Preventing Network Discrimination

In the last decade, and coincident with the advent of broadband Internet technology, Internet regulation has been the subject of intense public debate over network neutrality, a legislative concept designed to provide Internet consumer/producers the right to open and non-discriminatory access to the network.  At the heart of the debate is the determination of whether the Internet constitutes a commons, and if so, whether the commons needs to be regulated to protect equal and anti-discriminatory access in what is now, a largely privatized network.  Of course, the Internet is not the first privatized network that engendered the commons debate.  Arguably, while the Internet is a unique infrastructure in many respects, it also has significant similarities to earlier networks, such as roads, railroads, the telegraph, telephone networks, radio networks, and television networks (Blondheim, 2004).  Indeed, many of these networks created positive network externalities that constituted public goods, and as such were considered commons subjected to common carriage law, a form of regulating the network infrastructure to protect the public good.  Therefore, examining the Internet network neutrality debate through the lens of common carriage, while not new, is useful insofar as it centers the discussion on the firm foundation of historical precedent, and captures the essence of what is at stake.  As such, this paper will cover a brief historical background of common carriage, describe the application of common carriage principles in the early Internet, compare and contrast proposed network neutrality legislation with common carriage principles, and conclude with a considered recommendation advocating for network neutrality legislation.

Common Carriage Background

            Common carriage is a legal principle that intends “to guarantee that no customer seeking service upon reasonable demand, willing and able to pay the established price, however set, would be denied lawful use of the service or would otherwise be discriminated against (Noam, 1994, p. 436).  The origins of common carriage law predate English law and whose precursors “go back to the Roman Empire and the legal obligations of shipowners, innkeepers and stable keepers” (Noam, 1994, p. 437).  English common law supports the notion of common carriage, beginning with the 1701 case, Lane versus Cotton, in which Justice Holt asserted “that one in the public employment can not refuse the duty incumbent upon him and that there would thus be causes of action for a postmaster refusing a letter, inn keeper refusing a guest or blacksmith refusing to shoe a horse” (Moglen, 2009, p. 1).  As such, common carriage’s core principal is that of anti-discrimination.

Common carriage was applied in the United States initially as common law, most notably to regulate the activity of the railroads, in absence of specific congressional legislation governing interstate commerce (“Western Union Telegraph Co. v. Call Pub. Co.,” 1901).  In addition, common carriage was applied to the first U.S. telecommunications infrastructure, the telegraph network, as a result of discriminatory behavior by Western Union (“Western Union Telegraph Co. v. Call Pub. Co.,” 1901).  Western Union’s discriminatory practices extended far beyond choosing winners and losers in the open market; the company went so far as to practice censorship by choosing political sides and only offering the perspectives of candidates whose policies favored Western Union (Rock, 2012; Wu, 2006a).  As a result of this and other corporate abuses of monopoly power over the telecommunications network, common carriage over telecommunications was codified into law with Title II of the 1934 Communications Act (Noam, 1994).  Since then, regulated telephone companies have been generally referred to as ‘common carriers’ and as such, have the obligation to provide non-discriminatory access to telephone service across the nation, and in exchange are not held liable for the content of traffic across the network.

The Internet and Common Carriage

            To say that the Internet was created as a result of the common carriage principle of non-discrimination is not an overstatement.  There was a time, prior to the 1980s, when consumers had to purchase their telephones from a Bell company and were not allowed to attach any other device to their phone line (Wu, 2006b).  However, a series of court decisions, including the Hush-A-Phone and Carterfone decisions, led to the FCC to enact “a strong non-discrimination rule for consumer network equipment, and even blocked the regional Bell operating companies from offering such equipment” (Wu, 2006b, p. 33).  The rule sparked a new wave of commercial innovations that saw the development of fax machines and modems, antecedents of modern networking.

Moreover, principles of non-discrimination were built into the very architecture of the Internet.  According to Lessig and Lemley (2001), the design of both the Internet and it’s predecessor ARPANET were based on the end-to-end design principle which organizes the placement of intelligence at the ends, while making the communications protocols simple. “One consequence of this design is a principle of non-discrimination among applications” (Lessig & Lemley, 2001, p. 927).  In essence, the network is a highly sophisticated set of dumb pipes, in the sense that any network or device can interconnect to the Internet by following the basic communication protocols.  Of course, the last thing that cable and DSL providers want to be are ‘dumb pipes’ and therefore, many use a variety of strategies, including discrimination, to avoid becoming a commodity (Knowledge@Wharton, 2009).  Indeed, there is little to prevent broadband providers from using their monopoly power over the network to introduce discriminatory behaviors that favor their commercial interests.

