Cybertelecom
Cybertelecom
Federal Internet Law & Policy
An Educational Project

Common Carrier : Market Power

Navigation Links:

- Common Carrier
- History
- Theory
- -Bailment
- - Market Power / Essential
- Duties
- - Non discrimination
- - Refusal to carry
- -Interconnection
-Liability
- Benefits
-Examples
-Telecom Carriers
-Telegraph
-Reference
- Telephone
- - AT&T
- ICC
- FCC

:: Feedback ::
:: Disclaimer ::
:: Sitemap ::

William Jones, The Common Carrier Concept As Applied to Telecommunications

B. COMMON CARRIER AND THE LAW OF FRANCHISES

The second source of the law of common carrier originates in the writings of Sir Matthew Hale. In De Portibus Maris, written about 1670 and published in 1887, Lord Hale distinguished between private and public wharves and cranes: [16]

A man for his own private advantage may in a port town set up a wharf or crane, and take what rates he or his customers can agree for cranage, wharfage, [etc.;] for he doth no more than is lawful for any man to do, viz, make the most of his own... but such wharfs cannot receive customable goods against the provision of the statute of 1 Eliz. cap. II.

If the king or a subject have a publick wharf, unto which all persons that come and unlade or lade their goods for the purpose, because they are wharfs only licensed by the queen, according to the statute of 1 El. Cap II, or because there is no other wharf in that port, as it may fall out where a port is newly erected; in that case there cannot be taken arbitrary and excessive duties for cranage, wharfage, [etc.,] neither can they be enhanced to an immoderate rate, but the duties must be reasonable and moderate, though settled by the king's license or charter. For now the wharf and crane and other conveniences are affected with a publick interest, and they cease to be juris privati only...

But in that case the king may limit by his charter and license him to take reasonable tolls, though it be a new port or wharf, and make publick; because he is to be at [Jones A-14] the charge to maintain and repair it, and find those conveniences that are fit for it, as cranes and weights.

The position of Lord Hale found support in ancient common law doctrines recognizing the special status responsibilities of ferriers,[17] and was applied by the English courts in two cases involving port facilities. In Bolt v. Stennet (1800), [18] the licensed owner of a crane in a port sued defendant for using the crane without permission. Defendant's justification -- that the crane was necessary to land goods and that he had a right to use it on payment of reasonable compensation -- was accepted as proper. In Allnut v. Inglis (1810),[19] defendant had the only warehouse in London in which plaintiff's wine could be stored free of duty. Plaintiff refused to pay defendant's storage fee and, as a consequence, was compelled to pay duty. In a suit to recover damages, plaintiff prevailed when defendant declined to contest plaintiff's claim that it had tended reasonable compensation for the storage requested. Because defendant had a monopoly, it was limited to a reasonable rate: [Jones A-15]

If for a particular purpose, the public have a right to resort to [the warehouseman's] premises and make use of them, and he have a monopoly in them for that purpose, if he will take the benefit of that monopoly, he must as an equivalent perform the duty attached to it on reasonable terms. [According to Lord Hale,] whenever the accident of time casts upon a party the benefit of having a legal monopoly of landing goods in a public port... he is confined to take reasonable compensation only for the use of the wharf[20]

That there were two separate sources of common carrier responsibilities is supported by the separate attention given to each by the leading treatise writers of the 19th century. James Kent, in his Commentaries on American Law (1848), [21] discussed separately the rights and obligations of holders of franchises [22] and the responsibilities of common carrier for goods in their possession. [23] The source of subsequent confusion is suggested by Kent's Commentaries, for the railroads -- the most important business enterprises of the 19th century - were discussed under both headings. [Jones A-16]

.....

V Telecommunications in the Courts in the Pre Commission Era

The adjudication of telecommunications issues in the courts, prior to the establishment of regulatory Commissions, was strongly influenced by the monopoly-franchise theory of Lord Hale. The theory was brought to bear principally in two ways. First, many cases were decided in the context of statutory provisions that, expressly or by implication, embodied the monopoly-franchise approach. Second, the leading constitutional precedent on the scope of state regulatory authority – Munn v. Illinois [164] – relied on the writing of Lord Hale.

In Munn, the United States Supreme Court sustained as constitutional state regulation of the rates of Chicago warehouses. The Court commented on the importance of the warehouses in the shipment of grain from the Midwest to the East and quoted from Lord Hale on the common law applicable to [Jones A-59] businesses "affected with a public interested." It then observed that the warehouse owners jointly fixed their rates for storage of grain:

Thus, it is apparent that all the elevating facilities through which these vast productions [of grain] must pass on the way [to market] may be a 'virtual' monopoly . . . Every bushel of grain for its passage 'pays a toll, which is a common charge,' and, therefore, according to Lord Hale, every such warehousemen 'ought to be under public regulation, viz., that he … take but reasonable toll.' Certainly, if any business can be clothed 'with a public interest, and cease to be juris private only,' this has been… "[165]

While Munn subsequently generated significant controversy as a decision delimiting the scope of state regulatory power under the Constitution, there was no dispute, during the period under consideration, as to the soundness of Munn in its application to telecommunications. Telephone and telegraph consistently were held to be "public" businesses, subject to government regulation and subject to common law limitations in the absence of statutory controls.

