Business Bookshelf: The Master Switch

  • Updated: December 11, 2010 - 11:03 PM


Tim Wu, Knopf, 384 pages, $27.95

In Tim Wu's view, new information technologies follow a predictable pattern that he ominously terms "the Cycle." First, the technology emerges, "bright with promise and possibility." The new world is dominated by enthusiastic amateurs and seems more open, more democratic and more free. Advocates imagine new forms of journalism, education and even government.

But Wu, a law professor at Columbia, writes in "The Master Switch" that the expansive liberty offered by the new technology can carry a downside for consumers. They are often overwhelmed by content that is, at turns, brilliant, crass and untrustworthy. The service is unreliable and difficult to use. And for all the medium's promise, no one is making any money.

This gives rise to the next phase in the Cycle: A mogul, or small group of moguls, emerges to take control of the new service. Importantly, Wu does not deny the benefits of these monopolies. "Delivering a better or more secure product," he writes, "the mogul heralds a golden age in the life of the new technology." The problem comes later. Eventually, new innovations or forms of expression threaten the business model, and the moguls use their power over the market to set back any advances by rivals.

Wu tracks the Cycle over and again: in the telegraph, with Western Union; in the telephone, with the rise of AT&T; in radio, with the dominance of RCA; in television, with the cartel of NBC, CBS and ABC; in film, with the five major studios. The ultimate point is that there is little reason to believe the Internet is somehow immune to the Cycle. Indeed, consider the giants that dominate online markets: Google in search, Amazon in retail, Apple in music.

This month, Julius Genachowski, the chairman of the Federal Communications Commission, proposed a set of rules for "Net neutrality." Worryingly, the initial response can best be summed up as glee from telecommunications giants and dismay from open Internet advocates and content providers such as Google and Netflix and Amazon. It's early yet, but the process bears watching. Those who forget the Cycle are doomed to repeat it.


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