NNSquad - Network Neutrality Squad
[ NNSquad ] Net Neutrality and Common Carriage
------- Forwarded Message From: DAVID FARBER <dave@farber.net> To: "ip" <ip@v2.listbox.com> Subject: [IP] another round on the NetNeu oped issues Date: Sun, 11 May 2008 10:37:09 -0400 Please read BOTH Barb and Chris comments. Dave From: "Cherry, Barbara" <cherryb@indiana.edu> Christopher Yoo's response unfortunately contains several historical analytical errors that I've repeatedly discussed in my writings. It is unlikely that he actually read my TPRC paper to which you provided a link in [y]our blog, as he would have readily discovered some of them. Perhaps the fundamental problem is that many economists and legal scholars commenting on the network neutrality debate DO NOT understand the history of common carriage. Under the common law, common carriage obligations were TORT obligations imposed on carriers (in their relationship with customers) simply by virtue of their status of engaging in the business. In other words, the obligations are STATUS-BASED and unrelated to the industry's market structure. Attributing the imposition of common carriage obligations to natural monopoly is a MYTH, unfortunately so often erroneously repeated in the secondary literature that it is believed to be true. The tort obligations of common carriage remained, even after the development of general contract law. In fact, common carriers were strictly limited in the degree to which they could contract out of their tort obligations. The common carriage obligations later became codified in statutes (given perceived inadequacies of common law remedies) to which additional obligations and mechanisms were added (e.g. filing of tariffs enforced by administrative agencies). Furthermore, common carriage - both under the common law and statutorily - - predates the statutory antitrust regime. In other words, the industry-specific common carriage legal regime predates the general business regime of antitrust (and even later, of consumer protection legislation). This temporal sequencing is very important, as the general business legal regime evolved after, and as an augmentation of, the preexisting industry-specific regime. The reason that Chris says my point of view is novel is because, as stated above, many do not accurately understand the body of law of common carriage. In fact, I didn't discover the true history until I did my Ph.D. Dissertation. Although I've published a book based on my dissertation, which corrects the inaccuracies upon which many rely, unfortunately its contents have not sufficiently penetrated the general discourse of telecom policy. As for the common carriage obligations of transportation carriers under deregulatory policies, I note with interest Christopher's statement that "it is my understanding that railroad, bus, and airline deregulation did actually remove most (of not all) of the major common carrier requirements." This is yet another assumption, or (mis)characterization, of the effect of deregulatory transportation policies that many have - and without researching the matter to determine its accuracy. Later this year, I will be publishing a paper that specifically discusses what the effect of the deregulatory transportation policies have been. Importantly, although many elements of the older statutory provisions - overlaying the common law common carrier obligations - have been significantly altered, the critical elements of common carriage (originating under the common law) have remained. The transportation carriers (railroad, airline, bus....) ARE IN FACT STILL COMMON CARRIERS, but what ha! s changed is the manner by which the obligations are enforced. Overall, one has to get the correct historical alignment of various legal principles and bodies of law straight before one can understand the points raised in my writings. Conversely, many of my colleagues fail to sufficiently scrutinize the assumptions upon which their analyses are based, thereby overseeing numerous analytical errors. Best, Barb From: Christopher S. Yoo [mailto:csyoo@law.upenn.edu] I don't pretend to be an expert on the history of common carriage regulation. Barbara has spent far more time thinking about this than I have, so I always appreciate hearing her reactions and learn from reading her work. That said, here are a few thoughts. It is true that common carriage long predates both the Granger Movement and the Interstate Commerce Act of 1887. That said, one of the central problems is that the historic justifications for common carriage have not aged very well. Often times the common carriage obligations were regarded as a quid pro quo for a government grant of some economic privilege. Other times they were justified because the industry was "affected with a public interest," a concept that is usually traced to the landmark Supreme Court case Munn v. Illinois (1876). The Supreme Court struggled to imbue that standard with content (along with a number of early treatises trying to make sense of the concept) and would ultimately abandon it as analytically empty in Nebbia v. New York (1934). Legal scholars, such as Thomas Nachbar and James Speta in addition to Barbara, have attempted to recover lessons from this era. I have never spoken to Barbara about this in particular, but both Tom and Jim have noted the difficulty in extracting any useful lessons from the