Montana Says It Won’t Do Business With ISPs That Violate Net Neutrality

While several states have proposed their own net neutrality rules in the wake of the FCC’s attack on the popular consumer protections, Montana is the first state to actually follow through.

A new executive order signed by Montana Governor Steve Bullock directs the state Department of Administration to incorporate net neutrality into the procurement process for ISPs looking to do business with the state. More simply: if you violate net neutrality, you won’t be winning state contracts for telecom services.

That’s sure to piss off AT&T, Comcast, Verizon, and CenturyLink, which all currently do business with the state.

The order states that beginning in July, ISPs looking to secure a government contract cannot block consumer access to lawful content, applications, or services. ISPs are also banned from engaging in paid prioritization, or letting deeper-pocketed content or service companies buy an unfair advantage for their traffic in terms of speed, latency, or network prioritization.

ISPs have supported rules prohibiting the outright blocking of websites, knowing full well that the PR backlash for such ham-fisted anti-competitive behavior would make such efforts counterproductive. ISPs like Comcast have however made their interest in paid prioritization deals abundantly clear, given that tilting the playing field in favor of deeper-pocketed content companies (or an ISP’s own content) could prove immeasurably lucrative.

ISPs like Comcast have slowly-but-surely been walking back their past promises to avoid paid prioritization in the wake of the FCC’s repeal. In fact, the company was caught having deleting a past promise to avoid paid prioritization the same day the FCC announced it would be repealing the federal rules.

Montana’s new executive order also prohibits ISPs from “unreasonably interfering with” or “unreasonably disadvantaging” a consumer’s ability to access the “lawful internet content, applications, services, or devices of their choice.” It also bans ISPs from blocking content companies’ ability to provide those same services. ISPs like Comcast have engaged in all manner of creative ways to make accessing streaming services more expensive—and more difficult.

Those efforts have included imposing arbitrary and unnecessary usage caps and overage fees on broadband connections in uncompetitive markets. Such surcharges not only make streaming Netflix more expensive for would be “cord cutters,” but ISPs often exempt their own content and services from said caps (known as “zero rating”), giving them an unfair market advantage.

ISPs have also been accused of routinely letting their interconnection points with content and transit companies intentionally congest in order to drive up costs for these competing streaming providers. While the FCC’s net neutrality rules didn’t ban such behavior, it gave the FCC the authority to stop anti-competitive behavior on a case-by-case basis.

Bullock says Montana was pushed to action thanks to federal apathy on the consumer protection front.

“There has been a lot of talk around the country about how to respond to the recent decision by [the] Federal Communications Commission to repeal net neutrality rules, which keep the internet free and open,” Bullock said in a statement. “It’s time to actually do something about it. This is a simple step states can take to preserve and protect net neutrality. We can’t wait for folks in Washington DC to come to their senses and reinstate these rules.”

Bullock also encourages leaders in other states to use Montana’s executive order as a template for their own net neutrality rules.

“To every governor and every legislator in every statehouse across the country, and to every small business and every Fortune 500 company that wants a free and open internet when they buy services: I will personally email this to you,” Bullock said.

However, Montana’s effort may have several hurdles to overcome.

One, the order allows ISPs to throttle or block some services, provided it constitutes “reasonable network management that is disclosed to the consumer.” But what’s considered “reasonable” is often open to interpretation, and ISPs have a long history of trying to hide anti-competitive behavior behind routine network management.

Comcast insists its usage caps and overage fees, for example, are essential for the health and security of the company’s network. But critics have consistently charged that such restrictions aren’t necessary, and Comcast is simply using the specter of congestion to justify price hikes and anti-competitive behavior under the umbrella of legitimate network management.

“Data caps and usage-based pricing discourage a consumer’s consumption of broadband, and may impede the ability of some households to watch Internet television in a manner and amount that they would like," Netflix said in an FCC filing in 2016. "Data caps on fixed-line networks do not appear to serve a legitimate purpose: they are an ineffective network management tool.”

Without addressing usage caps and zero rating, ISPs would still be free to abuse a lack of broadband competition in order to hamstring streaming alternatives, something the Montana order doesn’t specifically address.

Montana will also need to deal with the fact that the FCC’s “Restoring Internet Freedom” order attempts to ban states from trying to protect consumers in the wake of the FCC’s repeal. This restriction was specifically lobbied for by Comcast and Verizon, who were nervous the states might actually protect consumers in the wake of federal apathy.

They were right. States including Washington, California, New York and Massachusetts are also considering their own net neutrality and broadband privacy protections. In several instances, these laws mirror Montana’s attempt to hold ISPs to account by tying good behavior to their ability to secure government contracts, something ISPs are certain to contest. 22 State Attorneys General are also in the process of suing the FCC over its unpopular repeal.

Whether the FCC has the authority to limit state regulatory efforts is up for debate. The FCC had its wrist slapped by the courts when under former boss Tom Wheeler it attempted to stop some states from writing state laws designed to hamstring community broadband efforts. Ajit Pai’s FCC could run face-first into the same jurisdictional challenges.

ISPs have been quick to argue that state efforts to impose their own consumer protections creates a discordant and costly patchwork of rules ISPs will struggle to adhere to. That’s something company executives should have thought about before they lobbied to dismantle arguably modest but hugely popular federal net neutrality rules.