The Internet and Net Neutrality

            The advent of the Internet has ushered in new era of debate over non-discrimination on the network, partly because with the Telecommunications Act of 1996, the FCC designated cable and DSL as ‘information services’, rather than telecommunications (United States. Congress., 1996), and as such, they are not designated as common carriers.  Moreover, freed from constraint, telecommunications providers have used their network power to discriminate against perceived threats.  For example, Telus Corporation blocked subscriber access to a Union website critical of their labor practices (CBC News, 2005).  In addition, Madison River Communications, a DSL provider, blocked subscriber access to Vonage, a company with voice-over-IP technology that allows subscribers to place calls over the Internet, rather than paying for traditional phone service (Sandvig, 2007).  Finally, Comcast Corporation intentionally blocked subscriber access to Bit Torrent, a popular peer-to-peer file sharing protocol (Weiser, 2009).  Nor is the discrimination likely to end any time soon.

For example, former AT&T Chairman and CEO Whitacre (BusinessWeek, 2005) described the motivation for AT&T to discriminate against Internet upstarts like Google, Vonage, and MSN, noting:

Now what they would like to do is use my pipes free, but I ain’t going to let them do that because we have spent this capital and we have to have a return on it. So there’s going to have to be some mechanism for these people who use these pipes to pay for the portion they’re using. Why should they be allowed to use my pipes? (p. 1)

It is not surprising, that when freed from the constraint of common carrier classification, broadband providers use discriminatory practices to create and sustain competitive advantage; it is in their nature to do so.

However, the Federal Communications Commission (2010) recently passed a set of Open Internet rules to address broadband discriminatory practices.  The Open Internet rules force broadband providers to be transparent about their network management practices, prevent the blocking of legal content, applications, services, or devices, and prevent unreasonable network discrimination (Federal Communications Commission, 2010).  While the rules appear to provide a basis for the FCC to deal with discriminatory practices, there are several problems worth exploring.

First, the FCC treats fixed broadband and wireless broadband differently, providing far more leeway for cellular providers to discriminate, particularly against competing services.  Second, there remains considerable question as to whether the FCC has the legal authority to enforce such rules, particularly given the FCC’s original classification of broadband as an ‘information service’.  In fact, the DC Court of Appeals, ruling on the Comcast and BitTorrent FCC decision, recently “struck down a federal rule that required broadband providers to keep their networks open” (Puzzanghera & Guynn, 2010, p. 1).  Furthermore, Senate Republicans recently attempted to put a bill on the floor to overturn the FCC’s Open Internet rules, however the bill was narrowly rejected (Puzzanghera, 2011).   It appears likely that the FCC Open Internet rules will continue to be challenged in the legislature and the judiciary until the Internet is treated legally as a commons.

Of course, the critical issue with the Open Internet rules is the lack of legal recognition of the Internet as a commons.  Instead, the emphasis is on the Internet is as an important commercial platform for innovation and growth that must be protected with administrative rules rather than law.  While the Open Internet rules are an important step in anti-discrimination, they fall short of common carriage law insofar as they fail to treat the Internet as a legal commons that produces a public good.  Moreover, the Open Internet rules are not a legislative solution and remain dependent on the support of the FCC.  This author suggests that the anti-discrimination principles inherent in network neutrality proposals come largely from the common carriage principles of earlier legislation.  Moreover, the current Open Internet rules contain important anti-discrimination principles, but lack the force of law.  This author recognizes that despite the progress inherent in the FCC rules, net neutrality legislation is required to assure a lasting solution that recognizes the importance of the Internet to public good.


            From the telegraph to the Internet, each new communication technology creates a similar debate.  To what degree does the network constitute a public good and require regulation as a commons?  In the past, common carriage laws have been used to assure that corporations are unable to use their network ownership to discriminate.  However, the recent net neutrality rules enacted by the FCC, while providing an administrative basis to prevent the worst forms of discrimination, falls far short of common carriage legislation of the past, and continues to be challenged by lawmakers and the judiciary.  Therefore, this author suggests that the fight against network discrimination has only just begun, until such a time where anti-discrimination law for the Internet is a reality.





