The Master Switch: The Rise and Fall of Information Empires
by Tim Wu
Alfred A. Knopf, 384 pp.

im Wu thinks he has discovered a recurring pattern in the history of modern telecommunications.

“The Cycle,” as he calls it, starts with a technological breakthrough that allows someone to communicate with someone else better, faster, or cheaper than before. Think of the telegraph, the telephone, movies, radio, television, cable television. Each new medium starts out more as a curiosity, the plaything of inventors and hobbyists. But pretty soon people begin to figure out the potential to change the way business is done or life is lived. Before long, we are in that messy, disorganized, exciting phase in which lots of people are trying lots of creative ways to harness the new technology.

At some point it becomes clear that the new medium works best if lots of people have access to the same network. It also becomes apparent that building out and supporting these networks takes lots of money. And so what starts out as a creative, democratic, and fragmented new medium soon falls under the control of a handful of well-financed industrial conglomerates. To fight off rivals, these conglomerates win the favor of regulators and politicians, or wage brutal legal warfare to prevent or delay the introduction of new ideas and disruptive new technologies. Ultimately, however, after decades during which consumers and the economy as a whole have been denied the benefits of choice, competition, and freedom of expression, the stranglehold is broken.

Wu’s “Cycle” represents a “Manichean contest” between the open and the closed, between unbounded creativity and enforced mediocrity, between free markets and central planning, between vibrant democracy and confining corporate dictatorship. By now you have a pretty good sense of where this is going. Wu’s contention is that we are just now at that tipping point when the next generation of vertically integrated conglomerates is about to put the stranglehold on the newest medium, the Internet. Only government can prevent it, by insisting on a policy of “net neutrality,” a term Wu coined several years ago and a policy he has championed as chairman of Free Press, a media watchdog group. (The multi-hatted Wu is also a Columbia University law professor and a fellow at the New America Foundation.)

As history, The Master Switch is original, insightful, even compelling. Wu skillfully evocates the early years of telephony, when Western Union was on the verge of crushing Alexander Graham Bell’s young company until the telegraph giant suddenly found itself the subject of a hostile takeover by financier Jay Gould. Those were the days when who you could talk to depended literally on the network you were on, with competing wires running down the streets of New York and other major cities. In the end, Western Union agreed to exit the new market in exchange for Bell’s promise not to contest what it viewed as its more valuable telegraph monopoly. With the financial backing of J. P. Morgan and a strategy of “one company, one system” executed in hard-knuckle fashion by chief executive Theodore Vail, Bell’s AT&T used its dominance of the long-distance market to gain control of many of the country’s local exchanges. In time, AT&T convinced Washington of the logic of a regulated national monopoly under private ownership and control.

Although AT&T tried initially to dominate the new radio medium, it quickly met its match in David Sarnoff’s Radio Corporation of America, which used patent litigation and the threat of a government antitrust investigation to force the phone monopoly to divest its broadcast operation. In Wu’s telling, it was Sarnoff who imposed the advertising-based business model on broadcasting—“entertainment that sells”—and Sarnoff who convinced the new Federal Communications Commission to consolidate the broadcast industry into a smaller number of more powerful stations that were gradually consolidated into a handful of national networks, RCA chief among them. When an engineer at RCA’s laboratories came up with the technology for FM radio, Sarnoff did his best to squelch it, hoodwinking regulators to block its introduction to protect his AM franchise. Sarnoff would successfully follow a similar strategy with television, which came relatively late to the United States, and then only under the ownership of the existing radio networks.

Wu’s history of the motion picture business begins with the Edison Trust, which used its patents on the machinery to tightly control who made, imported, distributed, and exhibited the talking pictures. In time, control of the industry was passed back and forth between the studios and the movie theater chains until Adolph Zukor, a rebel distributor, gained control of Paramount and began buying up his own theaters to serve as the exclusive exhibitors of Paramount films. It would take a Justice Department antitrust suit to finally break up this “vertical” integration, but not before the studios had so firmly entrenched themselves that they provide the foundation for today’s media conglomerates—conglomerates which Wu contends continue to impose a stifling mediocrity on American cultural life.

