New Year’s Eve 1879 is not a date most people recall from their history classes. However, on this ostensibly unassuming day in my hometown of Edison, NJ, Christie Street became the first street in the entire world to be powered by an incandescent light bulb using a power system designed by Thomas Edison. This was the catalyst to the creation of the modern electric grid and, subsequently, the electric utility corporations we know today. During the earlier years, neither the states nor the federal government regulated the industry. Cities and townships were largely tasked with granting utility companies the right to use public streets. Consequently, regulation for entry into the industry was de facto controlled by municipalities. It was not uncommon for cities to grant these rights to competing companies for the same area. In 1907, states began to pass legislation that granted utility companies localized monopoly power in order to correct for ‘natural monopoly-style’ market failures. The states argued that the cost advantages caused by overwhelming economies of scale allowed the winners to establish monopolies “naturally” threatening public well-being. This idea of a “public interest” and the “greater good” was extended to also regulate other critical public services such as the water and gas utilities. Recently, in January of 2014, a federal appeals court ruled that regulations enacted by the Federal Communications Commission (FCC) unfairly treated Internet services providers as if they were public utilities. This decision halted the expansion of these ideals to regulate additional industries, namely the Internet. This landmark decision begs the question, should the Internet be considered a public utility? If so, is this the best solution to the problems facing Americans regarding the Internet service provider industry? Before I jump into a discussion of what constitutes a public utility, first, let me discuss briefly the implications and why it matters in relation to the Internet. Since its inception, the Internet has been a revolutionary tool for humanity. It changed the way in which we communicate with each other, exchange ideas and even purchase goods and services. From a business perspective, any company that has been slow to adopt the Internet as an integral part of its strategy has seen profits decline or, in some cases, filed for bankruptcy. Eventually, entire businesses would (and some would argue should) become web-based. When taking all of these factors into account, the importance of the Internet to our economic growth cannot be understated. Needless to say, its gatekeepers (such as Comcast and Time Warner Cable) have significant leverage due to their position in the ecosystem. Up until the federal ruling, the gatekeepers were required to treat all web traffic equally. Now that the FCC rules have been struck down, the gatekeepers can create price stratifications and charge premiums to companies for access to their networks and can threaten to decrease data transfer speeds if they don’t pay. Netflix, for instance, recently signed agreements to pay premiums of this type to ensure video streams from their site wouldn’t be “throttled.” Worse still, many were outraged at the recent announcement of Comcast’s intent to buy Time Warner Cable. These two corporations represent the number one and two players in the cable and Internet business, respectively. Collectively, these behemoths have 30 million subscribers. To put their scale into perspective: with about 6.5 million subscribers, Charter Communications would be in second place (if you can even call it that). With the recent federal ruling on “net neutrality” in mind, a company of this size would have enormous influence over the flow of web traffic. The FCC tried to curtail this influence through its “Internet openness” (aka “net neutrality”) rules, but was denied by a federal appeals decision (the original text of which makes some hilarious references to cat videos). Ironically, the decision cited interpretations of the Telecommunications Act of 1996 that the FCC itself created in 2000. In short, the court referenced the FCC’s determination that broadband cable service providers were providing an “enhanced” service which was not subject to regulation as a public utility like telephone lines (which are called “basic services”). The original FCC interpretation of broadband service, however, was made when a mere 3% of American households were subscribers to broadband Internet. This pales in comparison to the 70% figure that a September 2013 Pew Research survey found. The technology sectors fast growth has resulted in a dramatic shift in the landscape in little over a decade; but the legal system, it seems, is not quite as adaptable. Historically, public utilities have been immensely regulated due to a theory that they are industries conducive to natural monopolies. This theory states that there are certain industries wherein one market participant is able to provide a good or service at the least cost. This is due to the extremely high fixed-costs associated with maintaining a large network of cables, pipes and landlines. As a result, the government decided to ensure the lowest cost to consumers by legalizing monopolies -- with the caveat that they would be enormously regulated industries. Unfortunately, federal code isn’t clear as to what constitutes a public utility. An important guiding principle in