comes from the book, this oh wow, the yankees learning some stuff about the state's idea. i think that informed a lot of the book because none of this is normal to me. it was like wow. .. >> maybe a little bit this way, but this is sort of our media and telecommunications policy

week here. we have an event tonight, we have another event on thursday night featuring a speech by fcc commissioner mike copps with a number of respondents to that. so what's all this doing at a journalism school? when i was just starting as deep this fall of -- dean in the fall of 2003, i was sitting at my desk one day, and the phone rang, and i picked it up. and office a young -- it was of a young woman who was a senior at harvard. and she said i'm writing a senior thesis on the media reform movement, and what i want to know is why is this movement taking place with no journalist ever present at any meeting, convention, conference, etc. this -- and i said to her, well, that's a good question. i thought that probably wasn't a good thing although i think i

know part of the answer which is for journalists particularly, i notice that of the journalists in the audience they're a little skewed toward broadcast journalism, so you're kind of off the hook. but certainly for print journalists, we like to imagine we are riding across the prairie on our white horses and practicing journalism, and there is no policy context that matters to us except freedom of the press be maybe. maybe reporter shield laws. but i think, actually, you know, the better metaphor would be we're playing on a basketball court or a football field or whatever sports metaphor you want to use, and the way our game unfolds depends on the shape of the field and what the rulebook says. and that's where media and communications policy comes in. so it's, it's my hope by having these events that we both

generate some more interest in the school and in the journalistic community in these areas and get journalists into the conversation and in so doing we would express sort of the journalistic interest in these issues which i hope the get to tonight. the full disclosure here is that in the two book we're going to discuss there's very little about journalism, but i think implicitly there's a lot about journalism. so one of the tests is how much that we can bring to the surface. it's one of the pleasures of being at columbia university is you get to be be colleagues with people who are essentially creating the discourse on a subject rather than just sort of discussing the work of the people creating the discourse. so here we have two books both

published this year, i should switch them. "network nation" by richard john of our faculty, and "the master switch," by tim wu of the columbia law school faculty. they're on kind of somewhat related subjects, although in other ways they're quite different books. and we're hoping that we'll get the two authors to disagree somewhat to make the evening more entertaining. i would say, though, they agree about a few things. i'll try this out on you and see if you agree that you agree about these things. they agree that neither is a technological determinant, that is in the general conversation about the internet in lahr and telecommunications in general --

in particular and tell communuations in general is a sense of, poof, the telephone is invented and everything flows from that, poof, the internet is invebted, and everything flows from that. both authors would argue quite forcefully that's only part of the story, and it's also when a new mode of communication comes along, there starts to be a battle royal involving government policy on the one hand, business interests on the other hand. and fights over, to use my earlier metaphor, the shape of the playing field. so they both draw forceful attention to that and say it's really not useful to think of the technology itself in a vacuum, if that's fair. and i'll leave the rest until later. i want to begin by just asking each of them to give a very brief kind of the thing you use

from book tour, short description of the book and this main subject and spine of the argument. i'll take them in chronological order, that is, richard's book was both published first by a few months and it's set mostly about 100 years earlier. [laughter] so i should also say one of the things the books have in common is they share a ago mate belief that -- a passionate belief that someone very few people have ever heard of, theodore veil, does that name ring a bell? he was one of the most important people in american history. so you'll get maybe some of that too. so, richard, why don't you start, and then we'll go to tim, and i'll ask you some questions. >> good. thank you very much. the book that i wrote is an attempt to write the history of electrical communications going forward. that is to say, to tell the

story givenning in the early republic -- beginning in the early republic ending the story with the consolidation of the bell system which for much of the 20th century tim and i agree was the centerpiece of the american information infrastructure. so i try to tell the story forward rather than backward. and to tell the story what i try to do is to show how the strategy of the leading players who were business leaders almost without exception, their strategy was shaped by the rules of the game or the political economy in which they operated. so structure shaped strategy. in the case of the telegraph, samuel morse emerged in a political economy in which the rules of the game favored government ownership. post office was a government monopoly, morse thought the telegraph should be too. well, it didn't work out that way. it turns out a number of players including powerful new york editors were frightened of the prospect of the telegraph

destroying the metropolitan press. they used state legislation, they also used their own collective power to establish a new l regulatory regime which i call anti-monopoly. and the anti-monopoly regulatory regime the idea was to promote competition among telegraph companies, among network carriers. and that competition persisted for a couple of decades until lo and behold the greatest anti-monopolist of them all, jay gould, got control of the telegraph network in 1881. he was also the most hated finance year of the age. it's hard to think of anyone today who was as hated as gould. the telegraph story, then, you have anti-monopoly rules of the game, anti-monopoly political economy leading to what was effectively a duopoly. there were two companies in the 18 l 0s. the business strategy those firms pursued was business oriented, and it was very

