The master switch The rise and fall of information empires

Review by Choice Review

Wu (Columbia Univ.), a recognized authority on electronic media, investigates whether the Internet will follow the same historical cycle as have other information technologies--from open to closed, from decentralized to centralized. In a compelling writing style, Wu recounts the histories of telegraphy, telephony, radio, film, television, and finally the Internet. He provides intriguing portraits of key individuals, from inventors and innovators to empire builders, who eventually, often with the assistance of government regulators, centralize and gain control of each technology. Wu describes how Schumpeter's process of creative destruction can be blunted by business and legal strategies that hold disruptive technologies at bay. He urges adoption of a constitutional approach based on a "Separations Principle" to promote openness and decentralization. This approach requires the enforcement of antidiscrimination or common carriage rules, a prohibition on vertical mergers (so that content creators and disseminators remain separate), and the inculcation of an industry ethic that stigmatizes "site blocking, content discrimination and censorship, broadly defined." Wu believes the sacrifice of quality and cost savings this approach likely entails is warranted by increased innovation and greater economic and political freedom. See related, Eli Noam's Media Ownership and Concentration in America (CH, May'10, 47-5144). Summing Up; Highly recommended. General readers; students at all levels; researchers; professionals. R. C. Singleton University of Puget Sound

Copyright American Library Association, used with permission.

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Review by New York Times Review

