Award Winning Blog

Tuesday, October 30, 2007

Property Confiscation is in the Eye of the Beholder

The issue of FCC confiscation of private property has a long and checkered history in academic literature, sponsored research and litigation. In many instances incumbent telephone companies have argued that FCC regulation, which requires the carriers to do something they do not want to do, constitutes a confiscation or "taking" of property. So when the FCC orders an incumbent carrier to interconnect with a competitor--something common carriers have to do--incumbent carriers are quick to play the confiscation card if they do not like the terms and conditions under which they have to provide interconnection.

The incumbent carriers tried the confiscation argument before the Supreme Court claiming that unbundling and other affirmative obligations under the Telecommunications Act of 1996 constitued a taking of property. In Verizon Communications, Inc. v. FCC, 121 S.Ct. 877 (2001)the Court wisely rejected incumbent local exchange carrier arguments that using a theoretical, most efficient cost model, instead of actual historical costs, constituted a taking that violated the Fifth Amendment. See

Nothwithstanding the Court's determination the FCC has methodically dismantled just about all of the line sharing, unbundling and interconnection obligations incumbent carriers must endure. The Commission rationalizes such deregulation on bogus determinations that marketplace self-regulation will suffice because of robust competition.

With this in mind I have some mixed feeling about the Commission's ostensibly procompetitive, pro consumer decision to abrogate exclusive service contracts between apartment owners and cabel television operators. See

While I can appreciate that the initiative should trigger rate reductions for previously captive apartment dwellers, I wonder why similarly captive broadband subscribers do not warrant such aggressive and conscientious regulatory intervention. The FCC no longer requires incumbent local exchange carriers to share bandwidth available in their local loops at fair compensation rates. Bear in mind that these carriers installed such infrastructure and recouped their investment at a time when ratepayers were equally captive.

So once again the FCC can explain an inconsistent and assymetrical regulatory state of play on grounds that robust competition exists in one market and it does not exists in another market.

I cannot help but think that an alternative explanation exists: political expediency warrant accommodating Verizon, AT&T and other incumbent carriers in both instances. Eliminate unbundling, line sharing and now even most aspects of interconection (special access) regulation because the incumbent carriers want it and the FCC can make a claim that competition exists. Abrogate apartment owner-cable television operator contracts because Verizon and AT&T want the FCC to do so and because the Commission can make a claim that competition does not exist.

Well at least on the south facing side of many apartment tenants with access to private outside space, such as a balcony, can and do access Direct Broadcast Satellite television options. But more fundamentally the FCC can play the competition card in whatever way it chooses with impunity.


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