Law in the Telecosm

National Review, July 28, 1997 by Peter W. Huber

There are only two basic engines for making law. One is top down: it is law by edict and national commission. The other is bottom up: law built by adjudication in common-law courts. One kind of law occupies thousands of pages in the U.S. Code and the Federal Register. The other evolves in the courts, as a pure product of common law, or under short, general mandates like the Bill of Rights or the Sherman Act.

The first century or so of law in the telecosm was given to the top-down managers. Herbert Hoover gave it to them. As a Republican, he liked free markets and private property. But as an engineer, he wanted things nice and tidy. Markets aren't tidy. Hoover had to choose. He chose wrong.

Hoover wasn't President yet--he was still secretary of commerce. The critical choice he had to make concerned a new industry called broadcasting. Westinghouse had opened the first radio station, KDKN, in Pittsburgh in 1920. AT&T went on the air in 1922. Stations were popping up all over the country, and no one was regulating them. They registered with Hoover's Department of Commerce, in much the same way as ships registered. But that was it. Nobody could stop you from going on the air.

What happened when an AT&T station tried to broadcast on a frequency already used by Westinghouse? The companies went to court. Courts were just beginning to develop rights of private property in spectrum, relying on familiar, common-law principles developed over the centuries in connection with real estate. But the common law is a messy business--as messy as the marketplace. Hoover wanted order.

Order had already come to telephones. In 1902 telephones had been messy, too. Half of all cities had two or more competing phone companies. They didn't connect with one another. That was a nuisance.

In 1913 antitrust litigators hit on a solution. A consent decree forced AT&T to connect its long-distance network to independent phone companies. But by then it was already too late. People much like Herbert Hoover had taken charge. They solved the interconnection problem by abolishing competition. With only one phone company in town, it wouldn't have to connect to anyone but itself. That was tidy.

So by 1927 Hoover knew what he had to do. With the help of Congress, he nationalized the airwaves completely. He handed the ether over to a brand-new Federal Radio Commission. From then on, private ownership of any part of the airwaves was strictly forbidden. Private users operated only under short-term licenses, and under close federal supervision. The logic for this radical collectivism? Spectrum was too scarce to be owned privately.

And thus in 1934--while Stalin, Hitler, and Mussolini were proving to the world the remarkable efficiency of national socialism, and while George Orwell was formulating his gloomy views about Big Brother--we in the United States folded all federal authority over both wireline and wireless communication into a new, superpowerful communications commission called the Federal Communications Commission. The Germans got an FCC, too, even bigger than ours. They called theirs the Bundespost. Joseph Goebbels loved it.

Our own commission never got that bad, but it got bad enough. Our airwaves were about as free as a high-school newspaper. Anybody lucky enough to get a broadcast license took care not to offend the Commission.

And telephones? Well, in 1954 the FCC invoked the full majesty and authority of the Federal Government to block sales of the Hush-A-Phone. It was a small metal cup sold by a tiny independent company. The cup attached to the mouthpiece of a telephone, providing a bit of privacy and quiet in crowded offices. The FCC said it was a "foreign attachment," a competing network that was attempting to interconnect with Bell. And competition was illegal. Interconnection was forbidden. There was talk of outlawing private sales of plastic slipcovers for phone directories.

The years passed. And then suddenly we woke up one day, and who was that on our telephone line? Markus Hess. Hess was a teenage mutant ninja, a hacker. His 1986 exploits would be recounted in Clifford Stoll's best-seller The Cuckoo's Egg.

Using pseudonyms like Pengo, Zombie, and Frimp, Hess and others like him were bent on creating electronic anarchy. So they began throwing electronic bombs. They attacked computers in Germany, Switzerland, France, and then the United States. For a while they seemed able to go anywhere they liked. And they did it all over the phone wires.

What had happened? One day you can't sell a slipcover for a phone book. The next, people called Zombie and Frimp are ambling down the international phone lines and into the most private recesses of your computer.

What had happened was this. First, Bell Labs had invented dial tone for computers. It was an operating system called Unix, designed for computer networking. Second, in the 1970s the FCC had finally grown fed up with the silliness of regulating slipcovers. And so it began instructing Bell to connect with its rivals: first the competition's phones, modems, and computers, then long-distance competitors like MCI, and then online servers--the building blocks of the Internet. Big pieces of telephony were being handed back to the competitive marketplace.