SHORTLY after the United States developed the first atomic bomb, J. Robert Oppenheimer realized the country would need a new kind of weapons laboratory. This lab would maintain and improve the military's arsenal rather than create new weapons. It would be called Sandia National Laboratories and placed not far from Los Alamos. Initially, the University of California ran the lab, but President Truman soon decided to transfer its operation to the entity he thought could best run it during the nascent cold war: AT&T. "In my opinion," Truman wrote to an AT&T subsidiary in 1949, "you have here an opportunity to render an exceptional service in the national interest." AT&T ended up running Sandia until the early 1990s. It was one of the more extraordinary instances of Ma Bell's involvement with Uncle Sam. The company owed its very existence to a favorable federal patent ruling in 1878, which saved it from an early death at the hands of Western Union, the dominant telegraph company then trying to crush its new rival. A little more than a century later, Washington broke up AT&T. But regulators soon allowed many of the company's parts to merge back together. This consolidation, Tim Wu argues in "The Master Switch," probably allowed the Bush administration to conduct its wire-tapping program in secret for so long. AT&T is the star of Wu's book, an intellectually ambitious history of modern communications. The organizing principle - only rarely overdrawn - is what Wu, a professor at Columbia Law School, calls "the cycle." "History shows a typical progression of information technologies," he writes, "from somebody's hobby to somebody's industry; from jury-rigged contraption to slick production marvel; from a freely accessible channel to one strictly controlled by a single corporation or cartel - from open to closed system." Eventually, entrepreneurs or regulators smash apart the closed system, and the cycle begins anew. The story covers the history of phones, radio, television, movies and, finally, the Internet. All of these businesses are susceptible to the cycle because all depend on networks, whether they're composed of cables in the ground or movie theaters around the country. Once a company starts building such a network or gaining control over one, it begins slouching toward monopoly. If the government is not already deeply involved in the business by then (and it usually is), it soon will be. Wu argues that it has little choice. Not only are communications businesses particularly prone to consolidation, but the political effects are far greater than they would be in other industries. The book's title comes from a line by Fred Friendly, the longtime CBS News executive, in which he distinguished between free-speech laws and "exclusive custody of the master switch." They are two different things, but either has the ability to shape the flow of information. The same cannot be said, Wu notes, "of orange juice, heating oil, running shoes or dozens of other industries, no matter their size." Today may seem an odd time to be making this argument, given the online flowering of discourse, civil and otherwise. But Wu makes a good case that the Internet is vulnerable to the cycle. The world's computer network is ultimately a physical entity, onto which other forms of communication - film, telephone, television, radio - are starting to migrate. This is what media executives mean by "convergence." It seems likely to help big companies get even bigger, and arguably offers the potential for even tighter control of information than existed in the past. Wu's candidates for the AT&T of the future are Comcast (if its takeover of NBC-Universal succeeds), Google (if it decides to abandon its tradition of openness and instead tries to eliminate rivals) and some combination of AT&T itself and Apple. But he ponders this only briefly and acknowledges that it is too early to know. His most thought-provoking argument about the future may actually be the past. The similarities between radio and the Internet are particularly striking. Radio in the early 20th century was a scattering of amateur stations, started not for profit, but so its hobbyists would have a platform for their views and interests. Lee De Forest, a pioneer who ran a station in the Bronx, urged young people to listen so that in "the still night hours" they could "welcome friendly visitors from the whole wide world." Waldemar Kaempffert, the editor of Scientific American, proclaimed, "All these disconnected communities and houses will be united through radio as they were never united by the telegraph and telephone." Soon, however, radio's heterogeneity began to fade. In 1922, WEAF in New York, AT&T's flagship station, broadcast the first advertisement, for a leafy housing development in Queens. By 1926, AT&T had teamed up with the Radio Corporation of America to form a new radio network, the National Broadcasting Company. The station, at 660 AM, would become known as WNBC (and later as WFAN, the country's first radio station devoted to sports). AT&T and the radio manufacturers wanted radio to transform from hobby to big business, so they decided to fight back, publicly and in the courts, against a commerce secretary who had been protecting radio from what he called "advertising chatter." That commerce secretary was Herbert Hoover. A federal court eventually ruled that Hoover had no authority to assign radio frequencies, and NBC's network mushroomed. The cycle was under way. Wu wisely avoids magic-bullet solutions to the inevitable problems of the communications industry. Simply keeping government out of the business does not work, because the industry tends to form private monopolies if left alone. And having the government run the business, as England and other countries have tried, presents its own problems. The government itself is a monopolist and often behaves like one. Wu instead calls for constraining "all power that derives from the control of information." He writes, "If we believe in liberty, it must be freedom from both private and public coercion." In practice, this would mean that the Justice Department would have to adopt a broader definition of its antitrust powers, beyond its typical emphasis on competition's effect on prices. The longstanding Hollywood censorship code did not raise ticket prices, after all, but it did violate the country's ideals. Similarly, AT&T had the power to quash the answering machine, which, incredibly, a Bell Labs engineer invented in 1934. The "government's only proper role," Wu concludes, "is as a check on private power, never as an aid to it." It is a useful rule of thumb, even if not every choice breaks down quite so clearly. Wu previously popularized the phrase "net neutrality," an updated version of the old notion of "common carriage" in the telephone industry. The central idea, as with that of this book, is that market competition brings enormous benefits, but the market itself does not ensure competition - or, more broadly, desirable outcomes. This argument can be extended to the economic importance of communications, even if Wu's concern is more political. The businesses he describes have been some of the American economy's great global successes: Google, NBC, Paramount Pictures and many others. They were able to lead the way in part because they could take advantage of the fruits of this country's long tradition - now somewhat diminished - of government investment in basic scientific research that the private sector would never find profitable. The Internet, to take one example, may now be the world's communications network. But it started as a Defense Department project. As "The Master Switch" artfully shows, the government often has a role that no company will play on its own. Wu argues that the Internet is likely to follow the same progression as radio, film and television. David Leonhardt is an economics columnist for The Times.

Copyright (c) The New York Times Company [December 12, 2010]

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Review by Booklist Review

*Starred Review* A veteran of Silicon Valley and professor at Columbia University, Wu is an author and policy advocate best known for coining the term net neutrality. Although the Internet has created a world of openness and access unprecedented in human history, Wu is quick to point out that the early phases of telephony, film, and radio offered similar opportunities for the hobbyist, inventor, and creative individual, only to be centralized and controlled by corporate interests, monopolized, broken into smaller entities, and then reconsolidated. Wu calls this the Cycle, and nowhere is it more exemplary than in the telecommunications industry. The question Wu raises is whether the Internet is different, or whether we are merely in the early open phase of a technology that is to be usurped and controlled by profiteering interests. Central in the power struggle is the difference between the way Apple Computer and Google treat content, with Apple attempting to control the user experience with slick products while Google endeavors to democratize content, giving the user choice and openness. This is an essential look at the directions that personal computing could be headed depending on which policies and worldviews come to dominate control over the Internet.--Siegfried, David Copyright 2010 Booklist

From Booklist, Copyright (c) American Library Association. Used with permission.

