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Phenomenal World

July 27th, 2020

Essential Infrastructures

—   Sebastian Benthall Jake Goldenfein


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Essential Infrastructures

—   Sebastian Benthall Jake Goldenfein

 

Montjuïc Telecommunications Tower, Barcelona. (source)

 

As social distancing became norm and law in the early days of the Covid-19 pandemic, people turned to video teleconferencing to meet with friends and family, attend religious services, and go on dates. Zoom work accounts became a conduit for maintaining nonwork social ties, and as people came to depend on this enterprise tool, Zoom's stock valuation soared.1 The pandemic has widened the sphere of life dependent on such market technologies, heightening existing questions around the political, legal, and economic governance of these companies. How should the fabric of social life, especially as it is rewoven by the pandemic, relate to the private ownership of telecommunications?

Two legal regimes regulate the ownership of and access to telecommunications technology: the market disciplining forces of antitrust law (along with allied concepts like public utilities regulation), and the national security protections of critical infrastructure regulation. Certain applications of the former, concerned primarily with market power, identify privately-owned infrastructures that are “essential,” and regulate firms to ensure that access to that infrastructure is made available to competitors and consumers on reasonable terms. The latter, on the other hand, identifies infrastructures that are “critical,” and regulates them to serve the US’s national and economic security interests.

But both the market and national security regulatory systems leave in place the business model of telecoms, and consequently, we argue, cannot ensure the civic provision of what are now essential communications tools. While utilities regulation like “net neutrality”—which requires equal and nondiscriminatory treatment of content moving through telecoms infrastructure—may curtail certain malign effects of concentrated market power, it preserves the market dynamics that create the problems in the first place. These two regulatory frameworks are consistent with the continued functioning of what has been called informational capitalism.2 In the economic organization of technology, people are either employees, consumers, “users” whose data can be monetized, or some combination of the three. Firms exert power over individuals who, confined to these roles, do not have collective bargaining power with which to exert their interests.

If civil society is to retain political autonomy with respect to information technology, it will require exerting democratic political power. In what follows, we outline the history of the two existing legal approaches to regulating telecommunications, and then turn to several policy ideas—including public ownership and bargaining structures—aimed at asserting that power.

Antitrust: essential facilities and public utilities

In the 1876 Supreme Court case Munn v. Illinois, farmers successfully lobbied the government to legislate maximum rates that private companies could charge for the storage and transportation of agricultural products.3 In another case, in 1912, the courts determined that rail bridge owners could not refuse passage of their competitors’ railroad cars.4 These two cases illustrate the origins of the essential facilities doctrine, an antitrust tool that prevents the exploitation of infrastructural bottlenecks by a natural monopoly. Although it was developed a century before the internet, the doctrine has informed regulatory thinking about digital platforms: in the 1990s, the Federal Trade Commission investigated Microsoft for abusing its monopoly position by tying Microsoft products to the sale of Windows. Litigation pursuing the essential facilities doctrine followed in 2001 concerning the default installation of Internet Explorer onto Windows operating systems,5 and in 2017, the European Commission ruled that Google had to make its shopping aggregator bid equally with competitors for listing at the top of search engine results.6

While the essential facilities doctrine intercedes in business-to-business relations, other forms of competition law, like public utilities regulation, intervene in business-to-consumer relations—particularly where the product or service in question is socially or economically essential, like electricity, gas, or water. One type of utilities regulation is the “common carrier” designation, which defines licensed or regulated bodies that transport goods, persons, or in the case of telecommunications, content, for any party on reasonable terms. Online, however, where a great deal of content is user-generated, the business-to-consumer and business-to-business focus of these doctrines has blurred. The application of common carrier designation has been a large part of the net neutrality debate in the US.

