SB 822: California’s Net Neutrality Protection Law

On May 30, 2018, the California State Senate voted to pass a bill that will ensure net neutrality on the internet in the State of California.  With the FCC’s repealing of Obama-era net neutrality rules going into effect on June 11, 2018, California’s bill will provide for continued net neutrality protection.  Officially known as Senate Bill 822, the senate passed SB 822 by a vote of 23-12.  The bill will next go to the State Assembly to be voted on by the end of August.  If the bill passes the Assembly, it must finally be signed by Governor Jerry Brown in order to become law.

If made into law, the bill will prohibit Internet Service Providers (ISPs) from manipulating internet traffic.  Net neutrality rules ensure that ISPs cannot slow down or block access to certain websites, or give some websites and content quicker access speeds than others.  Preventing willful alteration by ISPs of internet connections between devices and sources of content is the key focus of net neutrality rules.  SB 822 will also allow the state to supervise commercial interconnection deals between corporate customers and ISPs to ensure that corporate customers are not taken advantage of by ISPs’ dominant market power.  Interconnection arrangements typically occur between content providers such as YouTube and Netflix, and ISPs such as Spectrum or AT&T.

The net neutrality rules would also ban third-party paid prioritization, as well as application-specific differential pricing.  Paid prioritization occurs when content providers pay ISPs a fee in order to ensure that users have higher access speeds to their websites than competitors’ websites.  ISPs claim that preventing this business model may cause an increase in the price that consumers pay for internet service.  Differential pricing is when goods or services are offered at different price points to different consumers.  For example, a company such as Microsoft may charge a higher fee to corporate customers for Microsoft Office software than to a personal user who purchases the software for use at home.  Differential pricing comes into play in the net neutrality laws with regards to user access to applications, content, and platforms (ACP).

ISPs have previously been able to deem certain applications, content, and platforms as having a “zero rating.”  This means that when users visit these sites or use these applications, any data used does not count toward the user’s established data cap.  Because of this data policy, users may be more likely to visit zero rating ACPs, to the detriment of other ACPs that do count toward the established data cap.  Because zero rating sites have no effect on a user’s data cap, users are implicitly encouraged to visit those sites instead of others.  This leads to a decrease in demand for ACPs without a zero rating.  Such favoritism of certain applications, content, and platforms by ISPs is what California’s net neutrality law will prohibit.

Supporters of the bill include Tom Wheeler, former Chairman of the FCC under President Obama, as well as numerous start-ups, public interest groups, and Los Angeles Mayor Eric Garcetti.  Over 24 states are currently considering legislation to re-enact the FCC’s net neutrality rules, and two states (Oregon and Washington) have already enacted such measures.  For an analysis of the bill’s measures, click here.

SB 822 will allow consumers to file suit under the Consumer Legal Remedies Act to ensure their right to an open internet.  The bill also empowers California’s Attorney General to enforce the net neutrality rules and to bring suit against ISPs in violation.

At our law firm, we assist clients with legal issues related to internet, technology, business, and cybersecurity.  Please contact us to set up an initial consultation.