Katherine Mereand-SinhaProfessor Lesley FairConsumer Protection

May 3, 2012

Internet Service Providers as common carriers:

A New Regulatory Landscape

“In every era, America must confront the challenge of connecting our nation anew. In this era, broadband can be our foundation for economic growth, job creation, global competitiveness and a better way of life. In the 1860s, we connected Americans to a transcontinental railroad that brought cattle from Cheyenne to the stockyards of Chicago. In the 1930s, we connected Americans to an electric grid that improved agriculture and brought industry to the Smoky Mountains of Tennessee and the Great Plains of Nebraska. In the 1950s, we connected Americans to an interstate highway system that fueled jobs on the line in Detroit and in the warehouse in L.A. Infrastructure networks unite us as a country, bringing together parents and children, buyers and sellers, and citizens and government in ways once unimaginable. Ubiquitous access to infrastructure networks has continually driven American innovation, progress, prosperity and global leadership.” — From the introduction of The National Broadband Plan

“A positive modern trend among the world's competition and consumer protection authorities is a growing recognition that skill in implementation and the quality of institutional arrangements shape policy results.” — William Kovacic, 2008, then Chairman of the Federal Trade Commission

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Introduction

The last twenty years has seen the growth from essentially no for-profit activity in

Internet service provision to a vast series of industries predicated on omnipresent data

networks’ presence. The Internet service provider (ISP) networks are critical infrastructure

for our economy at present, as well as any credible conception of how our economy will

evolve. This paper proposes that ISPs should be designated as common carriers and thus

would fall under the Federal Communications Commission’s (FCC) Title II authority for

regulation. At the same time, this paper advocates that a necessary and concomitant

regulatory realignment would be removing the statutory exemption that carves common

carriers out of the Federal Trade Commission’s (FTC) jurisdiction.

As the Internet has come of age,1 it is time to regulate it the communications

infrastructure that supports it in the same way other communications infrastructure is

regulated. At the same time, as the digital era has threaten to seriously erode privacy and

threaten consumers in various ways, it is time that telecommunications carriers and all

industries that transmit and compile consumer data are subject to the same consumer

protection oversight.

It has only been a decade since the FCC declared that the Internet was an

information service and thus outside of its jurisdiction, a decision that the 1996

Telecommunications Act (the Act) required the FCC to make one way or the other. That is

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1 There is ongoing discussion to suggest that Internet access may be considered a human right or at least a necessarily tool to ensure all people are able to achieve human rights. Adam Clark Estes, Th U.N. Declares Internet Access a Human Right, The Atlantic Wire, June 6, 2011, available at: http://www.theatlanticwire.com/technology/2011/06/united-nations-wikileaks-internet-human-rights/38526/.

because in the nineties this sector was emerging from research labs, beginning to affect

our society as a whole, but no real momentum had formed behind its progress. Today, it

comprises tens of thousands of companies relying on each other and building value upon

the foundation of the underlying services others provide. Whereas before the need was to

nurture and leave unburdened, now the need is to coordinate, stabilize, and ensure that

new forms of value can gain take form knowing that underlying services will be

omnipresent, predictably affordable, and interoperable.

This is the culmination of a conceptual idea, “ubiquitous computing” introduced by

Mark Weiser from Xerox PARC who coined the term in 1988. “Ubiquitous computing

names the third wave in computing, just now beginning. First were mainframes, each

shared by lots of people. Now we are in the personal computing era, person and machine

staring uneasily at each other across the desktop. Next comes ubiquitous computing, or

the age of calm technology, when technology recedes into the background of our lives.”2

Behind ubiquity lies critical infrastructure, and necessary to such infrastructure is regulation

to ensure competitiveness, fairness, and universal access in the face of industry that would

structurally tend toward monopoly.

During the personal computer era as internet infrastructure was being built out, the

Federal Communications Commission followed the course of non-intervention, allowing

the nascent internet industry to develop without the burdens of regulation. It now must

reverse itself. The underlying infrastructure of the internet is conceptually analogous to the

airwaves and the telephone lines–as well as public utilities like water and electricity– in that

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2 Widely attributed as the late Mark Weiser’s most quotable sentiment.

none allow for easy market entry and the type of competition in lines of commerce that do

not rely on limited resources like bandwidth, copper wires, or fiber optic cables.

There are a number of areas where this reevaluation must take place, largely having

to do with mediating between telecommunications firms that provide the carriage services

for the data that underlying the activities of the rest of the sector–and much of the rest of

the economy, with an eye towards balancing the need to encourage building out the last of

the infrastructure to underserved areas and preparing for the next step of yet higher-speed

data transfers. The current solution that the FCC has adopted, net neutrality, is a

necessary but insufficient solution to fully regulating broadband networks for fairness,

competition, and transparency.

While applying common carrier status. Peering agreements should be examined for

potential cartels, or impermissible collusion, as well as illegal restraints of trade. “Non-

facility” operators should be classified as “common carriers”, granting them the legal

immunities against the data they carry that they have sought for years, but also

encumbering them with obligations to offer their services to all comers. Finally, as it has

after the last shift, from rail to telephone, the definition of “common carrier” itself needs to

be updated, reflecting the realities of the new primary network carrying trade and

commerce in our time.

I. What is a common carrier?

The argument to designate ISPs as common carriers is broader than the push to

move regulatory authority to the FCC. Common carrier designation predates

telecommunications and the major telecommunications acts. Common carrier designation

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has a long history related to the major commercial enterprises that have grown the US

economy from the very start.

A. Public Utilities

The concept of common carriers is historically tied to the idea of public utilities; that

there are some services that are so necessary to the public welfare that the government

must either provide the service directly, or find some substitute (the private sector, usually)

to take its place. The responsibility of government to provide the service remains, even

when actual delivery of it has been delegated. From that responsibility is derived a special

mandate for regulation and oversight.

That principle began with the tendency of courts to apply burdens to certain

businesses, on the grounds that while the government may not be offering the service, it

had a responsibility to do so, and thus the implicated businesses had a responsibility (now

being extended by the government. in the form of those courts) to act in the public

interest. Carriers (businesses that were integral to the delivery of goods and the existence

of commerce) were the first to have this doctrine applied to them.

The the genesis of common carriers as a term generally begins with these judicial

mandates over “common” or regularly or habitually operated business that were “carriers”;

vessels3 through which commerce was conducted, and eventually including services

required for its conduct, rather than the businesses that were the end goal of the

commerce itself. Specifically, the tendency of courts in an earlier era was to uniquely

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3 Sometimes literally ships.