Because it was initially envisaged as a decentralized and unregulated system (as demonstrated by the Telecommunications Act of 1996), the internet was excluded from anything like public utilities regulation until the FCC issued its “Open Internet Principles” in 2005.7 In 2007, Comcast subscribers complained about interference with peer-to-peer applications on the network, claiming violation of the Open Internet Principles, eliciting a succession of back-and-forth between Comcast and the FCC. After the FCC censured Comcast in its first attempt to enforce net neutrality, Comcast brought an action challenging the principles on the basis that the FCC did not have jurisdiction over the behavior of internet service providers.8 The FCC then passed the Open Internet Order in 2010, premised on different statutory authority,9 which required that broadband providers not block or unreasonably discriminate against lawful content or traffic, and be transparent in their network operations.10 These regulations, however, were relatively light-touch, and neglected crucial subjects like rates, tariffs, and network unbundling. While the transparency rule was ultimately upheld, the blocking and discrimination rules were eliminated in a 2014 legal challenge brought by Verizon.11

In 2015, the FCC sought to implement net neutrality again by regulating ISPs under the broader oversight provisions in Title II of the Communications Act of 1934—the law introduced to address issues of monopoly telephone provision by AT&T early in the 20th century.12 The result was the reclassification of ISPs from “information services” to “telecommunications services,” as well as “common carriers.” Under net neutrality, consumers benefited from content providers being treated “neutrally” by ISP. Shortly after the presidential election of Donald Trump, however, Ajit Pai, the newly-appointed chairman of the FCC, rolled back the net neutrality rules with the “Restoring Internet Freedom Order.”13 The new ruling maintained the transparency requirement but eliminated all other regulatory interventions, instead preferring regulation of ISPs under consumer law as administered by the Federal Trade Commission.

Reinstating the information service classification ended public utility style regulation, clarified that broadband would be dealt with as a mass-market service at the retail consumer level for both fixed services and mobile, and re-opened the door for paid prioritization of content. Examples of ISP practices breaching net neutrality—typically when those ISPs are large telecommunication firms—include throttling peer-to-peer networks, not running competitors’ payments systems, and privileging single video providers like YouTube while charging extra for data downloaded from other services.14 The end of net neutrality could possibly allow restricting video chat or voice-over-internet protocol applications (like Zoom and Skype), as AT&T tried when Skype started competing with their telephony services. At heart, the information service classification opens the door for further centralization and integration of the internet service and content provision offered by telecommunications behemoths, who are no longer compelled to afford content providers open access to their systems. At the same time as the net neutrality rollbacks, a bill was passed under Trump preventing the FCC from enforcing rules that would require user consent for ISPs to collect and sell user data in data markets.15

The regulatory debate presently unfolding over “Big Tech”—the online, two-sided market platforms like Uber, Amazon, Google, and Facebook—bears the marks of these legal battles over ISPs. An emerging group of scholars, drawing on the regulatory strategies of the Progressive Era, believe that treating platforms as public utilities might enable governments to intervene in the business model that drives social media platforms to relentlessly pursue engagement at the expense of a democratic information environment. Making the antitrust case, K. Sabeel Rahman has argued that utilities regulation is appropriate for large tech platforms because they have become the infrastructural backbone of much social and economic activity.16 The concentration of power in these platforms generates the same sort of issues as corporate monopoly, such as unreasonable rates, discrimination, and quality of service, which prompted public utilities regulations for railroads and telegraphs in the 20th century.

Others, like Adam Thierer,17 find the application of utilities regulation an awkward solution. In this account, platforms are not sufficiently analogous to existing utilities, defined as they are by physical infrastructures. In a recent article, Susan Crawford suggests that treating Facebook like a utility would distract from proper oversight over real utilities like telecommunications,18 and that Facebook ought to be treated more like a TV station.

The public utilities debate is premised on the market being the best means of coordinating the provision of telecommunications systems and services. As more and more of social life takes place through telecommunications systems and privately operated platforms and services, regulation aimed at disciplining providers is not enough. Market discipline enhances the level of competition that has led to various exploitative practices by large tech firms, each incentivized to treat user data as a raw economic resource. In the absence of robust and enforceable privacy and data protection laws, it is not clear that reducing market dominance and increasing competition will cure such abusive data practices. The carrier layer of the internet has become indispensable for social life; it ought to be provisioned as a public good.

This is not a new argument—innumerable media scholars have commented on the antithetical relationship between privatized and nichefied media on one hand, and democratic and public life, understood as a social good, on the other. Such a position insists these technologies should be civic tools governed by civic values.19 This means asserting public interest as a priority over the extraction of rents—from payments or personal data. Ultimately, it means moving away from understanding consumer attention as a resource to be captured and leveraged into revenue by telecoms. Checking the market power of large firms does not prevent the exploitation of information flows through that infrastructure.

