Tim Wu

It is the summer of 2018. We have the now approved merger of AT&T and Time-Warner in the US. As well, Apple’s Chinese iCloud service will move to a state-controlled data centre which will in all likelihood be monitored by the Chinese government.

I thought it a good time to revisit Tim Wu’s 2010 classic “The Master Switch: The Rise and Fall of Information Empires” as a backdrop to new information monopolies such as Google and facebook, and to look at the AT&T merger under the lens of an earlier botched merger, that of Time-Warner and America Online back in the 1990’s.

Wu concerns himself with the rise and fall of telephone, radio, television and feature film monopolies and vertical integration. From the origins of the Bell telephone company, RCA in the AM radio bands, and the origins of the film studio system.

His biggest beefs of the monopolists are when they stymie innovation by eating their offspring to protect profits, when they cut into freedom of speech by controlling carriage, and when they consort with government to develop military projects to the detriment of a free marketplace.

He developed the position that while government regulation of monopolies in information and entertainment have provided stopgaps to the unfettered rise of these companies, the tools government used then are in noways adequate to guarantee a level marketplace, freedom of speech, and innovation in the future.

To which I have to say: Bravo! He’s spot on. Even eight years later.

Current US federal regulators have shown insufficient regard for “net neutrality,” a term popularized by Tim Wu in this very book. In this case regulators sided with AT&T that they are under pressure to retain their customers from Google, amazon, and facebook.

Opponents argued that because AT&T controls carriage of the Internet signal through their vast network of cables and towers and satellite transmission, the new merger will give them the power to discern which content provider gets the best broadband access to customers, and now they have a conflict of interest and will favour their own content, the Time-Warner assets.

Many fear their access to the giant Internet services will be beholden to AT&T.

Based on our reading of history, the opponents are right, in my opinion. AT&T was once broken up because it failed to give upstarts the right to compete on a level playing field. Vertical integration in the movie business was likewise reversed by government because it limited choice and indirectly freedom of speech of independent voices in the film business.

But since those times, AT&T reassembled itself during the Nixon, Reagan, Bush, Clinton, and Bush 2 years.

One can’t stop the analysis with Wu’s book only. This should be read in tandem with “The Idea Factory: Bell Labs and the Great Age of American Innovation” by Jon Gertner. In an effort to deal with the enormous technical problems of creating a universal telephone service in the US, the Bell company beginning in the 1900’s ran a kind of skunk-works which developed, and in some cases invented, technologies critical to innovation today: the transistor, the micro-processor, microwave transmission, cellular networks, fibre-optic transmission, satellite transmission, GPS, advanced data switching, and perhaps the one of the greatest inventions of the 20th century: Claude Shannon’s Information Theory.

All this done under the umbrella of protected profits, and mandated by government regulators to license these technologies, in many cases, for next to nothing. Silicon Valley got its start with many of these patents and the professionals who created them. You cannot say that monopolies and vertical integration in the US have not come without some huge benefits.

Are these times so different? Is an AT&T-Time-Warner merger likely to spin off more benefits or a diminished Internet?

One thing that is different about these times is the global reach of the monopolists. A lot of people globally depend on Google and facebook, a fact recently addressed by the European Union in sweeping privacy laws. One could argue that the US owes not only a debt of thanks to EU regulators, but some kind of royalty as a free-rider of EU regulation. Those spanking new EU regulations have undoubtedly affected how the monopolists treat information collected in the US.

If the US continues on its path of America First policies, of dividing its allies, it certainly risks becoming an impotent America, with the President becoming Eunich-in-Chief.

Moreover, there is certainly a false note in AT&T’s assertions that they only want a level playing field to compete with the information monopolists. My recent reading of “Greater Gotham: A History of New York City from 1898 to 1919,” by Mike Wallace reminds us that competition was never a priority of the trusts which arose at the end of the Gilded Age in America and continued into the Progressive era during the Teddy Roosevelt presidency.

Dammit! Competition drove profits DOWN complained J.P. Morgan, Andrew Carnegie, and John Rockefeller. Consolidation helped everybody, or so went the thinking.

Commercial expansion in the US was predicated on the expansion of slavery in the early days, the theft by use of force of the frontier lands, and subversion of the democracy for private interests.

And Peter Nowak’s highly entertaining “Sex, Bombs and Burgers: How War, Porn and Fast Food Created Technology As We Know It” reminds us that so much of technological innovation in the US was driven by the needs of war.

This is their patrimony.

How important is net neutrality going forward? Very important in the short-run, of questionable importance in the long run as the cost of storage, processing, and transmission continue to go down.

New US laws to reign in facebook, amazon, Google/Alphabet, twitter, and Apple will unlikely have the kind of effect regulators seek without international coordination. And this pitiful Congress will never agree on anything, awash as it is in campaign contributions and a corrupt administration.

In some small way, one can not fault the Chinese government with wanting data aggregation companies operating in their country to locate encryption codes inside the Chinese data wall. The Chinese are undoubtedly aggressors in the international data piracy, and yet Edward Snowden’s revelations must have shaken confidence in their sovereignty of their own information assets as well.