this regard is that of the “essential facilities doctrine.” While no explicit definition has been offered, I propose the following based on my reading: a good or service that has either nearly or completely inelastic demand and cannot be reasonably duplicated by another market participant. Infrastructure such as bridges, water lines and the electric grid fall comfortably within this framework. Broadband cable service is not as clear-cut as these examples, but a simple thought experiment can point us to an answer. Can the general public reasonably function without broadband Internet? Can another company easily replicate the services of current broadband service providers? The answer to both of those questions is a clear and resounding no. The competitive global economy would crush American companies if they were required to operate on dial-up Internet and new entrants would need to invest a prohibitively high sum of money before their network even came close to competing with industry incumbents. The world is a different place today than it was in 2000, and while broadband may have been an “enhanced service” in the past, today it is the “basic” (primitive even) form of Internet connectivity. Despite these facts, many argue that even if broadband Internet was considered a public utility, government regulation isn’t the solution to the myriad of issues that plague the industry. The New American Foundation did a wonderful study called “The Cost of Connectivity 2013” where they found that Internet service in the U.S. ranked 32nd globally. Their rankings compared Internet speeds and prices of global equivalents of “Triple Play” packages. South Koreans can access the Internet at speeds four times faster than the U.S. at a price of about $35 per month (compared to a median of $100 per month in the U.S.). These lower prices are predominantly the result of increased consumer choice of service providers that are simply unavailable in the United States. Anyone that has lived in New York City where Time Warner is, for the most part, the only option can attest to the abysmal state of customer service (when you aren’t afraid of losing your business you can take your sweet time in fixing cable and Internet outages). The American Customer Satisfaction Index ranked Internet service providers as the most hated companies in America. Simply put, the lack of competition has led to high prices for lower quality Internet service. Many point to regulatory capture as a primary cause of this issue. Comcast spent a little over $18 million dollars on lobbyists in 2013, which is about 15% of the $117 million spent by the media industry (which is more than the $97 million spent by Wall Street). Coupled with the revolving door in Washington where major decision makers are constantly jumping back and forth between the public and private sectors, it becomes difficult to imagine that the government is best suited to fix these problems (the current Chairman of the FCC, Tom Wheeler, used to be the Cable industry’s top lobbyist). Perhaps then, the best way to address the issue may be to take some lessons from the 31 countries that rank above the U.S. in Internet service. The major lesson gleaned from countries like South Korea and the United Kingdom is the availability of open networks. This policy boils down to government mandated competition where companies that establish and maintain the networks are required to lease them at cost to competing service providers. For obvious reasons this isn’t favorable to companies like Comcast who established the network in the first place. However, the cost incurred by these companies to maintain these networks would be shared. The resulting increase in competition would likely drive prices down and put pressure on companies to increase the quality of their service. While the FCC’s effort to categorize cable and Internet providers as public utilities and establish net neutrality is helpful, it is far from a comprehensive solution. The legal monopolies created to manage traditional public utilities such as electricity and water are inadequate in managing Internet service providers that participate in an industry with constantly evolving technology. Even traditional public utilities have suffered from complacency, which is clear when looking at the woeful state of American infrastructure…but I digress. Internet connectivity has rapidly changed from dial-up to cable and now fiber optics in a matter of a few decades. This high pace of innovation can only be sustained through a government-mandated competitive marketplace that encourages investment in new technologies. The pitfall of this solution is the necessity of government intervention in a country where special-interest groups have outsized influence. The first step towards ending our enduring ambivalence towards the issue has already seen progress. This is demonstrated by a recent Consumer Reports survey that found 71% of Internet users would switch to another service provider if their current provider violated network neutrality. Ironically, most of those people have very few options in service providers as it stands today. This leaves us with the democratic institutions we are lucky to have in America, which can be daunting to use effectively. Ultimately, though, the Internet is the epitome of a platform that is of the people, by the people and for the people – so let’s do our best to keep it that way.