The Master Switch: The Rise and Fall of Information Empires

by Tim Wu

Jonathan Zittrain calls a tethered technology: that is, a technology tied directly to its owner, and limited in what it might do.

In an oft-exampled way, a dominant power must disable or neuter its own inventions to avoid cannibalizing its core business.

Tethered technologies

“process of industrial mutation . . . that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”

Schumpeter's economic theory of innovation

“creative destruction.” As he put it, “Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.”

Creative destruction

the new only rarely supplements the old; it usually destroys it. The old, however, doesn’t, as it were, simply give up but rather tries to forestall death or co-opt its usurper—à la Kronos—with important implications.

Thanks to Jay Gould’s blindsiding attack, and good old-fashioned corporate ineptitude on its own part, Western Union broke down and gave up on its imperial plans. Instead of dominating a business it could have bought for $100,000, the company entered into negotiations with Vail, who struck a tough bargain. Western agreed to abandon telephony forever, in exchange for 20 percent of rental income on the Edison telephone and a promise from Bell never to enter the telegraph market or offer competition to the Associated Press. 20

Case study: Western Union's capitulation

Better communications, it is believed, lead to better mutual understanding, perhaps a recognition of a shared humanity, and the avoidance of needless disaster.

The ethics of better communication

Perhaps it is for this reason that the advent of every new technology of communication always brings with it a hope for ameliorating all the ills of society. The arrival of mass broadcasting inspired, in the United States and around the world, an extraordinary faith in its potential as the benefactor, perhaps even a savior, of mankind.

Lawrence Lessig,

you haven’t a hobby—get one. Ride it. Your interest and zest in life will triple. You will find common ground with others—a joy in getting together, in exchange of ideas—which only hobbyists can know. Wireless is of all hobbies the most interesting. It offers the widest limits, the keenest fascination, either for intense competition with others, near and far, or for quiet study and pure enjoyment in the still night hours as you welcome friendly visitors from the whole wide world.

Whatever he most desires—whether it be opera, concert, or song, sporting news or jazz, the radio telephone will supply it. And with it, he will be lifted to greater appreciation. We can be certain that a new national cultural appreciation will result. . . . The people’s University of the Air will have a greater student body than all of our universities put together.

Culture

Bell would dramatically undercut the rates of local independent telephone companies in any contested area, a tactic known as predatory pricing.

Predatory pricing

same logic Microsoft would follow in the 1990s, when its Windows operating system was similarly run as a partially open system. Like AT&T, Microsoft invited its enemies to connect, to take advantage of an open platform, hoping they wouldn’t notice or worry that the platform came with a spring trap.

Comparison Microsoft

The big question—now often the multi-billion-dollar question—is how to decide, as a matter of policy, what businesses should be considered common carriers with special duties to the public (as Bell positioned itself ), which companies should be run by government (as the Post Office has been since Franklin founded it), and which should be “ordinary services” left mostly to forces of the free market.*

Common carriage

Injunction suits—let there be injunction suits in large numbers, let them flock in from all quarters, let the federal courts and the state courts buzz with them. Scour the country for infringements, set spies on every independent camera, projecting machine, reel of film, that could be found. Let actions breed and multiply

Example patent law

Economics textbooks portray the harm of monopoly as its tendency to restrict supply and set high prices. But in the case of the Trust, the goal was to make a cheap product, and so the effect was to depress prices—can there be any harm in that? Yes, and in fact this is a case where the greater harm of monopoly reveals itself to be not economic but expressive. The Trust’s rules controlled not just costs, but the very nature of what film, as a creative medium, could be. In an information industry the cost of monopoly must not be measured in dollars alone, but also in its effect on the economy of ideas and images, the restraint of which can ultimately amount to censorship.

Censorship

It is inconceivable,” said Herbert Hoover, secretary of commerce, at the first national radio conference in 1922, “that we should allow so great a possibility for service, for news, for entertainment, for education, and for vital commercial purposes to be drowned in advertising chatter.”1 Hoover’s remarks reflected the accepted wisdom of the times: that advertising on radio was unacceptable.

Advertising

As an unanticipated dividend of Vail’s adroitness, AT&T was the only company in a position to form an entity the world had never seen before: a broadcast network. The value of a network, as opposed to a mere station, is in the power to harness economies of scale.

Network definition

Gillette’s first radio ad, for example, was a lecture on the history of beards.

Advertising to inform!! Gilette and the history of beards!!