Tim Wu’s Master Switch

Tim Wu of Columbia Law School has been best known to the technology world at large — as opposed to the circle of cyber-law academia that he inhabits — as a staunch proponent of net neutrality.  He occasionally weighs in on copyright-related issues on the Internet, but net neutrality is his calling card.

Now, with The Master Switch: The Rise and Fall of Information Empires (Borzoi Books), he is the latest in the long line of legal scholars to write a book about how the Internet is affecting creativity, innovation, freedom, and other public policy issues.  And this book is one of the better ones in the genre.

Somewhat surprisingly, net neutrality only makes an oblique guest appearance at the end of this book.  The central idea of The Master Switch is what Wu calls “The Cycle.”  In the Cycle, a new communications technology is introduced by inventors, hobbyists, hackers, startups, etc., then slowly gets coopted by major corporate interests, who monopolize the new technology, rob it of its openness and freedom, and rule… until the next iteration of the Cycle comes along.

Wu starts his story with the founding of AT&T in the early 20th century.  AT&T is a central character throughout the narrative, leading up to the present era, where it is the exclusive partner of another monopolistic, restrictive, closed-system, centralized-control proponent: a company called Apple.

But The Master Switch is definitely not just another predictable openness-and-freedom-good, corporate-greed-bad screed from an academic idealist.  The book is a breath of fresh air, in three ways.

First, although Wu does come down firmly on the side of openness and freedom, his analysis is even-handed and does allow that there are benefits to closed systems run by monopolists.  The early incarnation of AT&T as a telecommunications monopoly not only ran a system that was guaranteed to work all the time but also devoted much of its efforts to public service.  And Apple sure does make great devices.

Second, he’s practically the only member of his tribe to allow that a Silicon Valley company can ever do any wrong.  Not only does he accuse Apple of building closed systems and betraying its original ideals, but he calls Google “one of the great corporate hegemons of our time.”  His views of both companies are not altogether flattering, which is especially interesting considering his assertion that they are the two opposing superpowers in the next great conflict over communications technology.

Third, Wu actually cares about commercially produced content, whereas most other writers on this subject matter either treat content as undifferentiated piles of bits or prefer the content created by the newly liberated masses.  He’s evidently a film buff.  He looks deeply into the history of Hollywood and examines how its periods of greater or lesser creativity correlated with periods of centralized and decentralized control.  (He says little about other content industries such as music and publishing.)  He laments the fact that today’s massive glut of content on the internet is devaluing content in general.

After taking the reader through several iterations of The Cycle over the past century, Wu delves into questions such as: is the Internet really “different this time”?  What are the best ways to ensure that monopolistic behavior is kept in check?  And, what is the proper role of government versus private industry?

Most of his proposals and conclusions are relegated to the final chapter, where he switches from engaging storyteller to academic writer of portentous sentences like “[The] indifference to the danger of private power … owes in part to the Lockean sanctification of private property as enunciated by Jefferson.”  And this is where his book goes downhill.

Wu proposes something called the Separations Principle, whereby various mechanisms are put in place to keep content, communications, and electronics industries apart from one another.

The Separations Principle is not a simple recipe, such as “The FCC should impose net neutrality regulations” or “The Justice Department should go after info-tech monopolists much more aggressively” (for that one, see trust-busting litigator Gary Reback’s recent book Free the Market!).  Instead, Wu believes that a solution should come from a combination of relatively light-handed government involvement and behavioral norms that should keep corporate excesses in check.

In other words, Wu looks at only two of the four factors controlling Cyberspace that his Harvard Law School mentor Larry Lessig laid out so elegantly in Code and Other Laws of Cyberspace: law, economics (the market), technology, and behavioral norms.  He looks at law and behavioral norms, but his treatments of economic and technological issues are superficial.

As far as economics are concerned, Wu should have (or shows no evidence of having) read a book that is still, after over a decade, the Bible of information technology economics: Carl Shapiro and Hal Varian’s Information Rules.  If he had read that, he would know that companies like AT&T, Apple, and the major movie studios behave in exactly the ways that are proven to do what publicly traded companies are supposed to do: maximize shareholder value.  He would also recognize that Google’s “open” approach is anomalous, and that if Google is to dominate over the long term, it will either have to jettison its openness (just as Apple did) or literally rewrite the Information Rules.

And as far as behavioral norms go: it’s possible that Companies nowadays don’t exhibit the same level of public spirit that the AT&T of a hundred years ago did under Theodore Vail because they are savvier about  business nowadays, not because public service is an accepted behavioral norm of large companies.  Wu doesn’t allow for this possibility.