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Review by Publisher's Weekly Review

According to Columbia professor and policy advocate Wu (Who Controls the Internet), the great information empires of the 20th century have followed a clear and distinctive pattern: after the chaos that follows a major technological innovation, a corporate power intervenes and centralizes control of the new medium-the "master switch." Wu chronicles the turning points of the century's information landscape: those decisive moments when a medium opens or closes, from the development of radio to the Internet revolution, where centralizing control could have devastating consequences. To Wu, subjecting the information economy to the traditional methods of dealing with concentrations of industrial power is an unacceptable control of our most essential resource. He advocates "not a regulatory approach but rather a constitutional approach" that would enforce distance between the major functions in the information economy-those who develop information, those who own the network infrastructure on which it travels, and those who control the venues of access-and keep corporate and governmental power in check. By fighting vertical integration, a "Separations Principle" would remove the temptations and vulnerabilities to which such entities are prone. Wu's engaging narrative and remarkable historical detail make this a compelling and galvanizing cry for sanity-and necessary deregulation-in the information age. (Nov.) (c) Copyright PWxyz, LLC. All rights reserved.

(c) Copyright PWxyz, LLC. All rights reserved

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Review by Library Journal Review

In this eye-opening business history, Wu (Columbia Law Sch.) examines the evolution of media industries, such as film, radio, cable, telephone, and information, with Apple, AT&T, and Google among the major companies discussed. Readers will recognize that current events impacting the information environment are eerily reminiscent of past ones, especially plans affecting the open and free Internet infrastructure. Wu is an exemplary writer because he is able to draw readers into his stories with engaging details. He also here provides an economic analysis of the cyclical nature of the organization and size of firms. Relying on economic theories, Wu advises against government involvement, because it will only interfere with marketplace events. VERDICT Readers should be knowledgeable about the theories of important economists, such as Joseph Schumpeter, and have an economic background in the characteristics of corporate structures, such as monopolies and oligopolies, to make the best use of this book. Recommended for fans of Wu's Who Controls the Internet? and for those interested in the media infrastructure.-Caroline Geck, Newark Public Schs., NJ (c) Copyright 2010. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.

(c) Copyright Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.

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Review by Kirkus Book Review

Powerful forces are afoot to take control of the Internetfor profit, of course. It's happened before, writes Slate contributor Wu (Copyright and Communications/Columbia Univ.; co-author: Who Controls the Internet?, 2006), and the corporations have won just about every time.Take Alexander Graham Bell, for instance, "a professor and an amateur inventor, with little taste for business." More at home in the lab than the boardroom, Bell had backers who knew their corporate chicanery, such that the telephone, the child of many fathers, was soon in the hands of a monopoly, ATT, that endured for more than a century. In the spirit of Schumpeterian "creative destruction," one of those investors, who had a bone to pick with the telegraph companyanother monopolysaw the telephone as a means to kill the earlier technology, and so it was. Radio, too, emerged from many inventors, another example of the simultaneity of innovation. In the 1920s, writes Wu, radio "was a two-way medium accessible to almost any hobbyist," and private individuals and small businesses alike started radio stations as quickly as they set up blogs today. Trying to get a radio license today is a matter of considerable cost and bureaucratic negotiation, and of course it is illegal to broadcast without that licenseanother win for the corporations, which use these gatekeeping mechanisms to keep competition out. Examining one communication technology after another, Wu, coiner of the term "net neutrality," artfully charts a single story in which economic power consistently trumps public good, with the Google of today being the latest "master switch" that channels communication. Given that Google has recently been in negotiations with Verizon to take a public utilitythe Internetever more tightly into private hands, that story is timely.Eye-opening reading, with implications for just about anyone who uses that utility, which means just about everyone.]] Copyright Kirkus Reviews, used with permission.

Copyright (c) Kirkus Reviews, used with permission.