“impose insurers’ liabilities on [carriers] for goods carried”4. Over time courts interpreted

this practice to apply a unique and different legal treatment to carriers in all areas of activity.

Meanwhile, the insurance mandate faded into the implied assumpsit doctrine that applied

to all business activities, but the classification of common carrier persisted due to two

peculiarities. The first was the nature of the contract that animated the commerce they

carried. As their services were not generally pegged to a specific price, they could not avail

themselves of the assumpsit remedy, but rather had to hold the goods carried hostage for

a “fair” price. Second, they, like innkeepers and smiths that were eventually added to the

category, were generally available services, (“common”), not specially contracted, and vital

to travel and commerce. Should an innkeeper refuse to give a traveller a place to stay

without reason, or a smith to fashion horseshoes on a whim, travel would be rendered far

more risky, and perhaps impossible. While these services may seem mundane, the

principle of duty-to-deal irrespective of the consumer’s identity is very significant, and

remains a part of the overall common carrier doctrine to this day.

Individual categories of businesses would be added to the list of common carriers,

and eventually subtracted. The innkeeper and smith were replaced by changes in

transportation modes (and the speeds they allowed). The concept would be applied

“successively [to] the stagecoach, turnpike, canal, hackman, ferry, railroad, baggage

transfer, express, pullman [(sleeper railcar)], motor carrier, and airplane.”5

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4 Irwin Rosenbaum, The Common Carrier-Public Utility Concept: A Legal Industrial View, 7Journal of Land & Public Utility Econ. 155 (1931) [hereinafter Public Utility].5 Public Utility, Supra.

The concepts involved were then reapplied to public utilities generally. A variety of

businesses, while perhaps not directly necessary for commerce, were said to be “public” in

nature.

B. The Railroads

The legal history of regulating competitive conduct in “networks” of privately owned

trade-critical infrastructure essentially begins with the railroads. In 1876 the Supreme Court

upheld local Illinois mandates regarding grain elevators on the grounds that common law

had always required that “public callings” (facilities upon which there was widespread

economic reliance) must be operated in concert with the “public interest”, regardless of

private owners’ wishes.6 The Interstate Commerce Act of 1887 (ICA)7 applied that doctrine

to the railroad industry, and created the concept of a common carrier, an entity that offered

access to its network to the “general public” (rather than being a facility designed and

marketed to be used internally or by a small group of market participants). While antitrust

law would not exist for another few years,8 the idea that misuse of these networks could

be profoundly anticompetitive permeated the provisions of the ICA. In short order, the ICA

would be followed by the Sherman Act, the 1906 Hepburn Act that gave the Interstate

Commerce Commission (ICC) the authority to order interconnection and mandate through

routes, the 1910 Mann-Elkins Act that would require network owners to establish both

interconnection and through-routes without ICC order, and finally the 1920 Transportation

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6 Munn v. Illinois, 94 U.S. 113 (1876).7 49 U.S.C. § 1.8 Although some states began passing antitrust laws earlier, the Sherman Antitrust Act was passed in 1892. 15 U.S.C. § 1.

Act that required railroads to extend their lines and build facilities to facilitate

interconnection. The resulting statutory regime encouraged a large rail network on which

other businesses could rely, and on which new business models would depend.

C. Public Telephony

Common carrier status was applied to public telephony in 1910. What was

fascinating about the regime is how little change was required when, with telephony

increasing in popularity by leaps and bounds, first the Mann-Elkins Act,9 and then Title II of

the Communications Act of 1934 extended the common carrier regime to interstate

communications by wire. Many of the arguments mustered today of the “essential

qualitative difference between traditional telephony and the new data networks” were far

more credibly employed by those pointing out immediate and self-evident differences

between railroads and telephone networks. Nevertheless those more credible arguments

were still tossed aside in favor of recognizing that the chief characteristic, that a network

carrying the commerce of the day must be open, non-discriminatory with respect to other

market participants, and reasonably priced to encourage that commerce it carries.

Most of the questions at hand with the various ISPs have been answered with

respect to telephony over the last 80-100 years. The argument that Quality of Service

(QoS)10 was required to protect the network against customer uses that might

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9 The Mann-Elkins Act of 1910 gave the Interstate Commerce Commission the authority to regulate telecommunications (telephone, telegraph, and radio) as common carriers.10 QoS is the guarantee a certain "quality of service" to some applications/users is implicitly at the cost of the quality of service left to other applications or users. (i.e. net neutrality requires QoS shaping.)

compromise its quality was answered in 1968 by the FCC over the issue of the

Carterphone.11 Based on that ruling, all non-illegal products the customer might wish to

connect to the network must be allowed by the network operator, and if that connection

was to be regulated, it would be regulated by the FCC, and not by the network operator.12

The Telecommunications Act of 1996 was very hesitant to regulate the nascent

Internet, which had only really been commercialized two years earlier. For this reason, they

gave the FCC authority to determine what networks and which services fell under the

banners of “telecommunications service” and which under “information service”. The only

guidance given was that the former were supposed to regard carriage services where the

content or form of the communication wasn’t changed meaningfully from the end-user

perspective.

II. Challenges to common carrier Status for ISPs

Many interest groups, and many ISPs first among them, are less than excited about

common carrier status. The challenges to such an approach argue for freer markets, but

such arguments occlude the reality that ISPs have near-monopoly control of the services

they provide. Nonetheless, the standard argument against regulations, that of cost, loss of

revenue, and diminished innovation, are arguments against applying common carrier

status to ISPs.

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11 In the Mater of Use of Carterphone, 13 F.C.C.2d 420 (1968).12 That precedent has yet to be directly applied in the digital era, however, as in 2008 the FCC under Chairman Kevin Martin denied Skype a Carterphone application. Nonetheless, the new interconnection requirements that the FCC included in their November 2011 rulemaking does move toward making Voice Over IP (VoIP) a telecommunications service. Report and Order and Further Notice of Proposes Rulemaking, Connect America Fund et al., 26 FCC Rcd 17633 (2011).