Wu’s grasp of technology is weak.  I was hoping to read a cogent explanation of what net neutrality is and how exactly it would work, given that Wu is one of the top net neutrality ideologues; I was sorely disappointed.  And I suspect that like “net neutrality,” Wu’s “Separations Principle” is easy to state at a superficial level but extremely difficult to define precisely or put into practice.

As evidence of Wu’s technological shallowness, he gets a few salient tech-related facts wrong, such as his assertions that Apple was “the first to get the music industry to consent to online downloads” and that law professor Jonathan Zittrain first made the “startling prediction” in 2006 that “information appliances” would eventually overtake PCs.  (Correct answers: several companies offered major-label-licensed services 1-2 years before Apple did; Larry Ellison of Oracle made this prediction five years before Zittrain.)

The Separations Principle is an intriguing idea, but it’s hard to argue for or against it based on the thin explanation of it that Wu offers in this book.  In addition to not tackling economic or technical aspects, he doesn’t offer much evidence that disallowing combinations of, say, network providers with content owners is The Answer that will give people freedom, choice, creativity, etc.

For example, music companies have complained for years that Apple and other technology companies have damaged their business by throttling the economics of distribution.   Yet Apple doesn’t own any music copyrights, let alone record companies.  Conversely, no one seems to be complaining that Sony’s ownership of both a major movie studio and a major music company is hurting consumers.

Wu fears a combination of, for example, Comcast and NBC Universal or AT&T and Disney/Apple.  The former may happen.  Yet the latter seems to be little more than a partnership that has done wonders for AT&T but isn’t helping Apple very much anymore (just ask iPhone owners in New York and San Francisco) and in fact may be helping Google and its Android partners (just ask Verizon Wireless subscribers in those cities).  Moreover, one could argue that Apple’s bond with Disney (via Steve Jobs) may weaken rather than strengthen Hollywood’s hand by forcing the major studios into two separate technological camps: Disney/Apple and everybody else.

Wu does relate the Separations Principle to historical evidence of its necessity.  But by failing to explain how it would actually work, Wu misses an opportunity and diminishes an otherwise excellent book.  This is neither to discount the importance of the issues that Wu raises in The Master Switch nor to suggest that solutions are easy.  Solutions to the problems that Wu identifies will need to come from people with broader expertise and will take time to figure out.  In the meantime, The Master Switch offers important historical perspective on the current tugs of war, and is inherently valuable on that basis alone.

4 comments

  1. Not that I will ever have time to read such a book,
    It is an interesting point to bring up as in “What do we do to stop the big companies abusing there position?”

    Apple is a good example of this. After watching them do an excelent job of convincing consumers to sell their sole for a shinny box.. It did lead me to worry.

    Here in Australia we have laws about who can own media and how much media they can own. I think these laws have actually done a resonable job in some areas..

    I personally think that the future of media needs WALLS between producers, distributors and enablers (People who sell STB, Ipods etc). None can own the other. An example of how Apple abused this is how they stop other vendor music players from being compatible with iTunes. They keep changing it to make it not work. Locking the content into the Apple only world.
    For example, Apple would need to be cut up in terms of, if they want to be a distributor of content, iTunes, they cannot sell hardware. They have to make the distribution technology work on everything.

    Another example.. Sony, could have nothing to do with iTunes or mediaPlayers(Ipods etc)

    If such a business relationship was mandated by government, we would have a very open and competitive market..

    An example of this is how in Australia, the Government just took back control of the wholesale Internet infrastructure of Telstra, (Previous Gov sold it to make a lot of money and tie up voters to vote for them as the opposition wanted to pull it back, as that was the right thing to do. Hard to do when all the voters are invested in Telstra. Was a had fight to do the right thing)

    The importance of keeping the business of media competitive will become just as important to governments over the log term. I think it highly likely new media control laws will eventually be introduced.

  2. James,

    OK, so you basically agree with what Tim Wu says in his book.

    I have to admit that the more I think about it, the more I’m not convinced — just as I am skeptical about net neutrality. Not that I don’t think it’s a good idea in principle, I just have yet to get anything approaching a decent explanation of how it would work in practice without being bogged down in ambiguities and abuses. Joe Nocera did a great job in the NY Times a few months ago (http://www.nytimes.com/2010/09/04/business/04nocera.html) of bursting the net neutrality bubble.

    I’m equally skeptical (as is Tim Wu) of heavy-handed government intervention, because of the moving-target aspect of technology versus the snail-like pace of government. You want Apple to have to choose between content distribution and device sales? That might sound like an interesting argument to make today, but consider what Amazon.com is doing with e-books.