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Chapter 1 Exactly forty years before Bell's National Geographic banquet, Alexander Bell was in his laboratory in the attic of a machine shop in Boston, trying once more to coax a voice out of a wire. His efforts had proved mostly futile, and the Bell Company was little more than a typically hopeless start-up. Bell was a professor and an amateur inventor, with little taste for business: his expertise and his day job was teaching the deaf. His main investor and the president of the Bell Company was Gardiner Green Hubbard, a patent attorney and prominent critic of the telegraph monopoly Western Union. It is Hubbard who was responsible for Bell's most valuable asset: its telephone patent, filed even before Bell had a working prototype. Besides Hubbard, the company had one employee, Bell's assistant, Thomas Watson. That was it. If the banquet revealed Bell on the cusp of monopoly, here is the opposite extreme from which it began: a stirring image of Bell and Watson toiling in their small attic laboratory. It is here that the Cycle begins: in a lonely room where one or two men are trying to solve a concrete problem. So many revolutionary innovations start small, with outsiders, amateurs, and idealists in attics or garages. This motif of Bell and Watson alone will reappear throughout this account, at the origins of radio, television, the personal computer, cable, and companies like Google and Apple. The importance of these moments makes it critical to understand the stories of lone inventors. Over the twentieth century, most innovation theorists and historians became somewhat skeptical of the importance of creation stories like Bell's. These thinkers came to believe the archetype of the heroic inventor had been over-credited in the search for a compelling narrative. As William Fisher puts it, "Like the romantic ideal of authorship, the image of the inventor has proved distressingly durable." These critics undeniably have a point: even the most startling inventions are usually arrived at, simultaneously, by two or more people. If that's true, how singular could the genius of the inventor really be? There could not be a better example than the story of the telephone itself. On the very day that Alexander Bell was registering his invention, another man, Elisha Gray, was also at the patent office filing for the very same breakthrough.* The coincidence takes some of the luster off Bell's "eureka." And the more you examine the history, the worse it looks. In 1861, sixteen years before Bell, a German man named Johann Philip Reis presented a primitive telephone to the Physical Society of Frankfurt, claiming that "with the help of the galvanic current, [the inventor] is able to reproduce at a distance the tones of instruments and even, to a certain degree, the human voice." Germany has long considered Reis the telephone's inventor. Another man, a small-town Pennsylvania electrician named Daniel Drawbaugh, later claimed that by 1869 he had a working telephone in his house. He produced prototypes and seventy witnesses who testified that they had seen or heard his invention at that time. In litigation before the Supreme Court in 1888, three Justices concluded that "overwhelming evidence" proved that "Drawbaugh produced and exhibited in his shop, as early as 1869, an electrical instrument by which he transmitted speech. . . ." There was, it is fair to say, no single inventor of the telephone. And this reality suggests that what we call invention, while not easy, is simply what happens once a technology's development reaches the point where the next step becomes available to many people. By Bell's time, others had invented wires and the telegraph, had discovered electricity and the basic principles of acoustics. It lay to Bell to assemble the pieces: no mean feat, but not a superhuman one. In this sense, inventors are often more like craftsmen than miracle workers. Indeed, the history of science is full of examples of what the writer Malcolm Gladwell terms "simultaneous discovery"-so full that the phenomenon represents the norm rather than the exception. Few today know the name Alfred Russel Wallace, yet he wrote an article proposing the theory of natural selection in 1858, a year before Charles Darwin published The Origin of Species . Leibnitz and Newton developed calculus simultaneously. And in 1610 four others made the same lunar observations as Galileo. Is the loner and outsider inventor, then, merely a figment of so much hype, with no particular significance? No, I would argue his significance is enormous; but not for the reasons usually imagined. The inventors we remember are significant not so much as inventors, but as founders of "disruptive" industries, ones that shake up the technological status quo. Through circumstance or luck, they are exactly at the right distance both to imagine the future and to create an independent industry to exploit it. Let's focus, first, on the act of invention. The importance of the outsider here owes to his being at the right remove from the prevailing currents of thought about the problem at hand. That distance affords a perspective close enough to understand the problem, yet far enough for greater freedom of thought, freedom from, as it were, the cognitive distortion of what is as opposed to what could be. This innovative distance explains why so many of those who turn an industry