Infrastructure and Commons

1
Infrastructure and Commons

• Brett M. Frischmann
• Assistant Professor of Law
• Loyola University Chicago
• School of Law

2
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

3
Outline of talk

• Background Infrastructure and Commons
• Theory
• Jump to the model
• Typology
• Case for commons
• Network Neutrality debate
• Essential Facilities

4
Background

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

5
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

6
General Infrastructure Definition

• The resource is (or may be) consumed
  nonrivalrously,
• social demand for the resource is driven
  primarily by downstream productive activity that
  requires the resource as an input, and
• 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.

7

• 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

8
Infrastructure typology

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

9
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.

10
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

11
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

12
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

13
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

14
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.

15
Network neutrality

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

16
Network Core Efficiencies E.g., QoS, latency
sensitive apps, security
???
Network Edge Innovation New applications and
content
Network Core Innovation
Network Neutrality Balancing An oversimplified
view of the current debate
17
Network Core Efficiencies E.g., QoS, latency
sensitive apps, security
Positive externalities from public and nonmarket
goods
???
Network Core Innovation
Network Edge Innovation New applications and
content
Network Neutrality Balancing Modified by
Infrastructure Theory
18
Essential Facilities

• liability under the essential facilities doctrine
  exists where a plaintiff can establish
• that the monopolist controls access to an
  essential facility
• the facility cannot be reasonably duplicated by
  competitor
• the monopolist denies access to competitor, and
• it was feasible to grant access.

19
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

20
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)