Marx Was Right

Those politicos who chant the competition-as-salvation mantra, especially those in America, may find it hard to believe, but not so long ago many prominent U.S. businessmen and politicians were singing the praises of corporate monopoly.  Incredibly, given America’s current climate of opinion—where the word government, never mind socialism, seems a dirty word—just 100 years ago, it was widely believed that there were four basic industries with “public callings”—telecommunications, transportation, banking and energy—that were best instituted as government sanctioned monopolies.  The most successful of the corporate entities to occupy this place of economic privilege was the American Telephone and Telegraph Company (AT&T), and here’s what its then President, Theodore Vail, had to say about the social value of competition, “In the long run… the public as a whole has never benefited by destructive competition.”

Groucho's older brother Karl (kidding)

Groucho’s older brother Karl (kidding)

Karl Marx may have been wrong about many things, including what best motivates the average human being, but he was certainly not wrong when he suggested that capitalism tends directly toward monopoly.  How could it not, when the most durable means of defeating the competition will always be to simply eliminate it?  In 1913, AT&T had been remarkably successful in doing just that, and its monopoly would survive undiminished until 1982, when the Reagan administration oversaw the breakup of AT&T into the seven so-called ‘Baby Bells.’

(Before you conclude that it’s only right-thinking, right-leaning governments, like Reagan’s, that can properly control corporate America, know that it was also a Republican administration, under President Taft, that condoned the ascendency to monopoly by AT&T in 1913.)

Tim Wu, in his book The Master Switch (cited last week in this blog), has postulated “the cycle” as continuously operative in the communications industries (all the way from telegraph to TV), whereby technical innovation gives birth to an initially wide-open trade, but where soon enough corporate consolidation leads to singular business empires.  It’s worth noting that by 2006, AT&T had, via some truly brutal business practices, essentially reunited its pre-breakup empire, leaving only two of the Baby Bells, Verizon and Qwest, still intact and independent.

The latest example of the tendency toward monopoly in Canada can be seen readily at play in the federal government’s efforts to boost competition among the oligopoly of this country’s big three telephone providers, Telus, Bell and Rogers.  Evidence suggests that, prior to the government’s most recent intervention—in 2008 reserving wireless spectrum for new companies like Mobilicity, Wind and Public Mobile—Canadians paid some of the highest mobile phone charges in the world.  Since their entry into the marketplace, these three rookie players, have—what a surprise—struggled to prosper, even survive in the face of fierce competition from the triad of telecom veterans.  All three ‘Canadian babies’ are now said to be up for sale, and the feds, to their credit, stepped in earlier this year to block a takeover of Wind Mobile by Telus Corp.

Former Baby Bell Verizon—now referred to in comparison to Canadian telecoms as “giant” or “huge”—is reported to be circling Canada’s wireless market, rumoured to be considering a bid on either of Wind Mobile or Mobilicity.  Facilitating this move—and setting off alarm bells (no pun intended) near the Canadian cultural core—is a recent legislative relaxation of formerly stringent foreign ownership rules to allow foreign takeovers of telecoms with less than 10 per cent of the market.

Wu’s book asks if the internet will succumb to the same cycle of amalgamation that so many other electronic media have.  His answer: too soon to tell, but history teaches us to keep a wary eye.  And if you consider Apple’s cozy relationship with AT&T over the iPhone, or the fact that Google and Verizon have courted, you’d have to agree with his concern.  Wu concludes his book with an advocacy of what he terms “The Separations Principle,” an enforced separation of “those who develop information, those who control the network infrastructure on which it travels, and those who control the tools or venues of access” to that information.

The internet, given its decentralized construction, is not easy to consolidate, but no one should feel confident that today’s corporate titans won’t try.  Nor should we underestimate their ability to succeed in that effort.

 

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