In the Internet Age, Wu finds parallels in the AOL–Time Warner merger, which he views as nothing more than a ploy to force millions of AOL customers to consume Time Warner’s content. He sees it in the unholy alliance that forces Apple enthusiasts to use AT&T’s wireless network and Apple-approved applications and services for their iPhones and iPads. And he sees it in the proposed merger of cable giant Comcast with NBC Universal.

In the age of convergence, with telephone, television, movies, e-mail, and virtually all information now about to travel on the Internet, Wu argues that it is more urgent than ever that the network be “neutral,” lest a handful of companies come to control what we see, what we buy, and what we say. To that end, he proposes a set of “separation principles” that would prohibit any company that is in the business of carrying Internet traffic from also selling content or services, or selling preferential carriage to companies that do. Only such “structural” prohibitions, he argues, can assure the Internet’s vibrancy.

f there is a problem with Wu’s stylized history, it is that he has allowed it to become histrionic. While he provides a compelling reminder of the monopolist instincts of communications and media companies, Wu largely ignores the possibility that the underlying economics of these industries might tend them naturally toward consolidation, vertical integration, and winner-take-all competition. In fact, there is plenty of economic literature to suggest it.

Running through Wu’s history is an assumption that, if commercialization and consolidation had not occurred, the quality of service, news, and entertainment programming would have been vastly superior, even during what are often remembered as the “golden years.” For those of us old enough to have experienced some of those years, the proposition that the United States was a telecommunications backwater and cultural wasteland is as unconvincing as it is hypothetical.

Moreover, the examples Wu gives of countries that had better service and higher-quality entertainment were all places where the industry was under government ownership and control—exactly the opposite of the decentralized, free-market model Wu advocates.

In arguing for “separation principles” to prevent vertical integration, Wu argues that the goals of net neutrality are simply too important to entrust to the discretion of regulators, whose judgments may be flawed or compromised by powerful special interests. And yet his history is full of examples of regulators intervening to break up monopolies and stop their uncompetitive practices, from Western Union and A&T to Paramount and Microsoft.

Indeed, while there are examples of vertical integration that squelched competition and delayed innovation, there are others where it enhanced it. Wu himself cites the recent example of Google’s getting into the telephone space with its Android software. Competition between business models can be as important as competition among companies with similar ones. Inflexible rules governing which companies can do what not only would hinder that kind of competition and experimentation, but inevitably invite unproductive game playing by companies hoping to get around those restrictions.

One can certainly read Wu’s history and conclude that media giants never miss an opportunity to try to prevent and delay the introduction of disruptive new technologies that threaten their monopolies. You can also read it and conclude that, in the long run, these strategies inevitably fail because our political and economic systems won’t tolerate them for very long.

Which brings me to my biggest beef with The Master Switch. Like most conspiracists, of the right as well as the left, Wu doesn’t have much faith that the rest of us will recognize, let alone protect, our own interests. Underlying both his history and his prescription for net neutrality is an unspoken assumption that consumers and citizens are mere putty in the hands of corporate manipulators, who maximize profits by feeding us crap, denying us choice, and restricting our freedom of expression. So blinded are we by their technological wizardry that we don’t even know what we’re missing. In the brave new world Wu conjures up, the handful of vertically integrated giants who end up controlling the Internet will determine “who among us gets heard or seen and when, whether it is the aspiring inventor or artist or candidate.” That doesn’t sound like the America I know or experience, and it’s hard to believe that American consumers or voters would stand for it for very long. This kind of end-of-civilization-as-we-know-it argument may be well suited for grassroots advocacy, but it undermines the credibility of Wu’s legitimate concern that “the Cycle” is about to be repeated.