The Master Switch

by Tim Wu

  10. Mullen, Rise of Cable Programming, 84.

  11. Fred Friendly, “Asleep at the Switch of the Wired City,” Saturday Review, October 10, 1970, 58.

  12. Sloan Commission on Cable Communications, On the Cable: The Television of Abundance: Report (New York: McGraw-Hill Book Co., 1971), 119. The report examines the history and technology of cable, contemplates its potential, and makes suggestions as to its development.

  13. See the Cabinet Committee on Cable Communications (1974), Cable: Report to the President. A summary and discussion of the Nixon Cabinet Committee’s recommendations is in David Waterman and Andrew A. Weiss, Vertical Integration in Cable Television (Washington, DC: AEI Press, 1997), 1–2. For a discussion of the “separations policy,” the “open skies” policy, and other developments in the regulation of the cable industry through the end of the Nixon administration, see Parsons, Blue Skies, 297–341.

  14. The “wringer” quote is in All the President’s Men, 2nd ed. (New York: Simon and Schuster, 1994), 105.

  CHAPTER 14: BROKEN BELL

  1. Testimony on S. 1167 before the Subcommittee on Antitrust and Monopoly, July 9, 1974.

  2. The picture of John deButts comes mainly from Steve Coll, The Deal of the Century: The Breakup of AT&T (New York: Atheneum, 1986); Kristin McMurran, “A.T.& T. Chairman John deButts Puts on Golden Glow and a Big Smile for a Ma Bell TV Pitch,” People, November 28, 1977; and his obituary in The New York Times.

  3. For the excerpt from Judge Posner, see Richard Posner, “The Decline and Fall of AT&T: A Personal Recollection,” Federal Communications Law Journal 61 (2008): 15. For the excerpt on Bell’s advocating for absolute control of the system, see “In the Matter of Use of the CarterFone Device in Message Toll Telephone Service,” 1968 WL 13208, 4 (FCC, June 26, 1968).

  4. For a full discussion of the MCI episode, see Alan Stone, How America Got Online (New York: M. E. Sharpe, 1997), 61–81.

  5. For the Carterfone case, see CarterFone Device, 1968 WL 13208. For a discussion of the FCC’s phone jack standardization requirements after CarterFone, see Steven M. Besen and Garth Saloner, “The Economics of Telecommunication Standards,” in Robert W. Crandall and Kenneth Flamm, eds., Changing the Rules: Technological Change, International Competition, and Regulation in Communications (Washington, DC: Brookings Institution, 1989), 210.

  6. For a brief discussion of Hayes Corp.’s rise and fall, see Claus E. Heinrich and Bob Betts, Adapt or Die: Transforming Your Supply Chain into an Adaptive Business Network (Hoboken, NJ: John Wiley & Sons, 2003), 3–4.

  7. For a discussion of the 1971 FCC Computer I decision, see Alan Pearce, “Computer Inquiry I, II, and III—Computers and Communications: Convergence, Conflict, or Policy Chaos,” in Fritz E. Froehlich and Allen Kent, eds., The Froehlich/Kent Encyclopedia of Telecommunications, vol. 4 (New York: Marcel Dekker, 1992), 219–331.

  8. The bill for which AT&T lobbied Congress was often referred to by its critics as the “Bell Bill,” or the “Monopoly Protection Act of 1976.” See “Communications: A Bill for Ma Bell,” Time, May 4, 1976.

  9. For Faulhaber’s views, see, generally, Gerald R. Faulhaber, Telecommunications in Turmoil: Technology and Public Policy (Cambridge, MA: Ballinger, 1987).

  10. For a full discussion of the MCI episode, see Stone, How America Got Online, 61–81.

  11. For the full text of Judge Greene’s opinion in the case, see U.S. v. American Tel. & Tel. Co., 552 F. Supp. 131 (D.D.C. 1982). For a more in-depth look at the disposition of the antitrust suit against AT&T through the Reagan administration, see Robert Britt Horwitz, The Irony of Regulatory Reform: The Deregulation of American Telecommunications (New York: Oxford University Press, 1990), 239–43.

