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Transcript: Community Broadband Bits Episode 270
This is the transcript for episode 270 of the Community Broadband Bits podcast. Professor Barbara Cherry goes into detail on the history of common carriage and telecommunications law. Listen to this episode here.
Barbara Cherry: It's been a mess. And part of the problem is restoring a more accurate understanding of our history.
Lisa Gonzalez: This is Episode 270 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez this week Christopher talks with attorney and legal scholar Barb Cherry about common carriage. We often talk about common carriage as it relates to telecommunications. And this week Christopher and Barb get into the policy. But most of us aren't aware of the legal history behind common carriage. Barb describes how its origins relate to the way it's applied today and how we need to consider the past as we move toward the future. Now here's Christopher and Barb Cherry.
Christopher Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell from the Institute for Local Self-Reliance up in Minneapolis. Today I'm speaking with Barb Cherry a lawyer and a Ph.D. in communications who worked for the FCC for five years has 15 years in industry but is now a professor at the media school at Indiana University. Welcome to the show.
Barbara Cherry: Thank you, Chris.
Christopher Mitchell: Barb, one of the things I've warned you about. I'll tell the audience that you have an incredible amount of knowledge and you're very passionate. And so if this seems like it's getting a little bit too you know, friendly I might poke you a little bit to get some of that passion up on the surface.
Barbara Cherry: No problem.
Christopher Mitchell: Let's talk about common carriage which is something that I've never heard anyone explain as well as you have and and maybe you can just start with giving us a sense of the historical origins of common carriage in general.
Barbara Cherry: Yes common carriage is a special legal status that evolved over centuries literally to reflect that certain kinds of businesses engage in certain kinds of services that are considered essential. Common carriage comes from a body of law that we call tort law. I think it's helped explain to people that when our Constitution was formed in the late 18th century that wasn't the beginning of all the law was incorporated by Constitution or are these all these bodies of common law that we inherited from England and these guys in court include what we called Contract law property law and tort law and tort law is that the general body of law that has to do with if somebody engages in conduct or behavior that causes you damage the fact that the law will recognize that you have the right to some compensation for the damage done to you. Tort Law covers for example and it's different from contract in that let's say you trespass on somebody's property you cause damage under top tort law that's why you can sue someone to recover damages. What if somebody burns down your house. What if you're walking down the street and you tripped somebody. Well tort law is also the origins of some special obligations in commerce. And one of them is called common carriage and the basic idea is that if somebody holds themselves out to serve you by essentially moving things for you taking something that you already own or have and moving it from one place to another some form of transport That's called common carriage. And the fact that you pay them to do that. Common carriage in the beginning were physical things that we moved in the early form of communication that was coming just now what we call the postal system. They carry and transport information for you. And in a physical form well in the 19th century when we had new industrial revolution technologies new forms of common cures recreate created that were of the electronic form but they moved information on behalf of people like telegraph and telephone so common carriers just simply are in the business of transporting things for people from one place to the other without altering what it is that you're moving for them. Christopher Mitchell And when you when you say that you mentioned that this goes back to before the the Constitution so this is I mean people were moving things for a very long time. I often think about fairies presumably a thousand years ago.
Barbara Cherry: Yes. And this was a firm body of law already by the middle ages of England and it's part of what we inherited from them. So when the Constitution was formed we already had bodies of law that our courts recognized as a place where you could receive compensation for being injured. Now what it means under tort law is the fact that it's a inherent duty that you have in how you conduct your business. And so it's more fundamental and it's not even more fundamental than contract law. So the fact that a common cure has these obligations is not because you have a contract with them but it just comes with it's part of their duties of providing this kind of service. So what are the duties of a common carrier a common carrier has the duty to serve upon reasonable request which means they can't arbitrarily refuse to serve people. They have to provide service with without unreasonable discrimination. What that means is they have to treat similarly situated customers. Similarly there has to be generally some difference in the cost to the company or carrier of moving something for someone or to charge a different rate. They must provide services just in reasonable rates. They can't just charge whatever they want and they must provide their service with reasonable care. In other words, don't be negligent. The reason these duties are there is that was considered an inherent form of fairness in commercial transactions. So this is our fundamental notions of fairness and commerce that themselves have origins in Aristotle's body of ethics. So it's very deep seated very fundamental sense of fairness in commercial transactions. This legal status as I said had its origins or was well-formulated in England by the Middle Ages and continue to apply even as with the rise of capitalism and so with the rise of capitalism as more and more businesses were done by contract there were still certain entities or types of businesses that retained the tort obligation that it was considered so fundamentally important to what they did. Common carriers one of them.
