January 1, 2013

The Perils of Classifying Social Media Platforms as Public Utilities

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To the extent public utility-style regulation has been debated within the Intemet policy arena over the past decade, the focus has been almost entirely on the physical layer of the Internet.1 The question has been whether Internet service providers should be considered "essential facilities" or "natural monopolies" and therefore regulated as public utilities.2 Such concerns served to drive the debate over "net neutrality" regulation.3 

While the net neutrality debate rages on, the rhetoric of "public utilities" and "essential facilities" is increasingly creeping into policy discussions about other layers of the Internet, such as the search layer.4 More recently, academic and public policy circles are discussing whether social media platforms especially social networking sites-might also possess public utility characteristics.5 Presumably, such a classification would entail greater regulation of those sites' structures and business practices. 

Proponents of a public utility regulatory regime for social media platforms offer a variety of justifications for this approach. Amorphous "fairness" concerns animate many of these calls, but privacy and reputational harms are also frequently mentioned as rationales for regulation.6 Proponents of regulation also sometimes invoke "social utility" or "social commons" arguments in defense of increased government oversight, even though these notions lack clear definition.

However, social media platforms do not resemble traditional public utilities, and there are good reasons for why policymakers should avoid a rush to regulate them as such. Treating these nascent digital services as regulated utilities would harm consumer welfare because public utility regulation has traditionally been the archenemy of innovation and competition.8 Furthermore, treating today's leading social media providers as digital essential facilities threatens to convert natural monopoly or essential facility claims into self-fulfilling prophecies. Related proposals to mandate "API neutrality"9 or enforce a "Separations Principle"'10 on integrated information platforms would be particularly problematic because such regulation threatens innovation and investment.11 Marketplace experimentation in search of sustainable business models should not be made illegal. 

Remedies less onerous than regulation are available. Transparency and data portability policies would solve many of the problems that concern critics, and numerous private empowerment solutions exist for those users concerned about their privacy on social media sites. Finally, because social media are fundamentally tied up with the production and dissemination of speech and expression, First Amendment values are at stake, warranting heightened constitutional scrutiny of proposals for regulation. Social media providers should retain the editorial discretion to determine how their platforms are configured and what can appear on them.

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