In Just 218 Words, FCC Performs Private Property Slap-Down

by Mike Wendy on January 7, 2011

The FCC’s new Net Neutrality Order reveals a startling lack of respect for private property.

Wait.  Check that.  Startling?  I guess I shouldn’t be so surprised.

The Order – guided by such anti-property zealots as the Berkman Center, Free Press and Public Knowledge – yields only two short paragraphs (149 & 150), or just 218 words (minus footnotes) out of 194 pages, to 5th Amendment / takings of private property arguments.

Why?

I guess it’s an inconvenient truth.  The Internet is largely privately owned and operated.  That’s why it’s so successful.  But, if Chairman Julius Genachowski were to amp-up the private property-driven success of network providers, it might not only run afoul of its own Internet-as-public-good mythology, it may also force the agency to allow true “just compensation” for the property the FCC’s just “taken” from the network providers themselves.

Paragraph 149 holds this chestnut:

“…Our rules do not compel new services or limit broadband providers’ flexibility in setting prices for their broadband Internet access services, but simply require transparency and prevent broadband providers—when they voluntarily carry Internet traffic—from blocking or unreasonably discriminating in their treatment of that traffic.”

Wrong, Julius.

Your Order is exactly the opposite of what you claim there.  It compels access by unaffiliated third parties for all new services as long as they’re lawful (e.g., at paragraph 63 of the Order, “A person engaged in the provision of fixed broadband Internet access service…shall not block lawful content, applications, services, or non-harmful devices, subject to reasonable network management”).  And, it limits how such access can be priced by network providers for the use of their networks by those third parties (e.g., at paragraph 76, “…as a general matter, it is unlikely that pay for priority would satisfy the ‘no unreasonable discrimination’ standard”).

With its Order, the Commission exploits a modern Greek tragedy.  Network providers develop a successful business model that enables other channels of media (e.g., radio, TV, DBS, newspapers, video programming, blogs, gaming, etc.) to speak through its private facilities, and yet the FCC rewards network providers by essentially stripping their property rights.

As one commenter notes:

“…In essence, net neutrality would grant Internet content providers a permanent virtual easement across privately-owned broadband networks to deliver content to end-users. It thus would deprive broadband providers of the right to exclude others from their networks – a right that the Court’s takings jurisprudence has repeatedly dubbed ‘one of the most essential sticks in the bundle of rights that are commonly characterized as property.’”

It’s as if in the act of offering what the public wants, a constructive easement / adverse possession / or “Kelo” swap has involuntarily occurred, eviscerating a network provider’s right to dispose of its property as it sees fit.

Those in the industry call this a “regulatory takings.”  The Commission knows that for the 5th Amendment to come into play and protect network providers, such a takings must meet a high standard.  “Compelled permanent physical occupations of property” is a key term of art in this context.

I think that standard can be met, however.

Don’t transmission / capacity issues effect a permanent physical occupation? It’s traffic after all, which is a physical characteristic; and that traffic gets congested at times, slowing downloads and bumping calls.  More specifically, that traffic is made up of electricity (a physical property) and computer instructions (which direct physical properties), with the sum effect being that they occupy the resources of network providers – 24 hours a day, 7 days a week, 365 days a year – in order to connect any communications.

At least one industry expert seems to see it this way, too.  Jim DeLong, Vice President and COO at the Convergence Law Institute, writes:

“…to fail to view a stream of electronic energy as physical seems to demonstrate a certain lack of imagination, but in any case it would seem like the more rigorous standard could in fact be met, since bandwidth is not infinite and its compulsory use for one purpose precludes its use for another possibly more profitable one.”

The Commission, of course, does not agree.  It reserves the right to be arbitrary and capricious.  Networks providers should know that the agency could expropriate their property at any point in this “iterative process”.

Exclaims the Order:

“…the history of broadband Internet access services offers no basis for reasonable reliance on a policy regime in which providers are free to conceal or discriminate without limit…”

Translation?  The Commission has the network providers’ property by the short hairs.

Ironically enough, virtually zero of the “concealing part” has occurred.  And, as to discrimination, heck, I want my network provider to have such flexibility.  The whole of our economy is built on it.  Just look at grocery stores, or airfare, or mail service.  It’s an important tool that maximizes resources, provides needed return on investment, and, in the end, serves consumers with the things that they value.  Internet services are no different.

But, in the FCC’s eyes, they are different – they are basically public property.  And that’s why the untethered agency can get away with only 218 words to derogate a principle – i.e., protecting and respecting private property – which even the UN recognizes as integral toward the betterment of mankind.

Quite simply, the FCC’s Order is a redistribution / theft of property by another name.  If, as one FCC official recently put it, this is just the first step in a long process, how long can the FCC expect that private risk and investment will go toward building the Internet?

Not long, I suspect.  Sadly, maybe that’s what the FCC and their simpatico, anti-property zealots have wanted all along.

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