Applying Title II without embarrassment

[Commentary] Is there a way for the FCC to apply Title II regulations to the Internet without embarrassing itself? Yes, but it would require a change in direction.

“Title II” is the section of the Communications Act that was intended to regulate monopoly telephone companies as public utilities. Its roots go far back in history, but an effective starting place for understanding Title II is an 1876 Supreme Court case, Munn v. Illinois. The case involved grain elevators that the court found were situated uniquely between a river harbor and railroad tracks, giving the elevators monopoly control over grain movements from farmers in certain Midwestern states to markets on the East coast. The elevators extracted economic rent to such an extent that they seriously hindered the agricultural economies in the affected areas. Through Munn and some subsequent cases, the court formulated a two-part test to determine whether a business should be regulated as a utility under Title II. The first part stated that a firm must have the potential for exploitation or extortion because of its monopoly power. The second part said that the business’s service has to be construed as a necessity, i.e., fundamental to a community’s well-being.

Unfortunately the FCC is discarding the economic and legal logic underlying Title II by ignoring the first test: that of possessing monopoly power sufficient to exploit and extort. Applying this test would diminish greatly the damage done by adopting Title II.

[Jamison is the director and Gunter Professor of the Public Utility Research Center at the University of Florida and serves as its director of telecommunications studies]