Blondheim, M. (2004). Rehearsal for media regulation: Congress versus the telegraph-news monopoly, 1866-1900. Federal Communications Law Journal, 56(2), 300-328.

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Wu, T. (2006b). Why have telecommunications law? Anti-discrimination norms in communications. Journal on Telecom and High Tech, 5(7), 15-46.



The SEC and Madoff: The Need for Authentic Leadership in Regulatory Agencies

No scandal in recent memory highlights government regulatory ineptitude quite as clearly as the Security and Exchange Commission’s failure to uncover Bernie Madoff’s Ponzi scheme, a scheme that bilked investors “of an estimated $65 billion” (Shafritz, Russell, & Borick, 2011, p. 362).  Madoff, a wealthy, prominent, industry insider, perpetrated his scheme on unsuspecting investors beginning as early as 1992 and the SEC had received and investigated no less than six complaints between 1992 and 2008, when Madoff finally confessed (U.S. Securities and Exchange Commission Office of Investigation, 2009).   Why was the SEC so slow to respond to tips and complaints about Madoff?  More importantly, what institutional changes have been implemented at the SEC to assure that the regulatory agency is a more effective regulatory body in the aftermath of Madoff?  This author finds that while the SEC’s internal investigation has revealed some of the systematic causes of their failure, and has worked to address them, the most notable and enduring failure of the SEC was a leadership failure that remains unaddressed, prompting a call for SEC leaders to adopt the principles of authentic leadership to develop an ethical organizational identity.

On Causes of the SEC Failure

            In the wake of the SEC’s failure to catch Madoff, despite the numerous complaints, the SEC conducted an internal investigation to determine why they failed to uncover Madoff’s Ponzi scheme during the course of their many investigations (Wingfield, 2009).  The SEC (2009) report found that a) investigations and examinations went uncompleted, b) the agency failed to collaborate both internally or externally, c) the agency lacked resources,  d) the agency lacked needed expertise, and e) the agency did not have needed process, systems, or controls.  Equally important, the agency found a) no conflict of interest or impropriety in their handling of the case, and b) no attempts by senior SEC officials to influence the investigation (U.S. Securities and Exchange Commission Office of Investigation, 2009).  In addition, the report is notable for the focus on the specific SEC transactions with Madoff over the years, rather than investigation of systemic problems within the agency that contributed to the failures.  As a result, the SEC (2009) report does not address the role of organizational processes, leadership, or culture, in the failure to uncover Madoff’s scheme, rather it ends suggesting employees involved in the failure should be put on a performance plan.

In light of the SEC’s failure to identify systemic issues, it is worthwhile to review outside criticism of the notable SEC failure.  For example, Shafritz, et al. (2011) suggest the SEC was subject to the phenomenon of ‘agency capture’ whereby a government agency is overly influenced by industry economic interests.   Galbraith (2009) describes the problem endemic to most government regulatory agencies thus:

Regulatory bodies, like the people who comprise them, have a marked lifecycle.  In youth they are vigorous, aggressive, evangelical, and even intolerant.  Later they mellow, and in old age – after a matter of ten to fifteen years—they become, with some exceptions, either an arm of the industry they are regulating, or senile. (p. 166)

In the case of the SEC’s examination of Madoff, the mid-level bureaucrats that examined Madoff appeared overly cautious given Madoff’s stature as a giant in the investment world (Shafritz, et al., 2011).  In particular, because the career path of many in the SEC is in the very firms they are charged with regulating, the agency is susceptible to the ‘revolving door’ phenomenon (Barkow, 2010).  Agency capture, therefore, can be considered an individual choice of self-interest over agency purpose.  What, if anything, has the SEC done in the aftermath of their public failure, to reform the agency, and how will the agency address agency capture?


SEC Reforms

            Because of the intense public scrutiny following the SEC’s failure to prevent Madoff’s Ponzi scheme, the agency has published a list of reforms they have undertaken.  While the list of reforms is fairly comprehensive, this author will seek to outline reforms pertinent to the discussion in this paper.  First, the SEC (2012) reorganized their enforcement division and added industry experts to their staff.  Second, the SEC centralized the tracking and distribution of tips and complaints into a computer database (Lynch & Goldstein, 2011; U.S. Securities and Exchange Commission, 2012).  Third, the SEC (2012) has put internal process controls and a governance structure in place to assure appropriate follow-up and disposition on examinations.  Although, given the tactical nature of the reforms, this author thinks it likely that additional oversight failures are likely, primarily because organizational culture and leadership issues remain.