Tim Wu did not believe that a 1930’s era regulation framework would work in this era. he advocated a “Separation Principle” which kept ownership of the components of information creation, information transmission, data aggregation separate. “By that I mean,” Wu says, “a regime whose goal is to constrain and divide all power that derives from the control of information.”

He terms it a “constitutional approach” to regulation, not a regulatory approach. He feels that any government intervention is doomed to be subverted the workings of democracy in America today.

I kinda feel that even this progressive take on the regulatory problem is out-dated in an era where the traditional customers of the system are now the inputs of the system, pace facebook.

And I question whether this new merger will be any good for AT&T or Time-Warner any more than the earlier combination of Time-Warner and AOL. It is no longer the producers of content who have control over profits. It is the grand algorithms. That is why hip-hop artists succeed on YouTube and traditional television languishes in a backwater.

Today AT&T is not all that much different from the company that was broken up late in the 20th century. AT&T can roll out TV services for smartphones. They can even give it away for free to their subscribers and favour their transmission over AT&T lines, but I personally think the big money will go elsewhere.

Moreover, “national” or “nationalist” strategies in this environment which ignore regional and local and topical “neighbourhoods” are also doomed to fail. The market is so easily fragmented that large swaths of the public will never accept the legitimacy of national mandates if for no other reason than that neighbourhoods today cross national boundaries like so many blades of grass.… (mehr)

Not entirely convincing. Wu should include more on the steady rise of oligopolies in the modern US economy. He needs much more support for the claim that these oligopolies have caused growing inequality, and for their effects on politics. Wu glosses over the links here, and it is pretty weak. He also needs more on European antitrust policy. Still, there is a decent legal history here, and reasonable proposals for improved antitrust enforcement. Most of this would fit in a short magazine article, but the book itself is short.

> Robert Bork and others at the University of Chicago over the 1970s. Bork contended, implausibly, that the Congress of 1890 exclusively intended the antitrust law to deal with one very narrow type of harm: higher prices to consumers. That theory, the “consumer welfare” approach, has enfeebled the law. Promising greater certainty and scientific rigor, it has delivered neither, and more importantly discarded far too much of the role that law was intended to play in a democracy, namely, constraining the accumulation of unchecked private power and preserving economic liberty

> Today, as in the 1910s, two essential economic facts characterize the industrialized world. The first is the reemergence of an outrageous divide between the rich and the poor. This trend is most stark in the United States, where the top 1 percent today earn 23.8 percent of the national income and control an astonishing 38.6 percent of national wealth. The second is a return to concentrated economies—that is, industries dominated by fewer and larger companies

> It cannot be denied that some of the firms built during this era were impressive creations, and that the American economy, as a whole, experienced impressive if not wholly unprecedented growth.

> The language of the law is extremely broad. In section one it bans “every contract, combination in the form of trust or otherwise … in restraint of trade.” In section two it declares that “every person who shall monopolize, or attempt to monopolize … any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony.” The language is so strong—its literal text bans so much—that the scholarly debate over the Sherman Act’s meaning and history may never end.

> The more concentrated the industry, the fewer who need to coordinate, and the fewer among whom the stakes need be divided. If an industry has sixty or eighty firms in it, they may squabble, be incapable of acting as a group, and also face the problem of collective action. But, after consolidation, we might be speaking of just six firms, and the prospects for political cooperation improve. And after a merger to monopoly, there is no need to cooperate at all. The simplest—if slightly overstated—way to put this is as follows. The more concentrated the industry, the more corrupted we can expect the political process to be.

> After pausing briefly to settle the Microsoft case, the Bush Justice Department proceeded to bring a grand total of zero anti-monopoly antitrust cases over a period of eight years, and did not block any major mergers.… (mehr)

في العقود الأخيرة، شهدت الدول الصناعية عودة ظهور مشكلة التركُّز الاقتصادي، وهي العملية التي يتم من خلالها هيمنة عدد أصغر وأصغر من الشركات على الصناعات، والتي تنمو بشكل أكبر وأكبر، حتى يسود عدد قليل من الشركات العملاقة. يلقي هذا الكتاب نظرة على كيفية وسبب ظهور هذه المشكلة لأول مرة في أواخر القرن التاسع عشر، وانحسارها في أوائل القرن العشرين إلى منتصفه، ثم معاودة الظهور في أواخر القرن العشرين. أثناء القيام بهذه الجولة السريعة عبر التاريخ الاقتصادي والسياسي، ينظر المؤلف أيضاً في العواقب المقلقة للتركُّز الاقتصادي وبعض الحلول الممكنة.
الخلاصة هي أنَّ التركُّز الاقتصادي نشأ مع اتفاق المنتجين والاتحاد الاحتكاري في أواخر القرن التاسع عشر، ثم تراجع مع حركة مكافحة الاحتكار في أوائل القرن العشرين، ليعود مع زوال مكافحة الاحتكار في أواخر القرن العشرين. يُعتبر هذا التطور مقلقاً لأن الهيمنة التجارية المطلقة واحتكار القلة لها آثار مهلكة على الاقتصاد والمجتمع ككل. لذلك يجب على الحكومة أن تعود إلى تقاليدها السابقة في خرق التجمعات الاحتكارية وتجزئة الشركات العملاقة من أجل حماية الديمقراطية من مخاطر السلطة الخاصة المركزة.… (mehr)