Shirky's Machines

"Thanks to the move from analog to digital networks," writes Clay Shirky, "the telephone companies' most significant competition is now their customers, because if the customer can buy a simple device that makes wireless connectivity or [Internet] phone calls possible, then anything the phone companies offer by way of competition is nothing more than the latest version of ZapMail."

ZapMail? That was the Federal Express service that promised to deliver documents in just two hours, using a then-newfangled technology called faxing. What the company didn't realize was that, while faxing via FedEx may be quicker than sending a physical package, it's even easier and cheaper to buy your own fax machine.

"The business Fred Smith imagined being in—build a network that's cheap to run but charge customers as if it were expensive—is the business the telephone companies are in today," Shirky explains. "They are selling us a kind of ZapPhone service, where they've digitized their entire network up to the last mile, but are still charging the high and confusing rates established when the network was analog." Between wireless networks and voice-over-Internet devices, he argues, consumers will be able to route around the phone companies' barriers. That's bad news for the industry, but good news for the rest of us.