Weighed against the arguments laid out for why common carrier status might

improve the competitiveness of the bandwidth market is the question of the economic

viability of ISPs generally. Often the argument is raised, both in terms of QoS/network

neutrality as well as regulated interconnection, that without the ability to capture revenue

capture through selling preferentially QoS to content and application providers (CAPs),13

ISPs will not be able to offer as inexpensive rates as they do currently, invest in

infrastructure innovation and improvement, and yet stay in business.14 ISPs and their

advocates further argue that without the ability to further monetize existing infrastructure,

they will not be able to raise the capital required to perform expensive upgrades to the

capacity, performance, and capability of the nation’s network infrastructure.15

Generally, controlling for a fixed revenue extracted from a given capital investment,

the least distorting pricing structure is the one that involves the least deviation from either

flat pricing or resource-consumption metered pricing.16 Exclusive agreements, in particular,

distort the market, shifting producer and consumer surplus to the network owner in terms

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13 Watal, Aparna, A Co-Regulatory Approach to Reasonable Network Management, 1 Journal of Information Policy 155-173 (2011).14 Robert Hahn & Scott Wallsten, The Economics of Net Neutrality, AEI-Brooking Joint Center Working Paper No. RP06-13 (2006), available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=943757.15 Nicholas Economides & Joacim Tag, Network Neutrality and Network Management Regulation: Quality of Service, Price Discrimination, and Exclusive Contracts, NET Institute Working Paper No. 11-02 (2011).16 Flat pricing is the proposal of net neutrality.

of the party holding the exclusive contract, and generating dead-weight loss to both in

terms of the excluded parties.17

The harms of selectively free interconnection–peering agreements18 among Tier 1

ISPs–are perhaps harder to explain, as forgone revenue seems less injurious than

extracted revenue.19 Nevertheless, by creating this free peering situation that courts implicit

collusion, each member is certain to have access to the entirety of the long-distance

“backbone”20 as well as through their peers, any consumers or service providers interested

in using that backbone. This means in all negotiations with other T2/T3 ISPs, their

bargaining position is markedly strengthened; while they may wish the ISPs’ business, they

know they’ll be able to route to the customers of those ISPs regardless, and for little to no

cost. Conversely, the T2/T3 ISP may have no choice but to connect to one or another T1,

or lose access to most of the Internet altogether. 21The result of this are negotiations that

are distorted, pricing regimes that are slanted against the downstream ISPs (and through

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17 Monopolists and monopolistic service providers are able to extract economic rent from consumers who have little to no choice in services.18 ISPs using peering agreements to allow interconnection on their networks so that other ISPs can route traffic without building additional lines.19 “ISPs historically have been differentiated by “tier,” based on their ability to reach various parts of the Internet: Tier 1 ISPs are able to reach the entire Internet without purchasing transit from other ISPs, while Tier 2 or 3 ISPs must purchase transit from other ISPs in order to reach some addresses.” In the Matter of Applications Filed by Global Crossing Limited and Level 3 Communications, Inc. for Consent to Transfer Control, 26 FCC Rcd. 14056 (2011) [hereinafter Global Crossing].20 Id. at 11.21 Rob Frieden, Rationales For and Against FCC Involvement in Resolving Internet Service Provider Interconnection Disputes,ExpressO (2011),available at: http://works.bepress.com/robert_frieden/27.

pass-through pricing, their customers), and gains for the Tier 1 parties that are solely the

result of a market structure that invites implicitly collusive behavior.

Further, the insularity of these peering agreements prevents other ISPs from being

able to make a financial case for challenging any one of them in the long-haul backbone

market. Because they will have to pay to access most consumers and service providers,

they may never be able to compete on pricing with the Tier 1 and still maintain profitability.

This not only radically increases the barriers to entry in that market, but also disincentives

additional capital investment in the nation’s network infrastructure.

The problems with QoS traffic shaping are much easier to describe, which explains

the mass movement for network neutrality that has arisen in the last few years. Essentially,

while it may be reasonable to preserve service quality by shaping traffic for or against some

uses, offering exclusive “priority routing” or even actual pure exclusivity is incredibly

damaging to the ability of service providers and consumers to meet in the market place.22

Without a massive expenditure, it’s highly unlikely any one service provider will be able to

buy their way into preferential access to all customers, limiting the base of customers to

whom they may offer their products.23 Alternatively, should they be able to secure that

access, they will have entirely shut out their competitors, and bought themselves a

monopoly position. Against these harms, even if prices must rise, that increase would be

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22 See generally, Skype Communications S.A.R.I., Comments, WC Docket No. 07-52 (January 14, 2010).23 Id.

less injurious than these other attempts by ISPs to further monetize their existing

infrastructure.

III. Telephony & the Internet

Finally, as it has after the last shift, from rail to telephone, the definition of “common

carrier” itself may to be updated, reflecting the realities of the new primary network carrying

trade and commerce in our time. As the common carrier doctrine has evolved, updated as

it was applied to different types of commerce network infrastructure, the rights and

obligations of carriers may have changed. Such a redefinition would sensibly fit with the

regulatory agency that oversees the last critical common carrier infrastructure of the

twentieth century, the FCC.

At this point, voice communication and data links to the Internet are almost

indistinguishable from one another; they run over the same medium, are delivered by the

same end-user providers, and indeed often the former is routed over the latter.

Nevertheless, they are regulated very differently.

A. The Market

The economic realities of Internet, and the technology sector, are that all of the

above represent necessary infrastructure, but relatively little of the innovative activity or

growth of the sector. Instead their significance lays in the fact that the vast majority of the

market capitalization of the technology sector depend on ISP connects, and the market

participants choose how and which services to provide based on the nature, quality, and

cost of the end-user links generally extant across the country. Notably, despite being the

birthplace of the Internet, the US has (on average) slower and less reliable end-user data

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connections than many other first world nations.24 Among the consequences of this are

relatively light use of data-intensive services that are found pervasively in some other

nations. The relatively light regulatory approach, heralded as encouraging investment in the

sector and healthy competition between proliferating market participants, has instead left

us with an aging and undercapitalized infrastructure network and oligarchic competition.

