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Telecom Travelogues, Post II: Telecom-Media-Internet (TMI) Developments and Internet Regulation in the neo-Ottoman Empire (Turkey)

Post two in the Telecom Travelogues

Walking down the back streets of Istanbul a week ago today, Kristina and I stumbled across an amazing find: the offices of Turk Telekom tucked away in a building that had been constructed in the 1890s to replace even earlier offices that had been put into place during the submarine cable and telegraph building boom of the late-1860s.

My colleague and I, Robert Pike, write about this history extensively in our book, Communication and Empire (Duke, 2007). Following strong and historically-sensitive theories of globalization as well as those that focus on the interaction between technology and culture, we write about the relatively enthusiastic embrace of new communications technology by the leading forces in the Ottoman Empire in the last half of the 19th century.

Communication technologies were adopted reasonably quickly by the Ottoman Empire because they were seen as tools of economic development and integration into the world economy. They were also seen as rich symbols of modernity and progress. They were also seen as tools of integration for an empire still striving to consolidate its control over regions that stretched from Cairo, Egypt in the South, to Baghdad and the borders of the Persian Empire in the west, and around the Balkans up to the borders of the Austro-Hungarian empire in the north and northwestwest.

The development of telegraph lines were initially driven on by the British and French in the context of the Crimean War (1854-56). Already by 1857, however, the Ottoman’s Central Telegraph Administration had been established and work begun on a national telegraph system.

In conjunction with British investors and engineers, the Ottoman Empire’s Central Telegraph Administration set out to build a national network “from Constantinople to the head of the Persian Gulf”. Long-term exclusive concessions were signed with a variety of dubious and failed projects from the late- 1850s on before the regime finally struck a deal with what became the nucleus of the British-based Eastern Telegraph Company’s system: the company with the world’s most extensive submarine telegraph system of the time, one that ran through the Mediterranean and onto India by 1865 and subsequently to China, Japan, Australia and the rest of the Far East by the early- to mid-1870s.

The interaction between Ottoman officials and engineers, on the one side, and their counterparts from Britain and Europe, on the other, was not unique to telegraphy. Indeed, as our tour guide and local historian told us, the substantial renovations done to the Ayse Sophia during these same years also leaned heavily on architects and experts brought in from Russia and Italy. So too did efforts to write a new Constitution for the country, and for Egypt, which was brought within the relatively cosmopolitan fold of the Ottoman Empire in the 1860s, rely extensively on French and Austro-Hungarian legal experts.

By the late-1860s and 1870s, the Ottoman’s Central Telegraph Administration served simultaneously as a back-up network to the submarine cable network linking India to Britain and Europe by way of the Mediterranean and Red Sea, but also somewhat as a rival to the lines of the Eastern Telegraph Companies. Indeed, the Central Telegraph Administration’s services were substantially cheaper than those of the submarine cable colossus, but the drawback lay in the fact that the Ottoman system was less reliable and traversed the unruly ‘wild zones’ of tribal lands, thus compromising network security and a system that imperial and military administrators sought to mostly avoid.

Be that as it may, by 1871 the Central Telegraph Administration accounted for nearly 20 percent of the revenue on the Euro-India telegraph route. The telegraph was the tool of overlapping empires, but they were also the media of massive capital accumulation and cultural exchange. They were instruments of technology transfer, to use the language of our time. They were also a boon for the development of a private and commercial press in the Ottoman Empire.

As the historian of the Arabic world, Juan Cole observes,

The founding of private newspapers occurred simulataneously with the extreme speed of telegraph lines – new politics and political journalism grew tegother. By the 1860s, telegraph services allowed reception of international news through the wire services, and Otttoman and European newspapers could be shipped Alexandria and taken . .  . to Cairo and the interior (p. 112).

And as the British consul in Cairo noted in 1871, “every town or village of importance in Lower Egypt has a telegraph station”.

So, when Kristina and I were walking through the old Eminounou district of Instanbul and stumbled across an old telegraph and telephone building originally built in the 1890s, and which now advertises the availability of 100 MBps broadband Internet services on a fluttering banner outside, I was driven to see if I could negotiate access to go inside.

I’d given the chances of getting a guided tour of the facilities a one in ten shot of success, but five minutes later and we were in. Much to my surprise, a really nice young engineer fielded my entreaty, took it up with his superiors, and then took us on an hour-long tour inside. Amazing!

No pictures inside, I’d promised, because I’m not dumb and I know that all sorts of reasons, from competitive secrecy to national security, dictate a tight lid on how much information gets out. No worries, though, because I was more than happy to have just got inside. Later I was even able to negotiate a few exceptions to this rule, as we’ll see below.