  12. Sometime after divestiture, Henry Geller, the distinguished FCC policy insider, interviewed Charlie Brown and Judge Greene on their thoughts as to why AT&T agreed to the breakup; their consensus seems to be that even were AT&T to have prevailed in the instant suit, it would have remained under constant pressure from the Justice Department and would ultimately have been forced to capitulate. See “Questions and Answers with the Three Major Figures of Divestiture,” in Barry G. Cole, ed., After the Break-Up: Assessing the New Post-AT&T Divestiture Era (New York: Columbia University Press, 1991), 21–50.

  13. “9 Years of Litigation Ends: AT&T Clears Way for Bell System Breakup,” Sarasota Herald Tribune, August 4, 1983, Business section.

  CHAPTER 15: ESPERANTO FOR MACHINES

  1. Zamenhof first published his idea for an international language in 1889. Ludwik Ł. Zamenhof, La Lingvo Internacia (Korn, 1889). Zamenhof introduced the language that came to be known as Esperanto to Americans in L. Ł. Zamenhof, “What Is Esperanto?” North American Review 184: 606 (January 4, 1907), 15–21. For more background information, see Peter G. Forster, The Esperanto Movement (The Hague: Mouton Publishers, 1982).

  2. Zamenhof’s early writing contains a strong sense of idealism and hope. Ludwik Ł. Zamenhof, An Attempt Towards an International Language, trans. Henry Phillips (New York: Henry Holt, 1889), 5.

  3. Esperanto has been a remarkably strong movement in China; see Gerald Chan, “China and the Esperanto Movement,” Australian Journal of Chinese Affairs 15 (January 1986): 1–18.

  4. Vinton G. Cerf is vice president and chief Internet evangelist at Google Inc. These quotes and opinions were obtained in an interview with the author in June 2008.

  5. To read about AT&T at the time of the Internet’s inception, see Christopher H. Sterling, Phyllis Bernt, and Martin B. H. Weiss, Shaping American Telecommunications: A History of Technology, Policy, and Economics (New York: Routledge, 2006). To read how Vint Cerf, Robert Kahn, and Robert Metcalf interacted with AT&T, see their individual entries in Laura Lambert et al., The Internet: A Historical Encyclopedia, vol. 2 (New York: MTM Publishing, 2005).

  6. “A Protocol for Packet Network Intercommunication” in Jeremy M. Norman, ed., From Gutenberg to the Internet: A Sourcebook on the History of Information Technology (Novato, CA: historyofscience.com, 2005) 871–90.

  7. As quoted in Alfred L. Malabre, Jr., Lost Prophets: An Insider’s History of the Modern Economists (Cambridge, MA: Harvard Business Press, 1994), 220.

  8. Friedrich A. Hayek, The Road to Serfdom (London: George Routledge & Sons, 1944).

  9. This quote comes from Friedrich A. Hayek, Individualism and Economic Order (Chicago: University of Chicago Press, 1948), 77.

  10. Leopold Kohr, The Breakdown of Nations (London: Routledge & Paul, 1957), ix.

  11. Schumacher’s idea of “enoughness” stemmed from his studies of what he called “Buddhist economics.” See Ernst F. Schumacher, Small Is Beautiful: Economics As If People Mattered (New York: Harper & Row, 1973).

  12. Jane Jacobs, The Death and Life of Great American Cities (New York: Vintage Books, 1961).

  13. Frederick W. Taylor, The Principles of Scientific Management (New York: Harper & Bros., 1911).

  14. Jon Postel wrote this into the “Robustness Principle,” Section 2.10 of the Transmission Control Protocol (January 1980), available at http://tools.ietf.org/html/rfc761#section-2.10.