narrow. it may come as a surprise that western union which was the main network provider never aspired to provide access to ordinary americans to send information over long distances. if you want to communicate with someone in california, boston, send a letter. that was the company policy. the case of the telephone the story is extremely different, and this isn't a matter of the technology, it's a matter of the rules of the game. telephone business was never unregulated in the way or lightly regulated in the way the telegraph was. you needed to get a municipal franchise, and to get a municipal franchise, you were thrown into municipal politics. and in new york and chicago that got pretty down and dirty. in order to escape the clutches of the extortionate aldermen, a second generation of telephone managers decided they were going to try to popularize the medium which was very bold because it

turned out there were lots of reasons not to expand the telephone network. there were no network externalities of the kind we today associate with the internet or very, very few. but the second generation of telephone managers did this. they did it in the new york, they did it in the chicago, many other cities. the cell phone became a social medium around 1900 with the presumption that ordinary people should have access to it. that's a remarkable achievement that was the achievement of bell billion operating company managers. the story changes once again in the 19 aughts following the collapse of the rivals to this group of telephone operating companies which we can call the bell operating companies, the dominant group. they had control over resources and so on. they were rivals called, quote-unquote, independents. they collapsed by 1910, and this leads to a change in the political economy where you have

the new york state legislature in 1910, also the congress declaring telephone common carrier. and this is where veil becomes important. veil had little to do with the popularization of the -- >> tell us who veil was because that was a tease on my part. >> all right. who was veil? veil was the telephone manager who got into the business very early. he was a plunger, he was a speculator, he liked to invest in all sorts of fliers and all sorts of new technological kind of whiz kid ideas, and he was lured away from a very good job in the railway mail service where he developed this very capacious vision of network expansion. his ideas were rooted in the government of the 1870s, post office being the largest organization in the country, one with of the largest in the world. he was lured away to take a flyer on the telephone. it so happens that the consortium he ended up with got

control of the patents in 1879. there was a struggle involving jay gould who was at that time attacking western union. this was before jay gould got control of the telegraph. veil then becomes for a couple of years manager in new york city. we have to put the wires underground, and very briefly the president of a speculative venture, american telephone and telegraph which was a long distance network provider, was a very small part of the network, and it lost money probably until the 1920s. it was not that important. but he was president of that, and more importantly, president of metropolitan telephone. he leaves the business for 20 years, he lost money on the venture in boston, almost went bankrupt. came back in 1907 in a consortium of telephone managers, a new banking group in new york in which j.p. morgan was important. he came in, and what he tried to do was to bring to fruition his lifelong dream which was to bring together the telephone and

the telegraph which if he had the word, we would have called telecommunications. he got his dream fulfilled in 1909 when he bought out western union. and for a couple of years it looked like the telephone company, at&t, was going to provide universal service which meant a number of things including linkage of low-cost, short distance telephone with low-cost long distance telegraph. in other words, it was veil to helped to popularize the telegraph for the first time. this ran afoul of the justice department, and in 1913 the attorney general, mcreynolds, brokers a setment, forces veil to give up western union. so he's very important in helping to create a public face for bell, and he helps found corporate public relations. he helps associate bell with technological innovation with long distance which is a public relations coup for bell. not that important be

commercially, but hugely important in the realm of public relations. but he loses in a number of wayings. he doesn't control telegraph during the first world war. he tries to get control of cable, doesn't control cable, can't control radio. this some ways a tragic figure. but the bell system that he helped to establish and helped to really put on a footing where the stockholders are neutralized, no longer a problem for people like jay gould where the users are relatively happy, and most important of all where the independents are saved because if the independents had continued to fail and cause problems in the state legislatures as they had between 1907 and about 1913, it might have destable stabilized the telephone business. so everyone ended up happy. the independents got recognition, and that was veil's doing too. >> so the question you are never supposed to ask a historian -- >> yeah. >> what is the lesson from this

that would be interesting to help us understand the fights going on over the internet today? >> very interesting. veil's broad vision for telephone which he articulated, and tim and i both write about this in some detail, universal service. we have a different explanation for why it came about, but this was a response to federal legislation. congress decreed that the telephone and the telegraph would be common carriers which is a term of art. the new york state legislature declared that also in 1910. the broad vision for the telephone was a response to that piece of legislation which made it clear that there was not going to be competition. the telephone business, no one wanted competition in the telephone business after, really, 1907 or certainly after 1910. but it was going to be on a stable footing, and the investors were going to be neutralized. that is say there was going to be no financial juggle ri in the telephone business, and that established a sound footing that made it possible for the u.s.