National security and critical infrastructure

With the Trump administration's FCC rollback of utilities-style regulation on telecommunications, a different regulatory logic has come to the fore: geopolitical competition. The 2001 Patriot Act solidified a definition of “critical infrastructure” to mean systems or assets vital to the military security, economic security, or public health of the United States, and has allowed for the increasing power of the Executive over telecommunications. Homeland Security Presidential Directive 7 directed the newly-formed DHS to identify communications and information technology systems as priority targets for defense against terrorism. In 2013, a Presidential Policy Directive built upon this foundation, expanding its ambit into a sector-by-sector approach, including the communications and information technology sectors.

The reconfiguration of the national security interest in telecom in terms of economic security has made robust domestic regulation unlikely. Whereas the Obama administration’s approach to telecom policy was primarily concerned with expanding access to digital services,20 the Trump administration has been preoccupied with telecommunications infrastructure and services insofar as they are vulnerable to foreign attacks, in particular from China. They have therefore favored more overt legal tools connected to procurement, defense, and investment control.

The motivations driving legal controls to defend “critical infrastructure” are far from straightforward. In 2018, the National Defense Authorization Act (NDAA) banned the executive branch's procurement of telecommunications equipment or services provided by companies believed to be state-owned, like Huawei and ZTE.21 This rule followed the logic of cybersecurity supply chain risk management:22 a cyber-component whose production is controlled by a cyber-adversary could be a source of back-door vulnerabilities.

National security rationale always has an economic dimension, and cybersecurity is no exception. In 1975, the Committee on Foreign Investment in the United States (CFIUS) was established to review the national security implications of foreign investment in the US. The committee has seen a steadily increasing case load since 2008 as telecom and web applications have become central, both commercially and as a security risk. In 2018, the Foreign Investment Risk Review Modernization Act (FIRRMA) expanded the scope of covered transactions to any investment that would give a foreign person access to “material nonpublic technical information” held by a US business.23 In a particularly sensational case, CFIUS forced Chinese divestment from the LGBTQ dating app Grindr because investors might access personal data that “could be exploited by Beijing to blackmail individuals with security clearances.”24 By this rationale, critical information can be hacked both “from below” through a vulnerable component, or “from above” through investment and managerialism.

The national security framing of these policies can obscure the economic ends they serve. Former Trump National Security Adviser H. R. McMaster’s recent writing offers some insights into the US foreign policy establishment's view of China as a threat.25 Chief among these is China’s “Military-Civil Fusion” policy, through which all Chinese companies are enlisted in service of national intelligence. The policy gives China the legal fluidity to negotiate the transfer of technology from US firms both as a state and through companies, and to use this new technology both as part of national intelligence and for the economic benefit of Chinese companies.

For regulators, then, telecommunications and internet applications are “critical” not only from a military perspective, but also from an economic one. Dan Ciuriak has argued that trade wars, applied to the digital context, are best understood as a competition over rents.26 (There has been no shortage of opportunity for Silicon Valley to influence the US government's understanding of this dynamic: Eric Schmidt, former CEO of Google, currently chairs the Defense Innovation Board and National Security Commission on Artificial Intelligence, advising the federal government at the highest levels about how the competitiveness of US technology companies depends on federal support.)

In this light, “cybersecurity” initiatives that hamper Chinese telecommunications firm have the additional effect of preventing the flow of infrastructure rents to China. Similarly, security initiatives which prevent Chinese investment in telecom and internet applications, such as CFIUS, keep the flow of these rents in the hands of US persons. US wealth is thereby protected from competition for ownership over rents from American technology. Given this context, where the rents extracted by platform firms are understood as geopolitically significant, it is difficult to imagine national market regulation that tends towards the public provision of telecommunications services.

The pandemic has not stalled the Trump administration's pursuit of control over telecoms. An April 2020 Executive Order established a new Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector, which provides further executive oversight over the security-related aspects of the telecom sector, with the power to overrule both the FCC and the “safe harbor” results of CFIUS rulings.27 National and economic security interests, combined with executive authority, have pulled control over telecommunications away from democratically accountable administration aimed at civilian welfare.

Towards collective investment

We do not know what the consequences will be of having our social lives take place online. But we do know that telecommunications infrastructure is designed to maximize the profits of its owners.

