FPL, known to us old heads as Florida Power & Light, is a public utility under Florida law. Section 366.02, Florida Statutes, defines a public utility as ” … every person, corporation, partnership, association, or other legal entity and their lessees, trustees, or receivers supplying electricity or gas (natural, manufactured, or similar gaseous substance) to or for the public within this state …” In declaring its rationale for regulating public utilities, the Florida Legislature, in section 366.01, F.S., states that:
“The regulation of public utilities as defined herein is declared to be in the public interest and this chapter shall be deemed to be an exercise of the police power of the state for the protection of the public welfare and all the provisions hereof shall be liberally construed for the accomplishment of that purpose.”
In other words, Florida believes that because the products provided by utilities; electricity, water, natural gas, are of such necessity to its citizens, that regulating how they are provided and the rates they are provided at is essential to the well being of the states’s citizens. Imagine the levels of disease or hunger that would emanate from a prolonged loss of electricity, water, or natural gas. Commerce would come to a grinding halt without the electricity needed for energizing transportation facilities and the transfer of financial assets.
The economic reasons for regulating public utilities stem from their roles as natural monopolies. Richard A. Posner wrote in his text, Economic Analysis of the Law, that natural monopoly presents three problems that warrant regulation in some form or the other. One is monopoly pricing. The second is inefficient market entry resulting from the natural monopoly’s reaction to potential entrants. The third is the difficulty of devising an efficient pricing structure.
Judge Posner’s answer to the natural monopoly dilemma is public utility regulation, an approach to regulating a natural monopoly based on three elements: profit control, entry control via some license or certificate of necessity and convenience, and control over price structure.
At this point every investor should be sucking air in great pause were this type of framework be applied to broadband access providers. The framework introduces another level of uncertainty for broadband providers especially where regulation may lessen rates of return on capital or equity.
What I also find curious is why net neutrality proponents do not get this granular in their advocacy for common carrier or public utility regulation, preferring to stick to the narrative that broadband providers should be regulated because they might do something wrong that negatively impacts the consumer’s ability to get to a website.
I’m equally curious as to why net neutrality advocates never bother explaining why communications or broadband companies are not included in the statutory definition of a public utility. Some academics have tried. For example, Fordham University professor Rick Geddes includes communications firms in the definition of public utilities. He cites as a common thread between telecoms, electrics, and natural gas firms three components: production, transmission, and distribution. The problem with his analysis is that telecommunications firms don’t produce anything.
Whereas an electric company generates electricity, a secondary form of energy, and transmits and distributes the energy over its facilities, all a broadband or telecommunications firm does is transmits the messages or data that I request it to send. My original message gets to its recipient in the same form that I send it in; in the form I generated it in.
From a social perspective, while I am basically shy, I can warm up a bit and be pretty sociable. However, while I do need to eat properly cooked food and take a bath everyday, I don’t need to talk to anyone everyday. Broadband adds efficiency to my ability to gather, process, and disseminate information, but I don’t need it in order to collect or send information. It’s not a necessity.
Yes, that runs completely counter to the narrative pushed by the net neutrality types; that without broadband the whole world will come to an end and for that reason we should regulate the crap out of Comcast and Verizon, but that narrative is not steeped in law or the common view, not when you have fifteen to twenty percent of the American population getting along just fine without broadband.
The net neutrality narrative that broadband should be regulated like a public utility exposes another fatal flaw. If the true product being generated is information then in order to apply the public utility model the information generators i.e. end-users and edge providers, will have to be dragged into the regulatory eco-system. Privacy concerns and law may keep the hands of the Federal Communications Commission off of end-users, but edge providers such as Amazon, Facebook, and Google would be fair game, especially given their market dominance in publishing, online advertising, and search.
It’s no wonder they have been sitting on the fence during the net neutrality debate. Hopefully for them the wire is not barbed.
Bottom-line, broadband providers are not public utilities. They lack the generation component typically associated with a public utility. They are, for the most part, connectivity providers. One could argue that their portals provide news and information, but until they declare themselves media companies, providing a portal does not make you an information generator. If anything they are merely aggregating information from other sources that you can go directly to yourself.