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Summary

On August 31, 2018, the Californian Senate passed the strictest net-neutrality law in the US, which bans internet service providers (ISPs) from blocking and throttling internet content, and prioritizing some sites or services over others. The law effectively restores the national net-neutrality law that was revoked by the current administration in 2017. It also goes further by banning zero-rated services except in a limited number of circumstances. The legislation still requires sign-off by the governor in late September but, should it pass this step, it will become law.

Californian Senate set to ban ISPs from blocking internet content and prioritizing certain internet traffic

The Californian net-neutrality legislation passed by the Senate on August 31, 2018 is stricter than the existing federal rules in the US. The bill was introduced after the Federal Communication Commission (FCC) overturned in 2017 much of the national net-neutrality legislation passed under the previous administration. The net-neutrality debate in the US and the various rulings associated with it have taken many twists and turns and, as with most major telecoms regulatory issues, it has become part of a political battle. The FCC now prefers to rely on existing consumer protection law. However, the decision is being appealed in court by attorney generals from several US states, as well as consumer groups. In the meantime, the Californian state has chosen to pass its own law on the matter.

The new law, which applies to fixed and mobile connections, prohibits the blocking of websites and the speeding up or slowing down of services or applications. Providers are prohibited from evading these protections at the point where data enters their networks, and are forbidden from charging access fees. The law bans paid prioritization of some sites or services over others and prohibits providers from offering zero-rated data for their own content. Essentially, the bill would restore the net-neutrality rules created under the former administration. However, this bill in fact goes further than those rules by banning zero-rating apart from in instances where the free data applies to an entire category of apps (such as video streaming apps) and not just a single application. While zero-rating is, in theory, a form of discrimination, in the EU, zero-rating does not breach net-neutrality rules unless non-zero-rated services are blocked once a customer's data allowance is exhausted, leaving them to access only zero-rated services. Otherwise, all other types of zero-rating offers are currently being assessed on a case-by-case basis. Ovum believes that such an approach would be the best for regulators to adopt, rather than banning zero-rating outright, because the practice can bring about benefits to both customers and telcos.

This is the second attempt by Californian lawmakers to pass a net-neutrality bill, following the failure of a previous version. The bill now only requires sign-off from the governor before it becomes law. So far, the governor has not indicated whether he intends to sign off on the rules, but he has until the end of September 2018 to decide. Even if it is adopted into law, it is likely to face numerous legal challenges. On repealing the national net-neutrality law, the FCC also introduced a rule prohibiting states from creating their own net-neutrality laws. However, that rule has so far not been upheld in court. If adopted, the Californian net-neutrality bill would be a major test for the FCC's prohibition, and it remains to be seen whether the FCC actually has the authority to prohibit the Californian bill. It is likely that more states will follow if California's bill is signed into law, and they will use it as a template for introducing their own net-neutrality legislation; several have already taken steps on net neutrality, attempting to introduce executive orders or laws that circumvent the FCC's prohibition.

As traffic management techniques by ISPs have spread, net neutrality continues to appear on regulators' agendas around the world and has become a hotly debated topic. Regulators are beginning to place greater importance on transparency within net-neutrality regulation to ensure customers understand the terms of the services they receive, what happens to their internet service when they reach certain usage limits, and that they can decide whether to switch provider. This should really be where the focus lies in future.

Appendix

Further reading

The Experience in Europe of Implementing Net-Neutrality Rules, TE0007-001150 (June 2017)

"US net-neutrality policy was years in the making, and will continue being modified for many more," GLB005-000021 (January 2018)

"The appointment of the new FCC chair could mean an early end of net neutrality," TE0007-001125 (January 2017)

Author

Sarah McBride, Analyst, Regulation

sarah.mcbride@ovum.com

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