While the US government increasingly asserts oversight and control over telecommunications and internet application companies, it gives these companies tremendous freedom. The US government never seeks to own its telecom companies; it hardly tries to tax them. However, through its national security policy, it has given them uncontested access to its own territorially bounded source of revenue: US natural persons as “users.” Consequently, it has created, in telecommunications and internet firms, a new class of rentiers. While Covid-19 conditions may not be permanent, private telecommunications will continue to pervade human life, increasing the political stakes of this distribution of power. What will prevent a shift towards a totalitarianism of the rentiers?

There are meaningful alternatives. The essential facilities doctrine, used to promote interoperability between technology companies, is at the heart of recommendations made by the Electronic Frontier Foundation to the FTC.28 We have discussed its limits as a paradigm, but it is possible that a more competitive, functional market may indeed give consumers more power in relation to the corporations they depend on for the functioning of daily life.

Beyond antitrust and public utilities, degrees of nationalization take us closer to the provisioning of telecommunications as a public good, as with primary schools, water, and roads. Australia, which shares many of the US's political and security priorities, has a nationalized broadband network which functions as a wholesale service provider. During the Covid-19 pandemic, it was able to subsidize provision of broadband infrastructure to low income households with new home schooling needs, as well as residential and business customers facing financial hardship. It increased capacity to retailers by 40% at no cost in order to help Australians remain connected on broadband and regional satellite services during social distancing.29 Above the carrier layer, however, the government's commitment to national communications systems is somewhat more limited. For instance, the government still communicates with the public via Facebook-owned WhatsApp. (By contrast, the Netherlands and some municipalities in Germany have moved towards choosing open source software for civic applications by default.)

Across the world, a variety of states engage in various forms of what might be called “soft” nationalization, from taking stakes in infrastructure firms30 to creating sovereign wealth funds through taxes on industry. If telecommunications and internet applications must remain profitable monopolies, they can be made subject to public oversight and generate profits for public benefit through partial ownership schemes. There is some irony in the US government's strict prevention of even noncontrolling foreign ownership of US technology companies for fear that it will benefit China, when the US will not seek out the benefits of ownership for itself.

Since about 2017, activists, academics, and politicians around the world have been fostering and developing a “new municipalism” movement, which pushes for the municipal appropriation of formerly privatized assets and resources.31 Drawing on the history of “gas and water socialism” and “sewer socialism,” it favors commonly owned civic platforms, community management of public space and services, and municipal dominance over industrial and corporate market actors.32 The goal of the new municipalism is to extend municipal control over digital infrastructure. Within the world of new municipalist platform politics, Barcelona has become a center of democratic action, especially in the world of smart cities, pushing against corporate providers of civic cyber infrastructure.33 The goal is to limit the possibility that data generated through interaction with public space and services will be fed into the political economy of big tech accumulation. During Covid-19, we have already seen some municipalities take these risks seriously: at least one Germany city, Bühl, has provided an open-source video chat platform, Jitsi, to its citizens so that schools and churches could meet during the lockdown.34

The Covid-19 pandemic has made clear how dependent social have has become on private telecommunications infrastructure. Neither antitrust regulation nor national security regulation are sufficient to prevent the erosion of civic autonomy. Rather, protecting the domains of civic society and private life from being controlled and exploited will require the exercise of democratic will. Policy options that strive to restore the balance of power will arise when people and their governments act to bargain and assert power and terms of use over technology firms.


  1. Iman Ghosh, ”Zoom is Now Worth More Than the World’s 7 Biggest Airlines,” Visual Capitalist, May 15, 2020. 

  2. Julie E. Cohen, Between Truth and Power: The Legal Constructions of Informational Capitalism (New York: Oxford University Press, 2019). 

  3. Munn v. Illinois, 94 US 113 (1876). 

  4. U.S. v. Terminal R.R. Ass'n, 224 U.S. 383 (1912). 

  5. U.S. v. Microsoft, 253 F.3d 34, 64 (D.C. Cir. 2001). 

  6. Press Release: Antitrust: Commission fines Google €2.42 billion for abusing dominance as search engine by giving illegal advantage to own comparison shopping service,” European Commission, June 27, 2017. 

  7. Federal Communications Commission, FCC 05-151, Policy Statement, September 23, 2005. 

  8. Comcast Corp. v. FCC, 600 F.3d 642, (2010). 

  9. Primarily, section 706 of the Communications Act 1934

  10. Federal Communications Commission, FCC 10-201, Report and Order, December 23, 2010. 

  11. ^Verizon Communications Inc. v. FCC*, 740 F.3d 623 (D.C. Cir. 2014). 

