Uncommon Carriers

If you’ve been following the discussion about net neutrality, you’ve no doubt heard the term “common carrier” being thrown about in relation to your Internet service. Just what is a common carrier, anyway—and what does it have to do with ISPs?

Not much, it turns out.

Common carrier laws in the U.S. date from 1887 when Congress passed the Interstate Commerce Act. The Act gave the government the power to regulate private transportation companies that moved goods or passengers, starting with railroads and steamships, and later bus lines, trucking, airlines, and others. The laws established government control over pricing and delivery of services seen as essential to the public good.

Now, some people believe that reclassifying ISPs as common carriers would somehow spur competition and preserve an open Internet, or “net neutrality” as it’s often called. That would be a big mistake because it overlooks the stifling effect common carrier regulation can have on investment and innovation.

Little Incentive to Grow

Back in the dial-up days of the late ’80s and early ’90s, before broadband, we got our Internet service through providers such as AOL and Prodigy, who transmitted data over existing telephone landlines. Those landlines, of course, belonged to the phone companies, which were classified as common carriers under Title II of the 1934 Communications Act. The ISPs themselves were not treated as carriers and generally were free from regulation.

…these were not the glory days of the Internet.

As more consumers became interested in the Internet, the number of dial-up ISPs exploded. But these were not the glory days of the Internet. While ISPs were free to innovate in a highly competitive marketplace, they were entirely dependent on the phone companies, which had little incentive to invest in building better and faster “pipes” because the ISPs derived most of the benefits. It was a business model doomed to failure because of the poor incentives facing the phone companies. Even as those companies developed DSL technology, the regulatory structure had the effect of holding back investment.

Massive Expansion

In 2002, the FCC made the critical decision to take a different approach with respect to cable modem service, classifying cable operators as “information service providers” under Title I of the Communications Act—rather than as Title II carriers. Since then we’ve seen a massive expansion of cable broadband across the country, with availability now reaching 93 percent of the U.S. population. Along with that has come stunning leaps in quality and speed. Over the last decade Internet speeds have increased 1,500 percent and continue to rise.

It’s hard to imagine that cable operators would have achieved those same results if the FCC had imposed Title II back in 2002.

…it’s no surprise that U.S. web companies are models of innovation around the world.

The FCC ultimately took this same approach with respect to DSL, fiber, wireless, and satellite broadband, all of which are experiencing strong investment and the same type of expansion and speed increases as cable. With broadband investment totaling more than $1 trillion since the mid 1990s, it’s no surprise that U.S. web companies are models of innovation around the world.

Nostalgia for the ’90s may be all the rage these days, but let’s hope the FCC keeps its focus on the future.

Read more here: Uncommon Carriers