The Need for Authentic Leadership

            The SEC’s failure, in some respects can be considered a failure of leadership and culture.  Indeed, if you considered their failure to detect Madoff’s scheme in light of the larger regulatory responsibilities of the agency, the Madoff failure was one notable failure across two decades of similar failures.  For instance, the SEC failed to detect the widespread corporate fraud of the late 1990’s as corporate giants like Enron, WorldCom, Adelphia, and Tyco bilked investors and employees out of millions.  In addition, the SEC failed to adopt a regulatory position on mortgage lending practices that led to the subprime mortgage crisis.  When one considers the regulatory lapses of the SEC (2012) compared with their avowed mission “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation” (p. 1), one can likely conclude the agency is in dire need of change, but change to what?

Change is, by its very nature, a leadership problem.  As a regulatory agency that has grown too ‘chummy’ with the industry as a whole, where self-interest appears to override agency purpose, the SEC needs to transform rather than simply reform.  Some argue that the institutional design is flawed, and the agency requires a new design to prevent agency capture (Barkow, 2010).  While the existing reforms and new institutional design are important, equally important is a leadership transformation.  Some would argue that the SEC needs a ‘transformational’ leader to guide them into the future.  However, this author would argue that an agency-wide focus on authentic leadership development is more appropriate, because transformational leadership lacks an ethical or moral dimension.

Authentic leadership theory was born out of the corporate scandals of the late 1990s (George, 2006), however the importance of authenticity was described by Lord Polonius in Shakespeare’s Hamlet, “This above all: to thine ownself be true,
 And it must follow, as the night the day,
 Thou canst not then be false to any man” (Shakespeare, 1986, p. 676).  “Though, the working definition of an authentic leader is true to ones self, there is an expectation that being true to one’s self is also upheld by the overarching morality of society” (Tonkin, 2010).  It is in this context, that authentic leadership applies to the problems of ethics and morality in an organization.  Moreover, an authentic leader has the opportunity to drive the ethical identity of an organization through a written code of ethics and authentic leadership behaviors (Verbos, Gerard, Forshey, Harding, & Miller, 2007).  How then, does one tell the difference between self-interested leaders and authentic leaders?

A Tale of Two Leaders

            This author will describe his experience with two organizational leaders to illustrate an example of leadership authenticity.  The first leader to discuss is Jon Doe.  Jon’s day-to-day leadership was centered on the notion of crisis, real or manufactured, given both scenarios were equally useful to drive change.  Insofar as Jon sought to transform the company, using crisis as an enabler, characterized Jon as a transformational leader.  Moreover, Jon’s focus on transformation gave the appearance of the consummate executive, working towards the greater good of the company.  However, over time, Jon would often switch positions on key topics regarding organizational change, depending on the power of the position relative to other positions.  In addition, Jon would reprioritize organizational resources depending on the crisis of the moment, effectively abandoning earlier crisis, irrespective of the state of resolution.  This author’s opinion is that Jon was an opportunist that was expert at aligning his self-interest with organizational interest, rather than an authentic leader.

Contrasted with Jon Doe is Jane Doe.  Jane was an organizational leader that was several management levels below Jon.  Jane worked tirelessly to craft the organizational mission, vision, and values with the team.  In addition, Jane aligned word and deed, being the first to live organizational values.  In this respect, Jane was truly an authentic leader.  As a result, Jane’s organization was poised to make sound, ethical, business decisions even in ambiguous situations.  Moreover, Jane’s team had greater organizational commitment and job satisfaction than Jon’s team.  In essence, Jane was able to interweave the organization’s business identity and ethical identity with the organizational purpose.

The differences between these two examples highlight the importance of understanding one’s motivation.  In dramaturgical terms, an actor or actress seeks to understand a character’s ‘through line’, the overriding motivation that drives the character’s behavior and decision-making.   A leader’s understanding of their own ‘through line’ can serve to define organizational values and ethical identity, a situation desperately need at the SEC.


            The SEC learned much from their self-examination of the failures that led to the biggest regulatory miss of the last twenty years.  However, like any self-examination, there are difficult to reach places and blind spots that led the SEC to reform rather than transform.  Most notably, the SEC self-examination did not recognize the contributing and enduring role played by organizational leadership and culture.  It remains to be seen whether SEC reforms will have their intended effects, however, without the development of an authentic leadership capability within the agency, and the resulting ethical organizational identity, it appears likely that the SEC will remain an agency captured by the interests of the financial industry, rather than the interests of the public.


