Most cyberlaw tracts or Internet policy books today lament a world full of corporate conspiracies, closed systems, "kill switches," and squashed consumer rights. The world loves a good tale of villainy and misery, and that's exactly what Tim Wu, a professor at Columbia Law School, delivers in The Master Switch: The Rise and Fall of Information Empires.
Lawrence Lessig, the well-known legal scholar, kicked off this genre of hand wringing with his seminal 1999 book Code and Other Laws of Cyberspace, which warned that an unfettered digital marketplace would be anathema to our freedoms. "Left to itself," Lessig predicted, "cyberspace will become a perfect tool of control." Control, that is, by corporate forces hellbent on dictating the course of commerce and culture. Lessig argued that collective action was needed to counter these forces.
Lessig's many disciples in academia and activism continue to preach this gloomy gospel of impending, corporate-led digital doom and "perfect control." Jonathan Zittrain's much-discussed 2008 book The Future of the Internet & How to Stop It brought Code and Other Laws of Cyberspace up to date by giving us a fresh set of villains. Gone was Lessig's old foil AOL and its worrisome walled gardens. Instead, the new faces of evil were Apple, Facebook, and TiVo. Zittrain fretted about "sterile and tethered" digital "appliances" (like the iPhone and TiVo) that foreclose digital innovation, as well as the rise of "a handful of gated cloud communities" (such as Facebook) "whose proprietors control the availability of new code."
Tim Wu extends this pessimistic narrative in The Master Switch. He ominously warns that there are "forces threatening the Internet as we know it," then crafts an enemies list that reads like a Who's Who of high-tech America. Wu sees "information monopolists" everywhere: Amazon, Apple, eBay, Google, Facebook, Skype, even Twitter. In Wu's telling, periods of openness and competition in information industries are inevitably followed by concentrations of private power; the companies that come out on top, he believes, then have a lock on their respective sectors. Wu refers to this as "the cycle" and suggests that "radical" steps must be taken to counter it and "preserve freedom." "If the stories in this book tell us anything," he writes, "it is that the free market can also lead to situations of reduced freedom. Markets are born free, yet no sooner are they born than some would-be emperor is forging chains. Paradoxically, it sometimes happens that the only way to preserve freedom is through judicious controls on the exercise of private power. If we believe in liberty, it must be freedom from both private and public coercion."
Wu and other progressives don't always come right out and say it, but they often suggest that private power, however defined, is so persistently insidious that the only way to counteract it is by greatly amplifying state power. We see that yearning for a stronger state in Wu's suggestion that "the disposition of firms and industries is, if anything, more critical than the actions of the state in controlling who gets heard" and in his audacious regulatory solutions, which would greatly enhance the government's power over the information economy.
Wu's central claim in The Master Switch is that information industries evolve toward "closed," corporate-controlled, anti-consumer systems. The resulting "monopolists" then block innovation, competition, and free speech. Thus, he concludes, "the purely economic laissez-faire approach…is no longer feasible."
To his credit, Wu admits that government forces have facilitated this process. In particular, he notes the significant roles of regulatory capture and bureaucratic mismanagement: "Again and again in the histories I have recounted, the state has shown itself an inferior arbiter of what is good for the information industries. The federal government's role in radio and television from the 1920s through the 1960s, for instance, was nothing short of a disgrace.…Government's tendency to protect large market players amounts to an illegitimate complicity…[particularly its] sense of obligation to protect big industries irrespective of their having become uncompetitive."
Wu is certainly correct about this. Yet as quickly as he raises these issues, he walks away from them. He never draws any serious lesson from that disturbing corporatist history. Often within a few lines of raising such concerns, he seems to dismiss them entirely and proposes giving the state far more power to play games with the information sector. Wu's assessment that the "purely economic laissez-faire approach" is a failure is hard to reconcile with the history he recounts, since a "purely economic laissez-faire approach" never existed. Moreover, you won't ever get less regulatory capture and bureaucratic mismanagement by increasing the scope of government control.
Wu argues that the information sector is more important than all others, so much so that traditional forms of regulation, such as antitrust, "are clearly inadequate" for regulating them. The remedy, he writes, "is not a regulatory approach but rather a constitutional approach to the information economy. By that I mean a regime whose goal is to constrain and divide all power that derives from the control of information. Specifically, what we need is something I would call a Separations Principle for the information economy. A Separations Principle would mean the creation of a salutary distance between each of the major functions or layers in the information economy. It would mean that those who develop information, those who control the network infrastructure on which it travels, and those who control the tools or venues of access must be kept apart from one another." (Emphasis in the original.) Wu calls this a "constitutional approach" because he models it on the separations of power found in the U.S. Constitution.
In concrete regulatory terms—and despite what Wu tells us, his approach most assuredly would require regulation—the Separations Principle would segregate information providers into three buckets: creators, distributors, and hardware makers. Presumably these would become three of the new "titles" (or regulatory sections) of a forthcoming Information Economy Separations Act.
While conceptually neat, these classifications don't conform to our highly dynamic digital economy, whose parameters can change wildly within the scope of just a few years. For example, Google cut its teeth in the search and online advertising markets, but it now markets phones and computers. Verizon, once just a crusty wireline telephone company, now sells pay TV services and a variety of wireless devices. AOL reinvented itself as a media company after its brief reign as the king of dial-up Internet access. Would firms that already possess integrated operations and investments (Microsoft or Apple, for instance) be forced to divest control of them to comply with the Separations Principle? If so, wouldn't that hinder technological development?
