No Forced Sharing

Published January 1, 2006

In his Two Treatises of Government that so influenced our founders, John Locke famously admonished that “the preservation of property” is the “end of government.” The founders certainly agreed protection of property is, if not the end, then a paramount government objective. Hence, the Fifth Amendment prohibits the deprivation of property without due process of law and the taking of private property for public use without just compensation.

The U.S. Supreme Court’s sharply divided decision last term in Kelo v. City of New London, rejecting the claim of New London, Connecticut homeowners that condemnation of their property to make way for a new urban redevelopment project violated the Constitution’s takings clause, has precipitated a torrent of new interest in property rights. Liberals are joining conservatives across the country agitating for Congress, state legislatures, and local governments to pass laws restricting government authority to condemn private property.

This heightened property rights sensitivity is welcome. Now there may be even a greater appreciation for the role respect for property rights can play in other areas. Here, I especially have in mind the development of sound communications policy.

Telecom Property

Within a week of Kelo, the Court decided National Cable Telecommunications Association v. Brand X Internet Services, a case that also implicates property rights. But because none of the Court’s opinions mentions the word “property,” it would be easy to overlook a significant property rights issue that Brand X leaves in its wake.

The Court affirmed the Federal Communications Commission’s (FCC) determination that broadband Internet services offered by cable operators are properly classified as “information services” rather than “telecommunications.” Shortly after the Brand X decision, the FCC reclassified telephone company-provided DSL broadband services as information services, too.

Under the Communications Act of 1934, telecommunications providers are common carriers subject to access requirements mandating their facilities be made available to all on a nondiscriminatory basis at regulated rates. So now, neither cable nor telephone providers of broadband Internet services–nor presumably broadband providers using other technologies such as wireless–is subject to common-carriage open-access requirements.

Despite Brand X, the FCC is still considering whether, under its nebulous “ancillary” jurisdiction, it should impose some form of open-access requirement on broadband network owners. For example, the agency has asked in a rulemaking whether it should mandate that unaffiliated information service providers that do not own facilities be allowed to share the capacity on the networks owned by cable and telephone companies. And, pushed by open-access advocates, Congress has before it legislative proposals to the same effect.

Assuming regulators do not set rates at a confiscatory level, imposing mandatory access requirements on common carriers does not raise serious property rights constitutional issues. Indeed, the nondiscriminatory access requirement is at the core of common carriage.

With respect to service providers that are not common carriers, however, mandatory access requirements raise a serious Fifth Amendment takings issue. By imposing access requirements on private operators, the government, in effect, is dictating that network owners allow their facilities to be used and physically occupied by others. Even assuming the government requires payment of access fees that might be determined to be “just compensation,” it is doubtful mandatory access should be considered a legitimate “public use” for Fifth Amendment purposes.

Avoid Network-Access Mandates

As a matter of policy, there is no need to dictate network-sharing when competition among facilities-based broadband providers is growing nicely. Mandatory facilities-sharing discourages investment in new and upgraded networks, thereby discouraging development of additional competition. As Justice Stephen G. Breyer emphasized in 1999 in AT&T v. Iowa Public Utilities Board, another case involving network access regulations, “[i]t is in the unshared, not in the shared, portions of the enterprise that meaningful competition would likely emerge.”

In our increasingly competitive communications marketplace, common-carriage obligations appropriate to the earlier monopolistic era no longer make sense. Sensitivity by policymakers and regulators to protecting the property rights of service providers is necessary to the development of a sound, market-oriented communications policy.

Jeremy Bentham put it this way in 1876: “It is only through the protection of law that I am able to enclose a field, and give myself up to its cultivation with the sure hope of a distant harvest.” Modern wags like to say: “Nobody ever washes a rented car.”

Randolph J. May ([email protected]) is a senior fellow and director of communications studies at The Progress & Freedom Foundation. This article is reprinted with permission of the National Law Journal, where it originally appeared.