    Amazon started out with a very Apple-like model with the Kindle. But despite the huge marketing hype around Kindles, Amazon’s e-book format is readable on all manner of devices. Amazon is pricing Kindles at (I’m guessing) loss-leader prices to get consumers into its closed ecosystem so that it can make profit on e-book sales… which Apple doesn’t do on music sales. I’m convinced that Amazon introduced the entire Kindle concept in order to get consumers into e-reading in general by making available a device ecosystem that is simple and just plain works — unlike previous-generation e-book vendors (Gemstar, NuvoMedia, etc.). After a few years, Amazon can probably back away from the Kindle — to the point that if government asks it to do so, it can without too much adverse effect.

    In other words, Amazon is a very smart company with a very smart strategy. It’s a contingency that Wu’s Separations Principle doesn’t really address; moreover, one could argue that Amazon has done the world a good turn by hastening overall adoption of e-reading versus the pace that would result if Amazon were legally barred from being in both the e-reader device and e-book distribution businesses. Ultimately Amazon is going to be able to choose one of the two without prodding from the government.

    Theories are nice, but they are worthless without analysis of practical impact. This is one of the reasons why I left grad school almost 20 years ago.

  3. Bill,
    I am going to have to point out some realities based on what does happen here in Australia.
    Here net Nutrality is not really an issue per say as.. due to some small Austrlian laws about access to the local loop for competitors, we have more ISP’s then you could ever imagine.
    If any ISP has a sniff of filtering or prioritizing packets.. We have a great expression here called “churning” End user will churn to a plethora of different alternatives.
    This is because we DO have some government laws, simply that they may be, that makes such a competitive environment possible.
    Still, Teltra, who owned the exchanges is sued every 6 months as it used monopolistic practices to try and kill of these ISP’s. Teltra is in court all the time..
    But really, the fines they pay compared to the profit they made from these practices was called “The price of doing business” Ie they still made a lot more then the government would ever fine them.
    This comes down to the core issue of why the government has to take back complete control of it.
    It is simply a BAD idea to have private organisations in change of infrastructure that is key to the operation of society, operation of Country. Ie like water. Also a bad idea as some of the world bank activities in some third world countries have shown. (Ie people paying 1/2 their wage to purchase water to live)

    Your Amazon example is a terrible one. Amazon knows its model. The kindal does not compete with the iPad, but the iPad does compete with the kindel.
    They are not in a position to enforce any form of domination.. So they went the other way as its the best model. They DID try. But it didn;t work as they did not have the dominance to effect it.

    Apple Does.

    Demanding %15 of any subscription based App on the platform. My got , its like Selling a Car that only runs on roads that the car company approves. Roads the Car company has tolls on. That would be obserd. But from some reason, its fine for the Apple technologies.
    OR, even worse, write your own App for your computer then have to PAY to run it on other computers. Again, something Apple has pioneered.
    The only reason we put up with this crap is because Apple does have a compelling product “At the moment”, with no mentionable competitors with real products that compete. (Android and Google, maybe for the phone market, but Google has its problems too)

    Eventually people will wake up and understand the technology and the price.
    We can give Apple a reasonable free pass, for now.. As they do have such a nice shinny toy, but eventually we must see it for what it is. Monopolistic practices that should be made accountable.
    All I know, is when Governments let this slide, one day they have to pull it back and it ends up costing the end consumer 10 fold in Taxes to set it right, as the Telstra mess has for Australians.

    Tolls are the issue here. In Sydney for example, it can cost over $25 in Tolls to drive across the city. Full tank of petrol/gas costs $55-60. Governments will win elections on the issue of Tolls in the future.
    Apple is simply building virtual Tolls, and eventually, when the public start to understand the price of these poor decisions, they will also demand non- tolled access to content. Governments will one day be made or broken based on these issues.

    In terms of other government laws in the past. Media owenership laws, for example, stopped any one organisation owning to much of the media. Why? because they found that they could manipulate the people to vote whomever they wanted into government.
    The issue here is that if you can manipulate the market you will. Its the nature of the capitalistic animal. As such, any organisation that has as much control of the producer, distribution and content consuming model is likely to take advantage of it that is non-beneficial to the general community.

    The Government will have to step in eventually. Its inevitable.

    James

  4. James,

    We have “churn” in this country too, especially since the FCC mandated mobile number portability and threatened mobile carriers with penalties for taking more than a couple of days to port numbers over when asked to do so. We don’t have as much choice in ISPs as you do, though, that’s for sure.

    However, please read any of Geoffrey Moore’s classic books on tech marketing strategy (or the aforementioned Information Rules) before you call my Amazon example “terrible.” On the contrary, it’s right out of Geoffrey Moore’s playbook. In fact one could argue that Apple is ultimately doomed because they aren’t making the transitions that Moore says you have to in order to stay relevant.

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