A US Court of Appeals ruled the FCC did not have legal authority to reinstate net neutrality rules when it did so last year. While the federal rules have now been thrown out, some states with their own net neutrality laws. Operators will need to abide by the state laws, making net neutrality still very much a current issue.
Omdia view
Summary
The new year began with a pivotal ruling from the US Court of Appeals for the Sixth Circuit in Cincinnati, finding the FCC did not have legal authority to reinstate net neutrality rules when it did so last year. While the federal rules have now been thrown out, there are some states with their own net neutrality laws. Operators will need to abide by the state laws, making net neutrality still very much a current issue.
The long history of net neutrality in the US concludes with broadband interpreted as “information” not “telecommunications”
The Appeals Court's decision on net neutrality was based on the judges’ interpretation of broadband as an “information service” rather than a “telecommunication service” that would be regulated by the FCC. This judgment followed the June 2024 Supreme Court decision in the Loper Bright case, which overturned the Chevron doctrine, a 1984 legal precedent that said federal courts should defer to agency interpretations of ambiguous statutes; instead, courts should use their independent judgment in interpreting.
Net neutrality has a long history in the US, going back two decades. However, it was in 2015 that the FCC established net neutrality rules under the Obama administration. The rules were repealed two years later under the Trump administration. With the Appeals Court ruling this month, net neutrality is in the states’ hands unless Congress takes up the issue of codifying it in federal law – something that is unlikely when Republicans, who tend to favor deregulation, are in the majority as they are now. When net neutrality rules were repealed in 2017, several states took it upon themselves to enact their own net neutrality laws. With the final ruling from the Appeals Court, it’s probable more states will enact their own net neutrality laws.
While the ruling is considered a win for operators, state net neutrality laws are likely to still limit innovation
The decision is seen as a win for telecom companies, who oppose net neutrality rules because they can stifle innovation and competition. A prominent example of this is that it restricts operators from providing service options that give priority to certain applications over others. The ruling can also serve to allay operators’ concerns about deploying network slicing, something that wasn’t explicitly mentioned in net neutrality rules when they were temporarily reinstated last year. US mobile operators are free once again to create more innovative offers, whether with network slicing or other means. It should be noted that the recent ruling puts the US back to where it was from 2017–24, and there wasn’t a surge in innovative offerings during that period. But as 5G continues to advance, and network slicing is implemented, it increases the options for innovative offerings. This is all in theory.
It is all in theory because there is still the complexity caused by state-level net neutrality laws that mobile operators must contend with, and this brings up more questions than answers. While there is no federal net neutrality law, as mentioned, there are several states with their own and potentially even more in the future. This could end up stifling innovation, with operators restricting their offerings to comply with the net neutrality laws of states. This means it will be especially challenging to offer plans with any paid prioritization for certain apps. If an operator wants to offer such plans, they will need to be careful to do so only in states where there aren’t net neutrality laws that prohibit this. And as any new states adopt their own net neutrality laws, operators will need to adjust any offerings that no longer comply in that state. There is also the question of what happens if users with plans that violate net neutrality travel to states with net neutrality laws. Does net neutrality apply to where the subscriber of the plan resides or where the plan is being accessed? And who oversees enforcement? All the tailoring required may make operators hesitant to offer anything that doesn’t comply with the most restrictive state net neutrality laws. Going forward, operators are going to have to balance innovation and adhering to state net neutrality laws. And this can spell trouble for the monetization of 5G and future G’s.
Appendix
Author
Kristin Paulin, Principal Analyst, Service Provider Americas Markets