  15. This paper announced the innovative end-to-end design principle. J. H. Saltzer, D. P. Reed, and D. D. Clark, “End-to-End Arguments in System Design,” ACM Transactions on Computer Systems (TOCS), vol. 2, issue 4 (November 1984), 277–88.

  16. After January 1, 1983, ARPANET users could no longer use NCP, and the shift to TCP/IP was achieved. See Jane Abbate, Inventing the Internet (Cambridge, MA: MIT Press, 1999), 141.

  CHAPTER 16: TURNER DOES TELEVISION

  1. This quote is part of a larger discussion of Turner’s burgeoning empire as he moved to found CNN: Harry F. Waters, “Ted Turner Tackles TV News,” Newsweek, June 16, 1980, 58. Two particularly useful biographies of Turner, alternately known as “Captain Outrageous” and the “Mouth of the South,” are Robert Goldberg and Gerald Jay Goldberg, Citizen Turner: The Wild Rise of an American Tycoon (New York: Harcourt Brace, 1999), and Ken Auletta,
Media Man: Ted Turner’s Improbable Empire (New York: W. W. Norton, 2004). Others include Porter Bibb, Ted Turner: It Ain’t as Easy as It Looks (New York: Crown Publishers, 1993), and Christian Williams, Lead, Follow, or Get Out of the Way: The Story of Ted Turner (New York: Times Books, 1981).

  2. Ted Turner and Bill Burke, Call Me Ted (New York: Grand Central, 2008).

  3. This statement was the lead-in to Turner’s comment to Newsweek that he was to take television off the path of destruction. It was followed by this rather melodramatic prophecy: “Someday, somebody will put a bullet in me,” he says sadly. “I would like to stay around for a while, but I really do believe that I’ll be assassinated.” Waters, “Ted Turner Tackles TV News,” 58.

  4. For further insight into how the FCC drove the division of NBC into the separate NBC and ABC networks, see the Federal Communications Commission’s Report on Chain Broadcasting, Washington, DC, May 1941.

  5. See Auletta, Media Man, 32–34, for an explanation of the cable model as pioneered by Turner and his TBS network.

  6. Charles Haddad, “Ad Executives Love Turner Tales About Old Times and New,” Atlanta Constitution, March 5, 1999, H2.

  7. Apparently taken from an interview with Bob Hope in the mid-1970s, this ironic quote by the founder of one of the nation’s most watched news networks is from Patrick Parsons, Blue Skies: A History of Cable Television (Philadelphia: Temple University Press, 2008), 453.

  8. This point is drawn from Becker’s book on modern cultural identities and sexual politics as examined through the lens of media coverage and representation of gay America: Ron Becker, Gay TV and Straight America (New Brunswick, NJ: Rutgers University Press, 2006), 86.

  9. Cass R. Sunstein, Republic.com 2.0 (Princeton, NJ: Princeton University Press, 2007), xi.

  10. Ken Auletta, Three Blind Mice: How the TV Networks Lost Their Way (New York: Random House, 1991), 5.

  CHAPTER 17: MASS PRODUCTION OF THE SPIRIT

  1. An account of the rise and fall of United Artists, itself a story of open period filmmaking, may be found in Tino Balio, United Artists: The Company That Changed the Film Industry (Madison: University of Wisconsin Press, 1987).

  2. Stephen Bach, then a young executive at United Artists, wrote a firsthand account of the failure of Heaven’s Gate and subsequent fallout in Stephen Bach, Final Cut: Art, Money and Ego in the Making of Heaven’s Gate, the Film That Sank United Artists, rev. ed. (New York: Newmarket Press, 1999). The quotes referenced above are drawn from page 360.

  3. Vincent Canby, “ ‘Heaven’s Gate,’ a Western by Cimino,” New York Times, November 19, 1980, Cultural Desk, Late Edition.

  4. Yakov Amihud and Baruch Lev, “Managerial Motives for Conglomerate Mergers,” Bell Journal of Economics 12 (1981): 605–17.