In the period prior to Commission regulation of telecommunications, two classes of cases were particularly prominent: (1) those involving claims of discriminatory or exclusionary treatments, and (2) those seeking damages for failures, errors or delays in the transmission of telegraph messages. In the discrimination and exclusion cases, the courts consistently imposed a duty of impartial treatment, relying either on common law principles or statutory standards. By contract, the results in the damage liability cases were conflicting and inconsistent, reflecting no clear consensus. Underlying these disparate patterns were the two sources of common carrier status. The franchise-monopoly theory of Lord Hale provided a firm basis for resolving the discrimination and exclusion cases. But the custodial theory of common law liability, having its roots in the law of bailments, tended to confuse rather than clarify the responsibility of telegraph companies for failures, errors and delays. Indeed, the resolution of many cases in this second category ultimately turned on abandonment of the custodial theory in favor of the franchise-monopoly theory.

Criticism of Monopoly as Critieria

Thomas Nachbar, Open Access, TPRC 2006 (rejecting "Market Power" as sole justification or criteria for common carrier status)

Historians debate whether monopoly was instrumental in the development of common carriage. Businesses found to be "public callings" in early English common law were often franchised by the Crown under privileged terms and exercised market power. On the other hand, in many areas there was competition among such public callings as innkeepers, blacksmiths and tailors.
      In the United States, much of trucking and airlines are treated as common carriers even though significant competition exists. And at the time the telephone industry was first made subject to regulation at the state and Federal levels, there was some competition for local service. Conversely, most firms with market power are not common carriers. Thus, market power is neither a necessary nor sufficient condition for common carriage.
-- Eli M. Noam, Beyond Liberalization II: The Impending Doom of Common Carriage, 18 Telecomm. Pol'y 435. Sec. III.1. (1994).

The available evidence strongly suggests that monopoly and essentiality were the bases for imposing the duties of common callings. Only a limited number of trades clearly were held to be subject to a public duty to serve. The cases generally repeat the specific instances of smiths, carriers, and innkeepers which in many cases were considered to have an effective monopoly over essential services. [Keilway, 50.4 (1450); Y.B. 39 H.VI. 18'24 (1460); Jackson v. Rogers, 2 Show. 237 (1683); Lane v. Cotton, Ld. Raym. 546 (1701).] Taken as a whole they appear to theorize that these professions were in the nature of public offices. [Lane v. Cotton, Ld. Raym. 546 (1701), Ansell v. Waterhous, 2 Chet.R. 1 (1817).] Indeed, if all the professions had been held to the same duties the courts most likely would have said so, rather than making this analogy to the few offices which were purely public. Many other professions were at one time or another referred to as 'common' in the Year Books and cases, [See Adler, supra, pp. 149-52.] But there are no cases and no convincing evidence that these references meant that the public duty to serve was imposed upon them. The word 'common' was used in many different senses, and often meant 'ordinary' as for a common soldier, or 'habitual' as for a common scold. There is little reason to believe that the various references to common cooks, builders, or bakers implied that those professions bore a legal duty to serve, and surely no cases hold to that effect. Rather, these references seem only to have been to ordinary members of those trades. Thus, it appears that the common law imposed the duty of common or public callings on a case-by-case basis upon certain essential occupations which were effective monopolies. The theory, as expressed in Lane v. Cotton, 1 Ld Rym. 646 (1701) was that these particular occupations exercised a form of public office, analogous to sheriffs and public clerks.-- [FCC 1981]

Cases

  • Munn v. Illinois, 1978 Sup Ct Rev 313 (1979) (presence of monopoly justifies regulation)
    • This brings us to inquire as to the principles upon which this power of regulation rests, in order that we may determine what is within and what without its operative effect. Looking, [p126] then, to the common law, from whence came the right which the Constitution protects, we find that, when private property is "affected with a public interest, it ceases to be juris privati only." This was said by Lord Chief Justice Hale more than two hundred years ago, in his treatise De Portibus Maris, 1 Harg.Law Tracts 78, and has been accepted without objection as an essential element in the law of property ever since. Property does become clothed with a public interest when used in a manner to make it of public consequence and affect the community at large. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by discontinuing the use, but, so long as he maintains the use, he must submit to the control.
    • Munn v. Illinois - summary and commentary

Essential Facility

Facility or infrastructure which is necessary for reaching customers and/or enabling competitors to carry on their business. A facility is essential if its duplication is impossible or extremely difficult due to physical, geographical, legal or economic constraints. Take for example a national electricity power grid used by various electricity producers to reach the final consumers: Since it would not be viable for these producers to build their own distribution network, they depend on access to the existing infrastructure. Denying access to an essential facility may be considered an abuse of a dominant position by the entity controlling it, in particular where it prevents competition in a downstream market. ”  -- European Communities : Glossary http://ec.europa.eu/comm/competition/general_info/e_en.html

