"Common Carrier" Craziness

 Posted by on 17 July 2008 at 11:38 pm  Business, Politics
Jul 172008

The common law doctrine of “common carrier” would be funny if it weren’t so stupid. In effect, the common carrier doctrine operates by designating a service as indispensible, and then destroying that service.

A New York Times article discusses the doctrine in the context of the debate over the advisability of “net neutrality,” which is “the idea that Internet access providers like Comcast should not be allowed to favor some uses of their networks over others.”

[The chairman of a net neutrality advocacy group] said the issues at stake go back to the common-law concept of a common carrier, which defined certain businesses — from blacksmiths to ferries — as so essential to commerce that their owners could not discriminate against any paying customer.

The ‘Lectric Law Library fleshes out what it means to “not discriminate,” in the classic application of the doctrine to a transportation provider:

1. To carry passengers whenever they offer themselves and are ready to pay for their transportation. They have no more right to refuse a passenger, if they have sufficient room and accommodation, than an innkeeper has to refuse a guest.

What’s funny is that no-one seems to follow this policy to its logical conclusion. Let’s say a common carrier does routinely refuse to provide service to certain individuals or a class of individuals. If the carrier is profit-seeking, the refusal to provide service will rest on the profitability of that refusal, or else some other carrier will enter the business to provide service to the denied individuals. Under the common carrier doctrine, such “discriminating” carriers would have to be punished, in proportion with the severity and persistency of their discrimination. Eventually, one or all of the following three things will occur: 1) common carriers will cease to be profitable as a result of increasing fines, and go out of business, 2) punishment of carriers will escalate to forcibly shutting noncompliant carriers down, or 3) no-one will undertake common carrier trades. Either way, the doctrine must have the effect of eliminating the businesses designated as common carriers.

If all of the above is true, then why, you may ask, do we still have common carriers? It is because we have a mixed economy. In a free economy, all property is privately owned, including all businesses. In a mixed economy such as ours, internet service providers such as Comcast can do business only if they are first licensed by the government. Once licensed, they enjoy a near-monopoly, with the ability through incumbency and lobbying to prevent other potential providers from entering the field.

So, we now we have the following perversion of incentives: a government policy of violating property rights (the common carrier doctrine) becomes a weapon by which those whose rights are violated (like Comcast) keep competitors out of the field by force. That is, the system is set up so that it is possible to make money by giving up your rights, so long as you thereby gain the power to violate the rights of others.

Ironically, this policy is supposedly designed to protect consumers. But it is consumers who lose in the end. Licensed common carriers have little incentive to provide good service at a good price, because consumers have no choice but to deal with them. So under common carrier policies, consumers must either 1) purchase overpriced and inferior services, or 2) face the complete unavailability of those services.
There’s a way to describe a policy like this. It’s called “stupid.”

Actually, there’s a better way to describe the common carrier doctrine. Wrong.

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