Christopher Mitchell: And so one of the things that I've learned from you is that the coming carriage regime this body of practices is a little different from industry to industry and so I'm curious if there's anything unique about how we apply this to Telecom that works.
Barbara Cherry: Common carriers, there can be different types of common carriage as you mention older forms included ferries people moving things like a horse back in the 19th and 20th century as we develop new forms of common care. They included like railroads airplanes buses and then electronic forms with telegraph and telephone are examples. And with each technology there's been some challenges about how the business is conducted now over time. As I mentioned this was initially under the common law. And what's important about that is to enforce it requires you to go to court. So a person who was harmed by a common care of violating one of the duties duties explained the only way you could enforce is you had to go to court. What happened during the 19th century with the rise of new forms of common carriage the amount of investment that was required to provide these forms of common carriage in a particularly some of them they had to provide the equivalent of their own infrastructure to provide common carriage over railroads had to build their own railroad tracks for example they just couldn't use existing roads and telephone and telegraph had to create new infrastructures in terms of wires and poles and things like that. The corporate form was the best way to amass the kind of capital needed to build these networks. And so we started having the rise of corporations in terms of number as well as their size their amount of capitalization and economic power and the relevance of all of that is it turned out over time expecting people to be able to enforce their common law rights against these companies in court became more and more impractical. By the end of the night towards the end the 19th century both the states and Congress deemed the common law remedies are no longer adequate. It was just too hard to enforce them. These big corporations had so much advantage in litigating in the courts. That's what led to the rise of enforcing common carriage through commissions on the commissions were the ones that in other words government now stepped in to help enforce these obligations of the curious because it's no longer reasonable to expect the judicial system through complaints through cases filed by individual plaintiffs to be able to push back on the power of these big corporations.
Christopher Mitchell: Yeah I think back to the the incredible work that Ida Tarbell did in uncovering the Rockefeller deals with the railroads and it seems to me that that when there's all these secret deals the courts don't know about them. And so how could one expect the courts to the tune to stop kickbacks that no one even knows about are happening.
Barbara Cherry: Well it turned out in the 19th century with the rise of corporations. There were two different strategies. The states and Congress used to deal with them. One strategy was to develop industry specific regulation. These commissions that had specific jurisdiction only in certain industries. That's one strategy. Another strategy was to develop another other bodies of law that apply to businesses generally like antitrust law. The first antitrust statute by Congress was the Sherman Act in 1890 and that was passed three years after Congress passed its first law the interstate commerce act to regulate railroads. So it was a two two step or two part strategy passed laws to deal with very specific industries because of how important they are. To the economy and the kind of expertise that would be needed to keep pace with these corporations in their and their behavior and the other was just to prevent certain kinds of behavior under and I trust to prevent certain types of conspiracies in restraint of trade or to deal with certain forms of monopolization. So it was a two part strategy. What was interesting however is that even those companies under industry specific regulation were also subject to antitrust. So both types of laws apply to them. But these industries that had specific regulation also had such unique and in-depth problems. That's why it took an agency to have constant oversight because Congress couldn't possibly keep up with it. So to understand or regulation is to understand how over time we've developed a two pronged strategy. Some industries require very special attention YBM industries specific regulation and then in addition we have more general business laws like and I trust and eventually consumer protection statutes which are still more general in nature and those those helped pick up the slack with the rest of the economy. When you asked me earlier about the different industries specific it turned out the real breakthrough at the federal level was the Interstate Commerce Act of 1887 that created the Interstate Commerce Commission to regulate railroads. Well not that long afterwards in 1910 that law was amended by the man Elkins act and applied now to telegraph and telephone. So the first federal regulator of Telephone and Telegraph was the Interstate Commerce Commission that precedes even the FCC the FCC the Federal Communications Commission wasn't a crate until 1934. The reason for it was to have a commission now that dealt with all the communications because we had rise of further technologies like radio. So what they did was they copied the law that already existed pretty much in interstate commerce for railroads that had been applied telephone telegraph and just recreate it and the FCC and now mood regulation of telegraph and telephone to the FCC. In the meantime the 1920s there were some radio acts to deal with the rise of radio and then that was all put in one place right. The reason I mention as people think regulation of telephone telegraph started on the federal level 34 act and that's wrong. It goes back further.
