by Tim Wu
The Empire, long divided, must unite
Under the name that had signified unified telephony for more than a century, Whitacre’s company became the largest communications firm in the world, just as its namesake had been. It had spent twenty-one years in the wilderness. But in name and in fact, AT&T was back.
SPYING
“I flipped out,” he said. “They’re copying the whole Internet. There’s no selection going on here. Maybe they select out later, but at the point of handoff to the government, they get everything.”15
Mark Klein began his career as a young engineer at AT&T in 1982. Twenty-one years later, Klein was still at AT&T, working in the San Francisco offices, when he began to notice something odd. His fellow AT&T engineers were installing a raft of expensive hardware in little-used Room 641A, and access to that room was restricted.
Klein watched carefully and began to take notes. He noticed that the restricted room was connected to a larger one containing the high-speed fiber optic lines that went in and out of the building, the ones carrying Internet traffic to and from San Francisco, and the “peering links” to other major telecom providers. At some point—details are sketchy—Klein managed to get inside Room 641A. There he found an array of sophisticated networking equipment—crucially and in particular a semantic traffic analyzer, a special machine designed for intensive data mining and content analysis. After more than two years, Klein came to a most upsetting conclusion: AT&T had built a secret room to help the federal government spy on the Internet, and not just AT&T’s customers but everyone’s.
You might have wondered whether there had been any practical consequences to the return of AT&T, which, considering the drama of its dissolution, had been allowed rather quietly to regroup. It may seem that the average person, assuming he saw no spikes in his monthly phone bill, could afford to remain fairly indifferent to who runs the telephone system. But as Klein’s story suggests, it can be a matter of very serious importance. It may be impossible to say for certain that the reconsolidation of AT&T fundamentally enabled the National Security Agency’s surveillance program, but the need to involve so few companies in the conspiracy undoubtedly made things much easier. Suffice it to say, as the Cold War made clearest, the federal government has usually found an integrated telephone system more malleable to its needs than a fragmentary one.
In the early 2000s, when the spying began, SBC and the rest of the Bells had various merger deals pending before the Justice Department and the FCC. Again, while a direct causal link, much less a quid pro quo, is impossible to prove, this was obviously a very prudent time to be helping out the government.
Here is how Klein described the situation:
In 2003 AT&T built “secret rooms” hidden deep in the bowels of its central offices in various cities, housing computer gear for a government spy operation which taps into the company’s popular WorldNet service and the entire internet. These installations enable the government to look at every individual message on the internet and analyze exactly what people are doing.16
He described, in particular, the setup at his own place of work:
In San Francisco the “secret room” is Room 641A at 611 Folsom Street.… High-speed fiber-optic circuits come in on the 8th floor and run down to the 7th floor where they connect to routers for AT&T’s WorldNet service, part of the latter’s vital “Common Backbone.” In order to snoop on these circuits, a special cabinet was installed and cabled to the “secret room” on the 6th floor to monitor the information going through the circuits.17
Mark Klein passed these declarations, along with pictures of one of the secret rooms, to the Electronic Frontier Foundation, a digital civil liberties group based in San Francisco. After holding a press conference, the EFF sued AT&T, alleging, on the basis of Klein’s documents, violations of the Foreign Intelligence Surveillance Act (FISA), which at the time made it illegal for a private party to engage in electronic surveillance not authorized by statute.* The EFF declared, “We want to make it clear to AT&T that it is not in their legal or economic interests to violate the law whenever the president asks them to.”18
When Klein made his startling allegations, however, it wasn’t exactly clear that they were true. In its filings, AT&T was unresponsive, and the federal government wasn’t about to admit it was spying on Americans. No one knew then about the secret order Bush had signed in 2002 authorizing domestic surveillance without a warrant, a contravention of FISA and of the administration’s repeated claims that the NSA was spying only on foreigners. But by April 2006, the administration had entered the lawsuit, asking for its dismissal.19 It was now clear that something was going on.
The resolution of this matter has little to commend it. In July 2008, during the presidential campaign, Congress passed a law granting AT&T and Verizon full and retroactive immunity for any violations of the laws against spying on Americans.20 (That same measure, incidentally, also expanded the period that the FBI could spy on Americans without a warrant, now up to one week.) Tying the immunity provisions to a national security bill was crucial, for doing so terrified any congress-member, Republican or Democrat, who might have opposed the broad grant of immunity, lest he be accused of being weak on national security. Presidential candidate Senator Barack Obama, for example, while on record as opposing the immunity, nonetheless voted for the bill in order to defend his national security credentials; he described the bill as “improved but imperfect.”
With the bill’s passage, the matter mostly faded from public view, like much else of questionable legality undertaken during these years in the name of national security. Just as surely as the iron fist of government had been the only power equal to dismembering the mighty Bell monopoly, the flameproof hand had again intervened, this time to pluck its sometime corporate adversary, but now, as in the good old days, its strategic partner, from the fires of legal jeopardy.
