Review: “The Master Switch”

Tim Wu’s The Master Switch‘s greatest flaw is by no means unique. “Practically every” book about social or political ills,” David Greenberg tells us, “finishes with an obligatory prescription that is utopian, banal, unhelpful or out of tune with the rest of the book.” Wu’s final chapter manages to be all four, and I deeply identified with the the strained, almost frantic way he tried to MacGyver a half-dozen incongruous and sometimes contradicting themes into a coherent conclusion. I’ve been there myself, as I think most writers have, and since nobody else can figure out final chapters either, let’s put his final chapter on hold for a moment and consider the rest of the book.

The book discusses the history of the American film, radio, television, telephone and internet industries – and, more specifically, the similarities Wu sees between the arc of each industry. Wu calls this the Cycle, and it plays out roughly thus:

1. A disruptive invention, which unsettles established players and often leads to a brief utopianism as idealists and hobbyists popularize the new invention
2. Consolidation, as powerful forces gobble up control over the new technology and shut out further applicants.
3. Breakup, as (usually) the federal government eventually decides to fulfill its role as trust-buster, and we return to Step 1.

The Cycle serves decently well as a framing device, but Wu puts more weight on it than it can bear and tries to paint it as an inexorable rule of information industries. True, the cycle fits very well with radio and telephone, and well enough with television. But film (as Wu does explain) jumped directly to Step 2 with the Edison Trust, went back to Step 1 mostly through internal forces,¹ back to Step 2 with vertical integration of studios and theaters, and then a very Step 2-looking Step 3 when the Feds broke up the vertical integration but left the Hollywood production oligopoly essentially unchanged. The internet is even more troublesome; Wu alternates between describing the internet as a fragile thing that needs to be protected from content producers and telecom giants lest it enter Step 2, and an system fundamentally different from radio et al whose very nature renders it impervious to consolidation.²

The internet may in fact be both of those things. But Wu is much better at theorizing re: the effects of information monopolies than he is at systematizing the ways they appear. Some are created through brute capitalism (the Hollywood Oligopoly of the 20s-50s), others through regulatory entrapment (radio and then TV).  AT&T became a national monopoly mostly through massive amounts of JP Morgan’s capital; regulatory capture was certainly involved, but it served more to maintain the monopoly than to create it. And there’s no real reason information industries should follow the same pattern, just because they deal in information. Telecoms are an example of a natural monopoly and as such have more in common with, say, power generation than an industry like film. The barrier to starting an independent radio station was lower in the heyday of AM consolidation than the barrier to starting a telecom system was in the brief period of openness after the breakup of Ma Bell in the 1980s. The Cycle doesn’t tell us much useful about how information monopolies form.

Still, the thrust of the argument behind the Cycle frame is sound: information industry monopolies are different from other monopolies because they deal extensively in who can say what and who can hear them – that is, free speech is meaningless if you’re only talking to yourself. Wu includes some great – that, is, terrifying – examples of this phenomenon, the best of which is probably Western Union, the AP, and the 1876 Presidential Election. It’s excerpted here (seriously go read it), but the general outline is that Western Union had a monopoly on telegraph, and their close corporate friendship with the Associated Press meant that the AP had a monopoly on timely national news. Western Union and AP used this to build up Rutherford B. Hayes, tear down his opponent, and share Hayes’ opponent’s commutations with the campaign.

Less sensationalist, but more frightening examples to my post-“The era of big government is over” liberal ears are the tales of how regulatory capture aided and abetted these monopolies. As I mentioned before, AT&T’s détente with federal regulators was mostly ex post facto, but the paths of radio and TV were sometimes spine-tingling. Edwin H. Armstrong first demonstrated FM radio in 1936, and the first commercial FM station opened in 1941. But lobbying by RCA (the Godfather of AM) was successful in getting the FCC to move FM’s radio band from 42 to 50 MHz to its present home in 88-108 MHz – supposedly to give it more “room,” but in actuality to render all 500,000 working commercial FM radio sets inoperable. It would take more than a decade for FM to come back in any healthy form, and another two before it would supplant the technologically inferior AM. In the meantime, Armstrong – bankrupted by an intentionally-drawn out lawsuit by RCA, who was spuriously claiming to have invented its own FM standard – stepped out the window of this 13th floor Manhattan apartment.

