Intellectual Property Law

Structural separation

By Susan Crawford

I’ve been spending a lot of time with the 1956 At&T consent decree that was so disliked by Ma Bell.  The incumbent disliked it because it commanded that AT&T act only as a common carrier - no other functions allowed.  (It doesn’t say anything about precluding AT&T from using electronics in its network when it was acting like that carrier, by the way.  It does command, however, that the company not go into other lines of business.)

Today a Gartner report (summary here) written with incumbent-customers in mind, bemoans a global move towards 1956-like limitations on telcos:

[O]wnership separation [is a] global trend[ that] will particularly impact developed countries where the telecom market is mature and regulators are trying to inject more direct market competition as a stimulus for innovation and greater investment in next-generation broadband.

The report defines “ownership separation” as “a carrier division with some of the network or the entire network is placed in a separate legal entity and owned by a company other than the parent company.”  In other words, structural separation.

Now, Gartner isn’t happy about this, and says that this may interfere with “cost efficiencies currently enjoyed by  vertically integrated carriers.”  (In response, a comment reads:  “What?! Who paid Gartner to make this report?”)

Over the last fifty years, we’ve succeeded in this country in completely subverting the principles that brought us the 1956 decree.  A source of pain to AT&T (because it kept AT&T out of the computing business), and embarrassment to the Department of Justice (because it didn’t involve actual divestiture of any AT&T businesses), the decree had the merit of reminding AT&T that it was only a common carrier.   All the Computer Inquiries that followed afterwards were also based on the assumption that there would be a common carrier in the picture.  Now our carriers are all “uncommon” - all perfectly free to discriminate and vertically integrate.

But at least Gartner says structural separation is a trend.  Here’s hoping that under the next Administration in this country that trend will reach our shores.

Full post as published by Susan Crawford Blog on May 20, 2008 (boomark / email).