B. Telecommunications Services or Information Services

Much has been made of the statutory dichotomy between telecommunications

services and information services, and the FCC’s decision to classify ISPs as the latter (a

grouping far less subject to regulatory oversight).25 What most who comment on this miss,

is that the FCC’s classification was likely an attempt at an end run around the courts on an

unrelated question; can the FCC regulate local calls (and even ad hoc contracts regarding

local calls) between “incumbent local exchange carriers” (ILECs, largely the Baby Bells)

and “competitive local exchange carriers” (CLECs).26 Essentially, the interconnection

regime governing local calls made provision for per-connection payments from originating

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24 As there is little competition in the market, there is no pressing business case for investing in expensive infrastructure improvements to improve service quality, which has led the US broadband market to stagnate, with an average throughput less than 70% of the average for the OECD as a whole, and less than 20% of the average speed of the leader, Japan. The much slower network naturally impacts bandwidth intensive uses, making many impractical to offer to the American public, or unprofitable due to the paucity of connections with the requisite speed. The OECD Broad Band Portal, available at: http://www.oecd.org/document/54/0,3343,en_2649_34225_38690102_1_1_1_1,00.html (last accessed May 3, 2012). 25 The 1996 Telecommunications Act provides the FCC with regulatory oversight of telecommunications services. In 2002 the FCC declared that broadband was an information service, not subject to Title II jurisdiction under the Act, and that decision was upheld by the Supreme Court. See Nat’l Cable & Telecom. Ass’n v. Brand X, 545 US 967 (2005) (upholding the FCC ruling based on Chevron deference).26 Barbara Cherry, The Rise of Shadow Common Carriers: A Legacy of Deregulatory Broadband Policies, September 24, 2011, available at SSRN: ssrn.com—abstract=1995162 [hereinafter Shadow Common Carriers].

LEC to receiving LEC, but the development of specialized CLECs providing services to

ISPs meant that they were able to capture huge amounts of these connection fees without

paying any in turn. When the FCC attempted to intervene, the CLECs claimed it was

exceeding its statutory authority. Courts threw out the argument the FCC attempted to

advance that a call to an end-user ISP wasn’t a single communication, but merely a stage

along the routing of a communication through to the destination across the internet, thus

making the long-distance compensation formula the one to use. To achieve their goal of

buffering the ILECs from the CLECs’ demands, the FCC declared the end-user ISPs

information services, regulated under a different section of the 1996 Telecom Act, and thus

subject to its mandates in this regard. While that was a canny strategy, that determination

oughtn’t weigh into any stakeholder’s evaluations of what policies might be appropriate to

oversee network operators. That previous designation was merely a convenience.

IV. A Technical Look at the ISPs

If a network is comprised of computers linked together, the Internet is comprised of

networks linked together. It reveals an important, if obvious truth; those links are the sine

qua non of being a part of the Internet. Access to the Internet is extended to various types

of consumers (residential customers, companies, wireless customers, Internet content

providers, etc) by a few types of Internet service providers (ISPs) that connect those

consumers to their own networks, which are generally classified by the nature, topology,

and financial arrangements of their connections to other Internet-connected networks. As

a shorthand, three Tiers describe these interconnections between ISPs, and have broader

significance in describing the market position of each ISP. At this time, the FCC does not

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directly regulate the provision of those links within the US.27 In the absence of that

regulation, these Tiers have evolved to have great significance in terms of the structure and

competitiveness of the US telecommunications market.

A. The Tiers

Tier 1 ISPs are those with peering agreements (no-cost interconnection contracts;

more on these later) with other Tier 1 ISPs. Partly as a result of these peering agreements,

Tier 1 ISPs’ networks are often considered the backbone of the Internet, especially after

the government-operated public backbones were sold off or went dark. Generally

speaking, they refuse to sign such agreements with any other market participants, instead

metering access to the Tier 1 providers in such a way as to reinforce that distinction, and

their market position. Many, if not most, are global in reach, largely providing services to

other ISPs and large content providers, with all the others (the “regional” Tier 1s) being

large national or multinational full-service (consumer as well as commercial) telephony

providers. There are 10 Tier 1 ISPs worldwide.

Tier 2 ISPs are those that are forced to pay for connection to one or more Tier 1s,

and in turn are paid by the Tier 3 ISPs. Some are large enough to dwarf many of the Tier

1s in terms of customer base, revenue, etc., but critically, they don’t maintain enough of

the backbone to be accepted by existing Tier 1s into the peering agreement “club”.

Tier 3 ISPs pay to link to Tier 2 networks, and perhaps a Tier 1. They are generally

small, often outside major markets, and often do not offer ancillary services (cable, mobile

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27 The FCC may, however, be considering such regulation. See Glenn Kelley, Classifying an ISP – New Regulations by the FCC, HostMedic, February 4, 2012, available at: http://www.hostmedic.com/admin/telecom/classifying-an-isp-new-regulations-by-the-fcc/.

phone, or even land-line telephony). Critically, they are often the providers for small or

medium sized companies, even in major markets.

B. How they Peer

The significance of these peering arrangements cannot be overstated. As what is

essentially an “interconnectivity cartel”, the peering agreements enable member ISPs to

bargain far more aggressively with non-members, secure in the knowledge that their best

alternative to a negotiated agreement is to continue to be connected with several other

ISPs.28 That happy situation is not the case for the Tier 2 ISP, which must pay for each

connection, and in each negotiation for connection assumes that payment must occur,

that most viable Tier 1 connections will be substantially similar in price, and that the lack of

an agreement with at least 1 Tier 1 ISP (viz. the lack of connection to the Internet) will be

catastrophic. This asymmetry implicates every Tier 1/Tier 2 negotiation.

Further, an essential peering cartel preserves marginal cost advantages to the Tier 1

operators when they compete with Tier 2 ISPs for customers, whether end-user or other

ISPs. The Tier 1 lack of cost to the Internet “backbone” ensures per-unit-data advantages

that can be factored into pricing. Only the general diseconomies of scale and extant

regulations prevent the Tier 1 providers from entirely replacing Tier 2 and 3 operators.

C. Intercarrier compensation

In 2002, the FCC ruled29 that under the 1996 Telecommunications Act (the Act)

broadband cable modem service was an “information service” because Internet access

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28 Global Crossing, supra.29 In re Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities, 17 FCC Rcd. 4798, 4802-4803, P9 (2002)

manipulated and stored information and therefore broadband did not fall under Title II

mandatory jurisdiction of the act, instead it was only regulatable under the FCC’s title I

ancillary jurisdiction which is much weaker. The Supreme Court upheld the FCC’s decision

in Brand X30 based upon Chevron deference, the legal doctrine under the Administrative

Procedures Act with gives regulatory agencies wide discretion to interpret their own

regulations. Thus through Brand X the Supreme Court codified the decision the FCC made

in 2002 and fundamentally weakened future Commission’s ability to regulate broadband.

Nonetheless, in 2010 a new Commission sought to regulate broadband through the

National Broadband Plan (NBP).31 NBP included goals of rewriting the Universal Service

Fund (USF), a fund developed to make communications affordable across the US, to apply

to broadband, to redo how intercarrier compensation works, both of which the

Commission achieved in the November 2011 USF Reform rulemaking.