Thanks to the immunity grant, there is a good chance that the extent of government spying, past and present, will never be known. But the moral of the story is obvious. In an age more reliant than ever on telecommunications media, the more concentrated the power over information and communications, the easier it is for government to indulge its temptation to play Big Brother. With everyone in the country now connected, the fewer the parties that need to be persuaded to cooperate, the greater the risk. With the convergence of all communications by virtue of interconnected networks (aka intermodality), the reconstituted giants of telephony are closer to possessing a master switch than Vail himself could have dreamed. Those are the unremarked costs of the return of the empire.
THE CYCLE
By 2007, Ed Whitacre had fulfilled his mission, and his destiny. Most of the Bell system was back in place in the world’s largest communications firm, with him at the helm. At age sixty-five, with nothing left to prove, he announced his retirement.21 In accordance with the custom of the early twenty-first century, it would be the occasion for a very sizable payout, over $200 million, making it clear that even if money isn’t the only motivation for building an information empire, it is certainly among the rewards.
In one way, more than any other phenomenon we have considered, the return of AT&T—that perennial phoenix—would seem to prove the irrevocability of the Cycle of information empires, their eternal return to consolidated order however great the disruptive forces of creative destruction. After all, despite the explicit wishes and mighty efforts of the FCC and Congress to maintain an open and competitive telephone market, within twenty years the national phone system was once again ruled by just a few companies, most of them parts of the old Bell system. Though such a view of inevitability perhaps makes for a tidier argument, no theory of history operates in isolation from the particularities of the times and the actors. Every consolidated entity may well have only until the next turn of the Cycle before being scattered, and everything scattered may await only its eventual imperial visionary.
* Pursuant to a suggestion by the D.C. circuit court of appeals
, the commission decided to eliminate the requirement that the Bells share the entire “platform” (the line plus switch and other necessary equipment), obliging them thereafter to share only the “line.” That put on competitors, in all instances, the added burden of installing their own switching equipment within the Bell facilities.
* The law, 50 U.S.C. §1809, makes it an offense if a person “discloses or uses information obtained under color of law by electronic surveillance, knowing or having reason to know that the information was obtained through electronic surveillance not authorized by statute.”
The Internet Against Everyone
BY THE END OF THE FIRST DECADE of the twenty-first century, the second closing of the traditional information industries was complete. Most of the phone system was back in the hands of Bell, and its competitors were being steadily run down. A gang of conglomerates comfortably controlled film, cable, and broadcasting. And while this new order was by no means absolute, the industrial concentration had reached levels not seen since the 1950s.
The one great exception to this dominion of big business was the Internet, its users, and the industry that had grown on the network. Amid the consolidation, the 1990s also saw the so-called Internet revolution. Would it lead to the downfall of those consolidating superpowers? Some certainly thought so. “We are seeing the emergence of a new stage in the information economy,” prophesied Yochai Benkler. “It is displacing the industrial information economy that typified information production from about the second half of the nineteenth century and throughout the twentieth century.”
Unfortunately, the media and communications conglomerates didn’t consult Benkler as their soothsayer. With aggregate audiences in the billions and combined revenues in the trillions, they had—in fact, have—a very different vision of the future: the Internet either remade in their likeness, or at the very least rendered harmless to their core business interests.
For even though its origins are distinct, the Internet by 2010 had become a fledgling universal network for all types of data: phone calls, video and television, data, a potential replacement for every single information industry of the twentieth century. Technologically this was a product of the Internet’s design, conceived to be indifferent to the nature of the content carried, able to handle it all. But for the old media industries of the twentieth century, the shape-shifting nature of the Internet, its ability to be a phone, a TV, or something new, like Facebook, posed an existential threat. Hence the powerful desire to bring the network to heel, one way or another.
We now face squarely the question that the story told heretofore is meant to help us answer. Is the Internet really different? Every other invention of its kind has had its period of openness, only to become the basis of yet another information empire. Which is mightier: the radicalism of the Internet or the inevitability of the Cycle?
CHAPTER 19
A Surprising Wreck
On October 1, 1999, Steve Case and Gerald Levin sat together in a reviewing stand on Beijing’s Tiananmen Square, chatting about the future as they watched the long procession of troops and tanks roll by. Tiananmen Square, where these celebrations of the Communist revolution’s fiftieth anniversary were taking place, is surrounded by symbols of imperial power: the Forbidden City, home to generations of emperors, as well as the icons of the People’s Republic, including the giant portrait of Mao Zedong. The occasion was a historic superimposition of imperial spirits, for these two men, like those whose ghosts hung all around them, were also emperors of a kind: Gerald Levin ran Time Warner, the world’s largest media conglomerate, and Steve Case was president and CEO of America Online, then the single most successful Internet services firm in the world.1
The two men were in town for an event thrown by Fortune magazine commemorating the fiftieth anniversary of the Communist revolution, and watching the long parade, the two found they had much to talk about. In theory they were of rival clans, old media and new, but they found a connection. Each was an ambitious CEO with a taste for risk, but also a self-styled idealist. Both men of far-reaching vision and aspiration, they concurred in earnest that corporations, as Levin said, should be run in the public interest, to maximize long-term value, not short-term profit, the latter being the unfortunate obsession of too many American managers. Oh, and both felt they could see the future of the Internet.