Christopher Mitchell: Well in one of the things that we found and I want to just say we're going to turn this back to net neutrality in a second. But but one of the things I found interesting is working at the state level I've often found the big telephone companies in my case CenturyLink here in Minnesota will say oh we should just go back and clean out the old statutes because we should get rid of all this telegraphs stuff and in the end that 100 years ago telephone regulation. And because it's just unneeded it's just cluttering up the books. But then you find out that if you do that the authority of the Department of Commerce of the Public Utilities Commission it starts to disappear because everything was built on those original regulations. And so I think it's important to understand all that stuff that was done back then has been modified and is still kind of where this is necessary to have authority today.
Barbara Cherry: Yes, the fundamental legal principles that are embedded in common carriage law have been codified into statutes and then modify the method of regulation. Basically the principles have always stayed the same is just the means of enforcing them. That's had to adjust over time. So instead of having the primary form of an enforcement be in the courts we've provided it the first round of enforcement and with these agencies to deal with the reality of the rise of corporate power and how much market power they have with regard to individual customers. So. So the means of a force meant from time to time have been modified to improve it. But the danger is to think that you don't need the core principles of common care. That's where eliminating the body of law entirely is very dangerous because the same reasons why those principles are there still exist today common carriage function is still a critical function in our economy and the notions of fairness in commercial transactions underlie it's still irrelevant and the rise of corporate power or the the reality of the market power these corporations still exists. So we still need the body of law given that this body of law it's principles that go back centuries. Other bodies of law that are newer that evolved afterwards were all based on knowing that this other body of law come it already existed. So a lot of the issues that we've treated for centuries under common carriage are not picked up by other bodies of law. In other words they're adjunct to they're complimentary too. And if all of a sudden you eliminated the common character that based regulation all the existing already have will not fill in the gap.
Christopher Mitchell: Right. I think that's a sticky point. But I want to move on to what I think is is a hot button issue. And let me just describe how I think something that gets your blood boiling would be the way the media has shortened a discussion of Chairman Wheeler of the FCC decision to put telecommunications under Title 2 in order to enforce common carriage. A lot of times the media just shorten that to saying the FCC has decided internet is a public utility what's confusing and wrong about that statement.
Barbara Cherry: Yeah you're right. That really does get my blood boiling because it's just legally, factually false. First of all public utility is a separate body of law. It's a separate body of law that developed in the 19th century by the states. And what's at the heart of being a public utility is that the government gives you a franchise which is of like a contract and says you have the right to serve this area but then we're going to attach these obligations and examples of public utilities include getting franchises to water companies gas companies electric companies. Well it turns out in order to build infrastructures telephone and telegraph companies were also public utilities under became public utilities under state law because of the need to build these infrastructures. So what it means is in reality common carrier certain common carriers like telephone and telegraph were both common carriers and public utilities. But the reason for them being one or the other was for different legal reasons. Now why am I wasn't really get my blood boiling. The two were confused. Well it's not only that the origins of this other body of law is public utility which is separate from common carriage but it's because historically many public utilities have been monopolies. They don't have to be to be a public utility you don't have to be a monopoly because your franchise doesn't have to be exclusive. But if you happen to have a franchise that's exclusive means you're the only one that can do it in that area where you where you've been authorized to serve because many public utilities have been historically monopolies. People automatically assume then oh you're a big public utility only because you're a monopoly and then if people start confusing common carriage with monopoly then they start carrying the same confusion further. Oh you're a common carrier only because you're a monopoly and that's historically factually false. It makes you a common carrier it's got nothing to do with monopoly or not. It's the kind of service that you provide. Are you transporting moving things on behalf of a customer for up for compensation. And so the press is doing us a disservice. But so are some proponents of Chaldee because they say the same thing. So I find people all over the place using the wrong terminology. The press some supporters Chailly many supporters are opponents and try to keep confusing commentaries with public utility and it distorts our understanding of the importance of common carriage law.