While the FCC has moved forward regulating broadband, the did so in the face of

Brand X and a decision in Comcast32 v. FCC.33 Their authority under the Act is both murky

and under attack in a new lawsuit.34 The theory, however, appears to be that they are

claiming Title II jurisdiction for a portion of broadband service, namely the transmission

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30 Nat’l Cable & Telecommunications Ass’n. v. Brand X Internet Servs, 545 US 967 (2005)31 Connecting America: The National Broadband Plan. Mandated by the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5).32 The FCC does not posses authority to regulate services classified as Title I.33 600 F.3d 642 (D.C. Cir. 2010)34 John Eggerton, Net Neutrality Suit Players Agree to Briefing Schedule, Broadcasting & Cable, April 23, 2012, available at: www.broadcastingcable.com—483517-Net_Neutrality_Suit_Players_Agree_to_Briefing_Schedule.php.

component. This theory follows some of the original thinking on the issue, and it was

recognized in the Ninth Circuit in the lower court’s opinion on Brand X.

(Now former) Commissioner Copps "The only way the Commission can make

lemonade out of this lemon of a decision is to do now what should have been done years

ago: treat broadband as the telecommunications service that it is."35

Network Neutrality is the principle that “networks”, systems that carry other

commerce and are vital for the latter’s continuance, provide access openly to all comers,

do not discriminate against any user or their wares in favor of other users, or other types of

wares, charge fees that cover costs and ensure a profit but are not prohibitive to the use of

the system, and generally avoid interference or entanglement with the users and their

wares.

Applied to telecommunications, it generally implies that pricing be linked to usage

amounts, not purposes (either in terms of circuits occupied, or data transferred, pricing

ignore content, sender, and recipient in its fee structure, and that no attempts be made to

prioritize, delay, or block data based on the same (content, sender, or recipient).

The FCC regulates the activity of telecommunications carriers in the public interest,

but as was highlighted in the 2008 FTC Act that was not passed, the FTC has the skill to

look at billing, advertising, and other consumer protection authority. The agencies both

manage overlapping jurisdiction with other agencies (CFPB, DOJ, FDA, etc), and this

would bring section 5 unfairness standards to what is now a very unregulated area of

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35 Statement of Commissioner Michael J. Copps on the Comcast v. FCC Decision, Press Release, April 6, 2010, available at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-297368A1.pdf.

billing by telecommunications carriers. It would also be appropriate because the FTC has

come out on front on privacy, and fairness in privacy standards that are uniform across

similar industries is critical to privacy. Why make Facebook & Google have strict privacy

standards if mobile phone carriers and ISPs do not have similar responsibilities.

D. A Different View: The User’s Point of View

From a consumer’s standpoint, the Internet is divided up differently; the Tiers are

largely opaque and irrelevant. Instead, a physical geometry becomes chiefly important;

their end-user ISP links to other backbone ISPs and brings that link across the “last mile”,

the space between a significant communication node and the end-user’s premises.36 With

the advent of wireless connections routed over the mobile phone networks, people

desiring devices that use that type of link have three or four choices of providers (though in

practice, if a particular device is desired, there are only one or two options to choose from).

This market topology agnosticism has been used by large ISPs to argue that

competition regulations are unnecessary; that Shumpterian dynamic competition is

rendering existing wireline monopolies meaningless, and that cross-medium competition

preserves the market in network access irrespective of the lack of competition within each

medium.

This argument is flawed; as a result of free carriage from end-user to the backbone,

a Tier 1 operator competing in the end-user market has the same price advantages

(multiplied a few times as a result of bypassing both the Tier 2 and Tier 3 layers) as it does

20

36 David Alderson, Technological and Economic Drivers and Constraints in the Internet's "Last Mile", California Institute of Technology (2011).

in the intermediate networks (Tier 2) market. It isn’t a coincidence that in most American

major metropolitan areas, the major end-user options for connectivity are Tier 1 ISPs like

Verizon, AT&T, CenturyLink, T-Mobile (Deutsche Telecom), and Sprint. The only major end-

user access provider that is not a Tier 1 operator is Comcast.37

The market power of ISPs are being exercised in another manner, that relates

directly to network neutrality/common carrier obligations;38 ISPs have begun to demand

that content and application providers (CAPs) such as Netflix, Youtube, Facebook, Vonage,

pay a surcharge, or that their direct ISP pay one on their behalf (and naturally, pass those

costs on).

Some have started to publicly muse that access to their networks by certain

content providers should be metered not by amount of data, nor even data+surcharge, but

even a percentage of revenues or profits. This content awareness is being used as a new

form of abuse of dominance, with Verizon desiring to protect its telephony business by

adding charges for VOIP usage, while Comcast wishes to protect its cable television

division by charging Netflix and iTunes for the delivery of their media.

Beyond interconnection, another threat to the use of that infrastructure in a way that

encourages growth and market-building is the rise of QoS traffic shaping, where ISPs can

shape the bandwidth capacity available to a given use or user, in a manner almost entirely

21

37 Amy Thompson & Todd Shields, Comcast Starts Web Toll Booth, Netflix Supplier Says, Bloomberg, November 30, 2010, available at: http://www.bloomberg.com/news/2010-11-30/comcast-starts-online-video-toll-booth-netflix-web-partner-level-3-says.html [hereinafter Toll Booth].

38 Id.

hidden from the parties communicating, up- or down-stream. This is what “network

neutrality” aims to ban.39

In an environment where nascent services must financially compete with unrelated

entrenched service providers, new markets are strangled, and new services are slower to

emerge. Because the US does not control the entire Internet, and the EU is far m40ore

skeptical of QoS, an incentive is created to locate physical presence and eventually staff

overseas, where market access is more assured. The threat of QoS is particularly troubling

because both the down-stream end-user and the up-stream service provider may never

know they are the victims of traffic shaping. Because priority routing is what is being sold,

at times there may be no congestion; the end-user may have a very reasonable

experience. It will degrade far more rapidly than the increase in data traffic would imply, as

the end-user’s traffic may/will be the marginal, non-prioritized data that is delayed once

congestion increases. This in turn threatens services that rely on roughly real-time data

flows, such as streaming video, video conferencing, games, IP telephony, even the

nascent “augmented reality” applications.

The lack of transparency is even more challenging, because some use of QoS is

required every day simply to ensure routing takes downstream congestion into account

when settling on a patch. In other words, a mandate to reveal any use of QoS would be

meaningless, as the answer would always be “yes”. Sale of “priority routing” then becomes

22

39 See Public Knowledge, Network Neutrality, available at: http://www.publicknowledge.org/issues/network-neutrality (last accessed May 3, 2012).