TV was, if anything worse. Though the early, mechanical version of TV – incredibly anachronistic looking, with circular screens – would not have likely had widespread adoption at any rate, the FCC classified the technology as “experimental.” Experimental it may have been, but as such the FCC prohibited the upstart TV stations from running advertising, hamstringing the technology by prohibiting the revenue stream that had made AM radio a commercial viability.³ Meanwhile, RCA – in part through industrial espionage – was duplicating the electrical television of Philo Farnsworth⁴ and unveiled it as their own invention in 1939. The similarities to RCA’s response to FM are striking – up to and including the five-year legal battle with Farnsworth over the patents to the electronic TV.  To add icing to the cake, the FCC limited TV licenses to two per market – one for RCA’s NBC, and one for NBC’s partner in the AM radio’s duopoly, CBS.

Though Wu tries to make Ma Bell the villain of the story, he only partially succeeds. I am too young to remember the Bell monopoly, and my intellectual coming-of-age coincided with broadband, cell phones, and defanged local telephone monopolies. The reconstitution of Ma Bell is concerning, mostly for the privacy implications, but I’m too cynical to believe further telephony fragmentation would have hindered the NSA – after all, the closet the NSA installed in AT&T’s building in San Francisco had the ability to tap into all traffic on the common backbone, not just AT&T’s. It’s the federal government in all its hydra-headed aspects that comes off as both the hero and the villain – breaking up monopolies with one hand and sustaining them with the other, and exploiting them when it could.  But the most salubrious aspect of the book for me is the way it contradicts the typical left-right paradigm of government intervention that inhabits my brain in an era of “you didn’t build that” and “severe conservatives.” There were pro-business conservatives who upheld monopolies and pro-market conservatives who destroyed them. The Nixon White House supported cable TV in its battle against the broadcast oligopoly, and began the antitrust suit against Ma Bell; the Reagan White House finally broke up AT&T (while Goldwater called the breakup “the worst thing to happen to our national interests in telecommunications that will ever occur.” Meanwhile, support for the monopolists was usually framed in left-leaning terms like “planning” and even consumer protection.⁵ To my mind, regulation today means things like reigning in fracking, or getting a leash on an industry that almost destroyed the world economy in 2007. If nothing else, The Master Switch gave me sympathy for those who see danger and regulatory capture in every attempt to regulate industry.

It’s the capricious, arbitrary nature of the federal government’s roll in these information industries that makes Wu’s final chapter such a let down.  After a book detailing the ways in which Washington condoned or exacerbated information monopolies, Wu proposes… a regulatory philosophy. And lest the reader thing he is proposing something radical (read: useful), he assures us his regulatory principle does not require a constitutional amendment or even “an overhaul of current approaches to the information industries in the Untied States.” On the contrary, his regulatory proposal is already in place, kinda? I don’t mean to say that his proposal – the “Separation Principle” – is a bad one. It’s not, and it’s a good metric for judging the potential threat of industry action. It’s just that articulating a regulatory philosophy will in no way prevent regulatory capture. Channeling shades of Acemoglu and Robinson, I don’t think regulators shielded Ma Bell from competition and protected AM radio from FM and TV because they were stupid. The Sherman Act was passed in 1890 – people knew monopolies were, in general, a bad idea. But monopolies bring benefits as well – often to regulators, if not to customers – and regulators found it in their self interest (whether personal or institutional) to act as they did. Elucidating a superior philosophy of regulation by itself will not change those incentives.

Last chapters are hard, and Wu would have been laughed out of the room if he had proposed changes that could actually have solved the problems he identifies – say, a constitutional amendment expanding free speech protections from corporations, instead of just from the federal government, or a well-funded agency protected from regulatory capture with independent authority to police the corporate world.  Both of these suggestions have massive practical problems and would be near-impossible to institute in any case. But trying to hand-wave the problem away after spending 300 pages explaining it just left me with a bad taste in my mouth. Instead, I think we (as in, we the internet) should consider Wu’s last chapter as our marching orders: to be vigilant of both the industry and the regulators, and put pressure on Congress the way people did in 2006 to save net neutrality. The bulk of Wu’s book explains why such vigilance is needed; the last chapter tells us what to watch for and gives us rhetorical and philosophical support for public action.