[Ecommerce] Really Useful FTC NN Submission by Barbara Cherry

[Seth Johnson]

(This article provides a very good analysis of common carriage and how
the net neutrality debate is being misdirected.  See the section I
post below.  BTW, it was submitted 3/15; I see another submission on
3/17, so it appears it's worth continuing to post to the comments for
the FTC workshop.  -- Seth)


> http://www.ftc.gov/os/comments/broadbandwrkshop/527031-00066.pdf


MISUSING NETWORK NEUTRALITY TO ELIMINATE COMMON CARRIAGE THREATENS
FREE SPEECH AND THE POSTAL SYSTEM

Barbara A. Cherry [FNa1]

33 N. Ky. L. Rev. 483
Northern Kentucky Law Review 2006
2006 Spring Symposium Issue

< Massive snip just to get to one good part >

V. Applying =93Essentiality of Access=94 Analysis to the Network
Neutrality Debate

The results of the prior =93essentiality of access=94 analysis of
broadband access issues reviewed in section IV shows that the FCC has
thus far declined to apply to broadband those legal principles that
have historically been applied to similar access problems. More
specifically, the FCC has declined to impose the following
requirements on broadband access providers: common carriage
obligations; public utility-type obligations, such as build-out
requirements and restrictions on exit; and access to competitive ISPs.
As to these broadband issues, the FCC's decisions are consistent with
the arguments of opponents of network neutrality rules described in
section II. Furthermore, the potential adverse consequences of the
FCC's actions discussed in section IV are reflected in the concerns
raised by the proponents of network neutrality rules. In this way, the
prior =93essentiality of access=94 analysis maps nicely onto the network
neutrality debate, providing a roadmap for disentangling the myriad
claims and assessing appropriate policy design.

A. Misleading Discourse in the Network Neutrality Debate

This section shows how the lineage of legal principles that evolved to
address differing forms of access problems is being misrepresented in
the network neutrality debate. The law of common carriage has and
continues to be mischaracterized, leading to a conflation of the legal
bases for addressing access problems for end user customers and
competitors. As a result, there is a preoccupation with regulation of
the provider-to-provider relationship, and unsubstantiated reliance on
antitrust principles to address provider-to-customer access problems.
The analytical errors arising from mischaracterizations of the
original common carriage legal regime are better understood when
policy recommendations are evaluated in terms of their likely
sustainability. However, *501 opponents of network neutrality rules
are resisting attempts to frame the debate in policy sustainability
terms, so as to steer discourse away from rigorous evaluation of
proponents' claims.

1. Misidentification of the original regulatory regime of common
carriage

Mischaracterizations of the law of common carriage and its
relationship to other bodies of law are creating a foundational
problem for constructive discourse of network neutrality. The common
law of common carriers evolved to address problems in the economic
relationship between the carrier and customers as end users, but not
to address access problems between the carrier and its competitors in
complementary markets nor the interconnection among carriers. [FN112]
Statutory obligations were ultimately created to address the problems
of access by competitors and for interconnection among carriers.
[FN113] Yet, in the network neutrality debate, common carriage is
sometimes characterized as the legal basis for ensuring access for
both end users and competitors. [FN114] Although such a
characterization is correct for the statutory version of common
carriage under Title II of the Communications Act, it is factually
incorrect for the common law of common carriage.

The confusion arises when reference to the statutory version-rather
than the common law origins-of common carriage is used as the frame of
reference for considering proposed network neutrality rules. By
conflating the legal bases of access to end user customers and
competitors in terms of the statutory regime, the original common law
regime has tended to be ignored, thereby masking its significance for
the carrier (provider)-to-customer relationship. The discourse then
permits opponents of network neutrality rules to leverage arguments
pertaining to the provider-to-competitor relationship to issues
related to the provider-to-customer relationship. For example,
assertions that common carriage obligations are not required to
provide access to competitive ISPs are also unquestioningly applied
for access to end users. [FN115] As a result, analysis of regulation
governing the provider-to-customer relationship is inadequately
explored and potential adverse consequences are simply ignored.

