by John Thorne, Peter W. Huber, and Michael K. Kellogg
As Lenin once remarked on the subject of tanks, quantity has a quality all of its own. Even things old and familiar can be transformed beyond recognition by the raw power of size.(1)
The telecosm--the universe of telecommunications and computers--is expanding faster than any other techno-cosm has ever expanded before. Bounded by hair-thin strands of glass below, the stratosphere above, and satellites 23,000 miles beyond, the telecosm is the telephone unleashed, the personal computer connected, and the television brought under control at last. It runs through offices and factories, warehouses and assembly lines, colleges and schools, hospitals, airports, and living rooms. Its capacity to carry information has expanded a million-fold in the last decade or two. It will expand another million-fold in our lifetimes. Or perhaps a billion-fold. No one really knows.
It is a catalyst for change more urgent and powerful than Gutenberg's printing press was five centuries ago. The power of speech is what differentiates humans from all other species. It was speech that gave early man the unique power to coordinate communities for hunting, gathering, farming, and the pursuit of civilization. Now, broadband technology is amplifying that power beyond all recognition. In an hour of a single day, we move more information than was moved by all of our human ancestors before the dawn of the twentieth century. Changes that large, in a capability that fundamental, change the face of society.(2)
Up to a point, the technology contains its own destiny. It will be deployed, it will be used, whatever lawyers may say about it. But baseball (as Yogi Berra once noted) is only 90 percent physical; the other half is mental. Law in the telecosm will significantly affect how the new universe unfolds, and on what timetable.
This is discouraging: the law is a mess. The rules that decide which broadband medium will be regulated by whom, over which part of its length, and toward what purpose, seem to have emerged from a sausage factory operated by a fractious band of intoxicated butchers. Traditional expositions of telecommunications law have been written accordingly. They track either technologies (such as satellite or cable) or standard packages of service (such as broadcast).(3) Our own Federal Telecommunications Law, a companion volume to this treatise, focuses specifically on common carrier telephone service.(4)
But these familiar organizations do not conform to the broadband reality that is now unfolding. All the important legal issues in the new telecosm cut across technology and traditional categories of service. Orthodox legal analysis tracks the well-travelled ruts on the old and unpaved country roads of telecommunications.
This treatise approaches the broadband telecosm not from the sausage's perspective, but from the pig's. The individual links are acknowledged, of course, as are the intoxicated butchers. But throughout, our purpose is to maintain a unified perspective on the whole of the rapidly converging broadband industry.
In the 1870s, Alexander Graham Bell set about developing a harmonic telegraph; the goal was to transmit several telegraph messages over the same line. (Today this is called "multiplexing;" all broadband technology depends on it.) Bell's telephone company was founded in 1877. By the end of 1983, its successor, AT&T, was the largest company in the world.
Radio was developed not long after the telephone. Guglielmo (G.M.) Marconi pioneered the technology in 1895; he formed his "wireless telegraph" company in Britain in 1897.(6) From the beginning, a single radio transmitter could reach any number of receivers within range. Radio and television were far broader than telephony, but they were also indiscriminate. A broadcaster's worst enemy was another broadcaster operating on the same frequency. Transmitters had to remain few and far between.
Bell's original metal wires are now giving way to fantastically capacious fiber-optic glass. Glass is already in place in the higher tiers of the telephone network; it is also rapidly being installed for backbone transport of cable television. Marconi's early radios gave way to broadcast television; broadcast is now giving way to even more capacious cellular narrowcast. Spectrum scarcity has been abolished: any number of new channels can be created by shrinking the power of transmitters and increasing their number. Satellites are also broadband media. For the most part, they have been used to distribute video to cable systems. But several million homeowners already pull down signals directly from satellite, and higher-power, direct broadcast satellites are now being deployed.
It is often assumed that wireline networks, particularly glass ones, have a decisive edge over any wireless alternative. This is true for some applications, but by no means all. Wireless can be extraordinarily efficient for one-to-many communication and is essential for mobility. It is less private--but the whole point of broadcast is to reach a lot of people simultaneously. Overall, landline systems offer more capacity and a greater assurance of privacy, but they are more efficient only for stationary, narrowcast, or point-to-point connections.
From a physicist's perspective, the wired and wireless components of the telecosm are not really different at all. Radio waves can operate at any frequency, from the very low frequencies used by long-wave AM radio, to the extremely high frequencies of light. The key difference between wireless and wireline media is what engineers call a wave guide. An ordinary radio transmitter broadcasts through the air in all directions. Electric and photonic transmitters dispatch narrowly, through the shielded confines of a wire. The wire simply channels the electromagnetic waves in the desired direction.
The telecosm has a third dimension--the intelligent terminal, the highway in a box. Every desktop computer has a broadband communication channel (the machine's bus) that runs the length of its internal spine. The bus can be connected by wire to other machines over local area networks. Wide area networks can be assembled over wireline telephone or cable lines or wireless media.
Terminal equipment itself supplies bandwidth, or at least a direct substitute for it.(7) It is always possible to trade conduit higher in the network for better equipment lower down. Digital compression technology is bringing about an enormous increase in the throughput of all distribution media. Small, low-power satellites require large dishes on earth; signals from high-power direct broadcast satellites can be received on much smaller, cheaper dishes.(8) Cable uses high-capacity wires linking comparatively dumb equipment at either end; Asynchronous Digital Subscriber Line (ADSL) can provide video dialtone over narrower telephone wires by using smarter compression technology at the ends.(9) Costs move readily from the wire into the nodes and back out. All communication involves similar trade-offs between the power or proximity of the transmitter and the sensitivity or intelligence of the receiver.
The telecosm has expanded rapidly throughout its first century of existence. In 1934, there were fewer than 600 AM radio stations; by 1990, there were over 10,000 AM and FM radio stations, 1,400 VHF and UHF TV stations, 700 low-power TV stations, and 11,000 cable systems.(10) Videocassette players and direct broadcast satellites offer countless additional channels. In 1970, cable passed less than ten percent of all households and offered twelve channels;(11) today, it passes well over 90 percent,(12) and hundreds of channels are technologically possible. In 1976, there were four national cable programming networks; in 1993, roughly 100 national and 30 regional cable networks were offering their own programming, and dozens more were planned. Computer and data networks are proliferating even faster.
The various media are constantly changing places and roles.(13) Broadcast television was first airwaves and rabbit ears, then airwaves plus a "community antenna," and now the community antenna has become cable, a direct competitor. Cable was first wire, then wire plus satellite, and now the satellite has become direct broadcast satellite (DBS), a direct competitor. Telephone used to be broadband only in the long-distance network, but now it is supplying a new generation of high-capacity connections to the home.
In all three segments of the telecosm--wireline, wireless, and terminal equipment--demand is growing insatiably. Broadband networks and intelligent terminals are consumer goods when they supply casual human contact and entertainment. They are also steadily substituting for materials, energy, real estate, transportation--all the traditional physical inputs to production. Step by step, the national economy is shifting from the material world into the telecosm.
Broadband media are already ubiquitous. Why then is there so much talk of spending hundreds of billions of dollars to build a new broadband superhighway? Consciously or not, most of us use broadband networks many times every day. Why then do most people doubt they even know what "broadband" means, still less for what it is needed?
Though it consumes many hours of our day, broadcast television is an inherently impoverished and impoverishing medium. It works only one way. It serves the semi-comatose and thus remains the technological darling of propagandists and entertainment moguls, of despots and dictators--the kinds of people who appreciate nothing more than a broadcast studio and a million couch potatoes.(14) Broadcast separates the populace into an elite few, who produce and perform, and the stupefied rest, who lie back and gape. It is of little use to the great mass of people at work.
For productive purposes, the telephone is a far better tool because it provides two-way capabilities. The higher reaches of the telephone network, built of lasers and glass, already comprise the most capacious, powerful, two-way broadband medium imaginable. But in the lower reaches of the network, telephony is still narrowband. It can carry voice adequately, but little in the way of pictures or voluminous data.
Thus, along one dimension, television is broad and telephony narrow. Television delivers enormous bandwidth; telephony is a thousand times too narrow. Along a second dimension, telephony is broad, and television is narrow. There are 150 million telephone lines in the country, but only about 1,500 television transmitters. Television connects the few to the many; telephony supplies connectivity to all.
The different types of networks create a remarkable financial paradox. Narrowband, though consumed sparingly, is much more lucrative than broadband, though it is consumed in profligate excess. In round numbers, the Super Bowl attracts 100 million viewers and $100 million in sponsors' cash. The game lasts four hours. That's about 25 cents per viewer hour. While sports enthusiast Jane Doe watches the big game, John prefers to chat with his college roommate on the phone. Though the cross-country call is carried mostly over the broadband facilities of the long-distance telephone network, at the ends the connection is still very narrow. Yet for entertainment that good, John is willing to pay about $12 an hour.
Multiply these numbers across 150 million households and offices, and you arrive at a comparatively small TV entertainment industry and a comparatively large telephone industry. Though it provides a broadband signal--sound and full-motion color video--and occupies the average American many hours every day, the U.S. video market, including all broadcast, cable, and videocassettes, generates revenues of $63 billion.(15) Telephony's revenues are much higher. Though each narrowband telephone line is used less than one hour per day(16)--far less than the average broadband television--local telephony(17) generates about $95 billion a year. Long-distance calling generates another $31 billion.(18) In total, then, narrowband telephony generates about $125 billion a year, or about twice the aggregate revenues of broadband video.
This advantage is now apparent within the wireless industry itself. Both television and cellular telephony use the airwaves. Both use "broadcast" technology: a pocket cellular phone, like a TV station, transmits outward in all directions. A television station uses 6 MHz; a cellular telephone network uses 25 MHz. Thus, a city with eight VHF and UHF stations and two cellular networks uses about as much spectrum for TV as for wireless telephony. The cellular carriers, however, create not a single, broad, one-way video channel, but thousands of narrow, two-way voice channels. Though still in its infancy and still growing at breakneck speed, cellular telephony already generates about $12 billion a year. The entire broadcast-television industry, though mature, generates about $26 billion a year--and that total includes not just the value of the transport but of the content, too. Within a few years, cellular's revenues will overtake those of broadcast. Counting the value of content conveyed, they already have.
Broadcast is broadband, but also steeply hierarchical. Telephone is narrowband, but also egalitarian. That simple difference accounts for two-way narrowband's two-for-one revenue edge over one-way broadband. If we have to choose, two-way connectivity is worth far more than bandwidth.
But we don't have to choose any more.
A ubiquitous, two-way broadband network is now at hand. It is in fact already up and running in the higher reaches of the telecosm. Distribution networks typically use their most capacious conduits at the top. A freight train is a hundred times bigger than a delivery van; an ocean tanker dwarfs the truck that delivers gas to the neighborhood pump. It is in long-haul, wholesale operations that consolidating facilities and deploying the highest capacity systems usually makes sense. Broadband networks have evolved accordingly. They already occupy the upper reaches of the telephone network, operated by regional and national telephone companies, and the upper reaches of the broadcast networks, operated by video carriers. Most of the major advances in broadband technology--coaxial cable, point-to-point microwave, satellite, and fiber-optic glass--were either developed or first commercialized by wholesale carriers.
Only the last mile remains to be conquered. Glassing every home in America would probably cost thousands of dollars per household, or about $100 billion to $300 billion for the nation as a whole. It is not yet clear whether that kind of investment would make sense; sooner or later it probably will. Meanwhile, the carrying capacity of copper and coaxial cable can be increased enormously. The "integrated services digital network," already widely deployed, provides a huge boost in the capacity of existing wires. "Video dialtone" over copper lines is technically possible. Coaxial cable has very large bandwidth and can be set up for either one- or two-way communication.
For now, about 50 million bits per second is what typically ranks as "broad." That's five complete newspapers a second, a compact disc every minute and a half, or five simultaneous channels of (compressed) color television. More ambitious visionaries speculate about high definition TV (HDTV),(19) or even holographic virtual reality. But these standards derive from the world of entertainment, the wrong point of reference. Human eyes and ears can register incoming information only so fast; intelligent machines face no similar limitations. Communicating computers, not Bill Cosby, will be the ultimate customers for bandwidth. There is no reason to suppose that their appetites will ever stop growing.