telephone network to be by far the finest in the world for the 20th century, and it helped to create a solid, steady stream of revenue that in bell labs established in 1925 would be directly responsible for some of the most important innovations including the tran sis to have which, of course, is the key innovation in the electronic age. so the analogy for journalism to take away for today was, i think, the money that made possible bell labs came from ordinary telephone users, big cities. they didn't have any interest, really, in supporting bell labs. but they got reasonably good telephone service, local -- because that's all they wanted for the most part -- and that that money went to bell labs, and bell labs then acted as a de facto national laboratory. cross-subsidies were so important to the telephone business, and it was only possible because of the extremely complicated regulatory regime in which it operated. no, no different regulatory regime in telegraph anti-monopoly, not

cross-subsidies, you didn't have the great public benefit. >> that's a perfect -- [laughter] cue to throw to tim who i think will vigorously disagree with some of that. >> right. >> although maybe not all. i just want to get to the local news angle. i just want to point out that the title of this book is a quote from fred friendly from his days as a columbia j school professor. and fred's widow, ruth, is here tonight, so welcome. and, tim, over to you. >> sure, thanks. first of all, thanks for welling a relative outsider to the world of writing and journalism. and back when i, back in the 1990s i worked in silicon valley in the dot.com industry, and there was one thing that we were absolutely certain about, absolutely certain beyond any other question, that we were living in the times without

precedent. anyone could start a web site, fortunes were being made overnight, the internet was radical, was different, there had nothing been like it before in human history, and there would never be anything like it again. as i got into academia, i started to wonder whether, in fact, that was true. a hundred years ago graduates of columbia university as opposed to being interested in a start-up or an app company which is sort of a popular career choice today might have thought about tarting a telephone company -- starting a telephone company. in the 1920s you might have started thinking about starting a radio station. it turns out that all of these media were at one point open, competitive entrepreneurial industries. it turns out that we live the

internet revolution that moment that kind of environment where things are open, competitive, entrepreneurial, everything seems to be different, that we had been there before. so what i was interested in when i wrote this book and the reason that i wrote this book is i wanted to see what had hand to the other darling -- happened to the oh darling -- other darling, exciting new media. by what had happened to the enthusiasm of the excitement of competition surrounding farmers who were setting up their own phone networks in the west what had happened to those eras. and what my book is about is about the fate of, essentially, these moments of openness. that there, i suggest, is a long cycle in the information industry between a more open, competitive entrepreneurial phase and a more closed, integrated, higher-quality and

often monopolistic phase.comuated -- dominated either by one company, at&t being the best example, nbc being another and cbs in their time. the third great example, or dominated by a cartel, hollywood being the greatest example, film a competitive industry eventually run by a cartel. so i wanted to know, and then finally ask in our times, is the internet destined for the same future? in other words, the sort of openness and entrepreneurial that we took for granted working in silicon valley that we assumed was forever now that we'd had the revolution, whether it too is destined for the same fate of every other new medium and whether we have a choice or not whether we can change and maintain a more open, if -- medium, if that's what we want, if we like things the way they are. >> so there's a lot to talk

about here. i want to, i guess, cut to the chase to some extent. by the way, in about 15 minutes i'm going to start taking questions from the audience which must be given from this mic, so be thinking. again, i'm sort of canting this a little toward journalism although not completely. you both degree that -- agree that when this process that you're talking about, tim, happens, the bad news from a public interest standpoint is much less diversity of, i guess you'd call opinion or speech or content. >> can right. >> because there is a small group of established players. but the upside is some, you know, higher level of quality, maybe of service and of content. there's a very brief section in

your book where you, you know, make reference to the so-called golden age of television. >> right. >> and, you know, bell labs and that we tend to be nostalgic for these old developlies and monopolies because they can use their stable position sometimes to create public goods that are very, very expensive and that can't be created in the an -- in an open-distributed system. so for us in the news business the big question is if you move the master switch to openness, do you lose the ability for anybody to produce high quality content? so i'm curious for your thoughts on that. >> so you're -- i'll start by avoiding the question for a minute and say that -- [laughter] it is a hard question, but i'll start by avoiding it for a

minute to say even though i've agreed to take the side of open, in truth if you read the book, it reveals a kind of profound ambiguity with monopoly. i both sort of worship it like a lot of people do in the way that people very openly worship monopoly, and men like veil would say this is just the best, it's the biggest, the greatest. there are these golden ages that are undeniable, and the benefits in journalism is one of them. the birth of journalism has a lot to do with industrial structure that can support the kind of quality journalism that the world never saw before the 20th century. so the truth is i feel profoundly ambiguous. but to me the drawbacks overweigh the advantages in the long term. the problem with monopoly over the long term is while it starts promising and results in a golden -- often results in a golden age, over the long term