Case and Levin had met briefly once before, in 1998, at a White House screening of the romantic comedy You’ve Got Mail, a Warner Bros. film that featured AOL product placement. Now as they spoke, a warm glow began to develop between a Montague and a Capulet who fantasized about all-embracing alliance between their seemingly irreconcilable houses. Theirs was to be a union that could move mountains—or at least break down the old barriers and create a perfect new world.2
The two moguls plotting the future of the Internet had something else in common: neither was what you might call a natural computer geek, in the manner of Bill Gates or Steve Jobs. Entrepreneurs like Apple’s Steve Wozniak got started by programming and soldering; Case was an assistant brand manager at Procter & Gamble in Kansas. He might have languished somewhere in upper middle management had he not resolved to grab the ring. Case took a job at a risky computer networking firm named the Control Video Corporation that had already failed twice. Three’s a charm, however: by some miracle, that firm eventually managed to become America Online.3
Once a corporate lawyer, Levin during these years was working as a cable executive. He made his name in the business as an executive at HBO, the first premium cable network, persuading cable operators to install the satellite dishes that Ted Turner would later make use of. But unlike Turner, eternally entrepreneurial and advantaged at birth, Levin had worked his way up within the system, a slow and steady rise within Time Inc. as it became Time Warner. There he became a protégé of Steven Ross, who, before dying, anointed him as successor.4
Not long after that Beijing parade, Case telephoned Levin with a proposal. And within three months of that rendezvous on the reviewing stand, on January 10, 2000, they were holding a press conference to announce their own revolution: a $350 billion merger between the world’s biggest media company and biggest Internet firm. AOL would be the engine that brought Time Warner’s old media holdings—a treasury of what was becoming known as “content”—into the new world. It was an effusive spectacle. Levin said “We’ve become a company of high-fives and hugs.” Ted Turner, the largest individual shareholder, likened it to “the first time I made love some forty-two years ago.”5
It looked as if the future had indeed arrived. To many it seemed that the Internet would eventually belong to vertically integrated giants on the model of AOL Time Warner. Here’s Steve Lohr writing in The New York Times in 2000: “The America Online–Time Warner merger [will] create a powerhouse for the next phase of Internet business: selling information and entertainment services to consumers who may tap into them using digital cell phones, handheld devices and television set-top boxes in addition to personal computers.”6 In time, it was envisioned, three or four consolidated firms—say, AOL Time Warner, Microsoft-Disney, and perhaps Comcast-NBC—would slowly divide up the juiciest Internet properties, such as Yahoo! and eBay, just as they’d already divided up the rest of the electronic media and entertainment world. In other words, Steven Ross’s media conglomerate model now seemed poised to conquer the new frontier that was the online universe.
Let’s stop for a moment to consider the world as it would look today had this expectation been fulfilled. The realm of information industries would be divided, essentially, in two: conglomerates on the one side and phone companies on the other, the rest serving as the business world’s equivalent of condiments. If it had all worked out, the new century would have begun with the world of information far more consolidated than at any time in American history.
But it didn’t work out.
Coming around the bend at full speed, AOL Time Warner ran right into a wall they didn’t even see. Soon the very nam
e became synonymous with “debacle.” The share price plummeted, and within a short time, Case was forced out and Levin retired. Time Warner would carry on, though seriously enfeebled, while the AOL part of the operation would survive only as a zombie of its former self before being cut loose.
Ugly though the crash was, to this day, some still believe that AOL Time Warner was a good idea poorly executed. Steve Case makes this claim, as does Larry Kramer, a media analyst, writing in 2009, “One of the world’s foremost content companies was merging with one of the largest distributors of online content. Content meets customers. Sounded perfect.… The idea that you could put world-class content in front of a huge audience wasn’t a bad one.”7 Most take the opposite view—and they are far more numerous and vehement—but these critics have created a different sort of misunderstanding about the fiasco. For it wasn’t, as generally reported, just a tale of epic personality clashes and bullheadedness, however much fabulous schadenfreude and great copy that story line made for. Far more than anyone realized at the time, the human errors plaguing the firm were less to blame than the very structure of the Internet in destroying whatever advantages the merger was meant to deliver. The principle of net neutrality, instilled by the Internet’s founders, is ultimately what wrecked AOL Time Warner. And that now iconic wreck, if nothing else, would attest powerfully to the claim that the Internet was at last the great exception, the slayer of the Cycle we have been visiting and revisiting.