The entertainment benchmark is more unreliable still in a second respect. In factories, offices, schools, and hospitals--wherever people work rather than lounge--the power to send information will be as important as the power to receive it. And here again, communicating computers will demand a much wider back-channel than mere humans might use. Empowering people to order a pizza in Pavlovian response to advertising will not be enough.
How much more is needed to close the loop efficiently is not clear. The loop must close, but it need not close symmetrically. A more likely prospect is a lot of bandwidth inbound, with less going back out.(20) Solid things obey immutable laws of conservation--what goes south on the highway must go back north. Information is different. It can be replicated at almost no cost, so every individual can (in theory) consume society's entire output. We all run information deficits; we all consume far more than we produce.
Networks have to be built accordingly.(21) Use DBS (say) to provide tons of capacity down, and then close the loop by telephone or something else narrow going back. Put glass in the backbone, then bundle coaxial cable and copper side by side at the end. Graft asymmetric broadband onto the telephone network itself. Segment the market. A bank and an insurance company do not need the same lines as a library or a home; a hospital needs something different again. Most workplaces will need capacious outbound channels, just as factories need loading docks. Schools will need more bandwidth in than out.
The main debate today is not whether two-way broadband is coming, but when and from whom. Some see a two-wire or multi-wire future; others suggest this would be wasteful and prohibitively expensive, especially in rural areas. The broadband visionaries who emphasize glass argue that fiber-optic networks are characterized by declining average costs over the whole range of demand and are therefore natural monopolies.
Experience so far points toward competition, not monopoly. Fiber is already used almost exclusively in the long-distance industry, which is served by three national carriers. Almost all households already subscribe to landline telephone service, and over 90 percent already have cable at their doorstep if they want it. A third wire--the electric utility's--may also become an information conduit. The very high fixed costs of wiring offices and households may not prove to be quite such insurmountable impediments to competitive entry when the enormous potential profits of selling bandwidth are added to the balance.
Experience also confirms that technologies will multiply, evolve, and adapt to occupy different niches in the telecosm. The FCC first opened the skies to competitive communication satellites in 1972, for example, in an attempt to promote competition in long-distance telephone service. At that time, AT&T also distributed most of the video programming for national television networks over landline circuits. As competing satellites began to be parked in orbit, however, long-distance telephony was moving back down to earth. The commercial satellite industry would have expired--if cable television had not been growing so fast. Satellites turned out to be the ideal medium for point-to-multipoint distribution of video programming.(22) For years, the FCC had attempted to promote a policy of "localism" in television broadcasting.(23) Cable television plus satellite responded with exactly the opposite: the so-called "superstation," local television from Atlanta viewable on cable from Miami to Seattle.
Microwave, another broadband technology, has demonstrated a similar, Phoenix-like capacity for evolution and survival. AT&T developed it for long-distance telephone service; the FCC then licensed it for use in private voice and data networks. MCI came along and built an independent, long-distance network out of microwave towers. Just as it finished the job, one if its rivals, Sprint, began running advertisements that showed microwave towers being dynamited to the ground--to be replaced by glass. By then, however, microwave had been given a new lease on life for the short-haul transport of video signals to the head-end of cable systems. Microwave frequencies were then assigned for use by local pay-television and "wireless cable" services.(24) The proliferation of other broadband media notwithstanding, there is still a great deal of life in this technology.
Experience teaches that it is almost certainly wrong to equate broadband with all-glass networks, or indeed with any single technology, and to write off older or less loudly touted alternatives. A far safer prediction is that tomorrow's telecosm will contain a "network of networks," an intricately interconnected matrix of wireless, satellite, copper, coaxial, and glass, with multiple overlapping, complementary providers, and no single dominant center.
Both cable companies and local exchange companies are building networks with similar capabilities. Both will be switched and two-way, linked to data and video servers, though not necessarily symmetrical or entirely digital. Wireless networks, which span conventional broadcast, cellular, emerging personal communications services (PCS), and a wide range of satellite services, are developing faster still. Many links surely have to be wireless: people on the move do not watch Roseanne, but they do communicate in person, and even more by machine, to and from assembly lines, warehouses, ambulances, and trucks.
The Internet illustrates the architecture of the future.(25) It is already the world's largest communications system, the data archipelago of the planet. It spans the national, regional, and local communications networks used by commercial, government, and educational organizations worldwide. It is also, at the same time, an array of independently owned and managed networks, separately funded, separately developed, and separately maintained, with no single entity or agency in charge of managing everything.
In all likelihood, the future will be realized in a similar, "geodesic" network,(26) with higher bandwidth. A broadband Internet will offer bandwidth and connectivity, but not simplicity or uniformity. It will be an inelegant mix of glass, coax, and copper, of terrestrial transmitters and satellites. No one technology will prevail. Bandwidth and two-way capabilities will constantly improve. The technological mix will constantly change.
Bandwidth and connectivity will proliferate, but so will complexity and unpredictability. It has been suggested that the airwaves and the landline network are trading places--that everything that now goes by wire will go by air, and vice versa.(27) But what is really going on is a hybridization of technology, not a simple exchange of chairs. Both wireless and landline technologies can provide broadband links; the choice will therefore depend on such factors as the need for mobility, population densities (which sharply affect the relative costs of wire and wireless), and overall network economics. The market will use broadband media in unexpected ways, if regulators will let it find them.
This convergence is transforming services, too; the vast capacities of broadband networks make nonsense of traditional regulatory divisions between "carriers" and "broadcasters."
Consider cable television. Originally called the "community antenna," cable began life as a carrier--a passive retransmitter of broadcast TV. Cable's status as carrier seemed so obvious that in 1968 the Supreme Court agreed that cable operators could pirate over-the-air broadcasts with impunity.(28) It took Congress fifteen years, two Cable Acts, and one major revision of the Copyright Act to clean up part of the ensuing mess. And there still remains much to clean.
Even the earliest systems could carry twelve channels, but there weren't twelve over-the-air channels to pirate. The seemingly vast excess capacity drove cable owners to develop new programming. First they imported broadcast signals from farther afield. Then they bankrolled Ted Turner. Cable operators quickly became major video programmers in their own right. The supply of programming expanded rapidly to fill the space available. Meanwhile, however, the FCC (and later Congress) had promulgated "must carry" rules and eventually imposed carrier-like price regulation, too.(29) Both are now under constitutional attack.(30)
Today, the law of cable TV is a bit of everything.(31) To a newcomer, it looks like some demented functionary at the FCC dropped the rulebooks for telephone, television, and publishing into a food processor, and then scattered shredded sections, paragraphs, and appendices in a new binder and called it cable. More of the same is scattered through the United States Code, the Federal Register, and federal casebooks. Technology is pulling down old walls between services far faster than regulators can shore them up or replace them.
The settled law of television broadcast, for example, unsettles fast when signals are scrambled or encrypted. Many services that are obviously "broadcast" in the common meaning of that word are not regulated as "broadcast" any more.(32) Once scrambled, they are really more like cable but without the wire. Both radio and television broadcasters also use parts of their spectrum to provide carriage. Many paging services piggyback their signals on "FM subcarrier" frequencies; when the resident from Seattle travels to Miami, her office tracks down the beeper in her pocket with the assistance of FM radio stations around the country. Paging--a locator service--is bought and sold as a "common carrier" service, yet the service itself plainly depends on "broadcasting" to locate peripatetic travelers wherever they may wander.
Satellite technology straddles the old regulatory divisions, too.(33) Satellite carriers mostly "carry" video from studios to the cable distributors, but, for four million homes with backyard dishes, satellite is already a "direct broadcast" medium. Higher-powered satellites are intended to broadcast directly to the final user, and their signals can be picked up on smaller dishes. The difference between satellite "carriage" and satellite "broadcast" is thus 100 watts (one light bulb) or six feet (the difference in size of two different receiving dishes).
By scrambling signals, and then selling decoders, broadcasters redefine themselves as for-pay narrow-casters. Cellular telephony or television can privatize "broadcast" services even more. Landline phone companies move in the opposite direction. Video dialtone services do for video what 976 services did for voice: they effectively transform the telephone network into a medium capable of carrying the Super Bowl to millions of households at once. A dial-a-porn service is far more like a "topless radio" station than like a Sunday afternoon phone call from Aunt Gwendolyn in Missoula. Broadcasters, in short, are mastering the art of keeping the "broad" while narrowing the "cast." Telephone companies are keeping their switched, addressable capabilities while widening their bandwidth and their reach. Nobody casts drift nets anymore. They are all fly fishermen now.
A full-bore broadband network will empower everyone to cast broadly or narrowly at will. The teletext world already does so: anyone can create a bulletin board, and anyone can post musings on it, whether wise or foolish, tasteful, crass, or crude, to be read by the world. With broadband technology, the text-based bulletin boards will support voice and video. Anyone will be able to compete against Peter Jennings; only Nielsen will pass final judgment as to whose performance is better. Broadband carriers will have room to carry anything anywhere: on their networks, anyone who chooses will be an instant broadcaster. Tomorrow's broadcasters will have the power to narrow and address their signals at will: on their networks, anyone who chooses will get private carriage.
A few die-hard providers may decide to keep their businesses strictly on one side of the old definitional line or the other, or be forced to do so by reactionary regulators. For the most part, however, the clean, familiar legal divisions between carriers and broadcasters will be impossible to maintain. In the broadband telecosm, "carriers" and "casters" will compete head-to-head, in a single unbounded arena.
Entropic debates about definition, jurisdiction, and choice of law consume vast amounts of legal effort and energy. Every tier of government raises its own jurisdictional claims. If every claim were enforced, every technology and service would be regulated several times over, and often in irreconcilably different ways.
The telecosm has traditionally been divided into three spheres. One encompasses private communication, either on private premises by way of facilities dedicated to a single organization, or encrypted to reach only a selected audience. The second, the traditional "common carrier," is "public" (in at least one sense) at both ends of its lines. Customers, not the carrier, define both the content and the audience. Anyone can place a call to anyone else. Traditional broadcast is also public, but only at the receiving end. Few are licensed to broadcast, but everyone is licensed to receive.
The Communications Act of 1934 was written with these three paradigms in mind. The technology of the day fit them fairly well. Broadcast really was broad; there was no cable and no scrambling. Telephony really was pure carriage; there was no dial-a-porn audiotext, no video dialtone, and no virtual private networks. Cable, which today supplies a messy mix of carriage and broadcast, had not been invented. Digital broadband had not even been imagined.
In sweeping language, the 1934 Act empowered the FCC to regulate "interstate and foreign commerce in communication by wire and radio."(35) Two separate titles address common carriage and wireless communication. When satellites created a new means by which to use the old wireless medium, Congress responded with the Communications Satellite Act of 1962.(36) Cable television evolved around the same time. For two decades, the FCC made up its own jurisdictional theories for cable. Congress finally took charge with the Cable Act of 1984, which carved up jurisdiction over cable between federal and state authorities; a second federal cable act, enacted in 1992, carved some more.(37)
Federal broadband law is further shaped by the Sherman Antitrust Act, the Clayton Act, and other federal antitrust laws. Federal copyright law also plays a significant role. So do a tangle of other laws, court orders, and international agreements. Municipal, county, state, federal, and international authorities may all claim authority over some part of the circuit. Who's in charge depends on the medium: airwaves or wire, copper or coax, terrestrial or satellite. It depends on where the medium is deployed: on private premises, under local streets, in the airwaves, or across state or international boundaries. And it depends on the matter: franchise, price regulation, carriage obligations, content, and so on.
Entry regulation--licensing--lies principally with the states for cable and local telephone franchises, but principally with federal authorities for terrestrial or satellite broadcasting. The power to regulate price lies mostly with the states for local telephone service, but mostly with the federal government for cable television and satellite services. Common carriage obligations are determined by yet another mix of federal and state mandates. So are structural limits on cross-ownership, vertical integration, or the raw size of telecom conglomerates. Federal authorities assert control over some parts of content--political spending, "fairness," and copyright, for example--while localities retain the power to define pornography.
