California is most definitely within its rights to regulate businesses operating within the state. If an ISP wants to sell its service to CA residents, it can abide by CA laws.
Even if that's true, that's not even half the problem. Especially because of the public outcry, I wouldn't be surprised if ISPs even lower consumer prices to try and drive the point home of "told you so". Then, on the other side, they get to play mafia with internet-based businesses.