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Illustration: Sarah Grillo/Axios

The tech industry's most consequential policy fights in 2020 will play out in the states, not Washington.

Why it matters: Momentum on a range of tech issues, from governing online privacy to regulating the gig economy, has stalled in D.C. as impeachment and election campaigns consume attention. State leaders and legislators are stepping in to fill the void. 

"It’s really interesting to see the metamorphosis of states going from being the bench players to being lead hitters. It’s because Congress and the federal government can’t be relied upon to protect consumers."
— Gigi Sohn, former FCC adviser and now a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy

Where it stands: These are the policy fights that have shifted to the states.

  1. Privacy: California's landmark consumer privacy law takes effect this month, while other state legislatures are considering their own privacy efforts amid a stalled attempt in Congress on a bipartisan national law. (Though some on Capitol Hill are still hoping for a breakthrough.) Industry watchers expect to see privacy legislation come up in New York, Washington and Illinois in 2020.
  2. Net Neutrality: California and Vermont are facing litigation over their attempts to impose their own net neutrality regulations after the FCC repealed the Obama-era open-internet rules. New York Gov. Andrew Cuomo said he intends to advance statewide net neutrality legislation.
  3. Gig-economy labor: California is starting to implement a new law that codifies a state supreme court ruling making it hard for companies to treat gig economy workers as independent contractors rather than employees. New Jersey recently fined Uber for allegedly misclassifying drivers as independent contractors and not employees.
  4. Facial recognition: California has a three-year ban on police departments using facial recognition on body cam footage, and the cities of San Francisco and Berkeley have banned the use of the technology by local government. Boston suburbs Brookline and Somerville have also implemented bans.
  5. Home-sharing: Legislatures in some states such as Tennessee and Arizona have passed laws placing restrictions on popular short-term-rental sites like Airbnb and HomeAway.

And then there's antitrust. Here, there may well be federal action. The Justice Department and FTC have both opened competition probes into major tech companies. But the states are throwing their own weight around as well.

  • Attorneys general from 50 states and territories, led by Texas, launched a joint antitrust investigation into Google.
  • New York is leading a coalition of 47 states investigating Facebook.
  • New York and California are leading the multi-state effort to block the T-Mobile-Sprint merger, which was blessed by federal regulators.

Between the lines: State-by-state policy battles will be headaches for all the companies involved. It's expensive to distribute lobbyists in state capitol buildings across the country and deal with localized politics and varying legislative processes.

  • The major players would much prefer to have Congress or federal agencies adopt national rules to forestall a patchwork of different state laws.
  • Sohn views the "patchwork" argument skeptically. "You will comply with the strongest state law, so really in essence, you’re only complying with one."

Some trade groups are beefing up their state operations. BSA | The Software Alliance, which counts Microsoft and IBM among its members, is launching its first state program in 2020, said Craig Albright, vice president of legislative strategy for the group.

  • BSA will hire a director of state advocacy who is expected to be active wherever state privacy efforts heat up, including in California and New York, Albright said.
  • "We can’t ignore the fact that states are going to be moving forward with legislation," Albright said.
  • The Internet Association, which represents tech companies like Facebook and Google, opened a new office in Illinois in 2019. The group's state operations include offices in California, New York and Washington.
  • TechNet, another trade group, has executive directors strategically located in state capitals, and last year added more staff in California and the Southwest.

What to watch: Cities are also asserting their power on these issues and, in the process, either fighting or trying to shape state-level laws that often preempt city-level ordinances.

  • For example, cities are taking the lead on regulating e-bikes and e-scooters, and ride-hailing firms like Uber and Lyft.
  • But as a growing number of legislatures adopt statewide laws, cities are more limited in their ability to pass locally specific efforts.
  • For example, 15 states (including Pennsylvania, Texas and Colorado) prevent cities from building their own municipal broadband networks.

The bottom line: States will be the focus of corporate lobbying while Washington is distracted.

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