  5. Aldous Huxley, “The Outlook for American Culture,” Harper’s Magazine, August 1927.

  6. Economic perspectives on the film industry include John Sedgwick and Michael Pokorny, An Economic History of Film (New York: Routledge, 2005), and the interesting discussion of uncertainty and the film industry in Arthur S. De Vany, Hollywood Economics: How Extreme Uncertainty Shapes the Film Industry (London: Routledge, 2004).

  7. Anderson’s theory, and his discussion of the interplay of “head” and “tail” consumer demand, may be found in Chris Anderson, The Long Tail: Why the Future of Business Is Selling Less of More (New York: Hyperion, 2006).

  8. De Vany, Hollywood Economics, 4.

  9. Steven Ross’s biography is gripping reading, and also provides a history of the creation of Time Warner. See Connie Bruck, Master of the Game: Steve Ross and the Creation of Time Warner (New York: Simon and Schuster, 1994).

  10. General Electric 2008 Annual Report, www.ge.com/ar2008.

  11. Roger Cohen, “The Creator of Time Warner, Steven J. Ross, Is Dead at 65,” New York Times, December 21, 1992.

  12. The failure of the Atari E.T. game is recounted in Bruck, Master of the Game, 180. The E.T. game is rated #1 on most lists of the worst games of all time. See, e.g., Emru Townsend, “The 10 Worst Games of All Time,” PC World, October 23, 2006.

  13. Betsy Schiffman, “Michael Eisner: Mouse in a Gilded Mansion,” Forbes, April 26, 2001.

  14. This accusation was delivered by letter after Eisner’s resignation from the board. Alex Berenson, “The Wonderful World of (Roy) Disney,” New York Times, February 15, 2004, Financial Desk, Late Edition.

  15. The Maltese Falcon case has been effectively overruled; see Warner Bros. Pictures v. Columbia Broadcasting System, 216 F.2d 945 (9th Cir. 1954).

  16. Edward Jay Epstein’s theories on the modern film industry may be found in his The Big Picture: Money and Power in Hollywood (New York: Random House, 2005).

  17. Richard Roeper, “Throw This God-Awful Sequel a Life Jacket; Even Funnyman Steve Carell Can’t Save a Movie That’s Drowning in Its Own Low Expectations,” Chicago Sun-Times, June 22, 2007, Movies.

  CHAPTER 18: THE RETURN OF AT&T

  1. The secret executive order was first reported in James Risen and Eric Lichtblau, “Bush Lets U.S. Spy on Callers Without Courts,” New York Times, December 15, 2005. The two reporters were awarded a Pulitzer Prize for their efforts; Eric Lichtblau later wrote Bush’s Law: The Remaking of American Justice (New York: Anchor Books, 2008).

  2. Whitacre’s full statement is available online; see The AT&T and Bellsouth Merger: What Does It Mean for Consumers?—Hearing Before the Subcommittee on Antitrust, Competition Policy and Consumer Rights of the Senate Committee on the Judiciary, 109th Cong. (2006) 10–12 (statement of Edward E. Whitacre, Jr., Chairman and CEO, AT&T, Inc.), available at http://ftp.resource.org/gpo.gov/hearings/109s/29938.pdf. Senator Arlen Specter described the hearing in “The Need to Roll Back Presidential Power Grabs,” New York Review of Books 56:8 (May 14, 2009).

  3. AT&T issued this statement of accountability in its annual report of 1911. AT&T, Annual Report of the American Telephone and Telegraph (New York: AT&T, 1911), 38. Whitacre’s aggressive tactics as CEO of SBC are discussed in Edmund L. Andrews, “Birth of a Giant: A Leader’s Vision,” New York Times, April 2, 1996, and Mark Landler, “Disdaining Regulators, Whitacre Carves Out SBC Empire,” New York Times, July 21, 1997. Whitacre’s statement appeared in Newsweek as part of a cover story on his success at SBC. Roger O. Crockett, “Whitacre Steps Up to the Mike,” Newsweek, April 12, 1999.

