The Peculiar Case of State Network Neutrality Regulation

Abstract

In the wake of the FCC’s 2018 decision to rescind federal network neutrality rules, several states have implemented their own network neutrality regulations, some in the form of procurement conditions on state contracts and others affirmative mandates requiring broadband Internet service providers to observe neutrality in providing service. The federal government and industry trade associations have challenged the state network neutrality laws as both preempted and unconstitutional under the “dormant Commerce Clause” doctrine.

This paper analyzes those state restrictions, as a matter of constitutional law. The Court has recently changed dormant Commerce Clause law, liberalizing those limits with regard to the Internet last year in South Dakota v. Wayfair and showing more deference to state regulation of the Internet. But state network neutrality rules present an altogether different problem than typically arises in dormant Commerce Clause cases, requiring a new approach. Much state network neutrality regulation (especially regulation of Internet traffic exchange) is problematic under traditional dormant Commerce Clause and due process analysis because it explicitly reaches outside of local states. But more fundamentally, the entire economic theory underlying network neutrality regulation makes network neutrality especially problematic under dormant Commerce Clause law. Although states are likely free to regulate many aspects of the Internet – especially after Wayfair – the peculiar nature of network neutrality regulation makes it singularly poorly suited for state regulation.

Keywords: network neutrality, dormant commerce clause, procurement, communications, internet

JEL Classification: K23