entrenchment leads to paranoia, stag nancy and abuse. over the long term. you know, cbs and nbc when they started had a lot to say for them. by the 1970s things had gone too far s. so what i guess -- so what i guess i suggest in my book is it is important to have the sort of structures that can support quality things, but not at the cost of entrenching a monopolist for so long that they just lose any sighting of what they have to do. and i think that's what happened with many of the media organizations in this country. by around the '60s and '70s. >> well, i've got two follow-up questions to that, one is prescriptive and one is descriptive. i'll do the descriptive one fist. you do a wonderful job of describing the tragic process you just described briefly where a new communications medium

comes along, all things are possible, there are these wonderful dreams of how fabulous it's going to be. the title comings from the now-long forgotten period when there were such dreams about cable television, some people remember those days. and then inevitably the bad guys take over and get their hand on the master switch. how can that not happen again if it happens every time? this. >> right, right. what journalists need to understand -- >> uh-huh? >> -- the importance of creative destruction in the journalism industry. we have to have a dynamic industry, we want to see companies die and be destroyed. journalists are afraid of death. [laughter] poor relationship with -- >> that's so unfair. [laughter] >> no, journalists and media -- i mean, look at these brands. new york times has been going for -- that's unheard of in other industries that have any sort of turmoil or natural market process to have brands that last for hundreds and hundreds of years and have these

dominant positions. journalists are exactly -- what is needed in journalism is a dine schism, a little bit of creative destruction. and it's not comfortable, and journalists will be upset about it, but in the long run it will be good for you. [laughter] >> right. you're switch withing from descriptive to prescriptive. -- let's switch back to descriptive for a minute. the model, i think richard would say this based on my reading of his book is, tim, you're dreaming because, you know, any communications medium as powerful as the internet just cannot -- the, you know, liberal reformer public interest advocates just cannot ever build a big enough fence around it to keep the process that's always happened in the past from happening again. so just as a practical matter how do you think we can prevent this process that you've

convinced us is cyclical from happening in this instance? >> right, sure. this is, the answer is related to my, some of my other work on things hike net neutrality which is to say there always needs to be channels whether it's the interbe net or other -- interor other channels where the new can challenge the old. where "the new york times" gets a run for its money. there has to be these channels. and the problem with, the problem -- i'll just go on the offensive and say the kind of worship of managerial capitalism in your book is it's too insensitive to the fact that managerial capitalism tends to make market entry very difficult. let's put it that way. >> well, the problem with your argument, tim concern. [laughter] is that there's no getting around the inevitability of the cycle. if i read your book, i would come away very depressed because

every single case you tell is one in which you have these bold innovators with these great ideas who were stomped down upon by these sort of either money-mad or reactionary pollute accurates and then something happens and this wonderful idea's born in someone's garage and someone's attic, and it starts up again. and that just isn't so. there were major public policy tryouts. bell loses big time in the 19 teens. they don't get to control the telegraph as well as the telephone. the kind of separations principle that you write about, i think, so persuasively and movingly in your final section happened there. radio act of 1927. keeps at&t out of the content business. content and conduit are divided there. if you had not had the studio system in hollywood in which you had the coming together of the people making the movies and the owner orship of the theaters, the united states might never

have established a dominant position in the world film business. [inaudible] in the 1930s and '40s. we had 80% of the world market. the europeans couldn't get their act together, we did, and that made possible the creativity that led to the self-sustained development of hollywood. >> if you didn't have the hollywood studio system, you also won't have had the most heinous example of private censorship in american history, private senatorship -- censorship -- >> that's a ridiculous claim, tim. first, the most -- >> private censorship. >> what is -- [inaudible conversations] >> tell the story, and i'll tell you why you're wrong. >> thanks to consolidation of the industry into the hollywood studio system, a cartel of five very integrated studios or maybe it was six -- >> right. >> -- every, the catholic church was finally able to enforce production code. >> uh-huh. >> and set up a system which you're familiar with where one

man, joseph breen, had to okay every single film before it was made which would be so illegal if it was a government system. let me give you one example. warner brothers in the mid '30s wanted to make a movie about what the nazis were doing in germany. they were, like, listen, this is bad. you know, bad things are coming. joseph breen who described his job as shoving ethics down the throats of the jews, that was how he described his job, i'm here to shove ethics down the throats of the jews, vetoed the movie. it was never made, but this is a form of censorship which should be intolerable to anyone in journalism school. >> this is the problem with this whole book. these heroic individuals who arrive out of nowhere, the mogul makes the -- >> medium. >> medium. look, the reason breen did what he did was seven states were