  4. For Whitacre’s explanation of why he doesn’t use email, see Roger O. Crockett, “Résumé: Edward E. Whitacre, Jr.” Newsweek, April 12, 1999.

  5. The cover story described how Whitacre built SBC into a “telecom profit machine,” but it predicted that the company would soon face fierce competition. Roger O. Crockett, “The Last Monopolist,” Businessweek, April 12, 1999.

  6. As quoted in Albert B. Paine, In One Man’s Life: Being Chapters from the Personal & Business Career of Theodore N. Vail (New York: Harper & Brothers, 1921), 254.

  7. Both Friedman and Stigler won Nobel Prizes in Economics for their work. A small sample includes Milton Friedman, A Theory of the Consumption Function (Princeton, NJ: Princeton University Press, 1957); Milton Friedman and Anna J. Schwartz, A Monetary History of the United States, 1867–1960 (Princeton, NJ: Princeton University Press, 1971); and George Stigler, “The Theory of Economic Regulation,” in George Stigler, ed., Chicago Studies in Political Economy (Chicago: University of Chicago Press, 1988), 209–33.

  8. President Bill Clinton made this statement in his State of the Union address. “Address Before a Joint Session of the Congress on the State of the Union,” Public Papers, vol. 1 (January 23, 1996), 79–87. For FCC chairman Reed Hundt’s remark, see The State of Competition in the Cable Television Industry: Hearing Before the House Committee on the Judiciary, 105th Cong. (1997) (statement of Reed E. Hundt, Chairman of FCC), available at www.fcc.gov/Speeches/Hundt/spreh754.html.

  9. Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (codified in scattered sections of 47 U.S.C.). For other sources that discuss the Act, see
Patricia Aufderheide, Communications Policy and the Public Interest: The Telecommunications Act of 1996 (New York: Guilford Press, 1999), and Robert W. Crandall, Competition and Chaos: U.S. Telecommunications Since the 1996 Telecom Act (Washington, DC: Brookings Institution, 2005).

  10. The article presented SBC as a “case study” to show how the Baby Bells were flagrantly thwarting competition. Marc Farranti, “Stall Tactics,” Network World, December 8, 1997, 1, 49–53.

  11. A list of lobbyists is maintained by Texas State Ethics Board and is available for 2003 at www.ethics.state.tx.us/tedd/conlob2003c.htm.

  12. Verizon Communications Inc. v. Trinko, LLP, 540 U.S. 398 (2004).

  13. The FCC adopted the Triennial Review Order, which reconsidered the Baby Bells’ sharing obligations, on February 20, 2003, and released it on August 21, 2003. FCC, Triennial Review Order, 03-36 (2003), available at www.fcc.gov/wcb/cpd/triennial_review/. The New York Times ran a short article discussing the order; see Jennifer Lee, “FCC Discloses New Rules for Telecom Industry,” New York Times, August 21, 2003.

  14. AT&T and SBC made this statement in the initial application of consent to the FCC. In the Matter of AT&T Corp. and SBC Communications, Inc., Docket No. 05-65 (February 22, 2005), available at http://fjallfoss.fcc.gov/ecfs/document/view?id=6517318964. To read about how the deal came about, see Ken Belson and Matt Richtel, “A Telecommunications Architect,” New York Times, February 2, 2005. Verizon beat out competitor Qwest Communications in a bidding war for MCI; see Ken Belson and Matt Richtel, “Qwest Withdraws Bid After MCI Accepts Verizon Offer,” New York Times, May 3, 2005.

  15. As quoted in Ellen Nakashima, “AT&T Gave Feds Access to All Web, Phone Traffic, Ex-Tech Says,” Seattle Times, November 8, 2007.

  16. Klein’s description, along with some of his evidence, can be found at “Whistle-Blower’s Evidence, Uncut,” Wired.com, May 22, 2005, available at www.wired.com/science/discoveries/news/2006/05/70944.