Skip Navigation Planning & Markets
Subscribe Submission Requirements Editorial Board Archive Links Search Home

XV. Summary and Conclusions

  1. Emerging case law is suffering from “regulatory lag” with regard to the use of eminent domain law by deregulated utilities (Posner, 1999, p. 60). Eminent domain law was originally meant to prevent natural monopolies and landowners from setting predatory pricing for property rights required for infrastructure that serves a public purpose. However, today the continued use of eminent domain powers by deregulated utilities does just the opposite by facilitating predatory pricing and denial of just compensation to landowners. Deregulated enterprises have established “going prices” equal to or many more times that of land values and telecommunications property rights typically result in negligible severance damages.
  2. Real estate appraisal is suffering from “market lag” with regard to the reliance on older “before and after” valuation methodologies, meant to compensate for negative values from takings, misapplied to positive easements where no discernible losses are sustained. Moreover, the market has created a commodified price for such property rights much higher than land values on which before and after compensation formulas are typically based.
  3. The argument from monopoly pricing for continued regulation of fiat pricing for pole line attachments and co-location rights no longer holds in the deregulated environment for telecommunications, as market going prices equal or greatly exceed commensurate land values and reflect fair prices set by buyers, not hostage prices set by monopolistic sellers. Moreover in most cases, pole line attachments are the least-cost alternative when compared to putting such infrastructure in streets or railroad corridors, or erecting entirely new pole line corridors.
  4. The argument from negative externalities for continued use of eminent domain to compensate landowners for damages no longer holds given the miniaturization of telecommunications infrastructure, its unobtrusiveness, and stealthiness. The numerous voluntary exchanges for fiber optic easements and wireless antenna sites also indicate that landowners do not feel the conveyance of such property rights require compensation for either severance or proximity damages.
  5. The percentage of land value appraisal methods for valuation of "easements within corridors" is overly theoretical, highly subjective, contrived, and prone to inequitably manipulated results for corridor owners over and against landowners in deregulated markets. Because deregulated natural gas pipeline and fiber optic utility companies typically are secretive about easement transaction prices, the true market price for such property rights does not always become transparent. Such transparency is essential for the operation of a market. One of the few places to discern what the telecommunications industry is willing to pay for fiber optic easements and other related property rights is from transactions on public lands where prices can be disclosed. However, with the adoption of new legislation mandating compensation for fiber optic easements based on “next best” land uses rather than industry going prices, the window into the confidential value of positive easements for build-out of the “information superhighway” may be forever foreclosed, only to be revealed from time to time upon discovery in litigation (see proposed HR 3258 Reasonable Right-of-Way Fees Act of 2001 and Public Lands Planning and Management Act of 2002). The legislative micromanagement of Federal rights-of-ways and public lands is likely to indirectly result in the continued misapplication of the old eminent domain paradigm by state public utilities commissions to the deregulated marketplace. Applying old paradigms to new network industry technologies is an endemic problem with deregulation (Duesterberg and Gordon, 1997).
  6. Markets can sometimes adjust to such nontransparent and unduly complex regulatory schemes and minimize the costs imposed by those laws (Stone, Levy and Paredes, 1996, pp. 95-128). Legalistic methodologies for the valuation of fiber optic easements that altogether omit “marked-to-market” prices can be obviated by the use of brokers and specialized real estate appraisers who are privy to otherwise closed market transaction data. This adds to transaction costs, but nonetheless, makes the market somewhat transparent. However, to date no such genuine market occupational specialization has occurred except with brokerage and appraisal practices on the side of government and public utilities as opposed to landowners. This is similar to railroad corridor and gasoline station appraisers who may be allowed access to proprietary property transaction data but are dependent on continued employment from such businesses for their livelihood. Brokers and appraisers for landowners are typically not privy to such data. And utility companies often can shroud prices paid for corridor property rights by use of confidentiality agreements and public recordation of memorandums of easements. This might be remedied by state legislation mandating full disclosure of deregulated utility easement sales prices and/or granting licensed real estate appraisers authority to access such market data.

Regulatory institutions establish and enforce the “rules of the game” of a society. The rules structure transactions and provide a framework for fair play. New technology network systems coupled with old eminent domain rules may tilt the game board so that one-sided landowner hold-out values are replaced by equally one-sided condemnor values based on non-corridor property values. A market system depends on some type of commercial law to provide the framework for non-exploitative transactions. The Fifth Amendment to the U.S. Constitution was originally and principally intended to provide protection from governmental predation. The law provides a baseline by providing a default rule, applicable unless otherwise specified by the parties. The default rule of just compensation can be contracted and litigated around by deregulated network industries by giving them the power of eminent domain and the discretion of creating a market price for the same property right which they can withhold if it fits their needs. Markets have checkmated eminent domain and regulated monopoly prices for deregulated utilities. But allowing one player to select the rules of the game as it sees in its best interest surely undermines the Constitutional contract (Cooter, 2000, pp. 359-379). A cup half full of regulated fiat prices and nominal eminent domain awards may be beneficial to consumers and resonant with populist politics, but the it may be tantamount to a cup half empty of just compensation to property owners.

page 15


USC Seal

Main Page | Subscribe | Submission Requirements | Editorial Board | Archive | Links

ISSN 1548-6036

Copyright 1999-2000
University of Southern California
Los Angeles, California 90089-0626