The first thing one notices after walking passed the armed guard is the rows-on-rows of racks filled with equipment from Alcatel, Ericsson and, more and more as I gathered, Huawei, the Chinese upstart that has rocked the comfortable oligopoly that has ruled trade in telecoms equipment for much of the 20th century. With Nortel bankrupt, and ICTs a cornerstone of the ‘China-rising’ story, it was not surprising to see Huawei’s equipment filling rack-after-rack in the building, undoubtedly to the ‘old guys’ chagrin.

Some old Nortel digital switching equipment from the 1980s and 1990s can still be seen sitting in the racks, whirling away, but its days are numbered. As I listened to my hosts narrate a story about how Nortel had been a leading edge provider of digital telecom gear in the past, I couldn’t help but picture in my mind its former Canadian headquarters that sit not 25 kilometers from my home and how the once great company had fallen to the rapacious hands of the digital robber barons during the dot.com boom and bust that ripped across just four short years from1996 to 2000. Time, history, poof! We can learn something here.

Now, all that is left of Nortel are these old clunky machines waiting to be wound down, and a treasure trove of patents being scattered by auction on among today’s telecom and ICT leaders: Apple, Google, RIM, and so forth. Amazing what you can see from Istanbul when your eyes are wide open, and your mind as busy as can be.

The massive old building in the Eminounou district of Istanbul now dwarves the telecom gear inside. Processes of miniaturization have shrunk the space needed to house telecoms gear to a fraction of what was once required. Now, the bulk of the space in the four-floor building lies empty, just laying there dark and neglected or in some cases in the throes of being retrofitted for new equipment and purposes, as the following photo shows:

In the remaining areas where all the new and still functioning gear is held, the windows were all open but air conditioners still whirled away to keep the network switches, servers and data storage equipment cool from heat outside that hovered in the upper 30 degree range.

Crates of new equipment, most of them marked Alcatel and Huawei, lay scattered across the concrete floors of the four-floor building waiting to be opened, switched on. The 100 MBps high-speed Internet service advertised on the cheap banner hanging outside is right here, inside these boxes laying on the floor.

The advertising is, however, somewhat ahead of itself, given that only about five percent of Istanbuli business subscribers can access such high-end Internet services. However, the plans are for universal coverage of business districts across the city in the next two years. Facilities for the average Istanbuli resident, as the friendly and proud telecom engineers shepherding Kristina and I told us, will be rolled out aggressively as well, but against an unknown time frame.

Even more ambitiously from a technological sense, if not a social justice one, next generation networks (NGN) capable of blistering 10GBps information transfers are and will continue to be rolled out as part of these objectives. That is not just a pipedream, but rather could be seen in those crates of equipment lying scattered about the floor from Alcatel (France), Huawei (China) and a smattering of Ericsson (Sweden) stuff that I told you about a minute ago. In fact, some of its already in the racks.

Currently, while Internet service is relatively cheap in Turkey against OECD standards, actual levels of connectivity and use are some of the lowest amongst the OECD countries (see pp. 268-275 on prices and p. 354 for broadband Internet access levels). What takes place over the next five years or so will go a long way to determining whether those levels see a significant improvement.

Just like in the days that marked the rise of the telegraph and the commercial press in the 1860s Ottoman Empire, so too today are developments in the telecoms and Internet infrastructure fully intertwined with broad and faced paced changes taking places across the Turkish media as a whole.

Indeed, a deluge of new newspapers and television channels makes Turkey one of the fastest growing media markets in the world, according to PriceWaterhouseCoopers’ (2010) Global Entertainment and Media Outlook, 2009-2013 report (see p. 66 and also OECD CommOutlook 2011, pp. 230, 246).

Between 2005 and 2010, newspaper circulation in Turkey climbed over 55 percent in Turkey, according the World Association of Newspapers. Couple this with fast growing Internet capabilities, albeit from a low base, and there is a sense that the media in Turkey are experiencing something of a golden age, at least in industrial development terms.

This is a far cry from the hand-wringing and whinging that has taken place in many circles in Britain, Europe, Canada and the US over the past few years around claims that the media — journalism in particular — are in crisis. From my view, these cries are often overwrought, but in Turkey the idea that the media could be in crisis, at least from an economic point of view, is the furthest thing from anyone’s mind.

There’s a giant paradox in all of this, however, and one that certainly takes the glow of any claims that this is a golden age for the TMI industries in Turkey. By this I am referring to the disconnect between liberal fantasies stretching back for centuries that more media will automatically deliver more personal liberities, freedom of the press and democracy.