Wu shrugs off such concerns. "The Separations Principle accepts in advance that some of the benefits of concentration and unified action will be sacrificed," he writes, "even in ways that may seem painful or costly." Such a flippant attitude ignores not only the potential benefits of certain forms of integration but also the fact that his proposed information apartheid would upend the American economy as we know it (by, say, forcing the breakup of dozens of technology companies and countless media providers). He also ignores the litigation nightmare that would ensue once the government started forcing divestitures.
Nor does Wu explain how the bureaucratic machinations and regulatory capture he decries earlier in the book would be held in check under his proposed regime. He breezily writes that "the government [should] also keep its distance and not intervene in the market to favor any technology, network monopoly, or integration of the major functions of an information industry," but he does not explain how this will be accomplished. Does he believe we can build a better breed of bureaucrat if we just try harder?
Equally astonishing is Wu's assertion that "a Separations regime would take much of the guesswork and impressionism…out of the oversight of information industries." To the extent that his Separations Principle eliminates "guesswork" and creates more regulatory certainty, it would do so only by creating rigid artificial barriers to market entry and innovation across the information economy. That's the kind of "certainty" we can live without.
Who or what would enforce this new system? Wu doesn't offer a detailed roadmap, but he indicates that many familiar faces would continue to have a role. Despite his admission that the Federal Communications Commission (FCC) "has on occasion let itself become the enemy of the good, effectively a tool of repression," Wu suggests the agency will continue to have "day-to-day authority over the information industries." The FCC's current regulatory authority is limited mostly to older sectors of the information economy (broadcasting and telecommunications in particular), but Wu believes its role should be expanded, particularly through "net neutrality" mandates on information distributors. (Among his other claims to fame, Wu coined the phrase net neutrality. For more on neutrality-based regulation of the Internet, see "Internet Cop," page 20.)
Yet stepped-up FCC oversight won't be enough. Wu says we need "not only an FCC institutionally committed to a Separations Principle but also a structural arrangement to guard against such deviations, including congressional oversight as well as attention and corrections from other branches of government." Here the "breadth and ambition" that Wu says will be necessary to enforce his Separations Principle becomes more apparent. We are talking about layer upon layer of prophylactic regulation.
Creating firewalls between the classifications that Wu proposes would be a nightmare, entailing incessant interventions to make sure the walls aren't breached. Regulatory line drawing would be mind-bogglingly complex and costly as each new information-sector innovation would be subjected to a laborious classification proceeding. Yet despite what history has taught us about the inefficiencies associated with such heavy-handed regulation, Wu asks us to believe this new regime will lead to more innovation and consumer choice than what the Internet has managed during the last two decades.
What's perhaps most troubling about The Master Switch is something it shares with Lessig's book: a concerted effort to redefine "Internet freedom." In the Lessig-Zittrain-Wu construction of Internet freedom, technocrats liberate us from the supposed tyranny of the marketplace and what Lessig calls "code failure." High-tech entrepreneurs are cast as villains; their innovations are viewed as threats to our liberties.
When challenged, Wu, Lessig, and Zittrain all vehemently reject the notion that their outlook is pessimistic. They occasionally insist that they are actually libertarians at heart. But a plain reading of Lessig, Zittrain, and Wu provides little cause for optimism. Unless someone or something—usually the state—intervenes, they warn, the Net and all things digital are doomed. "Not only can the government take these steps to reassert its power to regulate, but…it should," argues Lessig. "Government should push the architecture of the Net to facilitate its regulation, or else it will suffer what can only be described as a loss of sovereignty."
These scholars seem trapped in what Virginia Postrel labeled the "stasis mentality" in her 1998 book The Future and Its Enemies. They want an engineered world that promises certain outcomes. They are prone to taking snapshots of market activity and suggesting that those temporary patterns are permanent disasters requiring immediate correction. (Recall Lessig's fear of AOL, which once had 25 million subscribers who were willing to pay $20 a month to get a guided tour of the Internet, but which ignored the rise of search and social networks at its own peril. It didn't help that the company's disastrous merger with Time Warner ended with over $100 billion in shareholders losses and an eventual divorce.) The better approach is what Postrel termed dynamism: "a world of constant creation, discovery, and competition." Dynamism places heavy stress on the heuristic and believes there is inherent value in an experimental, evolutionary process, no matter how messy it can be in practice.
That doesn't mean everything will be sunshine and roses in a free information marketplace. There will be short-term spells of what many would regard as excessive market power, as with IBM with mainframes in the 1970s or Microsoft with operating systems and Web browsers in the 1990s. The question is how much faith we should place in central planners, as opposed to evolutionary market forces, to solve that problem. The dynamist has more patience with competition and technological change and is willing to see how things play out. "Market failures" and "code failures" are ultimately better addressed by voluntary, spontaneous, bottom-up responses than by coercive, top-down approaches. And as the case studies of AOL and IBM prove, those market responses can be ruthless, rapidly eroding the power of "information empires."
Indeed, the decisive advantage of the market-driven approach is nimbleness. It is during what some might regard as a market's darkest hour when some of the most exciting disruptive technologies and innovations develop. People don't sit still; they respond to incentives, including short spells of apparently excessive private power.
The future of the Internet will be determined by the ongoing interplay of these two conflicting visions. Sadly, with scholars like Lessig, Zittrain, and Wu dominating the academic discussion and producing books like The Master Switch, stasis and cybercollectivism may end up reigning supreme.
Adam Thierer is a senior research fellow at the Mercatus Center at George Mason University.