Tim Wu on the new monopolists: a "last chapter" for The Master Switch

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24 Responses to “Tim Wu on the new monopolists: a "last chapter" for The Master Switch

  1. Anonymous says:

    A monopoly can only exist with the duplicity of government (copyright, patent, licensing, regulation, et al).

    Even then the example of Facebook doesn’t even come close to being an monopoly. Someone could come in and take their place just like they did to MySpace.

    Nazi stormtroopers knocking down the doors of un-licensed disc duplicators, now there you could make a case for monopoly protection.

    • Anonymous says:

      Monopoly can exist only with the help of the government, but only that’s because that’s what enables businesses to own more property than their owners can carry.

      • coaxial says:

        I’ve seen some pretty preposterous statements regarding monopolies and government. Namely monopolies only exist because a government. Well that’s obviously not true. What law made Microsoft a monopoly? What law made Google a monopoly?

        The other statement is that monopolies are good right up until they ask for government protection. So a competitive market isn’t a virtue in it’s own right? Inefficient markets aren’t something to be avoided? Interesting.

        Both of these statement seem to be based in the concept of a government monopoly, but there is another type of monopoly, a “natural monopoly.” These occur when someone “wins” the competition. And yes, Ayn Randers, they do exist.

  2. Kosmoid says:

    Tim mentions Theodore Roosevelt among the trust busters in government from the past.

    I’m reading the Pulitzer prize winning “The Rise of Theodore Roosevelt” by Edmund Morris, the first book of his planned trilogy. (So happens that Scorcese is adapting this to film with DiCaprio as Roosevelt. We’ll see next year.)

    Roosevelt undertook his “Square Deal” which consisted of conservation of natural resources, control of corporations, and consumer protection. He took on such powerful business interests as JP Morgan, and was branded a “socialist” as a counter attack. Sound familiar?

    • turn_self_off says:

      And the policies was socialist (in the sense of being for the long term many, not the short term few), except that in USA socialist == stalin.

  3. toresbe says:

    “AT&T’s near-absolute dominion over the telephone lasted from about 1914 until the 1984 breakup, all the while delaying the advent of lower prices and innovative technologies that new entrants would eventually bring.”

    Nonsense. As far as I can tell, the US telephony infrastructure is more or less stuck in 1984, when the breakup essentially stopped R&D from happening.

    Remember Bell Labs? Where.. ehm, everything was invented?

    He may have a point but he’s really not using the right example there, IMO.

    • Church says:

      “Nonsense. As far as I can tell, the US telephony infrastructure is more or less stuck in 1984, when the breakup essentially stopped R&D from happening.”

      What’s ‘telephony?’

      • foobar says:

        What’s ‘telephony?’

        From the wiki:

        In telecommunication, telephony (pronounced /təˈlɛfəni/ or teh-LEH-fuh-nee) encompasses the general use of equipment to provide voice communication over distances, specifically by connecting telephones to each other.

    • jackbird says:

      Since 1984, we have, off the top of my head:
      answering machines
      privately-owned telephone hardware (i.e. telephones not manufactured by Bell and leased to consumers)
      Competing long-distance carriers
      computerized PBXes
      VoIP calls to/from the POTS network
      Voicemail systems
      Packet-switched trunks
      ISDN
      DSL
      dirt-cheap calling rates to pretty much anywhere in the world
      fiber to the home

      Bell Labs, and later Lucent, was certainly responsible for some of this, but asserting innovation stopped in 1984 is silly.

      • Anonymous says:

        Sorry, the development and sale of answering machines, privately-owned telephone hardware, DSL, computerized PBXes, and voice-mail systems existed well before the telephone breakup of 1984. And while dirt cheap long distance rates are possible, now, back in 1984, the bell breakup caused local residential rates to skyrocket.

      • JG says:

        Jackbird responded:
        Since 1984, we have, off the top of my head:
        answering machines
        privately-owned telephone hardware (i.e. telephones not manufactured by Bell and leased to consumers)
        Competing long-distance carriers
        computerized PBXes
        VoIP calls to/from the POTS network
        Voicemail systems
        Packet-switched trunks
        ISDN
        DSL
        dirt-cheap calling rates to pretty much anywhere in the world
        fiber to the home

        Yes, but take a real look at this. Carterfone led the way to answering machines and privately-owned telephone hardware; that significantly predates 1984, but around 1984 is when technology really began to be able to make cool new telephony doodads that the average person could afford.

