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The New Utilities: Private Power, Social Infrastructure, and the Revival of the Public Utility Concept

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The New Utilities: Private Power, Social Infrastructure, and the Revival of the Public Utility Concept THE NEW UTILITIES: PRIVATE POWER, SOCIAL INFRASTRUCTURE, AND THE REVIVAL OF THE PUBLIC UTILITY CONCEPT K. Sabeel Rahman† From the renewed controversies over financial regulation and the problem of too-big-to-fail (TBTF) financial firms, to the clash over the Federal Communications Commission (FCC’s) “net neutrality” regulations on internet service providers, and more recent questions about Google, Facebook, and online platforms, we are in the midst of a larger policy and political debate about how to regulate modern-day forms of private power. Encompassing different areas of law and policy, the underlying issue in this debate is the following: how should we conceptualize and regulate new forms of concentrated private power, particularly when these firms control the terms of access to vital services—such as finance, broadband internet, or information— upon which many communities, constituencies, and economic actors depend? Drawing on historical Progressive Era concepts of private power and public utility, as well as current debates in financial regulation and net neutrality, this Article † Assistant Professor of Law, Brooklyn Law School. Fellow, Roosevelt Institute. A great many colleagues have contributed generous feedback over the course of this Article. I am especially grateful to: Martha Minow; John Manning; Bill Novak; William Boyd; Frank Pasquale; Spencer Weber Waller; Saule Omarova; Aziz Rana; Morgan Ricks; Jim Rossi; Jon Michaels; Laura Phillips Sawyer; Brett Frischmann; Prasad Kirshnamurthy; David Grewal; Kent Greenfield; Usha Rodrigues; Roberta Romano; Elizabeth Pollman; Julie Suk; Ajay Mehotra; Ted Janger; Jocelyn Simonson; Ken Mack; Liz Schneider; Minor Myers; David Reiss; Maryellen Fullerton; Steve Dean; Julian Arato; Greg Mark; Ted De Barbieri; Natalie Chin; Cynthia Godsoe; Eun Hee Han; Maria Termini; Laurent Sacharoff; Prithvi Datta; Emma Saunders- Hastings; and Adam Lebovitz. Earlier drafts of this Article were previously presented at several conferences and workshops, where the participants were enormously helpful. Thanks in particular to the participants and staff at: the Harvard Law School Public Law Workshop (Spring 2016); “The Corporate Law and Economics Revolution 40 Years Later,” Business Associations & Law and Economics Joint Program, American Association of Law Schools annual conference (January 2016); Vanderbilt Law School Roundtable on “Revisiting the Public Utility” (February 2017); Yale Law School Information Society Project speaker series (February 2017); American Bar Foundation speaker series (January 2017); “Political Theory and the Corporation,” American Political Science Association annual conference (September 2015); and the Brooklyn Law School faculty workshop (July 2016). I am grateful to Andy Kissner, Nicole Mormillo, Pearl Shah, and Andrew Hwang for excellent research assistance. The Brooklyn Law School Summer Research Fund supported in part the development of this paper. This Article was accepted for publication in June of 2017 and circulated in pre-publication form under a different title of Private Power, Public Values: Regulating Social Infrastructure in a Changing Economy. 1621 1622 CARDOZO LAW REVIEW [Vol. 39:1621 provides an overarching framework to answer that question. First, the Article argues that what makes firms like TBTF financial giants and internet service providers distinct is that they represent a form of private control over “infrastructural” goods— goods that comprise a backbone for much of modern social and economic activity, upon which many communities and constituencies depend. Second, the Article identifies three key elements of a twenty-first century framework for public utility regulation designed to remedy this problem of private control of infrastructural goods: firewalling; imposing public obligations; and creating public options. Third, the Article applies these principles to the emergent debates over private power and infrastructure in the context of internet platforms and helps demonstrate their importance, shedding new light on how to address the myriad of concerns raised by new technology giants like Google, Amazon, or Uber. These public utility concepts offer a portable, trans-substantive legal and policy framework for understanding and contesting private power in a variety of sectors. Fourth, this approach also adds an important missing complement to our current legal frameworks and literatures on the problem of private power in the twenty-first century, particularly by reorienting business law and economic policy back towards a focus on the problems of power and inequality. Moreover, these concepts help bridge the growing literature diagnosing the legal construction of inequality with the aspiration to develop mechanisms that can undo widespread structural disparities of economic opportunity, welfare, and power. TABLE OF CONTENTS INTRODUCTION .............................................................................................................. 