The Privatization of “Legal Infrastructure,” the End of Net Neutrality, and the Steady Erosion of Constitutional Protections

You’ve likely heard by now of the recent decision by the Federal Communications Commission (FCC) to end net neutrality. In case you haven’t, in a nutshell, on December 14, 2017 the FCC decided to end rules prohibiting internet service providers (ISPs) from discriminating among customers or among the content they carry. By ending these rules, ISPs can now slow down or entirely block access to one or more internet sites and can also charge internet users more money in order to have access to certain sites with high speed internet, creating what have been described as internet “fast lanes” and “slow lanes.”

Setting aside the huge unpopularity of the FCC’s decision (more than 80% of voters opposed it), the decision has been heavily criticized for a number of reasons. For example, Scott Galloway, the founder of L2, stated:

This is the worst thing that’s slipping under the radar in a long time…If net neutrality goes away, you can see small companies not being able to compete or have access to the pipes that bigger guys have…The idea that we don’t have equal, unfettered access to what has become the mother’s milk of all innovation, of all online shareholder creation, and that is data into our lives and into our phones. This could be probably one of the biggest errors in one of the slow moving train wrecks we’ve seen in a while. The threat to undermine net neutrality is the most underreported news story of our day right now.

In particular, the FCC’s decision to end net neutrality has been criticized as an attack on first amendment rights of freedom of speech. The US Supreme Court has described social media websites as providing “perhaps the most powerful mechanisms available to a private citizen to make his or her voice heard.” Further, today the internet plays an indispensable role in political expression and organizing. By ending net neutrality, both access to social media sites and, more largely, the use of the internet for political speech and organization will be subject to the mercy of ISPs, each of which is a private (not state owned or controlled) company, and so not required to respect first amendment rights.

Writing in the New York Times just before the FCC decision, Nick Frisch set up a particularly disturbing scenario:

To taste a future without net neutrality, try browsing the web in Beijing. China’s internet, provided through telecom giants aligned with the Communist Party, is a digital dystopia, filtered by the vast censorship apparatus known as China’s Great Firewall. Some sites load with soul-withering slowness, or not at all. Others appear instantly. Content vanishes without warning or explanation. The culprit is rarely knowable. A faulty Wi-Fi router? A neighborhood power failure? Commercial sabotage? A clampdown on political dissent? To most Chinese netizens, the reason matters little. They simply gravitate to the few sites that aren’t slowed or blocked entirely: the Chinese counterparts of Facebook, Google, and Twitter. But these Chinese platforms come with heavy government surveillance and censorship by corporate and party apparatchiks. For the Communist Party and its commercial allies, this is win-win, cementing respective monopolies on political markets and consumer power.

The Trump administration’s plan to dismantle net neutrality regulations has brought this nightmare scenario to America’s digital doorstep. [The rollback of net neutrality rules] not only imperils fair play and free speech; [it also] also empower[s] foreign entities with substantial market-making power, like China’s government, to meddle in American public discourse on a scale dwarfing Russia’s recent cyber-chicanery. Worse, abolishing net neutrality gives American corporations the means, motive and opportunity to become accomplices in selling out our freedom of speech.

In sum, for Frisch as well as for many others, rolling back net neutrality means rolling back first amendment rights of free speech on the internet.

While it hasn’t gained the attention of the wider public, a comparable proposal—to privatize regulation—has attracted the attention as well as the wide acclaim of legal academia and a number of captains of industry, and has received an airing in the Financial Times. I describe this proposal in detail here and I discuss it at length here.

In a nutshell, the proposal, as it is detailed in Gillian Hadfield’s book Rules for a Flat World: Why Humans Invented Law and How to Reinvent It For a Complex Global Economy, is as follows: Our public institutions are woefully inadequate for many kinds of regulation. They are hamstrung by their propensity for high levels of complexity resulting in high costs for businesses. Further, and perhaps worse, they do not have the financial, technical, or human resources needed to develop the new “legal infrastructure” that we need today. For these reasons, much of the power to determine the rules that govern and deeply affect us as a society (such as those relating to contracts, health and safety, employment, data security), and that govern businesses in particular, should be removed from our current public intuitions (executive, legislature and judiciary) and instead be placed in the hands of privately-owned, for-profit companies (or privately operated non-profits) whose principal “customers” for such rules will be other companies. Once this is done, the role of the public institutions would be limited to regulating these private regulators.

As mentioned above and discussed further here, this proposal has been lauded by a number of captains of industry as well as thought leaders in academia. One commentator described it as “original” and “compelling” for “how to reconstruct the regulatory structures necessary for a complex global economy.”  Another described the proposal as a charter “for a more rational and inclusive legal system.” A third called the proposal “a blueprint for a more efficient, inclusive and accessible legal system.”

These references to “inclusive” and “accessible” are difficult to understand, at least in so far as they apply to the United States and other wealthy countries. As discussed here and here, recent research by NYU PhD candidate Hannah Simpson demonstrates that if a wealthy group—such as corporations—opts out of a state (that is, public) legal system in favor of a private one, it is more likely than not to have negative effects for the remaining population (that is, for those who are excluded from the private legal system). Further, Simpson’s research demonstrates that if a legal institution is used as a source of revenue (something a for-profit regulator would obviously use its institution for), this results in the denial of access to justice to those portions of the population that cannot access that institution because of inability to pay.