        ISDN is the next-gen telephony technology that never was (and I say this as someone who was a multiple BRI subscriber for over a decade).

        Competing long distance carriers and dirt-cheap calling rates were an obvious side effect of allowing alternative LD carriers.

        DSL has damn little to do with telephony except for the happy accident that at&t owns the copper and likes to bundle it with POTS service where possible. at&t would very much like to remain relevant by maintaining control over your information services.

        We may have seen some “progress” since 1984, but if you look at these things, it mostly isn’t because AT&T was an enthusiastic supporter. In the early 1990′s, the goal was to develop an “Information Superhighway,” a term that makes everyone cringe, and the telcos were supposed to provide a 45Mbps bidirectional pipe to your home, carrier-neutral. Instead you still have copper, in most cases, the same copper that was there in 1983.

        http://www.newnetworks.com/ShortSCANDALSummary.htm

        That seem a bit too loony-bin for you?

        http://www.pbs.org/cringely/pulpit/2007/pulpit_20070810_002683.html

  4. Fett101 says:

    “If Facebook’s rule over social networking … ended the moment the firm lost its technical superiority–the very idea of monopoly might seem almost wholesome”

    I think MySpace wants a word with the author.

    • coaxial says:

      Fett, you and everyone else saying “Pshaw! MySpace collapsed, Facebook can/will too,” are ignoring the context of the collapses.

      Facebook currently has HALF A BILLION users. If it was a country, it would be third most populous in the world. MySpace has about 125 million, and was already in decline when it was purchased by Fox in 2005. Facebook is integrated into many of the most popular websites in the world. While there are still markets Facebook doesn’t dominate, the English language market is over. As user bases increase, it becomes increasingly difficult to dislodge them. It’s called network effect, and it’s repeated in all the time.

  5. PapayaSF says:

    The three examples in the excerpt do not give me confidence about the quality of Wu’s analysis. Facebook is the leading social networking site, but in no real sense is it a monopoly. Leaders in any field may well be humbled by changing customer tastes, new technology, bad decisions, complacency, etc. E.g.: Ford’s Model T, GM, US Steel, passenger rail service, Breck shampoo (formerly a hugely successful premium brand, they expanded down-market and lost their cachet).

    As pointed out above, AT&T’s monopoly was official: sanctioned by the government.

    Hollywood “took control” of American movie-making in the sense of being successful at something that’s very hard to do without tons of money. They were only a monopoly in the way they owned theater chains and so could guarantee showings of their films, and prevent showings of movies made by rivals. That was ended in the late ’40s (IIRC).

  6. Kosmoid says:

    “We can also take comfort from the fact that most of the Internet’s giants profess an awareness of their awesome powers and some sense of attendant duty to the public. Perhaps if we’re vigilant, we can prolong the benign phase of their rule. But let’s not pretend that we live in anything but an age of monopolies.”

    What a way to end an article about dealing with monopolies. But again, the WSJ is probably the last place to lend a sympathetic ear.

    Wu is saying 1. we should trust “most” of TPTB running the monopolies, 2. by us being “vigilant” whatever that means we can keep these monopolies “benign,” and 3. this is the “age of monopolies” (compared to what other time?) and we’d better just accept it.

    Anti-progressive in the least.

  7. Anonymous says:

    Tim Wu’s point about copyright term is right on. Copyright was set up to defeat monopoly. In Britain, the Stationers’ Guild held exclusive rights to all publications under royal grant of patent, in return for religious and political censorship of all works and bypassing Parliament. A liberal parliament passed the Statute of Anne to break the monopoly, allowing publishers and authors to retain rights to their works protected by the government, for a limited time, when they would enter the public domain and be reused. Article I Section 8 of the US Constitution was modeled after the British law, with a 14-year, once renewable, term, with registration and deposit. However, subsequently the term has been lengthened to near infinity and the other requirements to protect the public domain dropped. Now copyright law is incompatible with the Internet and World Wide Web and cloud and mobile computing, and only serves the current information monopolists instead of allowing free access to the public domain. A return to utilitarian instead of natural rights copyright law is essential to restore freedom instead of monopoly and censorship.

  8. Anonymous says:

    pfff, right. Because AT&T would have given up all their infrastructure if there WASN’T government intervention.