Back at the sausage factory, different links of jurisdiction are thus allocated with gay abandon to commissions, departments, city halls, courts, and other regulatory buns. So far as regulators are concerned, some broadband media are schnitzels, others breakfast links, others foot-long dogs with all the trimmings. So far as engineers and consumers are concerned, broadband is broadband: they are all just meat.
The whole point of tele-technology is to make location unimportant. Indeed, the "tele" means "far." Rules and rulers, by contrast, are tied to places. Jurisdiction depends above all on where you are. The law abhors distance.
In the telephone arena, the jurisdictional debates revolve around two sets of maps. The first tracks state boundaries. Federal officials regulate interstate facilities and service; local officials oversee the rest. But there is no rest, or else, the rest is all of it. Everything of any importance in telecom connects to everything else: in that sense, everything is interstate. Everything is also located inside one state or another: in that sense, everything is intrastate. The map has been drawn nonetheless. Authority over lines and switches, traffic and costs, is divvied up between state and federal authorities in a mind-numbing process.(38) A second map, drawn in antitrust litigation against Bell, divides the nation into 164 separate territories, not fifty.(39)
The broadcast maps are quite different. Federal authority is plenary, but the FCC exercises it to promote "localism." The mapmakers have emerged again. Ordinary broadcast licenses prescribe contours of signal strength, so that good reception typically extends about fifty miles. Low power TV licenses are good for about twenty miles. Broadcasters are required to show that they diligently serve local needs within those circles. But despite the mapmakers, the broadcast universe has refused to remain confined within fifty-mile ethereal metropolises. National networks were inevitable because of the overwhelming economies of sharing entertainment and information. From the viewer's perspective, the national networks could just as well use 1,000-mile transmitters.
When cable arrived, a new set of jurisdictional maps emerged. Cable TV franchises typically track county lines. New programming was needed, however, to fill all the new bandwidth. Entrepreneurs recognized they could turn a single local broadcast station in Atlanta into a "super-station" by uplinking the signal to a satellite and then bouncing it back to the nation. Direct broadcast satellite will soon finish the job of delocalizing television. Geosynchronous satellites have huge broadcast footprints. The war between localism and telecommunications is over. Telecommunications has won, but someone has to tell the regulators.
Engineers today would happily forget about the distinctions among private transport, common carriage, and broadcasting. The technology and the markets are converging fast. It is regulation, now, that is shoring up the old cartels.
Some of the consequences are manifestly bad. Networks root their way toward the most accommodating regulatory soil, even if efficiency and sound engineering would favor growth in a different direction. The video programming dollar can be channeled toward stand-alone VCRs, regulated (if at all) by the sweat-shop labor laws of Singapore, toward video dialtone, under mixed state and federal authority, toward public cable, regulated through an uneasy (different) balance of local and federal authority, or toward private cable (master antenna services in high rises), where the balance of authority is equally uneasy but different yet again. Or it may flow toward direct broadcast satellites and backyard or rooftop dishes.
There is only one real choice at stake here--whether to spend more on powerful transmitters or more on sensitive antennas, whether private (dishes), semi-private (SMATV), or public (cable). From an engineering perspective, the efficient choice depends on population density, geography, a host of technical factors, and changes over time. An unregulated market will pursue the efficient solution. An unevenly regulated one will accept much inefficiency to find the path of least regulatory resistance.
But the fragmentation of jurisdiction has also done some real if unintended good. Fragmented regulation is inherently weak. Regulators are always accusing their targets of cross-subsidy, monopoly, predation, discrimination, and so on, but regulators are all too prone to those vices themselves. Regulatory competition disciplines regulators much as market competition disciplines everyone else. County regulators (say) can only jack franchise fees so high if federal regulators allow price cutting by telephone-supplied video or satellite-supplied direct broadcast. One all-powerful regulator can certainly harmonize the rules applied to different media, but the final tune might be all the more horrible. In a world of imperfect, acquisitive, or incompetent regulation, anarchy is not without its advantages.
This is, ultimately, the most important jurisdictional fact of all. Telecom gives people the power to distance themselves from sheriffs, judges, counties, states, and even nations that are badly governed. Half a century ago, George Orwell predicted that telecom technology would move us toward global collectivism, toward more government control over more people in more places. Central government ministries would control every aspect of life more completely than ever before in history, and nothing more completely than the instruments of telecommunication. The resulting totalitarianism would be more all-pervading than any imagined before. Big Brother was coming.(40)
Telecom technology has, in fact, had precisely the opposite effect: for the first time in history, it is possible to maintain brotherhood while keeping well away from Big Brother. With advanced telecommunication technology at hand, it is easier than ever to leave one jurisdiction for another, while still buying, selling, and congregating wherever one may please. Governments and regulators, policemen and armies, still control discrete places. But the age of telecommunications is the age of the nowhere man, in a nowhere land, pouring value into nowhere plans that can be conveyed anywhere to anybody. Armed with a telescreen, the human mind can escape faster than any regulator can pursue.
Who will be permitted by the government to build broadband networks? Given how loudly government has been promoting the "information superhighway," this question might seem idle. It isn't. Entry into the broadband business is strictly controlled through a labyrinth of franchise procedures and license requirements.
The franchising of communication technologies is not new. Soon after the printing press arrived in England, Henry VIII decided that the risks of sedition required control by the Crown. When it became impossible to limit the number of presses, the government tried its hand at licensing books.(42)
Licensing today is always undertaken in sorrow, not anger. It is a matter of necessity.(43) Franchises are required by the laws of physics, it is said: spectrum is scarce. Or by the laws of economics: monopoly is cheaper and more efficient than competition. Or by the inherent scarcity of orbital slots in which to park satellites.(44) Or by logistics: franchises are needed to protect the public from the inconvenience of too much digging in the public streets. When transmitters, wires on telephone poles, underground conduits, or simply our patience are in short supply, and under monopolistic (or at best oligopolistic) control, the government must step in to ration and dole out the poverty, protesting its reluctance loudly as it does so.
And often protesting all the way to the bank. Government entities that issue licenses have noticed that they can collect pay-offs for doing so.(45) With telephone service, the most common model is a local or state tax on receipts. With cable, franchise fees are more commonly paid in cash or kind-free wiring for schools, television studios for favorite charities, free TV time for city officials, and so on.(46) The federal government recently began cashing in directly, by selling spectrum for wireless telephones at auction to the highest bidders, or to bidders judged to be most diverse, marginalized, or politically correct.(47)
Antitrust law and the First Amendment have been the two main federal tools available to sanitize the process.(48) The inherent inefficiency (or worse) of the franchising process has grown clearer with each new advance in broadband technology. Virtually every locality in the country now has not one wireline network, but two; wireless alternatives are advancing and multiplying, as well. With digital broadband technology, every network is capable of carrying voice, video, and data, or soon will be.
On the constitutional front, government clearly could never get away with licensing paper-and-ink presses the way it currently licenses electronic ones. Press licenses were effectively abolished in the United States by the ratification of the First Amendment in 1791. For most of this century, courts distinguished celluloid and emulsion, radios and tuners, photons, phosphors, fiber-optic glass, and countless other electronic substitutes for ink and paper. Franchises, licenses, and permits are still the norm for these media, not the exception. But licensing remains the quintessential prior restraint; it creates countless opportunities to chill or to censor by way of bureaucratic wink, nudge, or frown. The First Amendment presumption is that other, post hoc means to any legitimate regulatory ends are strongly favored, if they can be concocted in any reasonable way.
They can be. The old rationales of scarcity and natural monopoly no longer persuade. The clamor of people who want to deploy new electronic presses faster than regulators can process their permits is reaching a crescendo.(49) Property rights and anti-trespassing rules are needed in telecommunications, as in all other free markets. Licenses are not.
Will broadband operators be common carriers, like telephone companies? Or will they be uncommon publishers, more like newspapers? Or a bit of both?
A common carrier serves the general public at rates announced in advance. Tariff and non-discrimination obligations strictly limit a carrier's flexibility to adjust the price and terms of carriage.(51)
Many telecommunicators deploy or lease facilities to move their own traffic--they are private carriers. Common carriers and others may also offer non-common private transport under contract, not tariff. The lease or sale of wires, circuits, channels, slices of spectrum, or transponders removes facilities from the ambit of common carriage. The other principal way to escape common carrier duties is not to surrender control of the medium but to seize control of the content. That turns you into some variation of a "broadcaster."
Much regulation is still aimed at making sure that carriers dance strictly on the "carrier" side of the floor. The bluntest tools are the limits on vertical integration discussed in Chapter 8. Alternatively, regulators may insist on the installation of high-capacity systems that cannot economically be dedicated to a single customer. Common carrier rules impose nondiscrimination mandates and public tariffs directly.
Once a carrier's status qua carrier is established, its obligations to carry are given several different labels. Ordinary customers get "carriage." Other carriers get "equal access," which in the end amounts to the same thing. Either way, carriers are supposed to offer outsiders equal opportunity to purchase carrier services.(52)
Broadcasters do not offer equal opportunity; they offer affirmative action. They are quasi-public trustees: they have traditionally been required to deliver some rough approximation of equal time, equal exposure, equal treatment of issues, points of view and even music or entertainment that the FCC considers important.(53) In principle, at least, broadcasters are strictly prohibited from "carrying." For example, the Commission has labored to eradicate "time brokering"--the sale of small slices of airtime to any comer who wants a soap box on the air.(54) Federal law insists that any brokering of time must be done not by the free market but by the Commission, through such means as the Fairness Doctrine(55) or political broadcasting rules.(56)
The most important issue in common carrier law is thus often the definitional one: resolving who is a carrier and who is not. The principal norms of conduct for carriers and publishers cannot be reconciled. What is absolutely required on one side of the definitional line may be strictly prohibited on the other. Carrier law demands equality for telecom customers at the starting block; broadcast law searches for equality at the finish line. In a carrier environment, the vocal, articulate, and the simply rich get more time than the rest: they retain more telemarketers, run more 800 lines, gobble up transport, and amplify their own views over everyone else's. Despite the accepted labels and models, this is also how broadcast works when it comes to advertising. Nonetheless, broadcasters remain subject to a whole host of requirements regarding community service, public interest programming, and various functional equivalents.(57)
The more bandwidth a medium offers, the harder it is to police legal lines of this sort within it. Satellites, for example, began as quintessential, government-owned common carriers. Then came private satellites. The private satellite owners began selling transponders outright to private users. A single bird will now routinely provide some mix, frequently changing, of public carriage, private carriage, and direct broadcast.(58) Cable likewise began life as a carrier, graduated to the ranks of publisher, but remains subject to must carry, public access, and leased commercial access obligations as well.(59) That medium appears now to be settling into a two-tier framework of operation, with "basic" services regulated and operated much like common carrier services (though never labeled as such), while premium services are operated in the "publisher" mode that cable vehemently insists is its right. But labels aside, the medium plainly straddles the traditional lines between carrier and direct broadcaster, and is often used for both simultaneously.
Telephone companies are also straddling, though they approach the saddle from the other side of the horse. They already perform as audio publishers on their 976 audiotext platforms; soon they will place their own video programming on some channels of their video dialtone platforms and will become de facto broadcasters, too.(60) On-line services like CompuServe and Prodigy provide an indivisible mix of publishing and carriage, ranging from advertising, the essence of discriminatory content, to e-mail, the electronic incarnation of the oldest of all common carriers, the mailman.
The broadband telecosm is now poised to offer hundreds, and then thousands, of separate video channels to the home--an unlimited number, in fact, if one considers the capabilities of video dialtone and videocassettes. There will be at least two wires, and perhaps more, when electric and gas companies begin running glass through or alongside their lines. There will be dozens more channels from terrestrial broadcast, and hundreds directly from space.
As broadband technology continues to expand the space available, and as the restrictions on vertical integration discussed in Chapter 9 continue to loosen, carrier and publisher operations will get more and more hybridized. The technological trends are clear; the economic imperatives are equally strong. A company that deploys a broadband medium will typically need some friendly, and perhaps affiliated, anchor tenants to fill some of the space right away, but it will also want to develop transport services for independent outsiders.
