In Short: California chose to make itself a battleground for the continuing fight over net neutrality when it signed its own net neutrality law despite the FCC's assertions that states were not allowed to do that, and now the Department of Justice has filed a lawsuit against the state over the matter. Attorney General Jeff Sessions, FCC Chairman Ajit Pai and two other high-level government personnel announced the suit, saying that the Restoring Internet Freedom act was about creating a web that is "free and guided by a uniform set of federal rules", and California's new law goes against those principles. Sessions cited the fact that individual states are not given the authority in the Constitution to regulate commerce that happens between state lines. Though internet service providers may operate arms within state borders, web service and the internet in general fall under the purview of this law, and thus qualify as "interstate commerce".
Background: California is the very first state to sign such a bill into law, and its version is by far the strictest, going as far as to ban most forms of zero-rating, a practice that allows certain traffic to not be counted against a customer's data allotment. The bill, introduced by Senator Scott Wiener, was subsequently cloned in New York and set the stage for many states to begin working on their own relevant laws. It skips many of the passages and entitlements seen in the old Title II regulations that classified internet service providers as utilities back in 2015, going straight for tenets that consumers have been fretting about. Things like zero-rating, paid fast lanes, potential censorship and soliciting payments from websites in return for not hobbling their services are all covered by the bill.
Impact: California's law goes beyond the original net neutrality laws put into place by the FCC back in 2015 in a lot of ways, and it is, as mentioned above, thus far the strictest in the nation in any form. The FCC and the Department of Justice are seeking a light-touch regulatory approach that puts trust in internet service providers to refrain from anti-consumer practices, and there's been no shortage of public outcry to the tune of such a move being far too trusting. Given this bill's strictness, its defeat may not quite set a precedent against state-level net neutrality bills, but since the main line of attack is that the FCC's order preempts any state law, future attempts to do this may end up quashed. Should California prevail, on the other hand, it would most likely mean that any state that seeks to do so could pass its own net neutrality laws without issue, essentially meaning that the battle will shift from a national one to a state-by-state effort to make officials see the value of net neutrality laws.