Global rankings consistently rank Turkey low on the scale of journalistic, media and Internet freedoms (see herehere, here and here). More media and internet connectivity, in other words, does not seem to add up to a free press. In fact, they may even subvert such things.

Deeply problematic is the stranglehold of Internet censorship that is already bearing down on all that equipment I talked about above, and which is about to get a whole lot worse next month once the new “Bylaw on the Principles and Procedures Concerning the Secure Usage of Internet” kicks into action on August 22, 2011.

The new bylaws were passed by the Turkish Telecommunications Directorate, with the blessings of the Information Communication Technology Association (ICTA) as well as the Radio and Television Supreme Court, in May of this year. The new rules set out to create a managed Turkish Internet Space bound by the rules that life online in the country shall respect and protect:

(1)  Turkish national values,

(2)  Family Structure,

(3)  Youth

(4)  Moral values.

As Eda Çataklar, a professor at the Intellectual Property Research Center, Istanbul Bilgi University states, the new bylaw has come under much criticism by many NGOs inside and out of Turkey since being passed earlier this year.

The primary flaws of the bylaws, according to Cataklar, are:

  • It is overly broad and lacks transparency.
  • mechanisms to remove URLs and banned words placed on a proscribed ‘black list’ are either inadequate or missing completely.
  • Rules governing how users establish and maintain their online profiles are vague.
  • International norms are ignored.
  • Government coercion has displaced ISPs’ own initiatives as a means for dealing with whatever Internet security problems do exist.

The push is disturbing for all of those who see communication rights as fundamental human rights. It is disturbing to a rich legacy of a vibrant and open political culture and press in the country, even if the room for manouever within that space has always been hard to decipher and tightly constrained.

The clampdown on the Internet also subverts the technological capabilities and goodwill of the staff that we met touring the offices of Turk Telekom in Eminounou. They are an affront to democracy itself, and strongly suggestive that the new Ottomanism that I heard some local professors gloat so much about during the IAMCR conference may not be as open as the Old Ottomanism of the late 19th century that I outlined above.

First and foremost, and this struck me with particular force in a way that has previously escaped me, the clampdown poses an especially harsh and oppressive threat to Lesbian, Gay, Bi, Transsexual and Transgendered (LGBTT) communities that have come out of the closet in ways that I never saw when I first lived in Turkey in the 1990s. The LGBTT community is particularly concerned that the new rules, and more specifically, its list of 160 plus banned words, will bear down hard on them and issues of sexuality as a new kind of state seeks to consolidate its power over a society in heightened state of flux.

As one person stated, if the Bylaw on the Principles and Procedures Concerning the Secure Usage of Internet prevails, “LGBTT individuals will be non-existent in the cyberworld”.

There is some hope yet that the new provisions will yet be rolled back by Turkish courts as an affront to Turkish Constitutional principles regarding freedom of expression and its commitments under European Human Rights agreements and the UN convention on civil and political rights (1966).

In the last few days while I’ve been Twittering away about these ideas in rudimentary form, one wag has repeatedly tried to tell me that the actions in Turkey are no different than those taken by governments in Australia, Canada, the US and China to regulate and control the Internet. I beg to differ.

They are much broader in scope, more opaque, and more severe than anything on offer here, although in a post that I plan to write in the next few days I will argue that things are going in the wrong direction in North America and Europe, and seem to be really coming to a head at breakneck speed in these summer days on account of:

  • the stronger push to turn ISPs into gatekeepers on behalf of the copyright industries that has gained much stronger footings in the US, Britain and the OECD countries as a whole in just the past week and the backlash against those proposals emerging from just mainstream groups (see here, herehere, here, and here),
  • the strong clamp down that seems to be occurring with respect to national security (and here)
  • the guerrilla information warfare being conducted between Anonymous, LulzSec, and a wide range of others, on the one hand, and the ‘security-state’ and military-information-media-entertainment (MIME) apparatus, on the other, are deeply disturbing (see here, here, here, and here).

Overall, standing from the shores of the Sea of Marmara and at a critical juncture in world history, one thing became somewhat clearer to me and that is, yes, what happens in Istanbul is deeply interconnected with what unfolds here. And for me, perhaps we can take some solace in the hope that the Turkish people struggle to find and secure their own freedoms, we will do the same with respect to ours, as will Internet users worldwide.

And on that point, well, we need to think of the politics of TMI issues not just in terms of whether they occur in Turkey, Canada, China or Britain, but as essential to our everyday lives wherever we live, and thus in need of the strongest recognition possible that Internet freedoms and communication rights are fundamental human rights regardless of where we stand.

