Infrastructure and Commons Brett M. Frischmann Assistant Professor of Law Loyola University Chicago School of Law

Research Agenda Infrastructure –Particular set of resources defined from the demand-side in terms of the manner in which the resources generate value –Fundamental, upstream resources –Role in complex, interdependent resource systems –Important subset within various areas

Outline of talk Background: Infrastructure and Commons Theory –Jump to the model –Typology –Case for commons Network Neutrality debate Essential Facilities

Background Traditional Infrastructure Government intervention Commons management Positive externalities / large social surplus

Infrastructure Theory (short version) Simple thesis: –If Infrastructure, then commons –Too simple More complicated version: –If infrastructure, then additional economic arguments for commons –Depends upon the mix of outputs –Infrastructure typology helps sort arguments –Need to consider value of commons management more carefully Demand side focus

General Infrastructure Definition 1.The resource is (or may be) consumed nonrivalrously, 2.social demand for the resource is driven primarily by downstream productive activity that requires the resource as an input, and 3.the resource is used as an input into a wide range of goods and services, including private goods, public goods and/or non-market goods.

Sharable, generic input into a wide variety of outputs Value is realized downstream by consumers of outputs –Potential to generate positive externalities –Potential for demand side market failure because output producers will not fully represent societal demand

Infrastructure typology Output focused Potential to generate positive externalities Potential for demand side market failure because output producers will not fully represent societal demand

Infrastructure Typology Commercial: Nonrival or partially (non)rival input into the production of a wide variance of private goods. Public: Nonrival or partially (non)rival input into the production of a wide variance of public goods. Social: Nonrival or partially (non)rival input into the production of a wide variance of nonmarket goods.

Case for Commons? Commercial Infrastructure –competitive markets (for both inputs and outputs) should work well –rely on antitrust principles –from the demand-side, there is less reason to believe that government intervention into markets is necessary, absent anticompetitive behavior

Case for Commons? Public and Social Infrastructures –Demand manifestation problems may lead to undersupply or misoptimization of infrastructure –Killer apps and small scale –Uncertain and long-term

Costs of restricting access to infrastructure Significant and difficult to observe Optimization for –Known or expected applications/uses –Applications/uses that generate observable and appropriable value

Case for Commons? Commons alleviates the need to rely on either the market mechanism or the government to “pick winners” –Market allocates access to infrastructure based on appropriability of returns from outputs –Could rely on the government to figure out which public good or nonmarket good outputs are worthy of subsidization or special treatment

Internet What makes the Internet valuable to society? Like other infrastructure, the Internet is socially valuable primarily because of what it facilitates downstream, how it can be used to produce applications, content, relationships, and so on.

Network neutrality Neutrality? –No such thing –End-to-end bias vs. market bias Network neutrality as an institutional means for sustaining infrastructure commons

Network Core Innovation Network Core Efficiencies: E.g., QoS, latency sensitive apps, security Network Edge Innovation: New applications and content Network Neutrality Balancing: An oversimplified view of the current debate ???

Network Core Innovation Network Neutrality Balancing: Modified by Infrastructure Theory Positive externalities from public and nonmarket goods ??? Network Edge Innovation: New applications and content Network Core Efficiencies: E.g., QoS, latency sensitive apps, security

Essential Facilities liability under the essential facilities doctrine exists where a plaintiff can establish: 1.that the monopolist controls access to an essential facility; 2.the facility cannot be reasonably duplicated by competitor; 3.the monopolist denies access to competitor, and 4.it was feasible to grant access.

The Essential Nature of Infrastructure (or The Infrastructural Nature of Essential Facilities) Adding a demand side component to EFD provides needed boundaries, constraint and theoretical support Plus, helps explain “bad” vs. “good” cases If EF, then manage as a commons

IP Pooling Constructing open environments Functional purpose of pooling –Complementary IP-enabled solution to a non-IP problem (e.g., collective action, infrastructure supply) –Solution to IP problem (e.g., anticommons) –Environment-mixing (government-industry-university interface, “bridge building”)