Communications / Politics / Regulation / Technology

The Tragedy of the Common Carriers

One cannot discuss Net neutrality these days without stumbling across the centuries-old legal concept of “common carriage.”  As with all antediluvian models of the world, time invites decline and eventual replacement.

And So The World Begins

Common carriage is a rather deceptively simple idea: a service provided by a private company to any market participant on the same terms, where individualized decisions regarding who to serve and what to charge are prohibited.  Being rooted deep in English common law tradition, common carriage has extended from ferrymen and innkeepers to surgeons.

In the late 1800s, with the ethos of natural monopolies pervading the public mind, politicians saw public utility and common carriage regulations as the only defense.  Even grain elevators in 1876 found themselves under government oversight as public utilities (Munn v. Illinois).  With a nation angry over railroad practices, Shelby Cullom, a first-term senator from Illinois, strategized the solution;—the Interstate Commerce Act of 1887.  With this, the government codified for the first time the common carrier concept.

With the rhetoric of nature monopolies and the mental model of a common carrier world, the progressive era set the tone for the 20th Century.  Yet, what was meant to reign in these beasts of capitalism would become in time a public burden.

Telecommunications Networks as Common Carriage   

With the Mann-Elkins Act of 1910, telephones and telegraphs—the vanguards of electronic communications networks—were designated as common carriers and public utilities.

Before the creation of the Federal Communications Commission (FCC), these telecommunications networks fell under the regulatory watch of the Interstate Commerce Commission (ICC), who supervised transportation networks, particularly the railroad industry.  With Title II of the Communications Act of 1934, the FCC exclusively would regulate telecommunications networks as common carriers.

Recently, Robert McMillan noted,

You can trace a direct line from Cullom’s 1887 act to the Communications Act of 1934—with its still-valid ‘Title II’ definition of communications carriers—and then to the 1996 Telecommunications Act, which governs service providers in the U.S.…  [I]nternet service providers were thought of as common carriers when the 1996 act was written.  The FCC’s 2002 decision [to classify ISPs as ‘information service providers, not ‘telecommunications services] changed this.”

The First “Future of the Internet”

By the early 1990s, some foresaw the fate of “common carriage” as eroding in time.  Moreover, a salvageable co-existence with contract carriage would not survive, since a hybrid model proved unstable.

Eli M. Noam continues, “Ironically, it is not the failure of common carriage but rather its very success that undermines the institution.  By making communications ubiquitous and essential, it spawned new types of carriers and delivery systems.”

There may well be some truth in this theory of nursing markets to maturity, particularly, in the case of the U.S. railroad industry, when capital markets were not yet fully developed.

Among many a Net neutrality advocate, this theory runs counter to their narrative of “openness” and the “cyber commons.”  Yet, seldom does reality embrace such a democratically-friendly story arc.

For example, in his book, Open Standards and the Digital Age: History, Ideology, and Networks, Andrew L. Russell retells the story, showing how the “openness” narrative ill-fits the reality.  He writes, “[T]he core Internet standards did not emerge from any principled commitment to openness.  Rather, the formative stages of Internet governance more closely resembled a form of autocratic and centralized control over the tasks of system architecture and standardization.”

And So The World Changed

In 2010, Dennis L. Weisman encapsulated much of what has been overlooked by policymakers and the public:

The rapid rate of technological change in the telecommunications industry over the last decade has fundamentally transformed the industry’s market structure.  The multiplicity of competitive platforms, including broadband and wireless, represents a metamorphosis of seemingly unprecedented proportion.  This paradigm shift necessarily calls for a reexamination and recalibration of the industry’s regulatory institutions.”

With these changes in technology, competition, and market structure, a new challenge stands: Do communications networks continue to fit the model of public utility and common carriage?

As far back as 2007, Alfred E. Kahn provides an answer:

[T]he industry is obviously no longer a natural monopoly and wherever there is effective competition—typically and most powerfully, between competing platforms—land-line telephony, cable and wireless—regulation of the historical variety is both unnecessary and likely to be anticompetitive.”

The evolution of a dynamic ecosystem breeds more complex actors, roles, and orderings, and the Internet is further testimony to this process.  Even the lamenting Noam divined this back in 1994, noting the “move from the network of networks to the system of systems.”

And Now Our Models Need to Change

With common carriage and public utilities—as with all other conceptual frameworks—when the reality of a matter does not match, or more importantly, no longer accommodates, the economic model, we need not resist shrugging off our past understandings, our past wishes, our past worlds.

Allowing for the inadequacies of the public utility and common carrier models to persist within even partially competitive markets, we add upon the public burden, since over-regulations foster noncompetitiveness and higher costs.

For example, in the late 1970s, U.S. commenced deregulating the railroad industry.  With costs and inefficiencies mounting, the nation’s first industry to be categorized as a utility had to be re-envisioned, rethought, and remodeled.  Since the Staggers Rail Act of 1980, which supplanted Cullom’s 1887 Act, “America’s freight railways are one of the unsung transport successes of the past 30 years.  They are universally recognized in the industry as the best in the world.”

So, as noted prior, new technology, added competition, and more diverse and flexible markets have wrought changes over the last half century that force rethinking and remodeling.  And consequently, the role of government in the economy must be readdressed.

Common carriage—Title II reclassification—sought for by Net neutrality advocates is not the rethinking and remodeling of our newfound world.  It is the avoidance—the forfeiture—of such.

Advertisements

2 thoughts on “The Tragedy of the Common Carriers

  1. You seem to misunderstand the term open in the context of “an open internet” and you fail to demonstrate that common carrier would hurt the internet or consumers. Open in this context simply means that all public informatioin is availible to all members of the network. That is what the internet was designed to do. That is the design philosophy for a packet switched network such as TCP/IP and its exactly how the internet is different from a circuit switched network such as the telephone system. As for the common carrier example, I’m not sure how rail roads and the internet are connected. You seem to imply that with the deregulation is the only ends to a successful industry which has never been demonstrated.

  2. You also seem to imply that the government should only consider the economy when enforcing regulations.

What do you think?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s