    Because the government was wrong to enable a monopoly doesn’t mean that they’re the only thing that can create them. Without any government intervention, sure you could always be “free” to start your own telco or railroad. Except that any space you need to actually do such a thing would be owned by one competitor. You wouldn’t be able to create a service, and they would be the only ones that could.

    It’s not a monopoly, though. Right?

  9. philipb says:

    Wu’s arguments falter when he lumps Facebook (into which I have invested substantial time & effort) and Google (of whom I’m one click away from a beter search engine) into the same category.

    He also confuses the ability to dominate a market with the ability to merely replicate another’s business model.

  10. Anonymous says:

    Let’s address some of these preposterous statements:

    “A single firm can dominate the market if the product becomes more valuable to each user as the number of users rises. Such networks have a natural tendency to grow, and that growth leads to dominance. That was the key to Western Union’s telegraph monopoly in the 19th century and to the telephone monopoly of its successor, AT&T.”

    Huh? Western Union and AT&T were competitors, not successors, although both benefited from government-granted monopoly rights and AT&T eventually bought Western Union out. AT&T’s monopoly in particular had very little to do with the network effect, and very much to do with government enforcement of that monopoly.

    Whether or not there is a dominant player at any given time, the key factor is leaving the market open to new players. A monopoly can only exist when there is no other choice, and such a situation can only occur through government intervention. He confuses “dominant player” with “no choice”, when in fact there are many choices all over the Internet if you do not like Google or Facebook.

    “This is an important principle of information economics: Market power is rarely seized so much as it is surrendered up, and that surrender is born less of a deliberate decision than of going with the flow.”

    Really? What market power was surrendered up to Facebook? Before the rise of social networking sites, the market didn’t EXIST. How could the market power of a non-existent market be “surrendered up”?

    “The problem is that dominant firms are like congressional incumbents and African dictators: They rarely give up even when they are clearly past their prime. Facing decline, they do everything possible to stay in power. And that’s when the rest of us suffer.”

    So instead of euthanizing a healthy company that has plenty of competition and is providing a valuable service, how about we deal with the actual problem: dominant firms gaining government protection?

  11. zyodei says:

    As a libertarian who has long been arguing that the current era of massive corporate power would be impossible without a strong government, and that the idea that the net result of government action is to restrain corporations is a myth, and that monopolies are very rare in a free market, but usually are based on government intervention, I say…yup.

  12. PapayaSF says:

    This may seem like splitting hairs, but I don’t think Microsoft is (or has been found to be in a court) a monopoly. They did engage in monopolistic behavior, of course, but you’re not a monopoly simply because of a large market share, and/or having the advantage of network effects. Same with Google and Facebook.

    True, there are such things as natural monopolies, such as utility systems, but there are no such natural barriers to prevent competition with Microsoft (thus Apple and Linux), Google (Yahoo), or Facebook (MySpace, Badoo, Bebo, LinkedIn, Netlog: all networking sites with 50 million members or more). The leaders may be riding high at the moment (well, maybe not Microsoft), but such positions are usually transient.

  13. Kaleberg says:

    AT&T had what was called a “natural monopoly” because it didn’t make a lot of sense to run multiple wires to each and every house when each house needed only one. It’s sort of the way streets are a natural monopoly and it makes no sense for each home owner to decide which street system his driveway should lead to.

    The only real competitor was cable, because cable companies needed to run coaxial cable to each home, but cable was also a natural monopoly.

    You’ll notice that neither the telephone companies or the cable companies have been particularly innovative. The only thing they’ve done is cut prices a bit, extended the existing trend, and not managing to strangle the internet at birth. You’ll notice that they are both doing what they can to get a good necklock right now, or you haven’t been following the network neutrality debates.

    Personally, I’d have been happier with a regulated monopoly. Prices would have continued falling, and we wouldn’t be having to fight so hard for higher bandwidth and keeping the playing field level. Every advance seems to have been despite these unregulated entities, rather by virtue of their competition.

  14. Kosmoid says:

    So it’s a strong government that gives Facebook its power. And less intervention would dissolve our “age of monopolies.”

    Still need to know how to be “vigilant” without going all Charles Bronsony.

    • Anonymous says:

      No, it’s not a strong government that gives Facebook its current dominance – it’s people’s voluntary choices. On the other hand, a strong government gave us the AT&T monopoly, the cable monopolies, the railroad monopoly, the old airline monopoly, and numerous others.

      Facebook is not the problem. When Facebook goes to the government to get protection, that’s the problem.

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