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For much of the last century, people didn’t have a choice of phone companies; a monopoly owned the lines that carried calls, and it provided the phones to homes as well. AM radio stations were held by a handful of people, who managed to squelch independent voices and delay the advent of a superior technology, FM radio. Television was dominated by just three national networks in the United States, and each offered similar programming.

Fortunately, we’ve overcome that. Governments recognized the benefits of busting up monopolies in these information industries so that competitors with creative ideas and innovative technologies could flourish. Inexpensive computers and electronic devices made it possible for more people to become creators. And the Internet emerged as a distribution platform that no one was in charge of, so anyone could be heard. Now we have more choices than ever in the media we consume and the ways we consume them.

Thank goodness the confining days of the 20th century are behind us and freedom of expression and choice will forever reign, right? Don’t be so sure, says Tim Wu, a law professor at Columbia University. In his new book, The Master Switch: The Rise and Fall of Information Empires, Wu argues that our Internet-driven, increasingly wireless information bounty could be on the verge of falling into the stifling control of a handful of powerful companies—just as TV, film, radio, and telephones did in their time. In Wu’s view, such companies as AT&T, Comcast, and Apple will try to increase their power as gatekeepers of information, subverting the promise of the Internet as a revolutionarily open distribution medium. Google was founded on an alternative premise, one rooted in the ideals of the Internet, but Wu fears that Google might also be drawn to the dark side.

Wu’s argument is important for two reasons. First, a communications industry that is closed (meaning, in this context, that it is dominated by a monopoly or oligopoly, unchallenged by government regulators) creates fewer opportunities for ingenuity and economic growth than an industry that is open to a wide range of players. When the Bell monopoly controlled the U.S. phone system, it quashed innovations such as the answering machine and blocked add-on products and services that weren’t provided by AT&T itself.

Second, the structure of a communications industry tends to shape its products. For instance, when Hollywood was closely held by studios that controlled the production, distribution, and exhibition of movies, it had little reason to take creative chances. And because it was consolidated, the industry offered one-stop shopping for conservative religious forces that demanded a “production code,” which prohibited films from depicting anything deemed immoral. As a result, Hollywood movies in the middle of the century were largely predictable, homogenous fare. In the 1970s, after Hollywood was forced to relinquish vertical control of the movies, risk-taking directors and producers finally got avenues to theater screens, and American cinema blossomed. But when the 1980s and ’90s brought a different kind of business structure to Hollywood—that of the conglomerate, in which a film studio is part of a larger corporation that also sells video games, books, or toys—then we got more and more movies like Transformers, which are not merely films but also two-hour advertisements for products and sequels.

Wu has one basic reason for believing that the communications industries of today could become dangerously consolidated, making it much harder for independent companies and creative voices to be heard: something like this has always happened. He calls it “the cycle.”

Wu’s cycle describes a pattern that fits each major new communications technology, from the telegraph and telephone to the Internet. First, the breakthrough overturns some dominant business order. It creates new opportunities for inventors and investors and expands the range of voices that can be broadcast. The advent of radio, for example, spawned thousands of small, independent stations around the country, as churches, unions, and other community groups all sought to express themselves over the airwaves—much as millions of everyday people and organizations would later put up their own Web pages.

But before long, the most powerful forces in the industry, seeking the significant benefits of scale in the information business, centralize control. They persuade government and much of society that this concentration is for the common good, so that productive order can be brought out of the chaos. In the case of radio, the executives who built NBC argued successfully that the nation needed to clear the airwaves of tiny, independent stations to make room for a network of larger stations that each could reach more people.

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Credit: Mikiko Hayashi

Tagged: Business, Business Impact, mobile devices, cell phones, communication, The Mobile Enterprise

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