The available evidence strongly suggests that monopoly and essentiality were the bases for imposing the duties of common callings. Only a limited number of trades clearly were held to be subject to a public duty to serve. The cases generally repeat the specific instances of smiths, carriers, and innkeepers which in many cases were considered to have an effective monopoly over essential services. [Keilway, 50.4 (1450); Y.B. 39 H.VI. 18'24 (1460); Jackson v. Rogers, 2 Show. 237 (1683); Lane v. Cotton, Ld. Raym. 546 (1701).] Taken as a whole they appear to theorize that these professions were in the nature of public offices. [Lane v. Cotton, Ld. Raym. 546 (1701), Ansell v. Waterhous, 2 Chet.R. 1 (1817).] Indeed, if all the professions had been held to the same duties the courts most likely would have said so, rather than making this analogy to the few offices which were purely public. Many other professions were at one time or another referred to as 'common' in the Year Books and cases, [See Adler, supra, pp. 149-52.] But there are no cases and no convincing evidence that these references meant that the public duty to serve was imposed upon them. The word 'common' was used in many different senses, and often meant 'ordinary' as for a common soldier, or 'habitual' as for a common scold. There is little reason to believe that the various references to common cooks, builders, or bakers implied that those professions bore a legal duty to serve, and surely no cases hold to that effect. Rather, these references seem only to have been to ordinary members of those trades. Thus, it appears that the common law imposed the duty of common or public callings on a case-by-case basis upon certain essential occupations which were effective monopolies. The theory, as expressed in Lane v. Cotton, 1 Ld Rym. 646 (1701) was that these particular occupations exercised a form of public office, analogous to sheriffs and public clerks.-- [FCC 1981]

A second theory held by the commentators is that only certain essential occupations were common callings, and that the duty to serve was imposed to protect the public against actual or virtual monopolies in those occupations. Carriers, innkeepers, and smiths, for examples, were trades upon which the traveler depended, and there might well be only one such tradesman in a given medieval English village. 'The traveller would be at the mercy of the innkeeper, who might practice upon him any extortion, for the guest would submit to anything almost, rather than be put out into the night.' Wyman, 'The Law of the Public Callings as a Solution of the Trust Problem,' 17 Har.L.Rev. 156, 159 (1904). A carrier, too, because of the comparatively small traffic and the dangers of travel to distant towns and villages, would have a virtual monopoly. The duty to serve all at reasonable rates protected against abuse of this monopoly position. As economic conditions changed, moreover, certain occupations ceased to be common callings. For example, smiths, tailors, and surgeons were common callings in the fifteenth century, but by the nineteenth century it appears that the duties of a common calling applied only to carriers and innkeepers. One commentator concludes that the common law principle was 'that in the private calling the situation was that of virtual competition, while in the public calling the situation was that of virtual monopoly.' Wyman op. cit. at 161. [The importance of legislation throughout this period also cannot be underestimated. Parliament at various times imposed wage and price restrictions in times of economic distress. For example, the first Statute of Laborers (1348) imposed limits on wages in order to deal with the drastic shortage of labor caused by the Black Death. Criminal actions brought under these statutes may often have supplanted civil actions to obtain damages for any breach of a similar common law duty.] --[FCC 1981]

Criticism

Common carriers are considered to be private businesses which are "affected with public interest," to use the language of the U.S. Supreme Court's landmark case on regulation. Being essential, they are accorded special treatment.20 But the notion of an "essential" service as a prerequisite to common carriage is often circular. Telephones, for example, started out as a specialized service for a few users; its essentiality is as much the result of its broad use as the other way around. Essentiality is a factor for the establishment of common carriage, but it is neither a necessary nor a sufficient condition. -- Eli M. Noam, Beyond Liberalization II: The Impending Doom of Common Carriage, 18 Telecomm. Pol'y 435. Sec. III.2. (1994).

Cases

  • German Alliance Insurance Co v Lewis, 233 US 389(1934)
    • the business of insurance has very definte characteristics, with a reach of influence and consequence beyond and different from that of the ordinary business of the commercial world . . . To the insured, insurance is an asset, a basis of credit. It is practically a necessity to business activity and enterprise. It is, therefore, essentially different from ordinary commercial transactions, and, ... is of the greatest public concern.

Links

  • Essential Service -

 

Web services provided by
Wyoming.com
: Home : About Us : Contact Us : Sitemap : Discussion : Search : Newsletter : RSS :
: ADA : Broadband : Crime : Copyright : DNS : ECommerce : EGovt : First Amendment : Digital Divide :
: Network Neutrality : Intl : Privacy : Security : SPAM : Statistics : VoIP : Vote : And Much More! :
:: Feedback : Disclaimer ::
© Cybertelecom ::