How network neutrality’s biggest advocate misreads history
If you want to understand why Tim Wu — the Columbia Law professor who invented the term “net neutrality” — is such a fanatic about open networks, consider the sorry state of cellular phones a mere four years ago. Back then, phone companies exercised total control over handsets, blocking customers from downloading any software to customize their phones, except perhaps for a few over-priced, badly designed apps. It’s just the sort of situation—powerful communications companies abusing their market position to close off consumer’s access to technology—that rightly makes Wu’s blood boil.
What happened next, as Wu recounts in his new book “The Master Switch: The Rise and Fall of Information Empires,” quickly changed the balance of power. First, in 2007, Apple (AAPL) strong-armed AT&T (T) into allowing the first app store in which consumers would have vastly greater choice over how to customize their phones. The next year Google (GOOG) weakened carriers’ grip further, leading a group of major companies in an “open handset alliance.” Today more new smartphones run on Google’s open Android operating system than any other. Customers now expect to control their phones, not to have them controlled.
Kind of makes you want to shout: “Hurrah for the forces of openness!” Right?
Not Professor Wu. Instead of being giddy at this explosion of openness, the Columbia law professor is glum. Thanks to a historical pattern he claims to have identified, the recent advances in mobile phone openness portend great evil. “I have always been struck by what I feel is too strong an insistence that we are living in unprecedented times. In fact, the place we find ourselves in now is the place we have been before, albeit in different guise,” Wu writes. “The oscillation of information industries between open and closed is so typical a phenomenon that I have given it a name: ‘the Cycle.’”
The only problem: Wu’s Cycle has been broken by digital technology. The 20th century was an analog age, when communications capacity was scarce, prices high and network owners powerful. The 21st century is a digital age, a world of abundant capacity, low prices and user-controled networks. The world has ripped itself free of Wu’s grim analog rhythm, in which something good is inevitably followed by something bad. The story of telecom no longer resembles an analog oscillation. A digital switch has been thrown, and now things are different.
Professor Wu confesses early on his distaste for rubes like me willing to believe from such digital delusions: “The immediate inspiration for this book is my experience of the long wave of easy optimism created by the rise of information technologies in the late 20th and early 21st centuries, a feeling of almost utopian possibility and idealism.”
Wu is one of telecom’s great writers (see his writings at Slate or this ingenious proposal for homes with fiber-optic “tails.”) In The Master Switch he gets off to a ripping start with stories about AT&T’s Theodore Vail and other titans of the 20th century, many of whom had an unhealthy preference for comfortable monopolies over real competition.
Yet even as the 20th century draws to a close Wu still see robber barons around every corner. In fact he becomes so convinced of his theory of the Cycle that he starts forcing history to fit his theory rather than the other way round.
How else to explain Wu’s inexplicable anger at the “new age of Bell ascendancy” that he says began for SBC (now AT&T) and Verizon (VZ) following the Telecom Act of 1996? That’s laughable. Any way you slice it, the Bells have had a brutal run since the day Bill Clinton signed that bill. Here’s a picture of the Bells’ alleged age of ascendance, during which their investors’ returns descended way below the rest of the market:
But that chart barely does justice to the pain the Bells have gone through as digital technology has gutted their two core businesses, selling local and long distance phone calls.
The Bells’ biggest lobbying victory in the 1996 act gave them the right to offer long distance service, traditionally the richest market in all of telecom. Lucky them! According to the FCC, SBC and Verizon managed to amass a mere 5% of the $109 billion long distance market by 2000—at which point the market began to implode. Today half those $109 billion in revenues are simply gone, disintegrated by cell phones and Internet calling systems such as Skype. The stench of digital death hangs so heavy on the long distance business that the phrase “long distance” no longer even appears in Verizon’s quarterly financial reports.
Not that you’d sense this from Wu’s version of telecom history. As he tells it, 2000 is when things really started going great guns for the Bells: “George W. Bush became president and within a few years most of the Bells’ wishes came true.”
Not unless the Bells had a death wish they didn’t. Up until 2000 Verizon and SBC had seen their core business of selling local phone service grow every year since the Great Depression. Starting in 2000 it has declined every single year as Internet calling and cell phones have empowered “cord cutters” and ravaged the industry. In the past year alone 2.5 million Verizon customers cut off landline service, a drop of 8.6%.
To be fair, that’s not what Wu means when he referred to the Bells’ “wishes coming true.” He is talking about how the Bell’s managed to subvert rules in the 1996 law meant to make them share their networks with local competitors.
And subvert them they did. But who cares? Professor Wu spends so much time bemoaning the failure of government-designed competition that he fails to notice that digitally-enabled competition blew up the powerful Bell’s main business. Looking back on the 1996 Act, you could be in dismayed by the phone giants’ massive lobbying muscle, as Wu is. Or you could simply be bemused at how laughably misguided the fight was, an all-out war to dominate the dying businesses of the 20th century.
Of course none of this would really matter much if it was only one professor’s reading of history. But Wu goes on to advocate for new network neutrality laws on the premise that the only way to arrest “the Cycle” is for government to leap into the fray. It is not such a big deal, he assured regulators in comments to the FCC earlier this year. (“It is far less aggressive than the anti-discrimination laws imposed on carriers under the Cleveland or Taft Administrations,” he told the commission.)
That approach shows a galling lack of humility. The Internet has worked stunningly well, and grown stunningly large without the aid of such laws. Yet Wu confidently declares his interpretation of telecom’s past is so precise as to warrant changing them now? Perhaps there will be times when regulators need to step in, but for now, as open networks do a stunningly good job of spreading themselves, why get the government involved?
The danger of Wu’s book is that readers will conflate his admirable love of open communications networks controlled by users with his affection for government regulations controlled by politicians. As Tim Lee recently pointed out, it is possible to be both pro-openess and anti-regulation.
Openness and a lack of regulation have always defined the Internet, making it unlike anything Tim Wu has studied in the past. The digital switch has been flipped. The Cycle is broken. The 21st century will be different.