On this point, there is more than a ray of hope, as some of the latest thinking about Internet access and connectivy as a fundamental and universal human right so ably and eloquently demonstrates. This is quite hopeful, actually. I hope you feel the same way, too.

The Telecom Travelogues, Part I: News Corporation in Flames, Media Moguls on Trial

I’ve been gone for two the past two weeks. Traipsing the streets, alleys and waterways of Istanbul with Kristina, my wife.

We conferenced, we hung-out with friends, and we partied at a swank event held for IAMCR conference goers at the Archeology Musuem in the heart of the old part of Istanbul, Sultanamet.

We gazed about the Hagia Sofia, the world-renowned Christian Church constructed in the 5th century (CE) and subsequently remodeled into a mosque after the Ottoman Empire conquered the city in 1453. The Topaki Palace was a sensorial blend of opulence, barbarism, and glories of a cosmopolitan empire whose time has passed.

Perched atop the slopes of the Bosphorous fjord that separates Europe from Asia, we could see a wide swath of the landscape. And from where I stood, the following five telecom-media-Internet (TMI)-related issues kept coming into view:

  1. The News of the World telephone hacking scandal.
  2. The deal between Hollywood and ISPs providers in the United States — Verizon, AT&T, Comcast, Time Warner, etc. – that will see the latter take on greater gate-keeper roles vis-a-vis online content.
  3. The export of bandwidth caps and the pay-per Internet model to the U.S. from Canada, as Time Warner and Verizon get set to follow the adoption of such measures by Comcast and AT&T (in 2008 and in May 2011, respectively).
  4. The outbreak of information guerilla warfare between Wikileaks, Anonymous, LulzSec, and so forth against Paypal, Visa, Disney, News Corp, Lockheed Martin, Arizona State Police because they see all of these entities as links in a much bigger cyber-military industrial chain (also see James Der Derian’s Virtuous War for one of the best scholarly treatments of this issue).
  5. The relationship between rapid TMI expansion and economic development in Turkey versus the reality of a strong state with a solid grip on Internet censorship and control, a system of moral and political regulation that the LGBTT community in the country expects will hit them especially hard.

I will write about these things in the next few days. The first post, though, is on the strange illusion that the News of the World telephone hacking scandal might somehow drive the final nail in the coffin for the much reviled, and seldom revered, Media Mogul.

First up, the dominant owners and hands-on controllers at News Corp, the world’s third largest media conglomerate: Rupert and James Murdoch. The News of the World telephone hacking scandal that has engulfed News Corp has already wiped out twenty percent of the media behemoth’s market capitalization in two weeks, roughly $8 billion (see here).  This is indeed a steep cost for transgressing the boundaries of law, good taste and solid journalism.

The Murdoch Family wield controls in News Corp despite the modest scale of their economic ownership stake.  While the family only owns about 12.5 percent of the capital stock of the company, it controls the company through voting shares and via positions in the executive and on the company’s board of directors. In narrow terms, the family’s coffers have definitely taken a hit.

News Corps’ telephone hacking scandal threatens bigger damage to the media conglomerate. Its contentious attempt to gain the remaining sixty percent ownership stake in BSkyB that it does not yet control has been suspended. The News of the World (NOTW) — a hundred and sixty some odd year old popular low brow paper — has been shuttered. The NOTW editor-in-chief (Rebecca Brooke), a sub-editor (Clive Goodman), Prime Minister Cameron’s director of communication and ex-editor at the NWOT (Andy Coulson) and two high ranking police officials have all resigned and/or been arrested (see herehere and here for chronologies and over-views).

This was not a one off deal. It has been going on for years, with episodic attention to this aspect of the sordid underbelly of journalism in the UK spurred on at the instigation of journalist Nick Davis and Guardian newspaper. Now, the subject has has been dragged out of the closets and once again been put into the spotlight. Heads may yet role.

What is interesting, however, is the extent to which observers are already extrapolating from the troubles of the Murdochs to the fate of media moguls as a whole. Indeed, many are predicting the imminent demise of the media mogul, the widely reviled character of the 19th and 20th centuries ‘industrial media age’, as if somehow the travails of News Corp and Mssrs. Murdoch — Rupert and James — are an index of what will happen to the media industries as a whole, and to media barons specifically.

The Economist seems to hope for the demise of the media mogul writ large should the Murdochs fall. It worries, however, that the world will be a worse off place without News Corp. The giant global media conglomerate with $40 billion plus per annum revenues and a vast stable of globe straddling entities — 20th Century Fox Films, Fox News, BSkyB, MySpace, Wall Street Journal, the Times, etc — plays an valuable role in the media and entertainment world, and in journalism and politics, too. It’s loss would impoverish us all.