1623 I. POWER, INFRASTRUCTURE, AND THE PERSISTING PROBLEM OF “BIGNESS” ...... 1628 A. Progressive Law and Economics and the Critique of Private Power .... 1628 B. The Strengths and Failures of the Public Utility Model ......................... 1634 II. TOWARDS A TWENTY-FIRST CENTURY PUBLIC UTILITY FRAMEWORK ............. 1639 A. Infrastructural Goods: Defining Modern “Bigness” ............................... 1639 1. Production ...................................................................................... 1641 2. Uses .................................................................................................. 1641 3. Necessity and Vulnerability ......................................................... 1642 B. A Modern Public Utility Toolkit .............................................................. 1644 III. TWENTY-FIRST CENTURY PUBLIC UTILITY REGULATION IN ACTION ............... 1647 A. Net Neutrality and the Revival of the Public Utility Ethos .................... 1647 1. From Telecom to Broadband: A Brief History of Net Neutrality ........................................................................................ 1648 2. The FCC and the Return of Public Utility Regulation ............. 1649 3. Adapting Public Utility Ideas for the Twenty-First Century ... 1653 B. Public Utility Principles and Financial Regulation ................................ 1656 1. Banking Regulation as a Form of Public Utility ........................ 1656 2018] THE NEW UTILITIES 1623 2. Public Utility Principles and Financial Reform Today ............ 1658 a. Firewalls .............................................................................. 1659 b. Public Obligations and Public Options .......................... 1661 c. Public Banking and Narrow Banking ............................. 1663 3. Implications for Twenty-First Century Public Utility Regulation ....................................................................................... 1665 IV. THE NEW UTILITIES? PLATFORM POWER AND INFRASTRUCTURE IN THE INTERNET ECONOMY .............................................................................................. 1666 A. The New Utilities: Google, Facebook, and Amazon ............................... 1668 1. Google, Facebook, and Informational Infrastructure .............. 1668 2. Amazon and the New Retail Infrastructure ............................... 1673 B. Uber and Airbnb: Partial or Emergent Utilities? .................................... 1674 V. PUBLIC UTILITY AND THE INEQUALITY CRISIS ..................................................... 1678 A. Public Utility as a Complement to Corporate Governance and Antitrust ...................................................................................................... 1678 B. Public Utility and the Renewed Concern with Private Power ............... 1680 C. Public Utility, Regulation, and the Inequality Crisis ............................. 1684 CONCLUSION................................................................................................................... 1687 INTRODUCTION Since entering office in January 2017, the new Trump Administration and Republican-controlled Congress have made plain their intention to undo several key policy developments of recent years. Wall Street firm stock prices have already begun to rise on expectations that financial regulations on “too-big-to-fail” (TBTF) systemically risky financial institutions will be undone.1 The Federal Communications Commission (FCC) has reversed its push for net neutrality rules.2 Similarly, tentative steps by the Obama Administration to tackle growing corporate concentration and merger activity seem likely to be undone as well.3 Meanwhile growing reports about the role of online 1 Ben McLannahan & Barney Jopson, What Wall Street Wants from Trump, FIN. TIMES (Jan. 11, 2017), https://www.ft.com/content/c7a5fde4-d722-11e6-944b-e7eb37a6aa8e. 2 See FCC Restoring Internet Freedom, 47 C.F.R. Parts 1, 8, & 20 (2018) (repealing net neutrality provisions). 3 Binyamin Appelbaum, Obama’s Work to Limit Mergers May Stop with Trump Administration, N.Y. TIMES (Jan. 10, 2017), https://www.nytimes.com/2017/01/10/business/ economy/obama-corporate-monopoly.html?_r=0. While as a presidential candidate, Donald Trump also expressed some opposition to the AT&T/Time Warner merger, it remains to be seen whether this opposition was more a statement of Trump’s dissatisfaction with the media coverage of CNN (a subsidiary of Time Warner) or out of a genuine concern with market concentration. 1624 CARDOZO
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