The misuse of the statutory regime of common carriage as the frame of
reference for purposes of evaluating future policy options is not
confined to the *502 network neutrality debate. Cherry [FN116]
explains how this phenomenon is affecting the general discourse of
deregulatory policies for communications technologies. For example,
the failure to use the original common law regime for common carriage
as the basis for evaluating deregulatory policy proposals has led to
mischaracterization of the evolution of the transportation
deregulatory regimes-claiming that common carriage regulation has been
eliminated, when in fact some statutory elements have been modified
but the common law elements have been expressly preserved by
Congress-and thereby misinforming implications for telecommunications
deregulatory policies. [FN117] In this regard, such analyses have
tended to focus primarily on regulation governing the
provider-to-provider relationship rather than the provider-to-customer
relationship, resulting in misleading conclusions for the former but
inadequate exploration of the latter. [FN118] As a consequence of this
preoccupation with the wholesale relationship, recommendations for
deregulatory telecommunications regimes place primary reliance on
antitrust principles to address problems of providers' market power.
[FN119] Nuechterlein and Weiser's book expresses this bias. [FN120]

It is therefore not surprising that opponents of network neutrality
rules also advocate that regulation, if necessary, be based on
antitrust principles. [FN121] However, whether for purposes of network
neutrality or deregulation generally, to advocate primary reliance on
antitrust principles ignores important historical facts. Common
carriage regulation, both under the common law and statutorily,
evolved prior to antitrust regulation. [FN122] Thus, antitrust law
subsequently evolved to augment-that is, to address issues and
situations not already encompassed by-common carriage. [FN123]
Furthermore, common carriage regulation evolved into industry-specific
regimes (e.g. railroads, telegraph, telephone, airlines) under agency
jurisdiction, whereas antitrust law evolved to apply to general
businesses. [FN124] Advocates of a regime based solely on antitrust
fail to explain how the issues pertaining to the provider-tocustomer
relationship, that have been governed by the ex ante rules of
industry-specific common carriage regulation, will be adequately
addressed by antitrust ex post remedies. This is particularly
troublesome given that the evolution of the Internet relied on common
carriage regulation of the telecommunications carriers' physical *503
infrastructure, and proponents of network neutrality have repeatedly
stressed this historical reality. [FN125]

2. Analytical failure to consider policy sustainability

The preoccupation with antitrust theory is symptomatic of an
analytical failure to consider policy change in terms of policy
sustainability. In numerous articles and papers, Cherry has stressed
in varying ways that sustainable regulatory telecommunications
policies require simultaneous satisfaction of economic viability and
political feasibility constraints, and that satisfaction of these
constraints is particularly challenging for regulatory regimes based
on competition rather than monopoly. [FN126] Some articles have
examined sustainability of specific regulatory policies, such as
universal service, [FN127] rate rebalancing, [FN128] and the effects
of detariffing on liability rules. [FN129] Others have broadened the
scope of inquiry, looking at sustainability problems arising from
fundamental attributes of the U.S. governance structure, [FN130]
including-and particularly relevant here-efforts to retrench from
public utility regulation [FN131] and to resist extension of common
carriage obligations to broadband access *504 services. [FN132]

Although beyond the scope of this article to recount fully here,
Cherry explains how the legacy of public utility regulation in the
United States constrains the adoptability and retention of new
regulatory models for certain essential services, such as
telecommunications. [FN133] To be able to continuously satisfy the
joint conditions of political feasibility and economic viability,
deregulatory policy affecting an essential infrastructure, such as
telecommunications, will likely require retention of certain
attributes of the common law of common carriage and public utilities.
[FN134] In other words, sustainable deregulatory telecommunications
policies will likely require retention of longstanding legal
principles that had evolved to address political-economic problems,
such as the access problems reflected in the =93essentiality of access=94
typology. [FN135] The need to retain elements of common law principles
of common carriage and public utilities for policy sustainability is
supported by subsequent analysis of the deregulatory regimes for
transportation carriers. [FN136]

An important implication of sustainability analysis for the network
neutrality debate is that, although antitrust regulation does play an
important role-as reflected in the Kingsbury Commitment [FN137] and
the Modified Final Judgment [FN138]-it is unlikely to be capable of
substituting in whole for the principles embodied in common carriage
and public utility law. Unfortunately, opponents of network neutrality
regulation seek to deter discussion of policy sustainability problems,
thereby masking likely long-term inadequacies of reliance on
antitrust-type remedies. In this regard, opponents characterize ex
ante network neutrality rules as premature [FN139] and as calling for
a legislative solution in the absence of a problem. [FN140] Such
characterizations attempt to truncate discussion of potential
long-term consequences, an inquiry that is critical for policy
sustainability. Other opponents assert reliance on antitrust remedies
based solely on economic *505 criteria, [FN141] such as consumer
welfare, [FN142] or economic benefits of deviating from
government-mandated rules. [FN143] These assertions fail to
incorporate political feasibility and long-term economic viability
constraints into their analyses, which are foundational considerations
for policy sustainability.

