Takings, Commons, and Associations: Why the Telecommunications Act of 1996 Misfired

Abstract

Joint efforts by two or more parties can be achieved either through voluntary cooperation, through state coercive activity under some version of the takings power, or by the creation of some form of commons. Network industries, such as telecommunications, cannot usually work by the former, and thus require some level of state coercion. The choice of the method of coercion is, however, critical because the use of the eminent domain power does not work well when applied to a high frequency of low level transactions that are difficult to price and monitor. In contrast, the creation of an interconnection obligation, while it requires the duplication of facilities, has the greater advantage of removing the fatal imbalances generated under the 1996 Telecommunications Act, which authorizes the mandatory sale of unbundled network elements. Virtually all of the many dysfunctional results under the 1996 Act stem from its failure to make interconnections the sole method of network creation.