40 EU Regulator Warns Against Internet Restrictions, Reuters, April 19, 2012, available at: http://www.reuters.com/article/2012/04/19/eu-internet-idUSL6E8FIFGS20120419.

even more difficult to detect, isolate, and consider. To a large degree, the service provider

worried about delays and considering whether to pay for it cannot determine if delays or

service degradation they have suffered were the result of others’ priority routing, or simply

inevitable misrouting or congestion that could not be avoided. It is impossible to make

considered decisions in an environment of such poor information, only damaging the

market behavior of all the stakeholders in this strata of the tech sector.

Finally, and most troubling, some proposed QoS contracts involve actually blocking

or banning some service providers or services, either due to the payment of a competitor

for “exclusive access” or because of non-payment of a specific access fee.41 Notably,

many cable-tv owned ISPs are considering charging Netflix and other streaming video

providers (who compete with their other non-ISP business) for access to their broadband

customers. While the last is very possibly a violation of existing abuse of dominance

provisions within antitrust law, the former still make the network architecture of this country

more and more opaque, and difficult to innovate upon.42

V. Regulatory Considerations

A. FCC Public Interest Standard43

The FCC operates under a “public interest” standard whereby many of its decisions

and actions must be in “the public interest, convenience, and necessity.” Such a standard

23

41 Toll Booth, supra.

42 FCC's USF/ICC Order: How It Affects Wireless Providers: CommLawBlog, available at: http://www.commlawblog.com/2011/12/articles/cellular/fccs-usficc-order-how-it-affects-wireless-providers/ (last accessed May 2, 2012).

43 Eric Krasnow & Jack Goodman, The “Public Interest” Standard: The Search for the Holy Grail, 0 Fed. Comm. L.J. 605 (1997-1998) (discussing the history of the FCC public interest standard staring in 1912).

even allows for otherwise unfair or anticompetitive actions by industry if outweighed by the

public interest.44

While critics of the public interest standard may refer to it as “vague to the point of

vacuousness,”45 it might be more accurate to tie the public interest standard to the

overarching priorities of the Commission at any given moment in time.46 That is not to

suggest that the standard is unbounded as critics would assert,47 but rather that any

micro-decision can be overlooked for the greater good in communications policy. It is also

true that the definition of the greater good can shift, quickly, with the political winds.

Nonetheless, as the Supreme Court determined in 1953, the FCC’s public interest

was both constitutionally valid–read: not vacuous–even though it was a standard that “did

not lend itself to exactitude.”48 Instead, the Court noted that it was quite rightly a standard

that “leaves wide discretion and calls for imaginative interpretation.”49 The standard allows

the FCC broad discretion in creating a leading national level communications policy that

24

44 For example, the some of the Commissioners for the FCC found the merger of NBC and Comcast to be anticompetitive, but with the non-germaine concessions that the merging companies offered, such as diversity promises, the merger was found to be on balance in the public interest. See Jonathan Baker, Comcast/NBCU: The FCC Provides a Roadmap for Vertical Merger Analysis, 25 Antirust 36, 38 (Spring 2011), available at: http://transition.fcc.gov/osp/projects/baker_vertical_mergers.pdf (finding that the FCC assessed the merger for “whether it advanced other communications policy objectives”).

45 Glen Robinson Title I, The Federal Communications Act: An Essay on Origins and Regulatory Purpose, in A Legislative History of the Communications Act of 1934 3, 14 (Max Paglin ed.,1989); The public interest standard always has been subject to debate and "has been under concerted assault during most of the past two decades." Willard D. Rowland, Jr., The Meaning of "The Public Interest" In Communications Policy, Part I: Its Origins in State and Federal Regulation, 2 Comm. L. & Pol'y 309, 309 (1997).

46 Recently such priorities have included net neutrality and the National Broadband Plan.

47 See William Mayton, The Illegitimacy of the Public Interest Standard at the FCC, 38 Emory L.J. 715 (1989) (finding the public interest standard to be unconstitutional).

48 FCC v. RCA Communications, Inc., 346 U.S. 86, 90 (1953).

49 Id.

helps ensure all citizens have access to communications services even though many are

run off of limited, monopolistic infrastructure.

25

B. FTC Consumer Protection Mandate

The FTC operates under a slightly different, two-pronged mandate to police

competition and consumer protection. Following Brand X,50 the FTC has seen its role with

respect to broadband as a full scope competition, consumer protection, and privacy role.51

Much of this authority falls under the broad authority the FTC has under Section 5

of the FTC Act which prohibits “unfair or deceptive acts or practices in or affecting

commerce”.52 While these standard may seem at first blush as vague as the critics claim

the “public interest” standard is, the fairness and deception standards are generally

bounded by long-standing agency definition and practice.53

C. Jurisdictional Swap

Were ISPs to be designated as common carriers then some competition (antitrust)

authority would necessarily be removed from the FTC authority has they have construed it

since the decision in Brand X.54 Concomitantly, however, this change would only work if

FTC were given jurisdiction over common carriers to carry out critical consumer protection

oversight. Congress considered the removal of the common carrier carve out, the

26

50 Surpa.

51 William Kovacic, Keynote Address: The Digital Broadband Migration and the Federal Trade Commission: Building the Competition and Consumer Protection Agency of the Future, 8 J. on Telecomm. & High Tech L. 1 (2010) (the Chairman and Commissioner discussing the FTC’s role in regulating the internet) [hereinafter Kovacic’s Future].

52 15 U.S.C. § 45.

53 http://www.ftc.gov/bcp/policystmt/ad-decept.htm and http://ftc.gov/bcp/policystmt/ad-unfair.htm.

54 Supreme Court decisions such as those in Trinko, Linkline, and Credit Suisse, demonstrate that the Courts generally find a clear repugnancy between the antitrust laws and regulated industries sometimes even in the face of antitrust savings clauses.

exception encoded into the FTC Act that does not allow the agency to regulate common

carriers, in a version of a reauthorization act that it did not pass in 2008.55

The changes this paper proposes would be a regulatory realignment: (1) an FTC

antitrust to FCC regulation jurisdictional swap of authority over ISP competition and (2) an

FCC regulation to FTC consumer protection authority over common carrier swap.56 While

the FCC would consolidate its oversight of how interconnection and industry-facing

regulation occurred erasing illusory distinctions between information and

telecommunications services, the FTC would to a greater extent fulfill its consumer

protection and emerging privacy regulation role. This swap streamlines regulation based

upon the industry action being regulated as opposed to the current morass that based

upon outdated definitions of the regulated entities. Jurisdiction based upon conduct and

expertise will be particularly critical to areas such as privacy.