history. Put another way, even though it is true that common carriage was not originally based on statutes or the theory of natural monopoly, it is not clear what to make of that fact. One problem is historical. A review of the extensive early 20th century literature examining common carriage reveals that the original theory of common carriage was not that well articulated and failed to incorporate the history that Barbara has identified. The subsequent development in different directions over the past century or so is as much part of the history of common carriage as the history Barbara identifies. And as I indicated in my previous post, there is a counter history that dates back to the earliest days of the cable industry. The Supreme Court consistently rejected attempts to turn cable into a common carrier. So even from a historical perspective, extending common carriage obligations to cable modems would be just as radical a change as lifting common carriage obligations from DSL. The debate should thus consider the potential adverse impact that increasing the regulation of cable would have on competition, investment, innovation, and speech at the same time it considers the potential adverse effects of decreasing the regulation of telco-based broadband. More importantly, we have learned a lot over the past 150 years. While history is often illumining, it would seem strange not to hold the old justifications up to modern standards to see if they still make sense. We now understand that price discrimination and product differentiation can provide benefits that we failed to appreciate a century ago. Thus, even if tort law once imposed a duty of nondiscrimination and just and reasonable prices, we should only adhere to that if it continues to make sense to do so in light of what we know today. We should also draw lessons from previous attempts to implement nondiscrimination regimes, both by the FCC (leased access to cable systems, UNE access under the 1996 Act) and by antitrust courts (essential facilities doctrine, Robinson-Patman Act). This history is not encouraging, particularly where the product and interfaces are complex and when technology is changing rapidly. Two last thoughts regarding concerns that John Quarterman mentioned: He raises skepticism about the competitiveness of the first mile. I agree that the world would be better if the market for last mile service was more competitive and there were at least five independent providers in each market. That said, the trend seems to be going in the right direction. DSL and cable modem providers seem to have built out most of the country. The key is generating a third pipe to the home. In this regard, wireless seems to be the most promising. As of the beginning of 2005, there were no wireless broadband. By last September, they had 45 million. I realize that as of now wireless broadband can only provided limited bandwidth, but they are working on it. I find it interesting that the wireline network providers have repeatedly increased bandwidth without increasing the cost of their basic service one penny. I also find it interesting that small rural wireless broadband providers have submitted filings to the FCC indicating that they need to able to discriminate against high bandwidth applications (particularly video) if they are going to be able to provide adequate service. That said, the stakes are about to get much higher as the market approaches saturation. Instead of retooling existing technologies to race for new customers, cable and telephone companies are increasingly having to make significant investment in new technologies to try to provide greater value to existing customers. As the days of millions of new customers and the fiber glut recede into the past, network providers will inevitably find new ways to compete. Because change always creates winners and losers, I suspect that the evolution of competition will be a source of considerable friction with both business partners and consumer groups. John also notes that I do not discuss ISP competition. I may have missed it, but I didn't see any mention of ISP competition in any of the e-mail traffic or on the webpage he posted. That said, it is not clear that the history of common carriage has anything to say about ISPs. Common carriage has traditionally applied only to customers, not to other carriers, providers, or competitors. Moreover, the FCC has repeatedly found the market for ISPs to be quite competitive, except in the WorldCom-MCI merger when it required the spinoff of some backbone assets before it would provide regulatory clearance. What also strikes me is how much more heterogeneous the network has become, both in terms of structure and business relationships. Secondary peering and multihoming have reached the point where 70% of the nodes can interconnect without passing through the public backbone. The advent of new business relationships such as paid peering and partial transit has made the economic environment richer and more complicated as well. The effect has been to weaken the hold of the Tier-1 ISPs. The world is more complicated, but more open to creative solutions than ever before. - ------------------------------------------- Archives: http://www.listbox.com/member/archive/247/=now RSS Feed: http://www.listbox.com/member/archive/rss/247/ Powered by Listbox: http://www.listbox.com