Perhaps the broadband telecosm will still allow regulators to define a regime of pure, unadulterated "common carriage" at the most basic tier of electronic communication. But even if a bottom level of unenhanced carriage can be defined, how does one deal with the inseparable mix of publishing and carriage layered above? One cannot simply declare that everyone above that bottom layer will be defined as a "publisher." A buyer of carrier services that simply resells them without more ado is plainly still a carrier, no more. And what does one make of the on-line services offered by CompuServe or Prodigy? If FCC regulation, or the common law, can dedicate a telephone company's lines or a cable operator's channels to common carriage, why not also some megabytes on Prodigy's computers--once Prodigy sets itself up, as it already has, to deliver mail?
Policing common carrier duties at that level would become fiendishly complicated. But insisting that a service like Prodigy is all "publisher" does not simplify things much. If a bulletin board is a newspaper, whose newspaper is it? The New York Times belongs to those who write it, not to those who supply the newsprint. Is an on-line information service the Times? Or is it a supplier of electronic newsprint--blank pages on which others write? New technology has overtaken the law's old and clean division of the telecosm between publishers and carriers. The classified advertising and glossy ads of an electronic Sunday Times magazine can be so hugely capacious that it will make no sense to hold the Times responsible for every pixel it happens to "carry" on them. Yet the Times demands complete control of what appears alongside the ads, and with that control must come responsibility for libel, copyright, and other content-related laws. How about the letters-to-the-editor section? Bulletin boards on services like Prodigy are already frequently used to debate or distribute vile and hateful content of every description. Are the speakers themselves (who are often anonymous) the only ones responsible? May the service providers discriminate, like any self-respecting publisher? Or must they offer equal access to all voices, like any law-abiding carrier?
Perhaps a measure of legal confusion is unavoidable when formerly distinct activities converge and markets change rapidly. The law should not (and in any event cannot) keep apart what technology is bringing together. It can, however, insist on truth in packaging. People who own and operate cables, wires, transmitters, transponders, or higher-level on-line services like publishing or e-mail must at least clearly declare whether a channel, facility, or service is operating as a carrier or as a publisher. Once made, the election should stick. If a cable operator decides to publish, not carry, on one of its channels, it should then take full responsibility for any defamation or copyright violation that may occur on the premises. A telephone company will want to make very clear where it is--and is not--surrendering its traditional carrier immunities for thefts, frauds, harassments, and worse that may be conducted over its lines. At the same time, simplistic, broad-brush categorizations that define entire industries as either "carriers" or "publishers" need not endure.
As broadband technology evolves and the expansion of conduit overtakes the expansion of content, more companies will recognize and embrace the advantages of defining themselves as common carriers and providing service accordingly. In the past, common carriage has been closely linked to monopoly or state license. But despite its dubious ancestry, common carrier law has evolved into a well-balanced jurisprudence of rights and duties. Even if broadband technologies sweep away the monopolies and sharply limit the importance of licenses, common carriers will endure, if the law of common carriage is kept in sound balance.
Meanwhile, and for the foreseeable future, more operators will float in regulatory limbo, somewhere between carrier and publisher. Each new arrival will wonder which cluster of carrier-like duties it has inherited, telephony's or television's, particularly after learning that complying with one cluster of duties will often mean violating the other.
In the early days of radio, manufacturers set up broadcast stations to promote sales of receivers. Then, for a while, tobacco companies and detergent manufacturers paid for most of broadcast's freight. Today, content is often sold commercial free, with scrambling used to assure payment at the check-out counter. There are other alternatives. On-line services like Prodigy, home-shopping networks, credit card companies, and airline reservation services all supply free (or below cost) information or entertainment; they take their cut on the sale of cucumbers or vacations in Costa Rica instead. Time magazine derives some revenue from subscriptions and some from advertising; as a come-on, it sometimes gives away a cheap telephone to new subscribers. Broadband merchants operate the same way. They sell every part of the pig, including the squeal.(62)
Left to its own devices, the market collects revenues wherever it can: from the boxes at the ends of the wires, from the transport media in between, from advertising, from receipts at the electronically scrambled box office, from cucumbers, in whatever mix of profit and subsidy the market favors at any given time. The price is loaded wherever buyers are least averse to paying it, and sellers find it most convenient to collect.
The profit mix is always changing. Cable television began as a free service, given away to promote the sale of televisions. It evolved into a carrier-like community antenna to boost (for a fee) reception of over-the-air broadcasts. Today, it supplies a stew of carriage, made-for-cable programming, and advertising, with two-way telephone capabilities coming soon. Satellites deployed to provide video carriage for cable companies also operate as direct video broadcasters for consumers who own backyard dishes. Early in the game it may be necessary to subsidize content and transport to sell terminals. Later on it may make sense to subsidize boxes to boost demand for services. Later still, bundling of terminal equipment and services may become necessary to sell content directly, with the box serving as decoder and cash register.
The prices of telecom services are regulated principally to control monopoly or to promote universal service.(63) But monopolists do not produce most of what is sold. Content is provided competitively. So is most hardware on customer premises. So are major parts of the broadband network itself, particularly the newer wireless technologies. Price regulation to promote universal service presents similar difficulties. Most of what broadband networks are used for cannot be bundled into any standardized "basic" package that all consumers need or want, or that all are willing to buy at some standard price.
To regulate price, then, regulators must first carve the bird: they must first separate the competitive drumsticks and un-basic trimmings from the carcass of monopoly and basic broadband necessity. The objective is to regulate only the core monopoly, the "exclusive" part of the franchise, the "essential" components of "universal service."
Content is usually removed first. Regulating the price of content is both infeasible and unconstitutional. Infeasible because you cannot regulate price without also regulating quality, and the quality difference between Wrestlemania and the Super Bowl is beyond the power of any commission to determine. And unconstitutional because regulating the price of speech is inimical to freedom, especially when "free speech" is sold for a healthy profit.
That leaves content-free equipment and service. But regulators do not want to regulate the price of all the equipment, either. And if they regulate only "basic" service, the price of "premium" service may rise all the faster, while the boundary between them steadily shifts south. All the while, regulators must fight off the market, where content, transport, terminal hardware, marketing, billing, and cucumbers are sold in every conceivable array of bundles, constantly rearranged. It is a messy business at best. Most of the time it is just legal butchery.
Traditional carriers are expected to sell unadorned transport at uniform rates. Traditional broadcasters are expected to deliver a bundled package of content and transport, and deliver it free. With cable, the price of basic conduit is regulated, though the price for cablecast programming mostly is not. Prices of telco-supplied video dialtone (VDT) are regulated under one set of rules; prices of premium cable and leased cable channels--against which VDT will compete--are under quite another. "Private cable" (LMDS), "wireless cable" (MMDS), and similar services are basically unregulated, though they offer service identical to "public cable."(64) Direct broadcast satellite offers a third conduit for services indistinguishable from premium cable or VDT, but neither conduit nor content are regulated here.
The price of a back channel needed for interactive services is under common carrier regulation if supplied by a telephone company, but not regulated if offered by way of the new wireless alternative, interactive video and data services (IVDS).(65) Back-channel services grafted onto cable networks probably will not be regulated, either. The price of customer premises equipment, which can substitute for many network-based alternatives, is likewise not regulated--unless it happens to connect to the cable network.
Regulation does not look any more logical from the provider's perspective. It is telephony's heritage to be regulated, so it is still regulated tightly. It is broadcast's heritage to be free, so it is free. Cable is too young to have much of a heritage, so it borrows regulation from the two older media. Satellite master antenna services, MMDS, and LMDS are younger still, and so carry the least price-regulatory baggage. Video dialtone is a startup service offered by a new entrant competing against established, dominant incumbents; because the new entrant is also an old telephone company, however, with dominance in other markets, the price of its new services is strictly regulated anyway. Other startup broadband services--direct broadcast satellite, wireless cable, and single-building SMATV--are not price regulated. For the most part, wireline services (telephone and cable) are more regulated than wireless substitutes (broadcast, satellite, MMDS, LMDS).
Thus, U S West/Time Warner can package and deliver Julia Roberts in Omaha, on a U S West video dialtone system, and in Kansas City, on Time Warner's cable system. Roberts may also appear on the new Time Warner broadcast television network, with interactivity (freeze frame or fast forward, say) supplied by the local broadcaster's IVDS radio back channel. Bell Atlantic may run Roberts in New York (via LMDS) or New Jersey (on video dialtone). TCI may distribute her nationally on cable, broadcast, and DBS. Yet regulation of the price of Pretty Woman will change as fast as one can walk the streets in the red light district of the electronic metropolis.
Regulating the price of simple scarcity in yesterday's telecosm was comparatively easy. Regulating the price of tomorrow's complex abundance will be far harder. The underlying costs will be too slippery. The technology will be infinitely adaptable and will offer any number of ways to set up toll gates and cash registers. It will not be feasible to place accountants and tax collectors in all the places effective regulation would require.
To regulate the price of a service, one must first define the service, and do so in enough detail to prevent providers from effectively changing the price by changing the good. Price regulation of plain old telephone service has been possible because a simple voice phone call just cannot vary all that much in quality. With cable, franchise agreements typically describe how many channels are to be provided, what kinds of two-way capabilities (if any) are to be supported, and who may interconnect. But every advance in cable technology widens the gap between service specifications and market possibilities. Price regulation of video programming has been at best quixotic, and at worst counterproductive, because the quality of programming can vary so much.
Broadband services will vary far more. There is no "plain old" standard here: everything is fancy and new. Bandwidth itself is infinitely variable. The mix of inbound and outbound channels can likewise be set in any proportion. In ordinary voice telephony they are roughly equal, but in dial-a-porn voice services they need not be, nor in video dialtone. Interactive cable and broadcast television will offer a quite different mix.
Not all bits are equal. Two-way voice bits, carried over a switched network, are far more valuable to consumers, and costly to providers, than one-way video bits carried over a top-down, unswitched broadcast or cable network. If broadband consumers were charged by the bit, either television would be fiendishly expensive (because it contains so many bits) or two-way voice would be ridiculously cheap (because it contains so few).(66)
Equally refractory is the problem of dealing with the considerable difference between average and marginal costs. Telephone companies are grafting video onto a regulated voice network. What makes sense for them is to charge video at the margin; voice already pays most of the freight. Cable operators are grafting voice onto a regulated video market. It makes economic sense for them to charge only marginal cost for voice; video is already carrying the base load of costs. Broadcasters can piggyback data channels onto their existing distribution channels; that's the cheap margin there. Satellite is yet another story: sometimes a voice carrier, sometimes a video carrier, and sometimes a direct broadcaster. Wherever it settles, the economically sensible course is to allocate most costs to established, base-load business and to price marginal business at the margin.(67)
But price regulation can be sustained, and will operate fairly, only if regulators reach all the alternatives in a market and treat them more or less the same. This will not be possible as formerly separate media, which begin with radically different price structures, converge to provide similar services.(68)
Chapters 7, 8, and 9 discuss three discrete categories of law, all aimed at limiting the scope and economic power of broadband providers. "Cross-ownership" rules control the simultaneous ownership of two or more media in the same market--newspaper, radio, television, theaters, telephony, cable, wireless cable, SMATV, or satellite. Virtually every major segment of the telecom industry is subject to at least one restriction of this kind. A second cluster of restrictions severs, or at least limits, vertical integration along the daisy chain connecting customer equipment, local distribution, long-distance transport, and informational content. A third set of rules places overall limits on how large a telecom conglomerate may become.
All of these rules are motivated by the common fear that broadband moguls will end up owning too much. The dystopian vision is familiar. Big Brother, Inc., a corporate octopus of wires, transmitters, and production studios, is going to buy up the whole telecosm and control everything.
Cross-ownership rules are said to protect competition by preventing the formation of multi-media monopolies. Absent such rules, it is argued, utilities would buy up competitors and cross-subsidize unprofitable services. But the rules often forbid far more than is necessary, and to that extent may suppress competition more than they promote it. If cross-subsidy is a peril, efficiency and economy of scope or scale are an opportunity. Preventing a phone company from buying up the cable lines that run alongside its own may make sense. Preventing it from offering cable service over its own network does not.
