Internet Law Lives in the 17th Century
As the Federal Communications Commission debates the future of Internet regulation, two very different visions are at odds.
The big broadband service providers claim a right to charge higher rates in return for faster delivery of content. For example, these "pay for priority" agreements would allow Netflix Inc. to deliver movies more swiftly.
On the other side are the "net neutrality" activists who want to preserve the leveling spirit of the Internet by guaranteeing that every packet of data, regardless of whether it originates with Netflix or from a blogger's basement, would move through the network at the same speed.
This battle, which has been playing out for more than a decade, has taken a new turn lately as advocates of net neutrality have tried to achieve their goals by claiming that the FCC can regulate the big Internet service providers as "common carriers."
That designation, formerly applied to railroads and conventional phone companies, forbids firms from giving preferential treatment to some customers over others. Thus, an Internet provider that regulators deemed a common carrier could not strike a pay-for-priority deal with customers.
As appealing as this strategy may sound to net neutrality advocates, they will likely find that this venerable legal convention is inadequate for the complexities of the Internet age.
The idea of a common carrier came of age in the Elizabethan era, when courts began to classify certain occupations or businesses -- such as innkeepers or tailors -- as "common," meaning they served the public in general. A subset of this group was "common carriers" -- those who carried goods or people: ferrymen, cab drivers and owners of docks and wharves.
According to legal scholar Philip Nichols, British judges argued that common carriers must serve the public without discrimination; anyone who came to them would be charged the same rate and would be served in the order of arrival.
This concept became well established in common law and eventually made its way to the U.S. One influential distillation of the doctrine held that a common carrier "must exercise the business of carrying as a 'public employment,' and must undertake to carry goods for all persons indiscriminately."
The prohibition on discrimination was understandable, given that many common carriers enjoyed a monopoly or near-monopoly on the services they offered. Not coincidentally, many common carriers operated under far greater regulatory scrutiny than ordinary enterprises, though this varied from state to state.
Things got even more complicated in the 1840s, when the telegraph came into commercial use. As wires carrying messages crisscrossed the U.S., courts considered whether telegraph companies were common carriers. Some, like the California Supreme Court, ruled that they were: "There is no difference in the general nature of the legal obligation of the contract between carrying a message along a wire and carrying goods or packages along a route."
Many judges didn't buy the idea. In 1873, a Massachusetts court observed that "a common carrier has the exclusive possession and control of the goods to be carried." By contrast, "a telegraph company is intrusted with nothing but an order or message, which is not to be carried in the form in which it is received, but is to be transmitted or repeated by electricity."
This uncertainty endured to the end of the century, and extended to the new telephone companies. Although many courts classified operators in both industries as common carriers, particularly if they enjoyed a monopoly on service, others didn't.
The federal government eventually got involved with the passage of the Mann-Elkins Act in 1910, which put the telegraph and telephone under the regulatory umbrella of the Interstate Commerce Commission. But Congress failed to invest the ICC with powers it needed to do its job. (Nor did it define which telegraph or telephone companies were in fact common carriers).
Indeed, it was only with the passage of the Communications Act of 1934, which created the FCC, that the federal government got into the business of regulating them as common carriers.
Yet even this landmark legislation was fuzzy on some crucial details. For example, Title II of the Communications Act of 1934 stipulated that any company engaged in interstate communication by wire was a common carrier. But the act defined a communications "common carrier" as "any person engaged as a common carrier for hire." This tortured tautology failed to establish a precise definition for future regulators.
In succeeding decades, the FCC did little to clarify matters. The problem, according to Nichols, began in 1979 with the FCC's attempt to deregulate the telecommunications industry by revising the definition of a common carrier. To promote competition, the FCC exempted smaller companies that didn't have a dominant market share from common-carrier regulations.
This two-tier system was ultimately codified in the Telecommunications Act of 1996, when Congress divided up the infrastructure of the Internet, making a precise distinction between "telecommunications carriers," which would be regulated as common carriers, and "information service providers," which would be exempt.
In 2002, the FCC put cable companies such as Comcast Corp. into the latter category, exempting them from common-carrier regulations. This ruling, which was upheld in court, ratified the idea that only certain parts of the Internet's infrastructure could be regulated as common carriers.
Since that time, the FCC has vacillated. It has issued "principles" governing ISPs that look suspiciously like common carrier regulations (and which were overturned in a lawsuit filed by Verizon Communications Inc.). In 2010, the agency contemplated going back on its 2002 decision, but then reversed course yet again.
The FCC's equivocation likely reflects that definitions of what constitutes a common carrier in the world of telecommunications -- never mind the Internet -- have long been ill-defined.
The problem, perhaps, is that as a regulatory framework, common carriage already has been stretched well beyond anything its 17th-century progenitors could have imagined. It simply may be ill-suited to accomplish what net neutrality advocates wish it to do.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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