D. The FTC Is Leading on Privacy

Privacy, and privacy in communications, is one of the pressing issues that society,

lawmakers, regulators, and companies are struggling with in the digital age. Common law

standards of privacy exist on an incredibly slippery slope, the Katz57 standard finding

privacy is based upon communal “expectations” of privacy. While the courts continue to

27

55 Prepared Statement of the FTC before the Committee on Commerce, Science, and Transportation, 20, April 8, 2008, available at: http://www.ftc.gov/os/testimony/P034101reauth.pdf (citing several other occasions upon which the FTC has testified in support of removing the outdated common carrier exemption).

56 As then Chairman Kovacic sagely noted, however, “As regulatory frameworks grow older, it can require a significant exogenous shock to stimulate change.” Kovacic’s Future, supra, at 4.

57 Katz v. United States, 389 U.S. 347 (1967) (finding that the right to privacy under the Fourth Amendment is based upon a reasonable expectation of privacy inside of a phone booth due to the expectation not the actual physical space).

address some timely privacy concerns, such as they did in US v. Jones,58 the FTC has

stepped to the forefront of protecting consumer privacy with respect to online services.

Through efforts with major content providers such as Google and Facebook, with

the recent staff report on Privacy,59 and with a general authority to ensure that companies

within their jurisdiction have fair and transparent privacy guidelines that they abide, the FTC

is poised to provide similar oversight to all common carriers. That includes both ISPs

should they receive such designation, and telecommunications companies that currently

are carved out of the FTC’s jurisdiction.

While the FCC currently has oversight over the privacy policies of

telecommunications carriers, there is little reason for two competing privacy standards to

exist. In fact, should the Katz standard continue to reign, any policies set by two agencies

attempting to deal with consumer privacy in closely related industries could inadvertently

destroy “expectations” of privacy by setting the bar lower on some services than on

others.

The sensible solution would be removing the common carrier carve out from the

FTC Act, and then requiring the FTC and the FCC to create a memorandum of

understanding (MOU) regarding privacy and other consumer protection matters (i.e. billing

issues, advertising, etc). This would also reduce the added regulatory burden that making

ISPs common carriers would place on the FCC by allowing another agency to pick up

some of the new and needed responsibilities.

28

58 132 S. Ct. 945 (January 23, 2012).

59 FTC Staff Report, Protecting Consumer Privacy in an Era of Rapid Change, March 2012 available at: http://ftc.gov/os/2012/03/120326privacyreport.pdf.

One of the most critical policies that the FTC could enforce on ISPs is privacy by

design. In the famous case of Wikileaks, Google and ISP Sonic.net fought the effort to turn

over Jacob Appelbaum’s GMail data and failing that fought to be allowed to inform Mr.

Appelbaum that the records were being shared.60 While Google and Sonic.net ultimately

failed but the long-over-due for an update Electronic Communications Privacy Act gave the

Justice Department authority to request the records, privacy by design would ensure that

ISPs in particular and other service providers have transparent and fair document retention

policies. Records that are not maintained, particularly should a consumer wish to destroy

them, cannot be used to undermine individual or communal privacy protections and

expectations.

The FCC is well suited to deal with interconnection and intra-industry regulation that

is nonetheless in the public interest. But the FCC’s strength is in serving a role ensuring

that antitrust and competition principles are enforced through careful industry monitoring.

The FTC has the expertise needed to expand consumer protection into the

communications sector, where arguably they already are except for where

telecommunications, to create simple and single standards that will provide industry and

consumers with the predictability they need to operate their lives and their businesses

without much thought to which privacy and consumer protection standards might apply.

VI. Economic Arguments

29

60 See Alex Wawro, FAQ: Will YOur ISP Project Your Privacy?, PCWorld, October 11, 2011, available at: http://www.pcworld.com/article/241591/faq_will_your_isp_protect_your_privacy.html; see also Julia Angwin, Secret Orders Target Email: Wikileaks Backer’s Information Sought, Wall. St. Journal, October 9, 2011, available at http://online.wsj.com/article/SB10001424052970203476804576613284007315072.html.

As described in the jurisdictional swap section above, in a way giving ISPs a

common carrier status would be a consumer welfare-focused approach to the antitrust

issues implied by ISP monopoly structures. The Supreme Court has been narrowing

antitrust injury claims, and there is a threat that the non-transparent pricing of ISPs could

lead to significant consumer harms.

A. Narrowing of Antirust from the Supreme Court

In Pac. Bell Tel. Co. v. linkLine Communs. Inc.,61 internet service providers (ISPs)

brought an action against provider of DSL services alleging that the DSLs were squeezing

ISPs profit margins by setting retail prices too low. However, the Court determined that

there was no antitrust obligation for the DSL providers to sell wholesale service to the

ISPs–only an FCC regulatory obligation–and thus there was no cognizable claim of a price

squeeze. Essentially, only dominant firms can be found liable for a price-squeeze, under

the Brooke Group/Weyerhaeuser, analysis.

In Verizon Communications Inc. v. Law Offices of Curtis v. Trinko,62 LLP, the Court

determined that despite a requirement of the 1996 Telecommunications Act for previously

monopolist local exchange carriers (incumbent local exchange carriers) to to share its

network with competitors, under antitrust principles the prior monopolist did not have a

duty to deal. Thus the Court streamlined refusal-to-deal precedent by heightening the

standard for determining when a market actor displays market power.

30

61 555 US 438 (2009).

62 540 U.S. 398 (2004).

B. Consumer Harms

The reduced role of the government in overseeing the ISP industry has led to a

decline in competition, both through consolidation as well as anti-competitive actions on

the part of ISPs against CAPs, and has also reduced consumer protections in a variety of

areas, both substantially harming the public. There is the threat of background reductions

in customer welfare due to higher prices and reduced incentive to improve service quality

resulting from oligarchic/monopolistic competition, as well as reduced innovation on the

part of other "carriage-reliant" businesses, as a result of the same higher prices and worse

service quality. Other, “foreground" harms actively transgress against consumer

expectations in areas such as privacy, reliability, and service quality.