Christopher Mitchell: Well I think one of the things I find really interesting and we can jump back in the history for this I think is there is an idea that common carriage would not be necessary if you have competition because you could just choose the better carrier.So maybe you can clear up why common carriage is still important even when you may have competition and choice.
Barbara Cherry: And this goes back to understanding why you had common carriers as a legal status back in the middle ages because the same thing happened. Competition doesn't solve certain problems and it's the reasons for that for that is this what a common carrier does is they move something that belongs to the customer and supposed to drop it off at the other end. It could be a tangible physical thing like railroads. We think it could be people themselves it could be car go with electronic it's important and certain information the content of which originates with the parties at the end. And what happens is it doesn't matter if there's competition because once you pick the carrier that carrier whichever one you pick now takes possession of what it is they're moving for you. And that's the beginning of a unique form of vulnerability. You have no idea once you give up possession to that carrier what they're going to do with it. How do you know for example particularly in cures interconnect with each other. If your message is lost or garbled you don't know well which company is responsible for that. Early on would have been common carriers and sometimes they would hold court cases or say it's collude with thieves. In other words they get somebody carrying your computer. And let's say a carrier wink wink tell somebody why don't you quote unquote steal it from me. Then I'll tell the customer Oh I'm sorry it was stolen I couldn't deliver it. And then you agree with the robber to the robber to go and sell it and then you split the proceeds. That carries the proceeds. There's so many ways in which a carrier could collude or misbehave, if you will, in their common carriage duty and how they perform their service that's not solved by competition. Once you give up possession it doesn't do any good to say what could have gone to somebody else they already given it up. And so it's a repeat game problem. And that's why under the law that's where the duties attach with the function. What makes you common carrier is the functionality of the service. What is it you're doing. And also another problem we have the rise of corporations. Another reason why competition doesn't help you is because the rise of these big corporations with these big mass market, retail mass market, offerings is that these companies will give you what are called contract of adhesion.
Barbara Cherry: It's a standardized contract you must adhere to the terms of your customer hence adhesion you must adhere to the terms if you want to get service. You can't really negotiate anything different in your contract. You either take it or leave it. What's happened today is that these companies give you these take it or leave it provisions in their contracts which include mandatory arbitration clauses and class action waivers. It means that it gets serviced you have to agree to these contracts that tell you you have no right to go to court even if you wanted to. You must go through arbitration. You may not organize with other people who have been similarly harmed to bring a class action lawsuit. And what's happening over time is all these companies are all putting the same provisions in your contracts. So even if the market you know appears top competitive in terms of going the one provider usually you can't find a provider that won't have those same terms so you're stuck.
Christopher Mitchell: Right, so there's no remedy if they misbehave which is why we have this body of law to protect us beforehand.
Barbara Cherry:Yes, this is why you need commissions because the court litigation. First of all the odds were stacked against you already because they can withstand litigation claims that -- The column report, There's an old report of the Senate in 1886 that studied this whole problem of railroads and found that it was impossible even back then for the individual shippers will stand up against these big corporations. And then in more modern times with these mandatory arbitration clauses and class action waivers you can even go to court if you want. And when you add all those up together your only remedies are going to be if you could have a commission with jurisdiction who then has the power the power to stand up against these big corporations on behalf of the public.
Christopher Mitchell: Right, and this is this is something that the Gigi Sohn is very concerned about and working on because there's a fear that that many including some in the FCC perhaps maybe like going to offload their jurisdiction increasingly to the Federal Trade Commission in which it would be harder there's less specialized knowledge for the commission to protect people that are working in independent communications services.
Barbara Cherry: Yeah it's really interesting you mentioned that because here's something else to understand. The Federal Trade Commission was created early 20th century and when it was created it was created to help enforce certain aspects of antitrust law to help protect customers. Well in that act that created the FTC. The FTC specifically does not have jurisdiction over common carriers because at the time it was already known you already had another commission that has the authority to look at that specific industry and how to deal with it. That exclusion of FTC jurisdiction over common care still exists today. Unless Congress changed the law if you got rid of common Kurd's status for these companies today there'd be no agency to fill in the breach even if you tried to get the FTC the jurisdiction one they don't have the history of knowledge how to do it. And number two, the FTC does not have the same powers as the FCC FCC has rulemaking authority within its statute that Congress given they have authority create rules when they discover more problems in the industry. The FTC does not have rulemaking authority not like the FCC. So the Free Trade Commission doesn't have the same kind of powers to deal with a lot of these industry specific problems.