poised to enact statutes of their own, and they could have created a patchwork of restrictions on movies. the studios worked with breen because it was an alternative to government censorship at the state level, and that would have been reminiscent of the censorship at the state level over all sorts of matters that persisted right up -- >> let me jump in on another point. this is a question to you, tim. back to the issue about the trade-off between openness, avoiding things like the joseph breen scenario and not having a sort of protective mechanism to produce certain kindsover content that requires a lot of economic regulatory whatever protection to produce, institutional protection. i mean, an example that springs to my mind although i don't think this'll be that persuasive to you is your own field of legal scholarship. >> oh, yes. >> which, you know, if it sits

inside this huge structure of bar exams and legal licensing and tenure and tuition -- >> am i supposed to defend the -- >> no. but if you felt legal scholarship were precious and if you deold develop rised the legal profession, arguably, there would be no legal scholarship produced because there just wouldn't be the means to produce it. is that a price be worth paying, or is there some sort of back door way of getting, you know, we're particularly interested in journalism reporting done and all that in a world that really privileges diversity of opinion and diversity of power? >> so the question is whether we should always accept, you know, artificial barriers on the, essentially, on the market in order to preserve things that we admire. i'd say so, but i say we overdo

it a lot. the legal profession's a great example. it's not as bad as in other countries in the american legal profession, but a lot of people can do legal work who are not lawyers. in fact, lawyers do things you don't need legal training to do. >> but you're not saying the sort of two clicks to the left of you positioning that the crowd will provide anything that has real value, right? >> yeah. if you wanted me to say that, you'd have to find somebody -- [inaudible conversations] >> coming here two days -- >> you can find clay shirk key or other people. i'm not a -- no, i think there are differences in what is produced. >> let me ask you -- >> with i guess my problem with journalists is that -- or the journalistic way of thinking about things is they -- any industry once it has its tariff, essentially, its protection begins to fetishize or treasure it and give it an importance which really varies to trade.

the legal profession's great, they say all this stuff about the bar exam, well, especially in other countries, and then it really is just -- so that's the danger. and journalism is always insulating itself against change continually and then calling it something nice like the newsroom, you know? [laughter] and they, and give good speeches about it. you know, i love steve cole, but he'll always give a speech about how great the newsroom is and everything. >> he's going to be here. [laughter] >> but, tim, there are organizational capabilities that have built up over a period of time in organizations large and small that if they are dissipated are hard to put back together again. it is possible for a country, for example, to lose its edge in x, y or z technology. goes overseas, you're not going to get it back. the miracle of the marketplace isn't going to solve all your problems. >> right. >> and the story i tell about telephone is not about veil, it's about the guys at the middle level; unsung heros who you don't write about who made

the key changes. but those organizations were pretty large too, and that's what worries me about the current internet was the advertising revenue for newspapers as we know, print media which has generated the vast majority of the news stories that we rely on to keep government and business accountable, right? that, as we know, has largely vanished, and what are we going to do about it as a nation? if we do not recognize that organizations can do things that individuals sitting in their attics or garages can't and have not done, if we don't realize that, then it seems to me that we are not being realistic about the possibilities as well as the limitations of organization as a way of shaping content. >> right. i haven't denied, and i said before i have a profoundly ambiguous relationship with large organizations. but -- >> you're much higher on veil than i am. >> what's that? >> you're much higher on veil than i am. >> yeah. he looks like theodore

roosevelt, he says crazy things -- >> he's a megalo maniac. >> that's attractive in its way. [laughter] makes him interesting to write about. but i will not deny that there are, that there are certain efficiencies gained by large institutions. but the problem -- i see it as a dynamic or in some ways sickular process. let's say google right now is in its golden age. it's full of smart people, they have swimming pools and volleyball courts. you know, it's in this moment where they're like, this is really special be. undoubtedly, within five or ten years they will turn their interests in innovation into an interest into trying to stay in power. every organization begins to decay and become rotten. and while i'll agree there are advantages to these giant institutions, we haven't figured out a way to get rid of them

when they start to rot. we need, essentially, term limits for monopolists. we understand this in politics. no matter who the president is, after eight years he's going to be president. if you let him go forever, he's going to try to set up his own kingdom. and be my belief is not that monopolists are terrible, they just stay around too long. at&t was in power for 70 years, but by the '50s, they had lost it. well, we can argue about that. >> i want to get to questions, but i want to ask one that's somewhat interesting ander relevant. part of both of your books is a discussion of the relationship between western union and the associated press, so i wondered if one or both of you could fill us in on that. >> do you want me to start? >> yeah. and just the whole story? >> yeah, in brief. >> yeah. >> because i'll tell you why i

think it's relevant today -- >> i think the western union associated press example is quite complicated, and your book, actually, is much deeper on it than mine is. mine pulls out the lurid details, essentially. >> which are plenty. >> yes. that is the danger of unrestrained monopoly, power -- >> wait. let's first describe the situation. >> yep. >> western union was essentially the monopoly provider of telegraph carriage, and they had a relationship with the then-new associated press, and they were sort of the exclusive carrier for the associated press. the associated press was the exclusive content provider to wen union. >> and there was a quid pro quo here that was explicit in the 1860s. >> right. >> western union managers were terrified, as we now know because identify worked in the letterbooks, the internal corporate archives which were just opened up in the late 1990s.

