Ajit Pai helped Charter kill consumer-protection rules in Minnesota

A court ruling that limits state regulation of cable company offerings was praised by Federal Communications Commission Chairman Ajit Pai, who says the ruling supports his contention that the FCC can preempt state-level net neutrality rules.

The new court ruling found that Minnesota's state government cannot regulate VoIP phone services offered by Charter and other cable companies because VoIP is an "information service" under federal law. Pai argues that the case is consistent with the FCC's attempt to preempt state-level net neutrality rules, in which the commission reclassified broadband as a Title I information service instead of a Title II telecommunications service.

The ruling was issued Friday by the US Court of Appeals for the 8th Circuit, following a lawsuit filed by Charter Communications against the Minnesota Public Utilities Commission (MPUC). A three-judge panel ruled against Minnesota in a 2-1 vote—the FCC had filed a brief supporting Charter's position in the case.

"[F]ederal law for decades has recognized that states may not regulate information services," Pai said in response to the ruling. "The 8th Circuit's decision is important for reaffirming that well-established principle: '[A]ny state regulation of an information service conflicts with the federal policy of non-regulation' and is therefore preempted."

Pai said the ruling "is wholly consistent with the approach the FCC has taken under Democratic and Republican Administrations over the last two decades, including in last year's Restoring Internet Freedom order," which repealed net neutrality rules and reclassified broadband. While California and other states are imposing net neutrality rules, the FCC says the reclassification should preempt any such attempts at regulating broadband at the state level.

Despite Pai's contention, a lawyer involved in the net neutrality case against the FCC told Ars that the 8th Circuit ruling "has no bearing" on the net neutrality case.

Preemption questions

Arguing that VoIP is a telecommunications service, the MPUC tried to force Charter to collect fees from customers in order to contribute to state programs that help poor people and people who are deaf, deafblind, or hard of hearing access telephone service. State officials also said that VoIP customers should be able to appeal to the MPUC in the event of disputes with Charter.

The FCC has never settled the regulatory status of VoIP, making it unclear whether VoIP is a telecommunications service or an information service. The MPUC asserted that VoIP is a telecommunications service as defined by federal law, but 8th Circuit judges agreed with a district court ruling that VoIP is more accurately defined as an information service.

Telecommunications, as defined by Congress in the Communications Act, transmits information of the user's choosing to and from endpoints specified by the user without making any changes to the user's information. An information service, by contrast, is defined in the Communications Act as "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications."

Eighth Circuit judges concluded that Charter's VoIP technology is an information service because it "transforms" information by converting voice calls from one format to another. Specifically, Charter "transforms voice calls from analog electrical signals into IP 'packets,' which are then carried on Charter's network."

"How a service is classified affects a state's ability to regulate the service. Telecommunications services are generally subject to 'dual state and federal regulation,'" the 8th Circuit decision said, citing previous cases. "By contrast, 'any state regulation of an information service conflicts with the federal policy of non-regulation,' so that such regulation is preempted by federal law."

Effect on net neutrality case?

The ruling won't necessarily have an impact on the net neutrality case, in which Pai is defending the repeal and preemption of state laws against dozens of litigants including more than 20 state attorneys general.

The net neutrality case is being handled by the US Court of Appeals for the District of Columbia Circuit, so it will be decided by different judges. The details are also different in the net neutrality case, said attorney Andrew Schwartzman, who represents the Benton Foundation in the case against the FCC.

In the net neutrality case, "the Pai FCC definitively said that it has no jurisdiction under either Title I or Title II [of the Communications Act] to regulate broadband Internet access service," Schwartzman told Ars. "As the governmental parties explained at pp. 39-56 their brief, when an agency lacks authority to regulate, it also lacks authority to preempt."

The VoIP case also differs from the net neutrality case in that there was "no FCC decision at issue" because "the FCC has repeatedly refused to decide what regulatory classification... should be applied to VoIP," Schwartzman said. "Thus, it was left to the court to consider the question in a case between the state and Charter."

There is an FCC decision for net neutrality supporters to dispute in the DC Circuit case. State attorneys general argue that the FCC decision was arbitrary and capricious and that state regulation of information services isn't automatically preempted by federal law.

While Congress prevents the FCC from imposing strict regulations on information services, "a 'clear and manifest purpose' to preempt the States' sovereign powers cannot be inferred from a congressional decision to strip a federal agency of jurisdiction," attorneys general argued.

The attorneys general also argued:

No other provision of the 1996 [Telecommunications] Act clearly expresses Congress's intent to preempt state regulation of information services. For example, while the 1996 Act expressly authorizes preemption with respect to certain types of state regulation of telecommunications services... the Act includes no similar provision regarding information services. To the contrary, Congress expressly preserved state regulation of all communications services through consumer protection, tort, or other state law remedies, and warned against implied preemption.

Additionally, Mozilla and other organizations fighting the FCC repeal argue that the FCC's deregulation order "fundamentally mischaracterizes how Internet access works" due to "semantic contortions or simply an inherent lack of understanding" and that the FCC ignored the public record when making its decision.

The net neutrality case is still in the briefing stage and isn't likely to be decided this year. The next briefs are due on October 11; final briefs are due on November 27. Oral arguments have not yet been scheduled.

Disclosure: The Advance/Newhouse Partnership, which owns 13 percent of Charter, is part of Advance Publications. Advance Publications owns Condé Nast, which owns Ars Technica.