTC) and state attorneys general (in other words, no private right of action)
• A flexible, case-by-case approach to alleged violations rather than overly proscriptive ex ante rules
• An "opt-out" model with respect to non-sensitive personal information
• An acknowledgement that consumers do value ad-supported goods and services

Bipartisan efforts in Congress, in particular the Senate, have managed to find common ground on a number of these issues. Two, however, at present serve as insurmountable hurdles.

The first is state preemption. As I note above and addressed in detail in "California's Heavy-Handed Approach to Protecting Consumer Privacy: Exhibit A in the Case for Federal Preemption," an October 2019 Perspectives from FSF Scholars, a "patchwork" of state and local privacy laws is incompatible with the inherently interstate nature of the Internet.

Consumers expect a common set of rules to apply no matter where they, or the online businesses with which they transact, may be located. Similarly, it would be unreasonable to require online businesses to comply with different requirements based upon (potentially inconsistent) geographic criteria: a customer's real-time location, state of residence, Internet Protocol address, or some other consideration. Technical and administrative efforts to make such identifications would be an unjustified waste of substantial resources.

The second is a private right of action. Without question, as a general matter enforcement mechanisms serve an important purpose. They provide the teeth that motivate compliant behavior, prevent violators from profiting from their misdeeds, generate clarifying case law, and compensate those who have been harmed.

Particularly in the privacy context, however, a private right of action is ill-suited to the achievement of these goals. Individual privacy-related injuries often go undetected. When they do draw attention, the identity of the perpetrator may not be known. Actual damages, necessary for a case to proceed, can be difficult to calculate. And statutory damages often lead to the unintended and undesirable result where plaintiffs' attorneys recoup legal fees but their clients receive little, especially in the case of class actions.

Nevertheless, the fact remains that members of Congress at present are unable to achieve consensus on either of these issues. The passage of federal privacy legislation therefore appears unlikely at this time. In the meantime, online businesses are subject to the CCPA and its evolving implementing rules.

Drafted in only "a matter of days" and signed into law on June 28, 2018, the CCPA:

• Created new consumer privacy rights (the right to know what data businesses collect, the right to require businesses to delete data, the right to opt-out of the sale of information, and the right to non-discrimination for exercising these rights)
• Imposed substantial compliance obligations, including detailed notice and record-keeping requirements, upon businesses
• Authorized the California Attorney General to impose civil penalties for violations
• Established a private right of action qualified by a right to cure.

The CCPA also delegated to the California Attorney General's office responsibility for promulgating rules defining its precise scope. The devil is in the details, as they say, and until final rules were in place, businesses unavoidably lacked confidence in the adequacy of their compliance efforts. Unfortunately, Attorney General Xavier Becerra did not release initial draft rules until October 11, 2019, less than three months before the CCPA became effective on January 1, 2020.

Worse, the rulemaking process dragged on for months, beyond both the start of the new year, at which point businesses became subject to the provisions of the CCPA, and July 1, when enforcement of the statute itself began. After a great deal of administrative drama, the Office of Administrative Law (OAL) on an expedited basis approved final regulations on August 14. The rules became effective immediately.

Less than two months later, on October 12, AG Becerra proposed a third set of edits to those rules. As a result, businesses once again are faced with an uncertain future.

One such change relates to "do not sell my personal information" requests: businesses would be required to "provide notice by an offline method that facilitates consumers' awareness of their right to opt out." By way of example, notice could be given verbally during an interaction via phone or, if at a physical location, on paper forms used to collect personal information.

Another update would require that the methods by which businesses accept opt-out requests "be easy for consumers to execute and shall require minimal steps to allow the consumer to opt out. A business shall not use a method that is designed with the purpose or has the substantial effect of subverting or impairing a consumer's choice to opt out."

Comments on these proposed changes are due on or before October 28.

While perhaps relatively minor, the fact remains that these contemplated revisions would require businesses to expend additional resources to update their compliance programs.

The ink is not yet dry on the long-awaited "final" rules. The full extent of the COVID-19 pandemic's economic impact is unknowable. And the presence of the California Privacy Rights Act of 2020 (aka the CCPA version 2.0) on the November ballot threatens still more change and uncertainty.

Now is a particularly inopportune moment to impose additional burdens. But on the bright side, this most recent development out of California might serve as motivation for Congress to pass a federal privacy law.