A Review of "The Master Switch"

By DAVID LEONHARDT
Published: December 10, 2010

THE MASTER SWITCH

The Rise and Fall of Information Empires

By Tim Wu

366 pp. Alfred A. Knopf. $27.95



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.

Excerpt: ‘The Master Switch’ (December 12, 2010) 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 wiretapping 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.