The increased prices result from the usual monopoly distortion of demand/supply

equilibria, but also from the desire of conglomerate monopolies (which all of the major end-

user ISPs are) to use access service provision to subsidize other business areas. The

Average Revenue Per User for residential internet access dwarfs the ARPU of most other

direct-to-consumer telecommunications services63 and keeping those margins high allows

these companies to continue to (in a textbook "abuse of dominance") leverage their

monopolies in this market to buy market power in other business areas.

As there is little competition in the market, there is no pressing business case for

investing in expensive infrastructure improvements to improve service quality, which has

led the US broadband market to stagnate, with an average throughput less than 70% of

31

63 Comcast SEC Form 10-Q, Commission File Number 001-32871, period ending March 31, 2012.

the average for the OECD as a whole, and less than 20% of the average speed of the

leader, Japan.64 The much slower network naturally impacts bandwidth intensive uses,

making many impractical to offer to the American public, or unprofitable due to the paucity

of connections with the requisite speed.

The application of QoS to network linkages renders the internet far more brittle,

retarding the self-healing re-routing that allows the Internet to remain robust despite its

highly decentralized structure and administration. Individual nodes that route traffic through

the internet go down frequently, the result of the volume of traffic and various interruptions

in the services upon which they rely–chiefly power and connectivity. Currently, their traffic is

routed through other paths frictionlessly, but with QoS limitations, that is less possible; the

maximum carrying capacity available to unprivileged connections is constrained. As the

practice spreads (and it will; see below) this problem will only become more concerning.

Even considering the slow US broadband offerings, with US ISPs expanding use of

QoS to throttle CAPs who refuse to offer bounties for preferential access, customers will

find some websites and services oddly slow, with no way of know this is not the result of

an imponderable congestion somewhere in the network between them and the service

provider, but rather the intentional policy of their service provider. Absolved of any

consumer pressure to avoid this tactic, it will be applied by ISPs more and more often to

extract economic rents, protected by a lack of transparency and the ISPs' monopoly

position.

32

64 OECD Broadband Portal, available at: http://www.oecd.org/document/54/0,3343,en_2649_34225_38690102_1_1_1_1,00.html (last accessed May 2, 2012).

The regulatory change to move ISPs to the FCC would ensure that in a marketplace

where real pricing transparency is not realistic, given the complex structure of

interconnection and the monopolistic nature of broadband provision, a regulatory agency

who is monitoring for anticompetitive practices and setting fair rates is needed to keep

economic rent of monopolists from being passed on to consumers. The same argument

applies to quality, product variety, and innovation. Without transparency, antitrust cannot

properly be applied to protect consumers and incentivize competitive and innovative new

products. The FCC has the expertise to oversee interconnection and peering agreements,

and in many cases has a long standing relationship with some of the parties involved (c.f.

Verizon).

Unfortunately, particularly with decisions like those in Trinko65 and Linkline66 antitrust

regulators' ability to deal with anticompetitive harms to consumers grows more limited over

time. Antitrust oversight must thus be married to common carrier regulation, allowing for

proactive intervention to protect this vital industry that "carries" so much of the US

economy's commerce.

Conclusion and Other Analogies

There is a principle within intellectual property law that IP holders that are being

given the boon of having their IP included in an industry standard (and thus underlie all

commerce related to that standard) are obligated to set fair, reasonable, and non-

33

65 540 U.S. 398 (2004).

66 555 US 438 (2009).

discriminatory (FRAND) terms for licenses for their IP.67 The reasons are many; the IP

holder will benefit from far wider licensing than would otherwise have taken place

(especially in the case of another equivalent approach being included in the industry

standard, which would have rendered their IP far less valuable than before), several layers

of commercial use will be relying on the standard, requiring that access to it be consistent,

openly available, and reasonably priced so as to not prevent many types of use from ever

occurring.

The requirement also prevents anticompetitive abuse of dominance; the IP in

question being universal, its owner would have a monopoly that they might use to

advantage their efforts in other markets, and disadvantage their rivals. As the IP essentially

“carries” the commerce built upon it, the FRAND doctrine is very similar to the rational

behind common carrier status—that of the essential facilities doctrine.

Left unsaid due to the reality of statutory distinction is that there is increasingly no

ontologically significant “bright line” that can differentiate between an “information service”

and a “telecommunication service.” Some of the problem is that the statute and rules

based on it in the past have conflated technical systems with some of the uses to which

they may be put, and purported to regulate the systems by the manner of their use.

That may not seem terribly important at first glance, but consider the telegraph, the

telephone, instant-messaging, and voice over IP (VOIP). The first two are text and audio

communication that are transmitted through copper wires—though the latter is now

34

67 Frand of Foe? No Sign of Ceasefire in the Mobile Industry’s Intellectual-Property War, The Economist, April 18th, 2012.

usually translated to optical transmission for any connection that is more distant than the

local “Class 5” exchange, and the former would be, were it still in use. The wireless variant

of the second transmits through modulated radio waves. Both are treated as

telecommunications services. The second pair are again text and audio communication

that are transmitted through copper wires, and then onto optical transmission for long-haul

delivery, and have a wireless alternative that uses modulated radio waves. However,

opponents of FCC oversight would treat the second pair as an “information service”,

saying that it does not qualify as telecommunication. If you add in fax services and file

sharing, you find that documents can be sent over similar media (copper wires or radio

waves, all using optic fibre for long-distance delivery), and achieve similar effects, but the

former is clearly a telecommunications service, and the latter is often regarded as an

information service.

Forget, for a moment, the seeming irrationality of the distinction from the

policymaker’s perspective. Consider the end-user’s perspective. They can pick up a

telephone at home, and be using a regulated telecommunications service. If they have a

Vonage or Skype adapter, they can use the same telephone, dial the same numbers the

same way to have the same conversation, but that discussion would operate over a far

less regulated informations service. They can receive a fax at work and have no idea if it

originated via another fax machine using a telecommunications service, or a “email to fax”

gateway transmitted for most of its journey over the unregulated informations service. In

each case, they would assume the law would protect them from unauthorized wiretaps,

and protect their communications records from warrantless disclosure. For each pair of

35

examples, only the first would actually afford them that protection. This confusion exists

even before analogous/substitutable services are considered.

To any consumer, the differences between “information” and “telecommunications”

services are entirely illusory. They generally acquire the services from the same companies,

use them the same way, and have the same expectations of privacy, stability, and security.

Increasingly, those expectations are not being ensured, because of a curious distinction

which cannot be meaningful articulated, much less defended.

36