Christopher Mitchell: Right now I think you know one of the problems that we continually face is an ignorance of these sorts of issues and so we're condemned to hear misinformation confusion from people over these problems that have been with us for more than 1000 years.
Barbara Cherry: I don't think as just a lawyer I would have understood all this. It turns out when I went back as a little a little older student when I went back to get my Ph.D. in communication studies at Northwestern University -- I'm being trained now as a social scientist. The subject of my dissertation had to do with the liability of these carriers under certain circumstances. And I had to go back and study a lot of the origins of these by the law. That's when I learned the true origins and I found that a lot of what scholars call the secondary literature, a lot of things that have been written by other people, about telecommunications' history. I found a lot of them were actually wrong. They were wrong. And so part of my research in a book I've already published on the subject was trying to help people understand that a lot of what we've been taught is wrong. So we either forgotten it or some of what we've been taught is actually wrong. And part of the reason is that some of the people who wrote books about telecom history were not lawyers and they mis understood and mis read the cases was inaccurate. So it's been kind of a mess
Christopher Mitchell: But that's that's how it feels frankly.
Barbara Cherry: Yes it's been a mess. And part of the problem is restoring a more accurate understanding of our history. I've appeared on behalf of the Public Interest Advocacy Center up in Canada. Proceedings before their commission the CRTC which plays a similar role to our FCC. The reason I mention that here is Canada inherited the same common law body of law that we did from England. And what I found in working up in Canada is that there has been some similar misunderstanding about some of these bodies of law. But one advantage Canada has had over the United States is that they didn't have the same public relations campaign of regulated monopoly. And this has to do with the fact that the bell patents were invalidated much earlier and competition started earlier. But here's the importance of that this legacy keep Association monopoly with the telephone system that quite U.S. centric idea that we had this been reinforced by an early 20th century corporate campaign of AT&T to convince the states and the federal government to go to a monopoly framework rather than rely on competition. It's the opposite because what happened up in Canada is that a lot of the with the rise of competition sooner up there is that some of these provinces like her state actually took over the telephone systems and the meek became publicly owned systems. AT&T didn't want it in the United States. So instead they developed this PR campaign of regulated monopoly and they were agreeing to regulation in exchange for being protected from competition. Why is this matter will that old PR campaign with PR specialists say is probably the greatest corporate campaign ever done. Now AT&T is trying to turn that PR PR campaign on its head to say that people see we we're only regulate because we are a monopoly. Right. So now that we're not monopolies we don't need regulation anymore and it's a total misrepresentation of history.
Christopher Mitchell: But Americans because of the legacy of this PR campaign they could be more easily lead right well I really appreciate you taking the time to come on here and help us to spread the good word of the history and to give people a better sense of why this is so important.
Barbara Cherry: Yes it's so foundational to these these systems these infrastructures are so critical to our economy and also with communication systems that are so critical to our political governance how we run elections how we become informed citizens. That's why we need extra care to make sure that we understand what's going on and not shoot ourselves in the foot so to speak by getting rid of a body of law they're actually very foundational and are very necessary.
Christopher Mitchell: Well thank you for your hard work on this. Thank you.
Lisa Gonzalez: That was Christopher with attorney and professor Barb Cherry talking about common carriage and telecommunications. We have transcripts for this and other Community Broadband Bits podcasts available MuniNetworks.org/BroadbandBits. E-mail us at Podcast@MuniNetworks.org with your ideas for the show. You can follow Chris on Twitter. His handle is @CommunityNets. You can also follow MuniNetworks.org stories on Twitter. The handle is @MuniNetworks. Subscribe to this podcast and the other ILSR podcasts: Building Local Power and the Local Energy Rules podcast. You can access them on Apple Podcasts, Stitcher, or wherever else you get your podcasts. Never miss out on our original research. Subscribe to our monthly newsletter at ILSR.org. We want to thank Arnie Huseby for the song Warm Duck Shuffle licensed through Creative Commons. And we want to thank you for listening to episode 270 and the Community Broadband Bits podcast.