The arguments against vertical integration often sound much the same, though in strictly economic terms they are quite different. The pernicious power of a "bottleneck" is the core problem, it is said. Market power in conduit will be "leveraged" upward into content, or control of content will be leveraged downward into conduit. Cable operators will use their monopoly over wires to swallow video programmers. Telephone companies will use their control of local lines to subvert long-distance carriers or videotext services. Broadcast networks will leverage their sitcoms downward into local distribution. But usually, the most profitable way to exploit monopoly power is simply to exploit it directly, rather than to try to extend it into other markets. And vertical integration is often efficient. It reduces transaction costs, facilitates the flow of information among interdependent producers, and creates economies of scale and scope.(69)
The logic behind the anti-bigness rules is weaker still. Big is said to be economically inefficient; it is also said to be anti-populist and undemocratic. The economic case against bigness is often muddled or worse. And in other contexts, government itself is often the first to embrace the counter-arguments. The standard rationale for granting exclusive franchises to cable and phone companies, for example, is that economies of scope, network externalities, club benefits, and so on make exclusivity more efficient.
For now, the broadband telecosm can prosper with less structural regulation rather than more. The big are indeed getting bigger. By merger, joint venture, or contract, their tentacles are indeed reaching out, both vertically and horizontally, into adjacent markets. But the market itself is growing too, through convergence and geographic expansion. Telecom giants are bigger than ever before, and yet are losing market power, not gaining it.
Content is converging. In the broadband world, a byte is a byte. A hiccup on a telephone call, a decimal point in a spreadsheet, or a pixel in a re-rerun of "I Love Lucy:" digitally speaking, they're all the same. Voice, video, and data are indistinguishable.
Media are converging. Television used to travel by air, telephone by wire. Today, cable is the dominant medium for delivering television the last mile to the home. The fastest growth in telephony is wireless. But telephone companies also have at hand the technology to carry video over their existing networks and are now winning the legal right to do so.
Geography is converging. It verges on the oxymoronic to define telecom markets by reference to a specific place; it is less and less possible today. Traditionally, for example, phone companies have charged sharply different prices to business and residential subscribers; the discrimination could be maintained because phone companies knew the difference between a business address and a residential one. This is no longer possible with wireless service: a car phone costs the same whether it is for the CEO or his teen-aged daughter. Strictly local broadcasting is giving way, steadily, to networks, direct broadcast satellites, and national superstations. The traditional broadcast networks peaked some years ago and are now losing market share.(70)
These trends all point toward more competition in every market, not less. In this kind of environment, a minnow can grow into a whale and still lose market share: the pond grows even faster.
Structural segregation makes less and less sense when bandwidth is growing and markets are converging from all sides. Rigid cross-ownership rules will only slow down the repositioning of media and services in ways that make the rules themselves unnecessary. If, for example, the economic imperative is to move broadcast television onto cable, and then to use the spectrum for wireless telephony, forbidding cross-ownership of broadcast and cable facilities will simply impede a smooth transition. Today, a patchwork of rules and laws separate the two media and require cable to carry broadcast. Sixty percent of U.S. households thus receive eight or more channels both ways--a remarkable waste of what has long been viewed as "scarce" spectrum. Market forces unleashed would quickly put an end to this nonsense. Broadband technologies make such adjustments more urgent than ever; rigid structural regulation always gets in the way.
The separation of content and conduit is still intellectually feasible but increasingly impractical. Producers of video programming are large and growing larger. Producing video programs for mass distribution is an expensive and risky business. The major producers are large and integrated with entities that control major distribution media--over-the-air broadcasting stations, cable systems, or video-related consumer hardware like VCRs. And producers have been consolidating, so that the production side of the market has grown increasingly concentrated.
The regulatory and legal trends are now moving away from rigid ownership prohibitions. In 1984, movie studios were relieved of obsolete antitrust restrictions that barred them from owning theaters.(71) The major television networks are steadily being freed to produce more news, sports, and entertainment programming. Cable companies remain free to provide their own programming, and they do so extensively. The major manufacturers of consumer video equipment--massive concerns like Sony, for example--have been permitted to affiliate with or acquire Hollywood studios without restraint.(72)
In a free society, speech--the content part--is always abundant. The very idea of a "content bottleneck" implies that the First Amendment has failed, and that independent voices are somehow in such short supply that only government stands between us and a dismal world of silence. The market facts are otherwise. With content abundant, there is no real risk of leverage downstream. As technologies advance and converge, distribution media are also becoming increasingly abundant.(73) There is then no risk of leverage upstream, either.
The hard thing in the marketplace of ideas is keeping track of who owns the fruit. Information itself is too fluid to hold. Copyright law therefore gives legal protection not to the content but to the means by which it is conveyed--paper, wire, glass, tape, celluloid, plastic, air, or ether.(75)
"Copy," "performance," "license," "fair use," "passive carriage"--all the key principles of copyright and related law--made intuitive sense in the days of print. And they were adapted without too much difficulty to broadcast on the one hand and telephony on the other. Broadcasters were much like printers. Telephone companies were carriers, like the post office.(76)
When cable arrived, it straddled the old lines.(77) Copyright law had to be rewritten wholesale as a result. New broadband technology slices across the old lines. Connected to a broadband network, every television or computer screen becomes a "copying" device, capable of plucking a picture, story, or song from the electromagnetic ether and printing it in the ink of phosphor, gas plasma, liquid crystal, or laser jet for immediate or later consumption, or for incorporation into some new production.
Carriers, for example, have traditionally been exempt from most forms of copyright liability; common carriage would hardly be possible otherwise. But broadband technology permits anyone to carry; sooner or later most (including both cable operators and broadcasters) will. The same technology permits carriers to "broadcast" over their own systems while also carrying broadcast-like programming for others. Whether a satellite operator is mostly a carrier or mostly a publisher depends largely on how sensitive an antenna is available to how many householders, and at what price.(78) Legal rights and obligations can thus be shifted sharply by changes in the price of hardware at Radio Shack.
For now, two bodies of law seem to be evolving, one based on traditional copyright notions, the other around the idea that "signals" may not be intercepted and retransmitted without appropriate consent.(79) Hollywood has copyright interests in its programming, qualified by compulsory licensing requirements. A TV station that broadcasts Hollywood productions over the airwaves has a separate cluster of rights that revolve around the signal itself.(80) What a private or commercial owner can do with a satellite dish or VCR is delimited by both copyright and signal piracy rules, which may supply different answers to the same basic questions.
Yet another body of law is being cobbled together to suppress the technology of illicit copying--to suppress satellite dishes, cripple VCRs, tax digital tapes, and hunt down the manufacturers of illegal decoders.(81) Most of this law is futile. The relevant parts of those instruments--microprocessors, software, and storage media--have far more legal uses than illegal ones. Moreover, as experience with VCRs demonstrates, what seem to be instruments of theft have a way of becoming legitimate items of mainstream commerce, generating honest wealth all around. Burning down the broadband mansion to roast the piracy piglet is out of the question. If manufacturers of transmitting and receiving equipment cooperate, they will always stay a profitable step ahead of the pirates. Whether antitrust law and FCC regulation will let them cooperate is less clear.(82)
Equally unclear is how much piracy will end up being legalized through Congressional action, FCC ruling, or Supreme Court pronouncement. We have become wedded to the notion that broadcast should be "free," which means paid for by commercials alone. Left to its own devices, the broadband marketplace will not operate that way, at least not most of the time. Less clear is whether lawmakers will permit the market to reprivatize with tomorrow's technology what could not be metered or protected with yesterday's.
If broadband threatens private interests in copyright, it also threatens a second regime of law, the public law of licensing and the censorship of insensitivity, indecency, and obscenity. The broadband network has room enough to transport deviance, political incorrectness, and sedition of every variety; the question frequently raised is whether it should. In Chapter 11 we discuss another tangled cluster of laws aimed at regulating the sexual, commercial, political, and social content of what moves over broadband media.
There is much more of this regulation than students of traditional free speech would ever believe possible. The First Amendment, after all, does not distinguish one "press" from another.(84) But judges always have. Each medium "is a law unto itself."(85) "[D]ifferences in the characteristics of new media justify differences in the First Amendment standards applied to them."(86) Print publishers clearly get the most protection. Broadcasters come next. Carriers like telephone companies apparently get the least.
And all providers of broadband services collide with another First Amendment anachronism: critical standards are framed as if communication at a distance did not really happen at all. Many traditional limits to free speech--on fighting words, obscenity, time-place-and-manner regulation, and so on--pivot on audience reaction. Free speech and the "pervert's veto" depend on who is being addressed, and where.(87) The First Amendment standard is applied locally, within the five-mile radius, say, of Mudville's main post office. But in the broadband telecosm, "community"--and thus the "community's standard"--will not be defined by geography--that's the whole point of having the technology. To impose local norms on media that are inherently un-local, whose whole point is to transcend locality, is to cripple the media themselves.(88) With enough sufficiently different local norms brought into play, the network will be permitted to transmit nothing but porridge.
The most fundamental problem for lawyers, however, is that all the different "presses" are collapsing into one. With broadband media, anyone can be a "publisher." Any declaration, however banal or incoherent, can be addressed to any number of recipients: it is just a matter of lengthening the e-mail distribution list or of posting text on an electronic bulletin board. On-line services like CompuServe and Prodigy, which began as publishers, have prospered by providing carrier services like e-mail. Personals, commercial advertisements, mail, editorials, and news all move through the same broadband conduits and are displayed on the same screen, combined at will, bit by bit, pixel by pixel. A single broadband terminal can serve up virtual newspapers, virtual television stations, and virtual carriers. The mix can shift as quickly as the supplier chooses or the user demands. The lines between these various functions will be blurred beyond recognition.
The Supreme Court's fractured 1994 analysis of the status of cable television--with voting among the Justices broken down into no fewer than four camps--provides a recent and sharp illustration of the problem.(89) No one can even decide whether something as simple as cable, still quite a primitive broadband technology, is more like a newspaper, a television, or a telephone line for constitutional purposes. This quacks-like-a-duck approach to discovering First Amendment rights cannot be sustained. Broadband technology is capacious enough to swallow all the old mergansers and loons, and all the swans, too. The technologies of print, broadcast, and carriage are converging. Somehow or other, constitutional jurisprudence will likewise have to converge.
The prospect of having to reinvent First Amendment law from scratch is a daunting one. Happily, however, most of the reinventing can be in the direction of simpler, clearer constitutional principles that tolerate less government intrusion than used to be considered acceptable.
The days of the "heckler's veto" should be numbered. The new networks reach everywhere: the chance of reaching someone who will despise whatever is conveyed now approaches certainty. But the technology itself also erects walls and creates shelters of quiet and solitude. Broadband technology can deliver electronic eye shades, ear plugs, and brown paper bags quite as efficiently as it can deliver pornography or violence.(90) It is very easy in the network to know in advance what your eyes and ears are in for, and to cover up if you prefer.
Cataracts of information are useless without powerful switches, tuners, scramblers, and lock boxes to determine precisely what goes where. Those tools can be lodged at every level of the network. The censor may be in a central office, like the headquarters of CompuServe or Dow Jones. It may be on the end users' premises, as it will be with the "V-chip" that will electronically flag TV violence.(91) Broadband technology need not be broadcast. To the contrary, the higher the bandwidth, the narrower the "cast." Senders and receivers alike have more power than ever to narrow the range of broadband connections established.
In the broadband telecosm, communities of speakers and listeners can thus become completely voluntary on both sides. Indeed, "obscenity" (as defined by the Supreme Court) cannot really exist at all in well-ordered cyberspace: "community standards" within any group of speakers and listeners can be completely uniform and harmonious, even if uniformly depraved or violent by standards outside the twisted tribe. "Deviance" loses its meaning when communities are formed entirely by consent and can be joined or abandoned at will. The on-line loudmouth is not a sound truck; the on-line exhibitionist does not flash his assets in a public park. Broadband media offer far more power than others for audiences to self-select and self-censor. When freedom of association is that complete, many traditional limits on freedom of speech are no longer needed.
