The Network Neutrality Battle Is About Common Carriage Functionality – The Monopoly Argument is a False Distraction
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The Network Neutrality Battle Is About Common Carriage Functionality – The Monopoly Argument is a False Distraction

Congressional consideration of “Save the Internet Act” is the most recent battlefront in ongoing legal warfare since the early 2000’s within what is called the network neutrality debate.  On April 10, 2019, the U.S. House of Representatives passed the “Save the Internet Act.” In response, Senate Majority Leader McConnell has claimed that this legislation is “dead on arrival” in the Senate.

There has been much misinformation in the public discourse as to what this war is about, thereby confusing the public as to what is really at stake.  The real battle is over legal classification of broadband Internet access service (BIAS) under federal law – is BIAS a “telecommunications service” or “information service” under the Telecommunications Act of 1996 (which amended the Communications Act of 1934)?  

Why is there a battle over legal classification?  Because legal classification determines the scope of federal regulatory authority, which Congress has delegated to the Federal Communications Commission (FCC).  In turn, the scope of federal regulatory authority determines the legal limitations that may be placed on BIAS providers’ business practices as well as the legal protections provided to BIAS customers.  

Under the federal statutory framework, if BIAS is a telecommunications service, then the service is a common carriage service and subject to certain regulatory obligations under both federal and state laws — this is referred to a shared federal-state jurisdiction whereby, consistent with the U.S. Constitution, federal law regulates interstate commerce and the states regulate intrastate commerce.   However, under the federal statutory framework, if BIAS is deemed to be an information service, then BIAS is not a common carriage service and the scope of FCC regulatory authority is not only weak but also ill-defined.  

What is the defining characteristic of a common carriage service?  It’s the functionality of the service – both technically and commercially.  In the context of telecommunications under federal law, the technical functionality consists of providing “the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.”  The commercial functionality consists of providing such service to the public for a fee – which makes the offering “common” and not “private.”

Why is it important whether BIAS is considered a common carriage service or not?  Because if BIAS is a common carriage service, then BIAS providers bear the fundamental obligations of common carriers.  These common carriage obligations are:

  • To provide service upon reasonable request (i.e. may the carrier may not selectively refuse to serve),
  • Without unreasonable discrimination (i.e. similarly situated customers must be treated similarly),
  • At just and reasonable rates, and
  • With adequate care.

These obligations arise from the functionality of the service – whereby, in order to provide the transmission function, the carrier exercises control over the information.   Such control renders the customer vulnerable to how the common carrier conducts its business and to economic exploitation. Recognition of a common carrier’s inherent power to economically exploit customers is longstanding, with the above obligations originally imposed under the English common law of tort.  The regulatory mechanisms for enforcing these obligations in the U.S. have evolved over time – initially only through lawsuits brought by customers in court, but since the late 19th century through regulatory oversight by federal and state regulatory agencies.   In this respect, the Telecommunications Act of 1996 further modified the means by which the FCC and state commissions exercised regulatory authority over telecommunications (common carriage) services.

If BIAS is deemed an information service, then the above-described common carriage obligations do not apply — and the FCC does not have the authority to impose them.  Furthermore, the scope of permissible regulatory authority over information services is unclear as a legal matter, and resultant efforts to test that scope can fluctuate over time as the political party (Democrat or Republican) maintaining a majority of FCC commissioners shifts back and forth.  

Thus, the differential impact of legal classification on BIAS’s providers’ regulatory obligations is the key to understanding what is really at stake.  In essence, the legal classification battle leads us to a fork in the road – one traversed by classification as a telecommunications service, and the other traversed by classification as in information service.  

As a result, it now becomes clear why the interests of BIAS providers and customers are not co-aligned.  In the pursuit of maximum freedom to exploit new business models and revenue streams, including through discriminatory practices and selective refusals to provide service, many BIAS providers seek classification as an information service.  On the other hand, in order to prevent ever-evolving forms of economic exploitation and unreasonable forms of discrimination and denials of service, BIAS customers as well as the content & application providers that seek access to such customers through BIAS providers seek classification as a telecommunications service.

So where does Congressional consideration of the “Save the Internet Act” fit within this battleground over legal classification of BIAS service?  The “Save the Internet Act” would restore the legal classification of BIAS as a telecommunications (i.e. common carriage) service, as declared by the FCC in its Open Internet Order of 2015.  It would also restore Open Internet Rules imposed on BIAS providers that were adopted by the FCC in its 2015 Order, including prohibitions on blocking, throttling and paid prioritization of traffic.  

Why is this restoration of legal classification necessary?  Because in 2017, after the Presidential election of 2016 and a new majority of Republican-appointed FCC Commissioners, the FCC repealed the Open Internet Order and most of the Open Internet Rules based on legal classification of BIAS as an information service.  The underlying justification for this repeal is both legally and historically flawed, and reflects much of the misleading public discourse about network neutrality.  

The flawed justification is the argument that BIAS providers are not monopolies, and should not be considered public utilities.  But these arguments are proverbial red herrings. The federal statutory definition of common carriage is based on functionality, not the (non)existence of monopoly.  Moreover, public utility is a different body of law from that of common carriage, which arose under state law and is based on the grant of a franchise (whether exclusive or non-exclusive) to provide a service.  The Communications Act of 1934, as amended by the Telecommunications Act of 1996, already provides the legal framework for coexistence of federal and state law in competitive markets.

Similarly, in Canada, it is noteworthy that some telecommunications companies attempted to distract the Canadian Radio-Television and Telecommunications Commission with such monopoly and public utility arguments — arising from what I call the false monopoly theory argument — in the context of network neutrality proceedings in Canada, but fortunately were unsuccessful.  BIAS service has consistently been considered a common carriage, telecommunications service in Canada.  Such classification needs to be restored in the U.S., and the “Save the Internet Act” is a means of doing so with greater political stability through Congressional legislation.

Informed by my participation in the network neutrality policy debates in both the U.S. and Canada, I have published an article comparing the differential efficacy of the false monopoly theory argument in the U.S. and Canada: Technology Transitions within telecommunications networks: Lessons from U.S. v. Canadian policy experimentation under federalism, Journal of Telecommunications Policy, 39 (2015), 463-485. One can better understand the mischaracterizations and distractions in the U.S. debate by comparison with the experience in Canada.

Barbara A. Cherry is a Professor in the Media School at Indiana University.  She has extensive telecommunications policy experience having worked as an attorney with AT&T, Ameritech, and the Federal Communications Commission.  Dr. Cherry’s research also reflects an interdisciplinary background, as she holds a Ph.D. in Communication Studies from Northwestern University, a J.D. from Harvard Law School, an M.A. in Economics and Law from Harvard University, and a B.S. in Economics from the University of Michigan.

Suggested citation: Barbara A. Cherry, The Network Neutrality Battle is about Common Carriage Functionality – The Monopoly Argument is False and a Distraction, JURIST – Academic Commentary, Apr. 25, 2019, https://www.jurist.org/commentary/2019/04/barbara-cherry-network-neutrality/

 


This article was prepared for publication by Brianna Bell, a JURIST Staff Editor. Please direct any questions or comments to her at commentary@jurist.org.


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