The Consequences of California’s Proposed Internet Regulations

In 2018, California passed The California Internet Consumer Protection and Net Neutrality Act (CICPNNA), the most draconian net neutrality bill in the country. After continuing lawsuits, Judge John Mendez of the U.S. District Court for Eastern California allowed it to be implemented. Unfortunately for consumers, the passage and judicial approval of the bill means they will lose out on significant welfare that light-touch regulation offers.

Under the 2015 Open Internet Order (OIO), telecommunication companies were classified as common carriers, allowing the federal government to set rates, mandate service in unprofitable areas, and penalize providers for alleged anti-competitive practices. However, OIO was later repealed by the Republican-controlled FCC after it voted to pass the Restoring Internet Freedom Order.

The CICPNNA imposes many similar provisions OIO and prevents ISPs from zero-rating or sponsored data packages that provide internet access to specific applications or content without using limited data.

California’s net neutrality bill will lead to multiple negative consequences for consumers.

Despite the altruistic intentions of net neutrality, who claim more needs to be done to ensure a fairer internet, critics have correctly stated the bill will damage innovation, disincentivize investment, and deny consumers access to services they could previously access for no cost.

Following the federal adoption of the OIO in 2015, research revealed a substantial decrease in network investment. Statistics from U.S. Telecom show investment in broadband infrastructure decreased by $3 billion during the Obama era of net neutrality rules. Speeds only rebounded after regulations were changed in 2017. For consumers in California, the net neutrality rules would likely mean depressed investment and poorer service.

The decline in network investments also left consumers facing reduced speeds. For example, the FCC introduced net neutrality rules, and consumers saw their average internet speeds drop to around 77 Mbps. Following the repeal of OIO in 2017, internet speeds increased significantly to 120 Mbps. If CICPNNA caused a similar drop in speeds, Californians would likely struggle to receive virtual health care, stream their favorite TV shows or movies, or enjoy other benefits that fast internet speeds enable.

In addition, the bill prohibits zero-ratings and sponsored data packages, which provide internet access to certain applications or content without using limited data. With these packages, wireless customers can use AT&T services like DirecTV and AT&T TV without incurring any extra charges. The ban on zero-rating and sponsored data packages will ultimately mean consumers are forced to pay extra for previously free services.

The consequences of CICPNNA are already noticeable. For example, AT&T ended its sponsored data program for consumers across the United States. In a statement announcing the end of sponsored data programs, AT&T argued that because “the internet does not recognize state borders,” CICPNNA “limits our ability to… our customers in states beyond California.” AT&T terminating its sponsored data program shows how the bill’s effects will spread beyond California, while other ISPs might follow suit. 

Additionally, two unnamed internet providers have warned the Department of Veterans Affairs that California’s law might force them to end their zero-rating agreements. Prior to CICPNNA, AT&T, T-Mobile, and Verizon offered, through zero-rating agreements, the ability for veterans to receive virtual healthcare without using up any data. However, shortly after implementing the bill, providers warned the Department of Veterans affairs that this service could no longer be offered. As a result of this bill, veterans, particularly those who live in rural communities, will find it significantly harder to access healthcare.

The ramifications of California’s new net neutrality laws hardly stay within the state’s borders. Under the new rules, consumers across the country face the prospect of poorer service and lost access to sponsored data packages. Specifically, Americans will have a more challenging time utilizing data bundles to access services such as browsing, streaming, and using applications without exceeding their monthly data allotment, with California being the most vulnerable. Despite the promised benefits, these laws do not help consumers and do not promote market competition or innovation.

Pauline Kabambi is a Policy Intern at the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.org or follow us on Twitter @ConsumerPal

FacebooktwitterredditlinkedinFacebooktwitterredditlinkedin