There remains the problem of speech that provokes antisocial conduct in response. Technology like the V-chip partly solves the problem so far as children are concerned, but only partly. With ubiquitous broadband networks, deviants and sociopaths will be able to hear and see more carnage than they safely can, and far more than they could through traditional media. There is no obvious solution to this problem, if indeed it is a problem. By making speech freer than ever, broadband technology amplifies the costs of freedom along with the benefits. One can only hope--this is ultimately a matter of faith--that the overall ledger will remain in the black.
We conclude in Chapter 12 with a discussion of an issue that transcends all the others: "universal service." A recurrent concern is that, as broadband abundance displaces narrowband scarcity, the new plenty will not be spread around as evenly as it should be. Society will stratify into information haves and have-nots, the info-rich and info-poor, with the gap perhaps growing wider year by year. Few seriously suggest that supplies of telecommunications services will actually shrink for any particular group; the concern is to make sure that the new abundance gets shared. There is little talk of price. Promising universal broadband has become, for politicians, much like promising universal wealth.
Broadcast and carriage have given us two quite distinct legacies of universal service. With radio and television, universal service has come to focus on programming--the content itself. This battle has pitted "free" television against pay-TV, cable, and other technologies that threaten to "siphon" programs off the public commons and into the marketplace. With telephony, universal service has come to mean a network that reaches every household, even those that cannot pay for the cost of the wire.
Because they are mature, the old definitions of universal service are simple. The universal server counts ears (telephones) and eyeballs (televisions) and ignores most everything else. The marvel of free television is that it is free; the regulator just does not dwell on the fact that most of it is rubbish. The marvel of plain old telephone service is that it is ubiquitous; no need to carp that it is very plain indeed. In this static and familiar world, universal service means that rich and poor get pretty much the same thing, little though it is. We claim victory in our pursuit of universal service precisely because the service is universally modest.
The arrival of cable, the prototypical broadband technology, has already sown confusion all around. Cable is supplied like telephony but consumed like television; it does not conform to either standard model of what universal service is supposed to be. In its infancy, regulators ignored it. In its adolescence, they denounced it as the enemy of universal free television. In its maturity, they embraced cable as the new standard to be delivered to all. A tier of "basic" cable service was defined by federal legislation in 1992 and subjected to rate regulation, a sure sign that a service is crossing the line from discretionary novelty to basic essential.(92)
Digital telephone service is now being deployed, and video dialtone will follow soon. Perhaps demands for universal service will come to encompass these, too. The most ambitious vision is for full, two-way, broadband service to every home, office, and institution. It seems unlikely that today's average householder would use outbound broadband nearly as much as inbound, but with video phones and home computers, demand for full, two-way broadband might indeed expand to fill the supply available.(93)
This much is clear: neither "universal" nor "service" are self-defining terms, and the more technology offers, the harder the definitions become. Spreading famine around evenhandedly is easy; spreading abundance is not. Institutions and households will use the new abundance of broadband in very different ways. Universal service in the merged world of broadcast and carriage cannot be based on the assumption that one size will fit all.
The old models of universal service do not help. With work, entertainment, and community itself moving on-line and traveling side by side over the same ubiquitous facilities, we have to move far beyond the simplistic models of free football brought to you by Doritos and below-cost wires subsidized by somebody else. The world of abundance is fundamentally different from the world of scarcity. With broadband, universal service is no longer a single concrete objective. It will never be measured again by anything as simple-minded as a count of televisions, telephones, or the number of people who gaze mindlessly on a Sunday evening at their fourth football game of the day.
One road to universal service--the traditional one--emphasizes equality and the specter of society polarized between haves and have-nots. The other--now emerging--relies on competition to drive down prices, and on the vision of growth and new opportunity. The choice between them ultimately depends on what we want more, abundance or equality. From 1945 until the 1970s, government policies favored mandatory price averaging, cross-subsidy, redistribution, and the monopoly that made them possible. Today, policies are shifting toward competition and growth. That is almost certainly where they should be headed. When technology is advancing as rapidly as it is in the telecommunications industry today, unleashing competitive forces will deliver more goods to more people than endless niggling about how the new abundance is to be divided.
When technology transforms society, the Constitution, or at least the way we read it, inevitably changes as well. The First Amendment evolves to address forms of communication never imagined two centuries ago when the Bill of Rights was composed. Fourth Amendment protections were redefined by the advent of cars and telephones. Due process rights of confrontation and fair trial must be reconciled with television, both inside and outside the courtroom.
As noted earlier,(95) broadband technology will force a new look at all forms of direct, content-based regulation of electronic media. But the First Amendment bears on content-neutral regulation as well-licensing,(96) common carriage law,(97) structural regulation,(98) and limits on free speech established by the private law of copyright(99) and defamation.(100)
Is the licensing of the new electronic presses--television stations, cable networks, video dialtone platforms--still tolerable under the First Amendment? Was it ever? Yesterday's Supreme Court affirmed that it was, but should tomorrow's? Licensing creates countless opportunities for regulators to shape the content of what is conveyed.(101) The First Amendment presumption is that post hoc regulation (if there is to be any at all) is strongly favored, at least if it can be administered in any reasonable way.
It can be. Airwave interference can be prevented by property rights and private civil actions against trespassers. Price gouging by a "natural monopolist" can be addressed by price regulation--if and when the monopolist emerges from an elimination bout in the marketplace. Open entry will also speed the transition back to competition as soon as new technology emerges that makes competition feasible once again. And in any event, natural monopoly is not viewed as a sufficiently serious problem to suspend traditional First Amendment protections for print media.
A new look at the constitutionality of carrier regulation is likewise in order. Carrier duties plainly may not be imposed on newspapers.(102) In 1969, the High Court uncritically upheld the "Fairness Doctrine" as applied to broadcasters; by 1994, however, it was far more hesitant about approving must carry duties imposed on cable.(103) Some scholars suggest that common carriers have no serious First Amendment rights at all, but this simply begs the question.(104) In the broadband arena, carriage is like the French Legion of Honor: few escape it.
Properly crafted, common carrier duties can certainly be content-neutral. And applied to media with abundant capacity (like the telephone network), common carrier duties clearly do not silence much speech. "Forced speech" objections are not persuasive, either; no one seriously supposes that the telephone company endorses every unpleasant word spoken over its lines. But this does not resolve the hard question. Newsprint is not scarce, new cable channels are being added all the time, and broadcast media can be expanded with compression technology. To what extent, then, may Congress or the FCC insist that cable operators, telephone companies, or anyone else devote some (or all) of their telecom resources to the speech of others?
Pricing regulation raises the same cluster issues. A general scheme to regulate the price of newspapers would not survive constitutional attack, at least not if newspapers had been singled out from other goods and services. So far, once again, newspaper logic has never come close to overturning financial regulation of the broadband industry. But the law may be ripe for change because market realities are themselves changing fast. In the broadband telecosm, quasi-public utility monopolies are giving way to indubitably private competition. The whole industry is shifting from single-provider central management to the marketplace. The constitutional principles designed to protect the marketplace of ideas are more relevant than ever.
Structural regulation of the broadband industry raises serious First Amendment issues as well: certain people are forbidden to use certain means, in certain places, to express their views. May the government impose a prophylactic ban on cross-ownership, vertical integration, or raw size--or must it wait for anticompetitive abuses to materialize first? Are structural rules truly structural, or do they in fact tilt against certain types of speech, speakers, or viewpoints? One could not constitutionally separate publishing from the printing press, or rabble-rousing from the megaphone, or owning a megaphone from owning a soap box.
For media companies, limits on size are de facto limits on freedom of speech, for the simple reason that these companies exist only to speak--through publishing, programming, and so on. The First Amendment is quite explicit as to which monopolist is too big to be trusted. It is Congress that "shall make no law . . . ." The argument that private power over mass media is more to be feared than government regulation is impossible to reconcile with the plain language of the Constitution.
The more persistent argument in favor of structural regulation of the telecom industry centers, ironically, on its tradition of "public service." Utilities like telephone companies--most especially those that receive exclusive government franchises--obviously have a quasi-public character. Government silencing private speech is one thing; government silencing itself--its own immediate agents--is quite another. But the trouble with this logic is that it can be pushed indefinitely far. Broadcasters are "public" because they occupy the ether under exclusive government license. Cable companies are (or at least once were) the "community antenna," much like the water pipe or sewer. Satellites are launched on government rockets and occupy outer space, over which international agencies have claimed dominion.
The Supreme Court will inevitably grapple with these issues as broadband media proliferate in the 1990s. As of mid-1994, arguments like these were being tested in a cluster of First Amendment suits challenging the 1984 Cable Act's ban on video programming by telephone companies. If the Court affirms the government's own power to "promote diversity" through structural regulation, the Court will then have to wade into the factual quagmire of determining what structural regulations do. The targets of structural rules can certainly claim that they too are on the side of diversity, and they will point out that removing their voice from a particular market subtracts one from the diversity total. Structural regulators will argue that adding one monopolistic voice will subtract several competitive ones.
If the constitutionality of a law ostensibly depends on economic conditions in the market, the High Court will have to decide these questions again and again. Market conditions change as a result of mergers, acquisitions, and--most importantly--fundamental advances in technology. Any economic rationale for doing what would otherwise be unconstitutional would seem to require periodic judicial review, to make sure that economic conditions have not changed. The Supreme Court has repeatedly extended constitutional protections to cover new technologies in the context of government searches and seizures, televised trials, and confrontation of witnesses. Courts owe the world no less when reviewing economic regulation that has been overtaken by changes in technology and the market.
Finally, do universal service mandates pass First Amendment muster? The First Amendment implies "negative rights," too--rights not to salute, not to pledge, not to embrace government propaganda, not to publish replies, not to insert proclamations in bills, not to disclose membership lists, and not to pay unwillingly for the political speech of others.
The broadband provider's objection to providing universal service will usually be based on commercial reasons. The economic factors, however, can be very chilling indeed. Universal service requirements can easily be pushed to the point where they overwhelmingly favor an established incumbent over new entrants, and monopoly over competition. Being forced to build more network than is economically attractive can be quite as chilling as being limited to less. The free speech of the New York Times costs sixty cents a copy in the city, more out of town. Those market-established prices generate more newsprint, not less, than forcing the paper to sell copy nationwide at a uniform price.
Economics aside, the more freedom a speaker is allowed to limit its audience, the more freely it will be allowed to speak. The right to limit one's audience promotes free speech, because free speech ultimately depends on mutual consent.(105) Narrower audiences will accept more shocking, idiosyncratic, unorthodox--in sum, un-average-messages--than will broader ones. The soap-box orator can say things that cannot be said by Peter Jennings on the evening news. Forcing a larger audience on a speaker can silence him quite as effectively as forcing a smaller one. Courts have only recently begun to grapple seriously with arguments like these.
Courts have long recognized that regulators may price-regulate a private enterprise into giving away its assets to its customers. Telephone companies have litigated such issues for decades. That line of precedent is alive and still relevant--perhaps more than ever, now that new competitors are at hand to do the "taking" if regulators will not step aside.
As broadband competition develops, so too will a new variation on the takings problem. Some price regulation establishes a floor on price as well as a ceiling. Sometimes the floor is simply announced directly; sometimes it is created indirectly, by requiring cost allocations to services based on accounting methodologies that would not otherwise be used. Can the failure to let a broadband provider cut its price amount to a taking, too? Perhaps. Regulators never guarantee an actual return on investment; they simply set rules under which the regulatee may offer its services to consumers. If consumers refuse to buy on above-market terms, the regulation is ruinous--as ruinous as when terms create a below-cost consumer windfall. As competition converges in the broadband industry, the freedom to lower price to meet competition will often be as important as the freedom to raise it. This side of the due process/takings coin has never been tested. It likely will be in the 1990s.
Takings law may likewise place limits on how far carrier duties can be pushed, particularly when they are pushed onto private real estate. Telephone companies recently won a takings challenge to an FCC order that required them to permit physical collocation of competitors' wires and switches on telco premises.(106)
So far, all of the successful takings cases involve tangible property like real estate. But the principles behind them are general and surely cannot be made to disappear through the clever use of vocabulary. Traditionally, an unconstitutional taking of carrier property assumes the form of prices set so low by a regulator that they amount to creeping confiscation. Carrier obligations, which regulate output, can be quite as confiscatory as rate regulation, which regulates price. It is equally clear that the demands for "channels," "access," and "interconnection" are demands for "property" in the Fifth Amendment sense of the word. Behind every "channel" there is glass and silicon: when you hand over a channel you hand over tenancy, in those formerly private spaces, to other people's photons and electrons. Micro-takings are no different than macro ones. In the age of information, the wealth of Croesus can be buried in bandwidth, compression algorithms, and databases that occupy no real estate to speak of. They surely deserve protection against government takings nonetheless. No one doubts that the Fourth Amendment applies in the telecosm. The Fifth Amendment surely does as well.