As discussed in section II, proponents of network neutrality rules
have attempted to raise issues of long-term consequences. For example,
Cerf stresses that key network principles of the Internet-such as its
end-to-end design, layered architecture, and open standards-need to be
preserved in order for the Internet to flourish, [FN144] and that
elements of openness and nondiscrimination that have long been part of
the telecommunications law need to be preserved. [FN145] Yet, thus
far, opponents of network neutrality regulation have declined to
engage such proponents' arguments on the merits. Inertia of the status
quo does favor opponents' political strategy to steer discourse away
from rigorous evaluation of proponents claims, because the FCC's
rulings in the Cable Modem Declaratory Ruling and the Wireline
Broadband Access Order have already eliminated some common carriage
rules that proponents seek. [FN146]

B. Evolving Interrelationship of Common Carriage and Free Speech

While the communications technology platforms remained distinct, the
applicability of common carriage obligations relative to free speech
rights of communications providers followed simple rules.
Telecommunications carriers, as providers of only transmission
facilities, bear the obligations of common carriers but possess no
First Amendment rights. [FN147] Conversely, mass media, as providers
of information content over their own facilities, are not common
carriers and possess free speech rights. [FN148] With the elimination
of technological entry barriers between telecommunications and mass
media, the interrelationship of common carriage and free speech
principles is becoming more complex. [FN149] This section discusses
how intermodal competition poses new challenges for maintaining a
sustainable balance of common carriage obligations and free speech
rights.

*506 1. Deregulatory Trend May Erode Free Speech Rights of Individuals

The deregulatory era for infrastructure industries in the United
States began in the 1970's, commencing with the transportation sector.
[FN150] It reflected a bipartisan political movement favoring
deregulation coupled with significant developments, such as
containerization, in intermodal transportation competition. [FN151]
The deregulatory trend coupled with technological change enabling
intermodal competition was later mirrored in the communications
sector. [FN152]

One of the consequences of digital convergence is that
telecommunications carriers can use their facilities to also provide
video programming. [FN153] As a result, telecommunications carriers
acquired free speech rights as providers of content in markets
complementary to the traditional common carriage market. [FN154] This
enabled telecommunications carriers to leverage their free speech
claims to limit or invalidate economic regulation imposed on them.
[FN155] An early example is the telephone companies' successful
judicial challenges to invalidate the federal telephone-cable
cross-ownership ban as a violation of their free speech rights to
provide video programming. [FN156]

Ostensibly consistent with a deregulatory philosophy, the FCC has
resisted extension of common carrier obligations to broadband access
providers in the Cable Modem Declaratory Ruling. [FN157]
Telecommunications carriers have successfully leveraged this result to
obtain a =93lighter regulatory touch=94 from the FCC in the Wireline
Broadband Access Order, which lifted the obligatory common carriage
requirements from the provision of wireline broadband Internet access
service. [FN158]

In the network neutrality debate, telecommunications carriers are
intensifying their efforts to reduce economic regulation. More
specifically, telecommunications carriers assert their economic
interests-the need to attract investment capital in a competitive
broadband market-as the basis for eliminating ex ante rules of common
carriage to their broadband service. [FN159] *507 As discussed in
section V.A, this strategy is being utilized to justify reliance on
antitrust principles rather than forms of ex ante network neutrality
rules.

As previously discussed, the elimination of common carrier regulation
for the provision of traditional telecommunications services is likely
to be unsustainable. The failure to apply common carriage obligations
to broadband service poses the question of whether free speech
objectives, such as viewpoint diversity, are sustainable. If antitrust
principles are insufficient to substitute for the functions that
common carriage and public utility obligations have served in
providing access, then free speech rights of individuals will be
sacrificed to serve economic interests of corporate owners of
broadband facilities.