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George, B. (2006). Truly authentic leadership. [Article]. U.S. News & World Report, 141(16), 52.

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Shafritz, J. M., Russell, E. W., & Borick, C. P. (2011). Introducing public administration (7th ed.). Boston: Longman.

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Tonkin, T. (2010). Authentic leadership: A literature review. Research Paper. School of Global Leadership and Entrepreneurship. Regent University. Virginia Beach.

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Wingfield, B. (2009, September 2, 2009). New Madoff Report Blasts SEC. The Regulators  Retrieved August 19, 2012, 2012, from

The Demise of the USSR: A Failure to Evolve Administrative Doctrine?

On December 25, 1991, the U.S.S.R. was officially dissolved as a state entity after roughly six years of the most ambitious attempt at reinvention of government in modern history.  Gorbachev’s policies of Glasnost and Perestroika, openness and restructuring, sought to reform the existing political and economic systems, given the failure of the U.S.S.R’s centrally planned economy (Moss & Thomas, 2010).  The inefficiency of the U.S.S.R.’s command economy resulted in the country’s inability to compete as a world power on the global stage with the United States (Shafritz, Russell, & Borick, 2011).  The subsequent dissolution of the U.S.S.R serves as a reminder of the important link between a state’s administrative doctrine and the well being of its citizens.  Indeed, effective administrative doctrine is essential for the successful public administration of state, given it is a key driver of the effectiveness of state institutions that can positively or negatively affect the well-being of constituents and the survival of the state on the global stage.

Early Soviet administrative doctrine was heavily influenced by Western schools of thought in pubic administration (Cocks, 1978).  In particular, the Soviet administrative rationality movement of the 1920s and 1930s, adopted many of Taylor and Fayol’s principles of scientific management (Cocks, 1978).  However, the USSR focused on the technical production aspects of scientific management and appeared unable to adopt Fayol’s managerial principles as they dealt with “coordination, control, organization, planning, and command of people” (Shafritz, et al., 2011, p. 231); issues that would affect the landscape of Soviet political power (Cocks, 1978).  Rather, “the rationalizers were to deal only with administrative methods; they were not to decide issues of policy and power” (Cocks, 1978, p. 46).  The limits placed on rational administrative doctrine by the Soviet party apparatus all but assured the rational movement would be unable to evolve to address the failures of the centrally planned economy.

In truth, while administrative doctrine in the U.S.S.R appeared to be unable to evolve, the history of western organizational theory demonstrates a consistent evolution and adoption of new scientific thought.  Shafritz, et al. (2011) note that paradigms in administrative doctrine “overlap both in time and content because they are constantly evolving” (p. 245), in response to scientific advances, technological changes, and changing environments, describing doctrinal development as “inherently cyclical”.  Furthermore, Shafritz, et al. (2011) attribute the cyclical nature of administrative doctrine to a competence/incompetence cycle whereby new innovations increase effectiveness until “advancing technologies and changing environments allow the innovation to deteriorate relative to other arrangements” (p. 246), noting striking similarity to the boom and bust cycles of the business world.

Indeed, both the boom and bust cycle of the business world and the competence and incompetence cycle of large organizations share similar roots in human biological and social processes.  Raafat, Chater, and Frith (2009) describe herding behavior in humans as “as the alignment of the thoughts or behaviours of individuals in a group (herd) through local interaction and without centralized coordination” and use the herding metaphor to explore the very human proclivity to follow the behavior of others preceding them, particularly should they appear successful.  Herding behavior, in this sense, can be used to describe why best practices and even benchmarking are commonplace.  Of course, the downside to herding is that individual or groups are unlikely to wander far from the herd, either, resulting in maintenance of the status quo until such time as there is an internal or external shock that creates a need for change to begin the innovation cycle anew.

Of course, the USSR administrative doctrine did not follow the competence and incompetence cycle and as a result, appeared unable to innovate or evolve their approach to public administration.  The lack of an evolved Soviet public administration doctrine left the state unable to deal with the changing global landscape, nor able to compete with U.S. economic and administrative power, despite the considerable political power of the U.S.S.R.  As the fall of the U.S.S.R demonstrates, effective administrative doctrine is essential for successful public administration of a state, can either positively or negatively affect the well being of constituents, and have implications for the long-term survival of the state.


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