they were terrified of either being taken over by the government which was plausible or being, in effect, subject to hostile legislation. and they recognized that if press began to editorialize calling for regulation ownership, they'd be in be trouble. so they cut a deal. we'll give you low rates, you won't say nasty things about us. seems to me google is in the position to strike the same deal. >> that would be about net neutrality, by the way. this is the problem of the special deal. telegram, just to repeat this n in the 1860s it was really the only method of instant long distance communications. >> yeah. >> so anyone who had control of this in terms of a news service had an immediate advantage because their news would arrive instantly. and that is a tremendous power which would have been fine if it were used sort of for good, sometimes it was, but they also had a habit of wanting to throw elections or trying to influence elections. >> the other detail was before

1945 the press associations, news brokers did not have to give the news equally to everyone. so the new york associated press cut deals with certain newspapers and not with others, and needless to say it was those newspapers they didn't cut deals with that began to lobby against them. >> yeah. >> so just, the last thing before we go to questions just to show you why all this matters, one could argue on richard's side, i don't know if you would, that these kind of incredibly unfair relationships helped establish the associated press which is still one of the great news organizations of the world. on the other hand, all other news organizations cried foul, rightly so, about the special deal the associated press had. why does this matter today? this has been happening and will continue to happen. the chair of the fcc, another former student of fred friendly's, julius genachowski,

is going to announce a net neutrality initiative tomorrow supposedly. it'll be instantly opposed by the industry. the scenario would be something like, you know, people who carry the wires into your house that gives you access to the internet might strike deals with preferred journalistic and other providers. they'd say with this deal you can get faster, better instantaneous service, and we can help support these news organizations, but there's a downside. so just to note this is not irrelevant history, it's really cued up right now. >> it's the strongest example of the dangers of total deregulated no knop hi of -- monopoly of information. not only does it, you know, does it mean that you don't have diversity, it means you have an influence on the political system. that there's a very powerful ability to try and move -- it's effective democracy. >> i see it very differently. i think you can make a good case

that at&t and apple are innovators, that they're doing exactly what your cycle would predict. they are creating all kinds of new content and that that may bring with it benefits. and why should netflix be able to send, you know, use 20% of the internet to send movies? i think you could make an argument -- and i'm not taking a policy stance here, but reading your book you could contend that, in fact, you should be arguing against net neutrality. you should be arguing for apple and against google. >> i think i would burst into flames if i did that. [laughter] >> right. so let's go to audience questions. and i hate to make you all schlepp to the microphone, but this is on c-span and everything. so who wants to start the process? >> you mentioned that in the early part of the 20th century they had to separate these industries in order for them to flourish. so do you see the same kind of

separation which replicates in the industry? >> yeah. i think it is important to recognize that in the united states we have a longstanding tradition going back to the founders of limiting concentrated power. newspapers were permitted into the mails in the 1790s on a nonpreferential basis which is enormously important for the structure of the press. the telegraph was not taken over by the post office. the telephone was not taken over by the telegraph and so on. this is different from the pattern european countries, and this didn't can happen because there were clever guys and addicts coming up with great ideas. this happened because of public policy. anti-monopoly public policy. and i think that your suggestion about a distinction between content and conduit that should be constitutionalized is, i think, a very provocative one, worth considering. i would contend there's a much stronger historical ground canning for that than even you provide -- >> well, it's a good point. i'll take that. >> let me just ask you for those

who haven't read the book to just state, you call it the separation principle. >> right. >> tell us what it is. >> all right, so from studying the history of these areas i decided -- it occurred to me the worst problems always came when you had a unity of ownership over moving information and careening information. when the pipe essentially became the same, people who created conflict because there's always an inherent conflict of interest in those situations. the western union associated press example is probably the strongest. >> this would be the example that you give in your book, this was the dream behind the time aol merger. you live in new york city, time brought the wire into your house. it then could only get to the internet through aol, and you could only get to time content. so it was the sort of dream of a closed system that got blown apart by the internet protocol. >> yeah, that's right. that is something we write about and i agree with what you said.

