Takings of Virtual Places

Is the internet an essential service? If so, should the government regulate internet service prices? This past January, New York Governor Kathy Hochul said that internet access was a “fundamental right” as New York’s Affordable Broadband Act (ABA) went into effect. This law requires that internet service providers (ISPs) in the state provide low-cost internet access to qualifying low-income households. ISPs argued that the ABA would increase demand on their networks and raise their expenditures, while the low state-set prices would not provide them with the necessary money to cover these additional costs. According to these ISPs, this will lower internet speeds for all state residents, regardless of whether they have internet access through the ABA or under an ordinary internet plan. A California legislator recently introduced a similar bill in her state. She argued that families need to access the internet for education, telehealth, employment opportunities, and more.

In opposing these laws, ISPs could perhaps draw from an unexpected legal authority: the Takings Clause of the Fifth Amendment. ISPs could argue that these laws constitute regulatory takings, particularly under Cedar Point Nursery v. Hassid. California enacted a law that allowed labor union representatives to enter a private strawberry farm’s land to speak to laborers. They were allowed to enter for up to three hours a day, 120 days each year. The U.S. Supreme Court held that “government-aided invasions of property…are physical takings requiring just compensation.” The Court reasoned that given the importance of the right to exclude, a government sanctioned physical occupation or appropriation of property, which the court called a “right to invade,” was a physical taking. Here, California’s law denied landowners the right to exclude labor unions from entering their land without permission and granted labor unions a “right to invade” private property to inform workers. As such, California could only enforce this law if it compensated landowners.

While there is no land involved in this dispute, the ISPs could still allege that the government is granting residents a “right to invade” their private property under these laws. The ISPs could argue that the internet is currently a private “place” with cost-restricted access, and these laws would open this “place” to the public. While the internet is an intangible medium, it is the only realm in which many businesses, products, and services exist. It functions almost as a separate and distinct economy. Currently, ISPs can restrict “entry” to the internet by requiring payments. This is like an exclusive gated community with businesses and residences that cannot be accessed anywhere else. Without laws like the ABA, ISPs decide whether to give internet access to someone, allowing them to limit access to the internet and exclude whomever they like.

The state could argue that the ABA does not grant citizens a “right to invade.” In Packingham v. North Carolina the Supreme Court noted that social media had become a modern “town square” for political discourse. Thus, the ABA and similar laws are democratizing access to a virtual world with job listings, medical care, schools, and constitutionally protected debate. This discourse is particularly important as it suggests that the internet is already a public forum. If the internet is already public, ISPs already lack a complete right to exclude, and this partial right is the ABA’s subject. More substantially, if the internet is taken as mere broadband signals, then perhaps ISPs don’t even have a property interest that could be invaded. Finally, the states could argue that even if the ISPs are correct and these laws are takings that hurt their businesses’ viability, these takings are for “public use” and therefore permissible.

Traditional government functions support internet access laws. First, states are setting internet service prices for the public to use the internet in the future. Lowering internet service costs enables state residents that cannot afford the ordinary market rates to access these services. ISPs could argue that there is already universal internet access through libraries and public wi-fi, so no additional portal is necessary. They could even claim that home internet access is a luxury. Second, increasing access to education, medicine, and socioeconomic advancement are all “traditional and long-accepted” government aims that could be advanced through internet access. ISPs could argue that the internet is simply another way of accessing these services, and that there are less burdensome ways for a state to achieve these goals. However, the Supreme Court said states should be given deference on these matters, so any alternative means analysis is irrelevant.

A government’s regulatory authority is fundamental for consumer protection and industry functioning. Limits on property rights avoid monopolies, incentivize competition and improvement, and ensure efficient allocation of property, goods, and services. However, these laws can also do the exact opposite. AT&T has ended their 5G home internet services in New York in response to the ABA. This hurts all current and potential AT&T internet service clients in the state. Further, cases like Cedar Point effectively create a government subsidy for certain benefits the state grants residents by requiring compensation for regulatory measures. Both attributes must be balanced; entities must be able to function under regulatory schemes just as the government must be able to enforce them. Ultimately, if either of these parties are unable to do their jobs, progress will stall under monopolies or overly restrictive measures.

The strong “right to invade” language create a sense that the government’s regulatory presence is wrong and should be punished. Yet regulatory presence can be essential to public welfare. For example, a Department of Agriculture inspector must physically stand in a meat-packing plant to inspect it. The takings doctrine thus largely defers to the government and the public’s interests, and at most compensates an injured property owner. In this internet access context, a court would probably defer to the government and the ABA would be upheld. But the public interest prevailing will not always discourage innovation. If anything, it might drive it. Certain industries are notorious for abandoning products that are no longer profitable and inventing or innovating new products or updates instead. Maybe if 6G home internet was around the corner, AT&T would not have left New York. Or even if their market was invaded, maybe AT&T will, or could, find a new, more profitable market instead.

Elianne Sato Morinigo is a student at the American University Washington College of Law.

Image: Lucélia Ribeiro, Children at school (8720604364).