Indeed, even without Simpson’s research the descriptions of “inclusive” and “accessible” are difficult to understand. By its very definition, the privatization of any previously public good or service excludes many persons from that good or service—it excludes the public—and makes it less accessible to many people—again, it makes it less accessible to the public. Real property as well as physical infrastructure, such as roads and bridges, are obvious cases in point. When real property is privatized it becomes accessible only to its owner and to those the owner allows on to the property, sometimes as guests but often as rent-payers. The general public, which previously had free access, must stay off. When physical infrastructure such as a road or bridge is privatized, it becomes accessible only to its private owner(s) and those who are able to pay the fee the owners charge to use it. The general public, which previously had free access, must stay off. Seen from this perspective, the suggestion that the privatization of any previously public good or service makes it more “inclusive” or more “accessible” is absurd on its face. To the contrary, the inclusiveness and the accessibility of that good or service is shifted from a large number of persons—the general public—to a very small number—the new private owner(s).

Further, the proposal to privatize regulation shares essential characteristics with the repeal of net neutrality: it would mean that corporate entities—not democratically elected or controlled bodies such as an executive, legislature or judiciary (or, at least, ostensibly democratic bodies)—would formulate and apply rules that would have consequences for a large number of persons, if not for the population as a whole (such as rules relating to employment and consumer law). As for-profit institutions, they would control access by their “customers” (no longer citizens) to rule-making and dispute resolution procedures, as well as to the rules themselves. There would be nothing to stop them from creating “fast” and “slow” lanes, notably with respect to the speed of dispute resolution or the quality of the rules themselves, dependent upon the price paid. To the contrary, by their very nature of being for-profit, they would necessarily restrict and award access to their products and services based upon ability to pay.

In essence, while the repeal of net neutrality will erode the constitutional right of free speech enshrined in the 1st Amendment, the proposal to privatize regulation, if implemented, would erode the constitutional right of equal protection of the law enshrined in the 14th Amendment. As the Legal Information Institute of Cornell Law School explains, “the point of the equal protection clause is to force a state to govern impartially—not draw distinctions between individuals solely on differences that are irrelevant to a legitimate governmental objective.”

The 14th Amendment applies only to state (public) actors, not to private ones. By removing regulatory powers from the state in order to place them in the hands of private, for-profit corporations, the corporations would, for the very reason that they are “for-profit,” draw distinctions between persons based upon their ability to pay. It is difficult to imagine under what circumstances differences in ability to pay for regulation are relevant to a legitimate regulatory objective: they would be relevant only to the objective of generating profit for the private regulator.

In 1938, Franklin Roosevelt warned:

Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people…The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is Fascism—ownership of Government by an individual, by a group, or by any other controlling private power… Among us today a concentration of private power without equal in history is growing.

Nearly 80 years later, in May 2017, Chris Hedges confirmed the realization of Roosevelt’s fear of American fascism:

Forget the firing of James Comey. Forget the paralysis in Congress. Forget the idiocy of a press that covers our descent into tyranny as if it were a sports contest between corporate Republicans and corporate Democrats or a reality show starring our maniacal president and the idiots that surround him. Forget the noise. The crisis we face is not embodied in the public images of the politicians that run our dysfunctional government. The crisis we face is the result of a four-decade-long, slow-motion corporate coup that has rendered the citizen impotent, left us without any authentic democratic institutions and allowed corporate and military power to become omnipotent. This crisis has spawned a corrupt electoral system of legalized bribery and empowered those public figures that master the arts of entertainment and artifice. And if we do not overthrow the neoliberal, corporate forces that have destroyed our democracy we will continue to vomit up more monstrosities as dangerous as Donald Trump. Trump is the symptom, not the disease.

Our descent into despotism began with the pardoning of Richard Nixon, all of whose impeachable crimes are now legal, and the extrajudicial assault, including targeted assassinations and imprisonment, carried out on dissidents and radicals, especially black radicals. It began with the creation of corporate-funded foundations and organizations that took control of the press, the courts, the universities, scientific research and the two major political parties. It began with empowering militarized police to kill unarmed citizens and the spread of our horrendous system of mass incarceration and the death penalty. It began with the stripping away of our most basic constitutional rights—privacy, due process, habeas corpus, fair elections and dissent. It began when big money was employed by political operatives such as Roger Stone, a close Trump adviser, to create negative political advertisements and false narratives to deceive the public, turning political debate into burlesque. On all these fronts we have lost. We are trapped like rats in a cage. A narcissist and imbecile may be turning the electric shocks on and off, but the problem is the corporate state, and unless we dismantle that, we are doomed.

It is in this context that the proposal to privatize regulation as well as the repeal of net neutrality can be best understood. They are logical steps in a “four-decade long, slow-motion corporate coup that has rendered the citizen impotent.” Rather than serve to dismantle the corporate state that Roosevelt feared and Hedges has confirmed, each serves to build it larger and stronger. We need to take Hedges’s list of basic rights that have been stripped away—privacy, due process, habeas corpus, fair elections and dissent—and add to it freedom of speech (due to the repeal of net neutrality) and equal protection of the law (if the proposal to privatize regulation were implemented).

Related posts on this site:

Chapter 27: Rules for a Flat World (Or Regulatory Dystopia)

Access to Justice vs. Revenue: A Zero-Sum Game?

You Asked For Research? You Got It! Now What Are You Going to Do With It?

Democracy? It’s Messy. Who Needs It?

Law and Economics Programs at US Law Schools

Law and Economics Programs at US Law Schools: Conceived in Opposition to Civil Rights and Dedicated to the Proposition that Majorities Should Not Rule: Part 1, Part 2, Part 3 and Part 4

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