For this reason, Cherry stresses that broadband access issues require
deeper inquiry as to the constitutional rights of natural persons as
opposed to corporations. [FN160] Given that the constitutional rights
of corporations are not coextensive with those of natural persons, it
would be permissible for the corporate form to be a factor in weighing
the competing interests of broadband providers and access recipients.
[FN161] For example, in Austin v. Michigan Chamber of Commerce,
[FN162] the United States Supreme Court upheld a Michigan statute that
prohibited certain corporations from using corporate treasury funds
for independent expenditures in support or opposition of candidates in
state elections. [FN163] The Court found that the State had a
compelling interest in preventing a specific type of corruption in the
political process by corporations due to =93the corrosive and distorting
effects of immense aggregations of wealth that are accumulated with
the help of the corporate form and that have little or no correlation
to the public's support for the corporation's political ideas.=94
[FN164] Applying a similar rationale to issues of economic regulation,
the free speech rights of individuals as citizens in a democracy could
provide the legal basis for government to limit the exercise of
economic and political power by corporations to influence broadband
policy.

2. Deregulatory Trend May Threaten the Sustainability of the Postal
System

To advocate a competitive intermodal communications legal regime based
on the elimination or erosion of common carriage obligations and
increased reliance on antitrust principles is inconsistent with
deregulatory policies in the transportation sector. [FN165]
Deregulatory transportation regimes-for railroads, air lines, and
motor carriers-still impose common carriage obligations, although in
*508 varying ways both across and within transportation modes. [FN166]
Furthermore, to serve public utility functions that address
provider-to-customer access problems, additional requirements are
imposed on carriers and funding programs have been created to support
provision of service to targeted customers and serving areas. [FN167]

The significance of this inconsistency is that deviation in key
attributes of economic regulation for communications relative to
transportation infrastructure may ultimately lead to devastating,
unintended consequences for the United States Postal Service (USPS).
[FN168] The effects of deregulatory broadband policies on the
financial sustainability and ubiquitous deployment of the postal
system has not been raised in the network neutrality debate, but needs
to be included as part of the general evaluation of policy
sustainability problems.

=93The postal business has always been one of information transportation
[and] throughout history, it has been challenged to adapt to new
technologies, from the telegraph, to the telephone, to the fax
machine, to the rise of private overnight delivery services and, now,
the Internet.=94 [FN169] However, the financial viability of the USPS is
now being threatened, in large part, by electronic substitution of
correspondence over the Internet. [FN170] =93Historically, the Service's
[USPS] business model depended on revenues from increasing mail
volumes to cover its expanding infrastructure. This model has proven
more difficult to sustain because of the decreasing mail volumes,
particularly in First-Class Mail.=94 [FN171] Total mail volume has
decreased by about 1.8 billion pieces from fiscal year 2000 to 2004.
[FN172] For the first time in history, First-Class Mail volumes have
declined for three years in a row. [FN173] The decline in First-Class
Mail revenues-about 5 per cent from fiscal year 2000 to 2004-is
particularly troublesome because First-Class Mail contributes the
majority of revenue to institutional costs. [FN174]

*509 To address the financial unsustainability of the USPS's current
business model, the President's Commission Report [FN175] recommends
that the USPS become a =93digital postal network=94 by taking =93full
advantage of the Internet and other technological advances to perfect
value-added services that will better serve the needs of its
customers.=94 [FN176] In this regard, the President's Commission
recommends that the USPS become more Internet-dependent, both for
coordinating internal operations and for providing value-added
services to customers. [FN177] Intelligent Mail would apply a powerful
hybrid of leading-edge information technology to the delivery of
physical correspondence, [FN178] and full-service post offices would
be increasingly replaced by the provision of postal services to
businesses and homes over the Internet. [FN179] The USPS has already
made significant changes to its operations and service offerings
through increased reliance on electronic network technology and the
Internet. [FN180]

Given the unprecedented effect of the Internet on the financial
viability of the USPS, the implications of broadband access policies
for the postal system can be dramatic. Therefore, an appropriate
inquiry as to sustainability of policies affecting broadband access to
the Internet must include questions related to consequences for the
postal system. How will elimination of common carrier obligations in
the provision of broadband access to the Internet affect the postal
system? Will there be de facto erosion of common carriage of the
postal system that adversely affects customers? [FN181] Will the
geographic availability of postal service significantly deteriorate?
[FN182] What will be the implications for free speech rights? [FN183]
How might government interest in viewpoint diversity be adversely
impacted-keeping in mind that postal policies have long played a
significant role in the evolution of the press and other print media?
[FN184] How might individuals' free speech rights as speakers be
adversely affected? It certainly seems incongruous to eliminate common
carriage obligations for *510 providers of broadband Internet access
while simultaneously increasing the dependence of the USPS, a common
carrier itself, on the Internet. The network neutrality debate also
needs to address implications for the evolving, layered infrastructure
of the postal system.