Free Market, Net Neutrality, and Common Carriage

February 15th, 2008 Richard Posted in common carriage, net neutrality, web and new media |

What bugs me most about the net neutrality discussion is that some see it as an issue of the “free” market (anti-net neutrality) vs. government regulation (pro net neutrality). The market and regulation certainly play a role, but not in this simple way, and, in fact, anti-net neutrality is definitely not synonymous with pro-competition - in some ways just the opposite.

Here’s why.

In researching net neutrality, I eventually came upon a very old concept, common carriage, and came to recognize that this was at the heart of the debate but, unfortunately, it was not often discussed. The basic common carriage concept is that there are certain businesses in society that require elaborate infrastructures that are fundamental for a functioning society such as communication and transportation. Further, it doesn’t make economic or social sense to duplicate these infrastructures. The most obvious example to most of us is the phone. When phone companies build phone lines, they are allowed access to public property, and they are often given the right to be the default company when people get a phone, but they are required to allow competitors to use their lines. You may recall a few years ago when all of us used dial up and we often had a choice among a number of internet service providers. This is because the phone companies were required to obey common carriage laws. Yes, common carriage is a type of government regulation, but at least this may explain the rationale behind it, and why, to me, it makes sense, both in terms of competition (multiple providers compete) and efficiency and common sense (you don’t have to keep building the same infrastructure again and again).

This, of course, brings up a big question, that you should be asking yourself (unless you already know the answer). Why is there only one choice of ISP for my cable modem or my DSL line? Aren’t they bound by common carrier laws?

The short answer is, no, they are not bound by these laws, due to a decision that the supreme court made in June 2005, which found that “… broadband cable modem companies are exempt from mandatory common-carrier regulation”. Their conclusion had something to do with re-classification of broadband companies as “information services” rather than “telacommunications”. Why this is true and/or why this matters, I can’t figure out. Feel free to read this supreme court ruling from the Cornell Law School site on this case, and then explain it to me. The DSL companies, of course, figured this was a big jip, since broadband is broadband, so the supreme court ruling was quickly followed by the FCC’s decision that braodband via DSL was also not bound by common carriage. Their rationale was that, the cable companies needed competition, which is ironic, of course, since the elimination of common carriage for either, dramatically decreases competition.

So, at this point, the DSL and cable companies have this monopoly/duopoly, which puts them into a position where they alone can control the flow of information accross “their” networks. At my home, a mile outside Rolla, Missouri, I have one choice for broadband, DSL, and one choice for ISP (Sprint). Inside the city limits of Rolla, like most communities, there is a duopoly, where they have two choices, DSL/Sprint, or Cable/Fidelity.

So, as you can see, the net neutrality thing is very much about competition and regulation, but not in the way you may have been lead to believe.