California is front line in fight over tech regs

California is front line in fight over tech regs
© The Hill illustration

California is the new front line in the fight over regulating the tech industry.

State lawmakers have put in place a tough new data privacy law and are moving to pass legislation not just restoring net neutrality, but implementing even stronger rules than those passed by the Federal Communications Commission (FCC) under former President Obama.

The moves have the tech and telecom industries worried that other states will adopt California’s tough approach, and they are mobilizing against the forthcoming rules. Consumer advocates, meanwhile, are vowing to defend them, setting the stage for a showdown.

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Tech companies have focused their ire on the data privacy rule.


Robert Callahan, the vice president of state government affairs for the Internet Association, which lobbies on behalf of major internet companies including Google, Amazon and Netflix, warned of the “inevitable, negative policy and compliance ramifications this last-minute deal will create for California’s consumers and businesses,” in a statement to The Hill.

Telecom companies, meanwhile, are up in arms over the net neutrality legislation. The head of U.S. Telecom, which lobbies on behalf of broadband providers such as AT&T and Comcast, said California’s tough new rules would only bring regulatory confusion and open the door to a state-by-state patchwork of laws.

The net neutrality bill moving through the state legislature, U.S. Telecom President Jonathan Spalter said, is “yet one more indicator that consumers and providers alike deserve a permanent, federal, legislative solution rather than confusing, conflicting and ever-changing state by state rules.”

Both the data privacy law and the net neutrality bill are likely to be the toughest in the country.

The California Consumer Privacy Act, which was signed by Gov. Jerry Brown (D-Calif.), would require websites to share with users the data collected, as well as how the data is being used and any third parties who have access. Users will also be able to opt out of having their data collected.

To many in the tech industry, the law goes too far in preventing them from using customer data, particularly by allowing customers to opt out.

“The reason these sites work is because companies are able to better monetize eyeballs with data than in Europe,” said Rob Atkinson, president of the Information Technology and Innovation Foundation, a tech-focused think tank.

“In California, if you want to opt out, you’re going to get random ads which are worth a lot less. This is why Europe has a weak internet ecosystem,” he continued.

The stakes for industry are high because, Atkinson said, the effects wouldn’t just be limited to California.

“The end result of what California is doing is imposing their political orientation on the rest of America because they’re so big,” he said.

He predicted that other states would likely adopt similar versions of the rule.

Even if other states didn’t adopt California’s opt-out approach, internet companies could be forced to comply with the Golden State’s tougher rules to avoid navigating a regulatory maze.

One prominent company, though, says it’s on board with the tougher data privacy rule.

Facebook, still dealing with the fallout from the Cambridge Analytica data scandal, had COO Sheryl Sandberg publicly back the bill just before it came to a vote.

Other web companies and internet industry groups have been more cautious and say they will push for changes before the law takes effect in 2020.

Meanwhile, consumer and privacy advocates have hailed the data law and the net neutrality bill and say they won’t let industry water them down.

“The California bill is the most comprehensive and well thought out attempt to codify the spirit of the net neutrality rules that the FCC gutted into state-level legislation,” Evan Greer, deputy director of the internet advocacy group Fight For The Future, told The Hill in a statement.

The net neutrality bill would reinstate the Obama-era rules that require broadband providers to treat all web traffic equally. It would also take a big regulatory step forward by banning some “zero rating” offers, a practice in which companies give customers free data for using certain applications or content.

Net neutrality supporters have long seen such plans as a way for broadband companies to circumvent the internet rules, and they pushed for the FCC, under Chairman Tom Wheeler, to outlaw such data deals. Wheeler probed those practices and issued a report shortly before leaving office in January 2017 that questioned whether those data plans complied with net neutrality principles.

Greer said that if the net neutrality bill passed, as expected, “it will send a strong message to lawmakers across the country that they can stand up to big telecom companies.”

“Strong net neutrality bills like this could spread like wildfire across the states,” she said.

The Electronic Frontier Foundation praised the California net neutrality bill as “what real net neutrality looks like.”

But companies such as Verizon and AT&T have pushed back hard on efforts to rein in zero rating, saying those plans allow customers to save more of their data.

Both sides in the fights over data privacy and net neutrality are focusing their effort on California.

Supporters see protecting the state laws as crucial, particularly at a time when Congress and the White House are not moving on those issues.

Lawmakers have floated efforts to pass a bipartisan net neutrality bill at the federal level, but Republicans and Democrats are far apart. And despite the focus on data privacy, it is unlikely Congress will pass legislation this year.

Atkinson said legislation could be beneficial but industry is worried the new rules would do more harm.

We already had “the most vibrant internet ecosystem in the world,” he said.