At the same time, "public forum" doctrine looms over broadband providers as takings theory in reverse. Takings law affirms the property owner's right to exclude the public; public forum doctrine affirms the right of the public to enter. State-required access to private property for speech purposes constitutes a taking, the Supreme Court has ruled, but "not every destruction or injury to property by governmental action has been held to be a 'taking' in the constitutional sense."(107)
One perverse aspect of the public forum logic is that it seems to leave the least First Amendment protection with the most accommodating and public-spirited media moguls. Operators (like newspapers) that are most selective and discriminatory to begin with retain a constitutional right to push selectivity (i.e., "editorial discretion") the furthest. Operators that discriminate the least (carriers), operators that most diligently expand their facilities to serve others, seem to stand the greatest risk of losing their right to discriminate entirely. The shopping mall loses its right to exclude precisely because it willingly admits so many to its wide open spaces. Similar obligations would never be imposed on an expensive, cramped restaurant or a private club.
In the broadband industry today, unequal regulation is the rule. The 1934 Communications Act, the two subsequent Cable Acts, and the FCC's various implementations of these laws for carriers and broadcasters, landline and wireless, are by no means uniform. The real differences that still separate various media and categories of service may still justify manifestly unequal regulation.
But media and the markets are converging fast--faster than is regulation. With broadband technology, the formerly separate businesses of broadcast, cable, and carriage are headed toward a single, undifferentiated broadband marketplace. Different media will be mixed and matched in every imaginable arrangement. They will provide the same services to the same consumers. Technologies and markets that were once very different no longer will be.
As media converge, the intricate regulatory structure now in place may well sink below the horizon of rationality. Identical services offered by evenly matched providers to the same consumers will end up being regulated wildly differently. At some point equal protection limits should kick in. Unequal regulation of unequal regulatees raises no constitutional problem. Unequal regulation of true substitutes does.
The Supreme Court still accepts the rationality of different regulatory approaches to threshold issues like franchising. Whether other aspects of regulation might engage stricter equal protection review is unclear.(108) Equal protection concerns may be defused, moreover, by timely FCC approval of flexible tariffs or a decision to forbear from regulating entirely as competition unfolds. Cable price regulation disengages when cable is "subject to effective competition."(109) So too may price regulation of carriers.(110) As regulation itself recedes, so will complaints about unequal regulatory burdens. But existing law simply may not permit regulation to recede as fast as technologies and markets converge.
We conclude by speculating briefly about the world that awaits us--a world shaped by perfect communication over any distance, between any pair, or among any group, a world in which records can be maintained and manipulated, combined and merged, moved and processed, effortlessly and at almost no cost, between any pair of points on the planet.
In the broadband society, free markets will be irrepressible. The genius of a market is that it elicits information about what people have and what they want. That information, however, becomes powerful only when it is communicated to others. The invisible hand has no power unless guided by visible eyes and ears. Broadband will allow communication as never before.
What, after all, are the essential ingredients of a market? Communication, to connect together the willing buyer and the willing seller. Promises, so that trades begun today can be consummated tomorrow. Memory, so that promises will be kept. Memory, to record what belongs to whom. Promises again, to create all other rights beyond property rights, because all social norms depend on a shared commitment to enforce them. Promises again, by which honest traders agree to ostracize cheats, deadbeats, and thieves. Promises and memories, trust and loyalty: these are the essentials upon which all else in the marketplace is constructed. And broadband is communication at its most capacious and powerful, with the wires and the ether terminating at electronic scribes, records, and memories, a laser-light weaver of trust and loyalty.
The giant trusts and corporations that evolved in the early days of capitalism will not reappear. The old corporation operated in the image of Big Brother, as a homogeneous, collectivist autocracy, dominated by a single, all-powerful leader. In the age of broadband communication, such structures cannot survive. Independent yet tightly interconnected business groups, linked by network yet disciplined in all their relationships by market forces, will replace them. In the broadband world, people will be paid because they work, not because they show up daily on the factory floor or in some glass-walled office. Services delivered over the new network will be metered with absolute precision. Specialists will specialize as never before.
Items supplied over the network--most of all labor--will be valued with scrupulous accuracy. People who really produce will be in high demand, and no one will care at all about their race or religion, their sex, their social graces, their physical appearance, or how they smell. Quality services will be purchased wherever they can be found, across the street or across the ocean. Inferior services will be priced accordingly, and incompetence will not be purchased at all, however much employment commissions may protest. No government agencies will even be able to keep track of what is being supplied where, still less to dictate who should be employed or on what terms.
The factory will be irrevocably changed. A car manufacturer will become a truly efficient assembler of parts provided by hundreds of independent suppliers. Secretaries, accountants, designers--most of the enterprise's support services--will be replaced by independent outsiders, knitted together into an efficient whole by the network. Suppliers, assemblers, distributors, and customers will be coordinated with meticulous precision. Even the largest factory will operate with no inventory, no warehouses, no fitful starts and stops caused by shortage of supply or excess of output. A customer's order will be conveyed instantly up the chain of production to the assembly line, and back further still to the factory's suppliers of paint, tires, and radios, and hence back to their suppliers of rubber and steel. Industrialism no longer requires collectivism. Cooperation will be by consent.
Marketing will be transformed beyond recognition. In primitive societies, the market operates with tiny stalls and without reliable currency; trading extends only as far as goods can be carried. In a barter economy, the seller exchanges the pig directly for a dozen chickens. Payment is assured, but the process is terribly cumbersome. In societies that are stable enough to issue currency and imbue it with value, money marks a great advance. It records value in a standardized form that is widely understood; it conveys value without any need to transport pigs or chickens. The paper itself is worthless, except for the information it conveys. Money, then, is just another network--a system of communication, a record of past effort and a promise of future return. With money, the record is on paper, a primitive, inefficient, and vulnerable medium of communication. And a single, master record keeper, the government treasury, with a single, centralized printing press, has absolute power to determine value.
But there is ultimately only one valuable currency: the currency of reputation, of stable, honest, reliable loyalty. Once it is established of a man, or a leader, or a nation's central banker that his word is his bond, he can issue currency at will. Once it is established that he is a chiseler, a deadbeat, or a thief, no amount of currency will do him much good, for his paper will be shunned wherever he tries to peddle it. The value of money thus depends on trust and promises among the people who control the records. If the network is powerful enough, nobody controls the records, or at least no central authority does. Trust begins between individuals; then it coalesces among larger groups; then it coalesces in larger groups still. Today, we put our trust in a thousand different private currencies in varying degrees: personal checks, stock certificates, bonds, credit card slips, futures contracts, green stamps, and patronage accounts of every kind. The network enables us to confirm that an account has assets, that a business is functioning, or that an individual faithfully pays his bills. Private enterprises issue countless private currencies by verifying credit, clearing checks, evaluating investments, dealing in futures, and insuring risks.
As the power of the network increases, so too will the power and reliability of private currency. With perfect communication, the government bank is no longer needed-currencies of every imaginable description can be created by the market itself, like all other goods. Virtually every kind of good can become the equivalent of a banknote, available for inspection, conveyance, and storage at any distance.
For better or for worse--mostly for better--broadband will transform the face of democracy. Opinion polls, call-in shows, and electronic town meetings usurp the "mediating function" of people like Sam Donaldson and George Will. The middleman in the dialogue of democratic government is cut out of the process, in much the same way as Sears is cut out by mail-order catalogues and 800 numbers. Governments, it has been noted, derive their just powers from the consent of the governed. Now we have at hand technologies for securing consent in ways never before imagined. Consent can now be sought directly, quickly, and efficiently, on issues both large and small. The broadband network will offer the man on the couch precisely the same chance as Dan Rather to raise his hand and say something rude when the President steps into the room. The machines behind the network can tally national opinion not only instantaneously but also with a level of delicate precision that would have left Jefferson breathless. Power will move into constantly shifting communities of shopkeepers, housewives, Yale bulldogs, fruit-juice thinkers, nudists, sandal-wearers, sex-maniacs, Quakers, Nature-Cure quacks, pacifists, and phesbian leminists. The networked society will be shaped by the accumulation of individual decisions to meet or stay apart, to buy or sell, to speak or remain silent.
Broadband promises the greatest liberation in the most important marketplace of all, the marketplace of ideas. Until recently, freedom of the press still belonged only to the few who owned one. Broadband will give voice to the average man, the man who has never before owned a printing press or a broadcast station. It will mobilize public opinion, giving every man a stake in free speech itself. By giving people the power to speak freely, broadband will also give them the right. No law will be able to repeal the technologies of freedom.
Ignorance--or at least rigid class ignorance, which endures generation after generation--cannot survive the advent of broadband. People will be able to educate themselves and their children, if they wish to do so. The state may continue to own the public schools--the buildings themselves--but broadband can create a school out of any pair of desks. The great universities, the great libraries, will no longer be in places; they will reside in cyberspace, securely out of reach of torches and bonfires. Heresy can no longer be eradicated by fire. Heresy is now fire itself, pulses of light in a network of glass.
Broadband promises the one freedom that matters in the realm of free expression: the freedom to choose. When men and women live as crowded as ants, they quarrel endlessly about who may make noise and who is entitled to quiet, who may watch and who has a right to close his curtains against prying eyes. Broadband gives humans eyes and ears that can see at any distance, so that thoughts and words and gestures can inhabit infinitely spacious parks. It frees our senses, and so frees our intellects and our conscious minds. It gives us the power to hear, see, and speak, to be heard and seen, in the company of our own choosing. Now, human beings can create new assemblies, new congregations, new cities whenever they need them, in the capacious light beams of the network and the airwaves of the stratosphere.
In today's world, the entertainment industries still pitch their programs at what the great mass of people share in common--their prurience, their neurotic fears--and still rely on crude polling to estimate how many people were sufficiently attracted by sex and violence to endure advertisements for sugared cereal and laundry soap. Much of this will disappear. Every hobby and pastime--cage-birds, fret-work, carpentry, bees, carrier-pigeons, home conjuring, philately, chess--will have at least one channel devoted to it, and often several. Gardening and livestock-keeping will have at least a score between them. Then there will be the sporting channels, the radio channels, the children's cartoons, the large range of channels devoted to the movies and all more or less exploiting women's legs, the various trade channels, the soap-opera channels, the needlework channels, and countless others. Ours will become, once again, a nation of flower-lovers and stamp-collectors, pigeon-fanciers, amateur carpenters, coupon-snippers, darts-players, and crossword-puzzle fans. The days of mindless broadcast to the mindless masses are at an end.
Amid all this freedom there will still be prurience, violence, necrophilic reveries, and the repulsive art of Salvador Dali. Yet in the broadband telecosm, speech in public spaces no longer needs to be regulated. Public spaces--or at least the ones of any importance--are no longer surrounded by walls or gates. Bulletin boards, auditoriums, theaters, schools, stadia, squares, subway walls--electronic replacements for all the traditional public fora--can be created upon demand. The network gives the pamphleteer and soap-box orator not just a place in Speaker's Corner but the whole of Hyde Park. There is room for the pacifist, the Communist, the anarchist, the Jehovah's Witness, temperance reformers, Communists, Trotskyists, Freethinkers, vegetarians, and any number of plain lunatics: all will be able to speak out over the network, all will receive a good-humored hearing from anyone who chooses to listen. The network will be Alsatia, where no opinions are outlawed. There has never been any place like it before in the physical world.
The network will supply room enough for every sight and sound, every thought and expression that any human mind will ever wish to communicate. It will make possible a wildness of spirit, where young minds can wander in adventurous, irresponsible, ungenteel ways. It will contain not innocence but a sort of naive gaiety, a buoyant, carefree feeling, filled with confidence in the future and an unquenchable sense of freedom and opportunity. It will be capitalist civilization at its best. It will be the new frontier, and also the last frontier, for it extends as far as any human mind may wish to range.