  12. Robert Litan, “Regulating Internet Access as a Public Utility: A Boomerang on Tech If It Happens,” The Brookings Institute, June 2014 

  13. Federal Communications Commission, FCC FCC 17-166, Declaratory Order, Report and Order, and Order, January 4, 2018. 

  14. Adi Robertson, “Here’s how companies have flouted net neutrality before and what made them stop,” The Verge, June 11, 2018, 

  15. Several states have since attempted to reintroduce those restrictions. (See: “2019-20 Privacy Legislation Related to Internet Service Providers,” National Conference of State Legislatures, 2019.) 

  16. K. Sabeel Rahman, “Regulating Informational Infrastructure: Internet Platforms as the New Public Utilities,” Georgetown Law and Technology Review 2, no. 2 (2018): 234-251.  

  17. Adam Thierer, “The Perils of Classifying Social Media Platforms as Public Utilities,” Journal of Communications Law and Technology Policy 21, no. 2 (2013): 249-297. 

  18. Susan Crawford, “Calling Facebook a Utility Would Only Make Things Worse,” Wired, April 28, 2018. 

  19. See e.g. Mark Andrejevic, “Public Service Media Utilities: Rethinking Search Engines and Social Networking as Public Goods,” Media International Australia 146, no. 1 (Feb. 2013). 

  20. More precisely, the Obama administration’s agenda was to expand the notion of the open internet both domestically and abroad. Its net neutrality ruling, as well as its foreign policy, created fertile ground for the growth of US digital services companies. The Trump administration’s reversal of net neutrality reflected a shift in favor of domestic ISPs. In this article, we discuss telecommunications companies inclusive of both digital services and ISPs, though at times these sectors are at political and economic odds. 

  21. Scott R. Anderson, Sarah Tate Chambers, and Molly E. Reynolds, “What’s in the New NDAA,” Lawfare, August 14, 2018. 

  22. Cyber Supply Chain Risk Management,” National Institute of Standards and Technology: Computer Security Resource Center, last modified June 22, 2020. 

  23. Anthony V. Capobianco et al., “CFIUS Annual Report Highlights Spike in Filings and Scrutiny of Chinese Investments,” Hogan Lovells, Lexology, December 13, 2019. 

  24. Georgia Wells and Kate O’Keeffe, “U.S. Orders Chinese Firm to Sell Dating App Grindr Over Blackmail Risk,” Wall Street Journal, March 27, 2019. 

  25. H.R.McMaster, “How China Sees the World,” The Atlantic, May 2020. 

  26. Dan Ciuriak, "The Economics of Data: Implications for the Data-Driven Economy," Centre for International Governance Innovation, March 5, 2018. 

  27. Scott Feira, Maureen R. Jeffreys, Ronald D. Lee, Peter J. Schildkraut, and Tom McSorley, “‘Team Telecom’ Revamp: New Executive Branch Process for Reviewing Foreign Participation in US Telecom Sector,” Arnold & Porter, April 9, 2020. 

  28. Cory Doctorow, “EFF's roadmap for a 21st Century antitrust doctrine,” Boing Boing, February 28, 2019. 

  29. It should be noted however, Australia’s National Broadband Network was born a mediocre technical system, with a carrying capacity 40x lower than its original design (i.e. fibre optic to the node rather than fibre optic to the house). This was the result of a conservative government kowtowing to Rupert Murdoch who saw the nationalized broadband infrastructure as a threat to his cable television interests. 

  30. Birgit Jennen and William Wilkes, “Germany Will Take Lufthansa Stake in Landmark $9.8 Billion Bailout,” Bloomberg, May 25, 2020. 

  31. Matthew Thompson, “What’s so new about new municipalism?,” Progress in Human Geography (2020): 1-26. 

  32. Masha Gessen, “Barcelona’s Experiment in Radical Democracy,” The New Yorker, August 6, 2018. 

  33. Evgeny Morozov and Francesca Bria, “Rethinking the Smart City: Democratizing Urban Technology,” Rosa Luxembourg Stiftung, January 2018. 

  34. Palim! Palim!,” Stadt Bühl, last accessed July 24, 2020. 

Title Essential Infrastructures
Authors Sebastian Benthall Jake Goldenfein
Date 2020-07-27
Collection Analysis
Filed Under
 
 

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