Now that the Federal Communication Commission’s (FCC) so-called Open Internet Order (OIO) has finally been released, we can begin to assess where we go from here. Besides the numerous reasons why the FCC’s decision is bad policy, it is also unconstitutional.
The OIO is a violation of the takings clause of the Fifth Amendment. The amendment concludes with the statement “nor shall private property be taken for public use without just compensation.” The legal history of this clause is long and complex, and the whole argument as it applies in this case is spelled out at length by Daniel Lyons. Here, I will only summarize some basic principles that can be applied to the FCC’s Order.
There is the rule, established by Loretto v. Teleprompter Manhattan CATV Corp, that a permanent occupation or regular use of private property by the government or the public is a per se taking which requires compensation. This is exactly the scenario that is created by the OIO. Internet service providers (ISPs) are now required to allow edge providers (e.g. Netflix, Amazon, Google) to use their networks without charge or face penalties for blocking and paid prioritization.
The FCC and its allies have responded to this argument by claiming that use of a network is not physical occupation, and therefore not a per se taking, but this assertion is incorrect. The sending and receiving of information over networks takes place in physical space; the moving of content across a network with flows of electrons is not non-physical simply because the occupation is too small to see. The moving of information along a privately owned fiber or wire is not unlike the movement of people across privately owned land which the Supreme Court has already ruled falls under the Loretto rule. Furthermore, even if it does not require permanent occupation, the order certainly requires ISPs to permit regular use of their networks, which still constitutes taking under Loretto.
The FCC acknowledges this difficulty in its order (page 277 of the order) but brushes them aside on the grounds that ISPs offer their services generally to the public. Since they voluntarily open their networks to occupation by customers, the order argues, they cannot assert that regulation which prevents them from excluding certain customers is a per se takings. The commission is correct in this argument; there is extensive legal precedent showing that regulators do have the power to enforce non-exclusion rules on firms which voluntarily offer their service to the public. The problem with the commission’s argument is that the issue at play in the net neutrality debate, and the issue addressed by the order, is not the relationship between last-mile ISPs and their customers but the relationship between last-mile ISPs and edge providers’ content.
While it is true that exclusion of end users is not a per se right, exclusion of edge providers is. This important distinction can be illustrated with a non-Internet example: Walmart cannot engage in discrimination (for irrelevant reasons) against its customers; it has to let everyone shop there. Walmart does not, however, have to let everyone sell their products in its stores, and it is allowed to charge a premium for things like prime shelf space. Therefore, it would be a per se taking for the government to mandate that Walmart carry certain goods or all goods. In the same way, since the Open Internet Order requires ISPs to allow all edge providers to regularly use their networks, it is also a per se taking which requires just compensation. Since the OIO doesn’t provide for such compensation, it is unconstitutional.