upside down are outsiders, even outcasts. To understand this point we need grasp the difference between two types of innovation: "sustaining" and "disruptive," the distinction best described by innovation theorist Clayton Christensen. Sustaining innovations are improvements that make the product better, but do not threaten its market. The disruptive innovation , conversely, threatens to displace a product altogether. It is the difference between the electric typewriter, which improved on the typewriter, and the word processor, which supplanted it. Another advantage of the outside inventor is less a matter of the imagination than of his being a disinterested party. Distance creates a freedom to develop inventions that might challenge or even destroy the business model of the dominant industry. The outsider is often the only one who can afford to scuttle a perfectly sound ship, to propose an industry that might challenge the business establishment or suggest a whole new business model. Those closer to-often at the trough of- existing industries face a remarkably constant pressure not to invent things that will ruin their employer. The outsider has nothing to lose. But to be clear, it is not mere distance, but the right distance that matters; there is such a thing as being too far away. It may be that Daniel Drawbaugh actually did invent the telephone seven years before Bell. We may never know; but even if he did, it doesn't really matter, because he didn't do anything with it. He was doomed to remain an inventor, not a founder, for he was just too far away from the action to found a disruptive industry. In this sense, Bell's alliance with Hubbard, a sworn enemy of Western Union, the dominant monopolist, was all-important. For it was Hubbard who made Bell's invention into an effort to unseat Western Union. I am not saying, by any means, that invention is solely the province of loners and that everyone else's inspiration is suppressed. But this isn't a book about better mousetraps. The Cycle is powered by disruptive innovations that upend once thriving industries, bankrupt the dominant powers, and change the world. Such innovations are exceedingly rare, but they are what makes the Cycle go. Let's return to Bell in his Boston laboratory. Doubtless he had some critical assets, including a knowledge of acoustics. His laboratory notebook, which can be read online, suggests a certain diligence. But his greatest advantage was neither of these. It was that everyone else was obsessed with trying to improve the telegraph. By the 1870s inventors and investors understood that there could be such a thing as a telephone, but it seemed a far-off, impractical thing. Serious men knew that what really mattered was better telegraph technology. Inventors were racing to build the "musical telegraph," a device that could send multiple messages over a single line at the same time. The other holy grail was a device for printing telegrams at home. Bell was not immune to the seduction of these goals. One must start somewhere, and he, too, began his experiments in search of a better telegraph; certainly that's what his backers thought they were paying for. Gardiner Hubbard, his primary investor, was initially skeptical of Bell's work on the telephone. It "could never be more than a scientific toy," Hubbard told him. "You had better throw that idea out of your mind and go ahead with your musical telegraph, which if it is successful will make you a millionaire." But when the time came, Hubbard saw the potential in the telephone to destroy his personal enemy, the telegraph company. In contrast, Elisha Gray, Bell's rival, was forced to keep his telephone research secret from his principal funder, Samuel S. White. In fact, without White's opposition, there is good reason to think that Gray would have both created a working telephone and patented it long before Bell. The initial inability of Hubbard, White, and everyone else to recognize the promise of the telephone represents a pattern that recurs with a frequency embarrassing to the human race. "All knowledge and habit once acquired," wrote Joseph Schumpeter, the great innovation theorist, "becomes as firmly rooted in ourselves as a railway embankment in the earth." Schumpeter believed that our minds were, essentially, too lazy to seek out new lines of thought when old ones could serve. "The very nature of fixed habits of thinking, their energy-saving function, is founded upon the fact that they have become subconscious, that they yield their results automatically and are proof against criticism and even against contradiction by individual facts." The men dreaming of a better telegraph were, one might say, mentally warped by the tangible demand for a better telegraph. The demand for a telephone, meanwhile, was purely notional. Nothing, save the hangman's noose, concentrates the mind like piles of cash, and the obvious rewards awaiting any telegraph improver were a distraction for anyone even inclined to think about telephony, a fact that actually helped Bell. For him the thrill of the new was unbeatably compelling, and Bell knew that in his lab he was closing in on something miraculous. He, nearly alone in the world, was playing with magical powers never seen before. On March 10, 1876, Bell, for the first time, managed to transmit speech over some distance. Having spilled acid on himself, he cried out into his telephone device, "Watson, come