the separation principle i talk about was an industry by industry principle, that is, one company had the telegraph, another company runs the telephone, another set of companies run radio. the fcc said no, so there was of this policing. >> uh-huh. >> but the structure of today's -- what we need to do is reinvent that principle for today's technologies. and the cut industry is vertically like that doesn't make sense anymore. my separation principle is a hour so manial cut. >> the content company is separated from the carriage company. >> right. and so on. >> sir. >> in talking about some of these new media that came along and gave us these great let freedom reign kinds of things but then the corps pock rah si took over and killed, a lot of these businesses were capital intensative. there were economies of scale that would encourage business

and is squeeze out the little operator. and i'm just wondering if internet finally has taken this to another level where the barriers to entry are very low. is anyone in here progressing live as we're heresome. >> i think we banned laptops. sorry. >> okay. but in places like this all over the country tonight there are people blogging, describing this stuff of what they're doing. and maybe this time the corps pock rah si won't be able to take over and hijack this thing, and people will be able to use the internet. and by the way, all these other cost, too, you could have a radio station with a web site, you can make movies now with little cheap cameras that look pretty good, you know? maybe find that the cartels won't run things. >> a fabulous question. and in some ways that is the big question at the center of this book. you know? is the history destiny, or is it, can in some ways things be different? my point would be not assume things are going to be different because some things have changed, and some things haven't.

some of the things that have changed are that the internet itself is fundamentally a communications network. the protocols are opened, they're not owned by anybody. investment structures are different, challengers of the monopolists can get funding from the industry, and as you write about, often credit was used to starve challengers. and i don't think we also just socially have the same worship of size. you know, i think in certain periods of american history bigger and progress were the same. so there's certain things that have definitely changed, but there's certain things that haven't changed. economies of scale, network effects, natural monopoly have not clearly changed, and most importantly human nature. we have not changed. we're the same.

consumers still love convenience almost over anything. who here does not use google? [laughter] we still love convenience. we still l love the benefits of the ease of a single company providing something as opposed to trying to figure out one or another. we still love that, and there are still people who want to run empires and who have an interest in consolidating industries, and that hasn't changed. >> but there are differences between what's going on today -- and we agree about this -- and what went on 100 years ago. bell had a public serviceman kate which was mandated by the states and the federal government. and google today has a mandate, do no evil, which is basically backed by the three guys who own google. and it seems to me that a large percentage of the shares. and it seems to me that that's a real problem because we're not in the let a thousand flowers bloom right now, we're in a mode

in which very large entities are moving to carve up the information infrastructure. and they're doing it pretty fast, and they're doing it in a world in which we have powerful voices that say the market reigns, and the little guy is blogging, the little gal is blogging. and i just think that's fantasy. >> right. >> next question. >> i'm going to try and meld both threads of this. the telecommunications giant at&t, as you said, provided research and such under a regime of regulated monopoly. >> right. >> regulated rate of return. >> uh-huh. >> they broke up ma bell, right? >> uh-huh. >> it has now reconsolidated so now, basically, at&t and verizon constitute most of what were the seven baby bells. >> correct. >> so now we have the worst of both worlds. >> correct. >> we have a deregulated monopoly, essentially, because

they don't compete out of region except in wireless. to bring it to the journalism point of view, i would say this story is vastly undercovered, that this sort of consolidation between the public infrastructure is being held hostage by people who now -- verizon and at&t both -- >> correct. >> -- claim to want deregulation, right? that regulation is an evil, but they were built, they have these inherent advantages as do other cable msos. >> can right. >> so my question is do you see that as coincidental that it's an undercovered story in journalism? >> no, i don't see it coincidental at all. google gets such good press and net neutrality gets such good press because those two interests are aligned. >> net neutrality is common carriage which is the public pressure you were talking about -- >> with common carriage there are going to be winners and losers. >> yeah. right. and that's what you're asking for, so i don't understand --

>> what i'm asking for is a recognition that the telecoms and other big players including google have an obligation to serve the public rather than their shareholders or themselves or their own vision. >> i agree. >> that's what i'm asking. how you get there -- >> the question as we're getting to the end. >> how can you compensate for, how can you perceive the switch between a telephone or a telegraph which one person is sending to another person and then the much ballyhooed prospect of one person connecting to many as a, quote, previous user on the internet and then, two, what i see potentially as a feedback loop if there is a tiered internet of people who are, i suppose, most privileged in society not only having recourse to traditional educational and financial benefits, but also to higher

tiers, bandwidth, access to further information and how that loop then intersects -- >> [inaudible] >> oh. so that, you know, if you're a person if of means, you not only have educational and financial advantages, you would in this a tiered internet also have access to greater bandwidth and then in turn more information and access to a potential audience. >> let me talk about the first. one to many, you know, one of the problems of the internet is that it is a medium where anyone's a publisher, you know, anyone could be -- [inaudible] but one thing i'll just suggest that was completely unheard of before, early radio had some of those features as well, early film in some ways when there was a lot of producers. now, it still wasn't as easy as it was with blogging, but we have seen some of that before. and the question, i think one interesting thing is whether we will look back at this period