1.See generally Peter W. Huber, Orwell's Revenge: The 1984 Palimpsest (1994) (hereinafter Orwell's Revenge).
2.See generally Ithiel de Sola Pool, Technologies Without Boundaries: On Telecommunications in a Global Age (Eli M. Noam ed., 1990); Globalization, Technology, and Competition: The Fusion of Computers and Telecommunications in the 1990s (Stephen P. Bradley et al. eds., 1993); Joel Kurtzman, The Death of Money: How the Electronic Economy has Destabilized the World's Markets and Created Financial Chaos (1993); Erik Larson, The Naked Consumer: How Our Private Lives Become Public Commodities (1992); Marshall McLuhan, The Gutenberg Galaxy: The Making of the Typographic Man (1962); Joseph Nocera, A Piece of the Action: How the Middle Class Joined the Money Class (1994); Lewis J. Perelman, School's Out: Hyperlearning, the New Technology, and the End of Education (1992); Thomas J. Peters, Liberation Management: Necessary Disorganization for the Nanosecond Nineties (1992); Steve Pruitt & Tom Barrett, Corporate Virtual Workplace, in Cyberspace: First Steps 383 (Michael Benedikt ed., 1991); Howard Rheingold, The Virtual Community: Homesteading on the Electronic Frontier (1993); Michael Schrage, Shared Minds: The New Technologies of Collaboration (1990); Walter B. Wriston, The Twilight of Sovereignty: How the Information Revolution is Transforming Our World (1992); Shoshana Zuboff, In the Age of the Smart Machine: The Future of Work and Power (1988); John A. Byrne et al., The Virtual Corporation, Business Week, Feb. 8, 1993, at 98; David C. Churbuck & Jeffrey S. Young, The Virtual Workplace, Forbes, Nov. 23, 1992, at 184; The Fall of Big Business, Economist, Apr. 17, 1993, at 13; Thomas W. Malone & John F. Rockart, Computers, Networks and the Corporation, Scientific American, Sept. 1991, at 128; Nicholas P. Negroponte, Products and Services for Computer Networks, Scientific American, Sept. 1991, at 106; Seymour Papert, The Children's Machine, Technology Review, July 1993, at 28; Michael Schrage & Alun Anderson, Computer Tools for Thinking in Tandem, Science, Aug. 2, 1991, at 505.
3.See Daniel L. Brenner, Monroe E. Price & Michael I. Meyerson, Cable Television and Other Nonbroadcast Video: Law and Policy (1994) (cable); Kenneth A. Cox & William J. Byrnes, The Common Carrier Provisions--A Product of Evolutionary Development, in A Legislative History of the Communications Act of 1934 (Max D. Paglin ed., 1989) (discussing origins of statutory regulation of common carriers); Charles D. Ferris, Frank W. Lloyd & Thomas J. Casey, Cable Television Law: A Video Communications Practice Guide (1993) (cable and broadcast); Pamela L. Meredith & George S. Robinson, Space Law: A Case Study for the Practitioner: Implementing a Telecommunications Satellite Business Concept (1992) (satellite); National Association of Broadcasters, NAB Legal Guide to Broadcast Law and Regulation (1988) (broadcast); Milton L. Smith, International Regulation of Satellite Communication (1990) (satellite); Angela J. Campbell, Publish or Carriage: Approaches to Analyzing the First Amendment Rights of Telephone Companies, 70 N.C. L. Rev. 1071 (1992) (common carriers); Mark A. Hall, Common Carriers Under the Communications Act, 48 U. Chi. L. Rev. 409 (1981) (common carriers); Phil Nichols, Redefining "Common Carrier": The FCC's Attempt at Deregulation by Redefinition, 1987 Duke L.J. 501 (common carriers).
4.Michael K. Kellogg, John Thorne & Peter W. Huber, Federal Telecommunications Law (1992) (hereinafter FTL).
5.See generally Chapter 2. For a dated but still valuable general discussion, see Ithiel de Sola Pool, Technologies of Freedom (1983).
6.Radio communication of human speech first occurred on Christmas Eve in 1906, when Reginald Aubrey Fessenden, a physicist, spoke by radio from Brant Rock, Massachusetts, to ships in the Atlantic Ocean.
7.See 2.6, 9.8.
8.See 2.5.1(iii).
9.See 2.7.4.
10.Jonathan W. Emord, Freedom, Technology, and the First Amendment 283, Table 1 (1991).
11.See Second Report and Order, Recommendation to Congress, and Second Further Notice of Proposed Rulemaking, Telephone Company--Cable Television Cross-Ownership Rules, Sections 63.54 - 63.58, 7 F.C.C. Rec. 5,781, 5,848 (1992).
12.See First Report, Implementation of Section 19 of the Cable Television Consumer Protection and Competition Act of 1992: Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, 75 Rad. Reg. 2d (P & F) 1415, 1421 (F.C.C. 1994); National Cable Television Association, Cable Television Developments 1-A (Apr. 1994).
13.See 2.4-2.5.
14.As George Gilder has observed: "Television is not vulgar because people are vulgar; it is vulgar because people are similar in their prurient interests and sharply differentiated in their civilized concerns. All of world industry is moving increasingly toward more segmented markets. But in a broadcast medium, such a move would be a commercial disaster. In a broadcast medium, artists and writers cannot appeal to the highest aspirations and sensibilities of individuals. Instead, manipulative masters rule over huge masses of people. Television is a tool of tyrants." George F. Gilder, Life After Television 19-20 (1990).
15.According to Veronis, Suhler & Associates, an investment banking firm, 1992 revenues were $26 billion for broadcast television, $20 billion for cable TV, $5 billion for movies, and $12 billion for sales and rentals of videocassettes. Jeffrey Daniels, Media Growth Accelerates But Industry Exiting Top 5, Hollywood Reporter, July 19, 1993.
16.Industry Analysis Div., FCC, Trends in Telephone Service 25, 27 (May 1994) (1992 rates).
17.This is usually defined to include short-haul (typically intrastate) toll calling.
18.Gross revenues are in fact about $61 billion, but $30 billion of that is paid to local carriers and is counted as part of their revenues.
19.See 2.5.1(ii).
20.See 2.7.6.
21.See 2.7.
22.See 2.4.1, 2.5.1(iii).
23.See 4.6.4, 11.5.1.
24.See 2.5.1(iv-vii).
25.See 2.8.
26.See Peter W. Huber, U. S. Department of Justice, The Geodesic Network: 1987 Report on Competition in the Telephone Industry (1987); Peter W. Huber, Michael K. Kellogg & John Thorne, The Geodesic Network II: 1993 Report on Competition in the Telephone Industry (1992).
27.See, e.g., Nicholas P. Negroponte, Products and Services for Computer Networks, Scientific American, Sept. 1991, at 106.
28.Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968).
29.See 5.5, 6.6.3.
30.See 5.9.2.
31.See 3.2.3, 3.3.1.c, 3.3.2.e-f, 3.3.3.c, 3.3.4.b, 4.5, 4.8, 5.5, 6.3.2, 6.6, 7.5, 8.3.4-8.3.6, 8.4.2, 9.3, 10.4.3, 10.6, 10.10.2, 11.2.4, 11.5.3, 11.9.2, 11.9.4.a, 12.3. See also 7.4.4 (telephone cross-ownership of cable), 8.4.6 (video programming).
32.See 3.3.2.d, 10.9.3-10.9.4, 10.10.
33.See 2.5.1.c, 3.2.4, 3.3.1.d, 3.3.3.a, 3.3.3.d, 3.3.4.d, 4.7, 5.6, 6.7, 9.5, 10.7, 10.8.3, 10.9.4, 11.5.4, 12.4.
34.See generally Chapter 3.
35.47 U.S.C.A. 151 (1994).
36.Communications Satellite Act of 1962, Pub. L. No. 87-624, 76 Stat. 419 (1962) (codified as amended at 47 U.S.C.A. 701-757).
37.See 3.2.1.c, 3.2.3, 3.3.1.c, 3.3.2, 3.3.3.c, 3.3.4.b.
38.See FTL 2.7, 9.3.
39.For a discussion of the creation of the local access and transport areas (LATAs) during the Bell System breakup, see FTL 4.8.
40.See generally Huber, Orwell's Revenge, at Part 1.
41.See generally Chapter 4.
42.See 4.1.
43.See 4.2.
44.See 4.7.1.
45.See 4.2.3, 4.4.8, 4.5.3, 4.6.7-4.6.8, 4.9.4.
46.See 4.5.3.
47.See 4.6.7.
48.See 1.9, 1.11, 3.3.2.d, 4.8-4.9, 5.9, 6.9.3, 7.6, 8.3.6, 8.5, 9.4, 9.6-9.7, 10.3.11, 12.8. See generally Chapter 11.
49.See 4.4-4.7.
50.See generally Chapter 5.
51.See 5.2-5.3, 6.4, 6.7.1, 7.4.4, 8.4.6.c, 11.2.5, 12.5.4. See also 5.6.2 (satellite carriage issues).
52.See 5.2, 5.3.4.
53.See 5.4, 11.2.3, 11.5.1.
54.See 5.4.2.
55.See 5.4.3.
56.See 5.4.4.
57.See 5.4, 11.5.1-11.5.2.
58.See 5.6.
59.See 5.5.
60.See 5.3.1.
61.See generally Chapter 6.
62.See generally Chapter 8.
63.See 6.1.
64.See 6.6.6.
65.See 6.5.2.
66.See 6.8.1.
67.See 6.8.2.
68.See 4.10, 6.8.3.
69.See 8.2.
70.See 9.8.
71.In 1980, a district court granted Loew's, a movie production company, limited freedom to re-enter the motion picture distribution business. By 1984, the Department of Justice concluded that the rationale for separation had evaporated. See discussion at 8.3.2.
72.See 8.2, 8.3.2, 8.3.5, 9.8.
73.See 8.5, 9.8.
74.See generally Chapter 10.
75.See 10.1, 10.3.1.
76.See 10.3.10, 10.4-10.5.
77.See 10.6.
78.See 2.5.1.c, 3.2.4, 3.3.3.d, 10.7.2.
79.See 10.5-10.11.
80.See 10.5.1, 10.6.
81.See, e.g., 6.3.3, 10.3.5, 10.3.9, 10.9-10.11.
82.See 10.9-10.11.
83.See generally Chapter 11.
84.See 11.2.
85.Kovacs v. Cooper, 336 U.S. 77, 97 (1949) (Jackson, J., concurring). See also Emord, Freedom, Technology, and the First Amendment at 278.
86.Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 386 (1969).
87.See 11.4, 11.9.
88.See 11.4.
89.See 11.2.4.
90.See 11.9-11.10.
91.See 11.10.2.
92.See 6.6.3. See also 12.3 (universal cable).
93.See 2.7.6, 12.5.
94.See 3.3.4, 4.9-4.11, 5.9, 6.9, 7.6, 8.5, 9.7, 10.3.11, 12.8. See generally Chapter 11.
95.See 1.9.
96.See 4.9.
97.See 5.9.3, 12.8.
98.See 7.6, 8.5, 9.7.
99.See 10.3.11, 10.6.1.
100.See 11.1.
101.See 11.8-11.9.
102.See 11.2.1.
103.See 5.9.2, 11.2. See also 5.5.8 (FCC review of Fairness Doctrine).
104.See 5.9.3, 11.2.5.
105.See FTL 16.9.
106.See 4.3, 4.11, 5.9.4.
107.PruneYard Shopping Ctr. v. Robins, 447 U.S. 74, 82 (1980) (quoting Armstrong v. United States, 364 U.S. 40, 48 (1960)). The taking was of the property owner's right to exclude others. Id. See also 4.11, 5.9.4-5.9.5.
108.See 8.5.
109.47 U.S.C.A. 543(a)(2) (West Supp. 1994). See also 6.6.3.b.
110.See 6.4.
111.The following section contains numerous unfootnoted allusions to the writings of George Orwell; the sources are fully cited in Huber, Orwell's Revenge.