here, I want you." When he realized it had worked, he screamed in delight, did an Indian war dance, and shouted, again over the telephone, "God save the Queen!" The Plot to Destroy Bell Eight months on, late on the night of the 1876 presidential election, a man named John Reid was racing from the New York Times offices to the Republican campaign headquarters on Fifth Avenue. In his hand he held a Western Union telegram with the potential to decide who would be the next president of the United States. The Plot To Destroy Bell Eight months on, late on the noght of 1876 presidential election, a man named John Reid was racing from the New York Times offies to the Republican campaign headquarters on Fifth Avenue. In his hand he held a Western Union telegram with the potential to decide who would be the next president of the United States. While Bell was trying to work the bugs out of his telephone, Western Union, telephony's first and most dangerous (though for the moment unwitting) rival, had, they reckoned, a much bigger fish to fry: making their man president of the United States. Here we introduce the nation's first great communications monopolist, whose reign provides history's first lesson in the power and peril of concentrated control over the flow of information. Western Union's man was one Rutherford B. Hayes, an obscure Ohio politician described by a contemporary journalist as "a third rate nonentity." But the firm and its partner newswire, the Associated Press, wanted Hayes in office, for several reasons. Hayes was a close friend of William Henry Smith, a former politician who was now the key political operator at the Associated Press. More generally, since the Civil War, the Republican Party and the telegraph industry had enjoyed a special relationship, in part because much of what were eventually Western Union's lines were built by the Union army. So making Hayes president was the goal, but how was the telegram in Reid's hand key to achieving it? The media and communications industries are regularly accused of trying to influence politics, but what went on in the 1870s was of a wholly different order from anything we could imagine today. At the time, Western Union was the exclusive owner of the only nationwide telegraph network, and the sizable Associated Press was the unique source for "instant" national or European news. (Its later competitor, the United Press, which would be founded on the U.S. Post Office's new telegraph lines, did not yet exist.) The Associated Press took advantage of its economies of scale to produce millions of lines of copy a year and, apart from local news, its product was the mainstay of many American newspapers. With the common law notion of "common carriage" deemed inapplicable, and the latter-day concept of "net neutrality" not yet imagined, Western Union carried Associated Press reports exclusively.10 Working closely with the Republican Party and avowedly Republican papers like The New York Times (the ideal of an unbiased press would not be established for some time, and the minting of the Times 's liberal bona fides would take longer still), they did what they could to throw the election to Hayes. It was easy: the AP ran story after story about what an honest man Hayes was, what a good governor he had been, or just whatever he happened to be doing that day. It omitted any scandals related to Hayes, and it declined to run positive stories about his rivals (James Blaine in the primary, Samuel Tilden in the general). But beyond routine favoritism, late that Election Day Western Union offered the Hayes campaign a secret weapon that would come to light only much later. Hayes, far from being the front-runner, had gained the Republican nomination only on the seventh ballot. But as the polls closed his persistence appeared a waste of time, for Tilden, the Democrat, held a clear advantage in the popular vote (by a margin of over 250,000) and seemed headed for victory according to most early returns; by some accounts Hayes privately conceded defeat. But late that night, Reid, the New York Times editor, alerted the Republican Party that the Democrats, despite extensive intimidation of Republican supporters, remained unsure of their victory in the South. The GOP sent some telegrams of its own to the Republican governors in the South with special instructions for manipulating state electoral commissions. As a result the Hayes campaign abruptly claimed victory, resulting in an electoral dispute that would make Bush v. Gore seem a garden party. After a few brutal months, the Democrats relented, allowing Hayes the presidency-in exchange, most historians believe, for the removal of federal troops from the South, effectively ending Reconstruction. The full history of the 1876 election is complex, and the power of the Western Union network was just one factor, to be sure. But while mostly studied by historians and political scientists, the dispute should also be taken as a crucial parable for communications policy makers. More than anything, it showed what kind of political advantage a discriminatory network can confer. When the major channels for moving information are loyal to one party, its effects, while often invisible, can be profound. Excerpted from The Master Switch: The Rise and Fall of Information Empires by Tim Wu All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.

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