ten years from now i and say remember when user-generated content was in? there's this fundamental question as to whether that's just kind of a fad or something we're going through right now, and i don't know the answer. steve jobs thinks it's not. steve jobs says the one thing we know about americans, they don't want amateur hour. they want hollywood content. so there are a lot of people who even though we think things have changed forever, again, back to my theme, want to make things the way they were. >> let me just give two quick observations about that. one is the fascinating conclusions my telephone research was that a lot of americans were willing to pay for low quality telephone if it was cheaper. and i think that that's relevant to the current debate over net neutrality. not everybody, and, in fact, the folks were insisting on flat rate or same quality service for everyone, those are the big business users, and they were using power to the people as an

argument in order to, in effect, protect their turf. and i think that that's worth keeping in the mind. second, this idea that decentralized media is prima facie democratic early radio, and you say this in your book, it lost a lot of its potential. well, if we hadn't had edward r. murrow in the second warld war -- second world war, no one with the resources in this london to be broadcasting about the nazis, you know, we, perhaps, would be in a different place today. and i think that is a real problem with this debate over small is beautiful. there's a reason you have standards, there's a reason you have training, and there's a reason that you have a limitation on access from the point of view of an ordinary might be. you -- not everybody is sitting there surf offing the net ten -- surfing the net ten hours a day. we have survey data that college

students are doing a lot less on the internet, and the bloggers tend to come from a rather, you know, well-off part of the social -- >> right. >> let me say since it's 8 and we can only go two more, i see three questioners, right? so you're the last three questioners. we'll do your three questions and then call it a night. >> thank you. perhaps i can ask a question to perhaps link the two sides, but i don't think actually it's that antagonistic. >> well, that's no fun. [laughter] we both think the telephone is really important. >> if i was in europe, if i was in asia and i was listening to a debate like this, it would be strange because it would be two people talking about mainly american business innovations and cycles. >> yeah. >> so perhaps the question that i would like to pose is this amazing ability of the american economy -- at least in the 0th century -- 20th century -- to produce and dominate these

successive waves of media content, software/hardware, you know, whatever term you want to use is, perhaps, related to the cycle of open and close if be by closed we mean the time when some folks can make some real money. and that profit motive of the prior or the current cycle drives the desire to be the next facebook or to be the next facebook squared, you know, whatever it is, you know? >> right, i got it. >> yeah. i want to answer that too. do you want to say anything? >> tim, you go first. >> yeah. basically, you restated the idea of joseph trumpeter, it's his theory of capitalism. that the lure of monopoly profit is what is the real driving force of american capitalism or any capitalism system. not the idea of people competing. really people just going for it. this book, and maybe it is something about american, i'm

canadian, so you can't accuse me of being that parochial. all this stuff was invented here. and it's fascinating and there's a mystery to why -- >> i don't think it's as big a mystery as you think. we have extraordinarily strong protections for intellectual property. that's why bell got into the telephone business or his future father-in-law thought he could make a killing. >> right. >> can and that was the same story with radio. and why radio in the united states rather than britain in the first world war? the navy said we're going to buy up all of the british patents. we are going to establish dominance in radio because we don't have dominance in cable. so political economy has been unusually favorable to entrepreneurship because you've got strong intellectual property rights, and you've got an anti-monopoly tradition or separations tradition that tries to promote competition. and those two things working together is a engine of innovation, and he was writing

about industries, electrical, where patent rights were absolutely central. and it seems to me that's what holds us together. >> thank you. my question is regarding the inevitable nature as you said of monopolies to move towards corruption once, you know, their foothold on the technology and society, the way society runs starts to falter. so specifically regarding that at what stage do you think facebook and google are at in these internet no monopolies? i'm also commenting on your recent "wall street journal" article. and how do you think there are motivations to stay on top in the future will effect their activities overseas? >> it's a great question. i guess we could ask the european union about google. i was at google this morning, actually, in this d.c., and we were talking about this exact

question. and google says we, google's idea is that they have designed their company to try to avoid internal corruption. that was what they said. we were at their company, so of course they're saying this. but they say we feel we're extremely aware of the danger, and we are, we put in measures to try to prevent ourselves from becoming corrupted. >> [inaudible] >> and three guys own, what, 30, 40% -- >> i'm not going to, i'm just saying -- >> that was true when i went to google too. >> this is what they think, they believe that this would be their downfall, so they're trying. now, what do i think? i think we are in a kind of golden age. there's a lot of amazing stuff going on right now. watch very carefully a certain ratio of innovation versus self-preservation measures. you can look at any industry and see what ratio between the two