I doubt that any such thing will come to pass. However, I do agree with Jeff Jarvis, albeit for entirely different reasons that will become evident below, that should this somehow turn out to be the beginning of the end for News Corp, such an outcome is not to be lamented.

Jeff Jarvis agrees with The Economist that the media mogul as a ‘type’ is on its last legs. He has some great stories from a long career that basically boils down to the idea that, individually, media barons are quirky and drawn to power and like to use it for personal gain and on a whim. Some moguls are pleasant and unobtrusive (he lists Rupert Murdoch as one of these types, based on his own personal experience); most are not and come across as tiny tyrants. All, however, Jarvis declares, are doomed to die, slaughtered by ineptitude and the Internet.

I first heard this chain of reasoning that stretches from the phone hacking scandal and News Corps woes, on the one side, to predictions about the imminent death of the mogul, on the other, last week when the New York NPR station WYNC contacted me in Istanbul to do an interview. The topic? The role of the media baron in American media history and “whether Rupert Murdoch is one of the last”.

The story was temporarily put on the shelf, for one reason or other. In retrospect, it is clear that the NPR folks were on to something. I hope they’ll pick it up again and run with it.

My answer, though, from the get-go is no, Murdoch is not the last of a dying breed. The future of the media mogul rests on much bigger forces in finance, markets and technology than the hacking scandal. The media mogul type, as I will argue, almost by design, gives rise to intrigue and scandals like those now afflicting the UK press. That is the ‘causal chain’ in such events, rather than the reverse one assumed by the Economist, Jarvis, etc., where scandal takes down moguls.

These events will undoubtedly cause NewsCorp to flounder, as I have already clearly indicated above, and maybe some heads will roll. But I do not believe for a moment that the phone hacking scandal will, by some lengthy chain of reasoning, lead to the death of the media baron.

To be sure, the media baron no long cuts as an imposing figure as Jay Gould, William Randolf Hearst or Lord Beaverbrook did in the 19th and early 20th centuries when the ‘industrial media age’ was taking root.  As Eli Noam (2009) indicates in his authoritative Media Ownership and Concentration in America, the number of owner-controlled media firms in the U.S. fell from 35 percent to just 20 percent between 1984 and 2005 (p. 6).

So maybe the Murdochs are hang-overs from a time now slipping irretrievably into the past?

I don’t think so. They may have declined overall, but not as much as Noam and others suggest. In fact, far from being a dying breed, the mogul type is actually quite prominent right across the TMI industries, and is in the process of being retrofitted for the digitally-networked media age.

Three of the top ten firms in the U.S., the largest and most developed medie economy in the world, are owner-controlled: Comcast (Roberts), News Corp (the Murdochs), Viacom-CBS (Redstone). Steve Jobs also holds a significant, but not controlling, stake in Disney. Other significant players still stand out as well, notably the New York Times (the Ochs family) and the Washington Post.

In Canada, the mogul cuts an even more imposing figure, with 7 out of the 10 biggest mediacos being owner-controlled (eg. Shaw, Rogers, QMI, Astral, Thomson-Reuters, Cogeco, Toronto Star). A similar scene prevails in Latin America, Russia and some parts of Europe too.

Of the top ten global media players, five are owner-controlled — Comcast (the Roberts family), News Corp (the Murdoch family), Viacom-CBC (Redstone family), Bertlesmann (remnants of the Bertlesmann and Mohn families) and Thomson Reuters (the Thompson family).

The media baron is not just a hold-over from the industrial media age, either, but a prominent feature among seven of the leading ten Internet firms as well: Apple (Jobs), Facebook (Zuckerberg), Google (Page, Brin and Schmitt), Microsoft (Gates and Ballmer), Yahoo! (Yang), IAC (Diller and Malone) and CBS (Redstone). In sum, new technologies and the Internet firms have not whisked away the owner-controlled media organization.

News Corps’ organizational structure thus is a mirror of this broader phenomenon and an index of something unique and deeply intriguing about the media, even in the 21st century and at a time when Google, Apple, Facebook and so forth are moving ever closer to centre stage. News Corp embodies the resilience of the media mogul form initially forged in the 19th century, and provides us with an opportunity to understand just how this seemingly anachronistic form is being retrofitted for the 21st Century TMI industries.  For the time being, we might call the new versions TMI Barons.

The media mogul has been familiar figure since the late-19th century industrialization of the press and entertainment industries, typically more prone to being reviled than revered. The Robber Baron Jay Gould was the target of public scorn when he ruled the Western Union, Associated Press, a couple of New York dailies, and railways across the country in the 1870s and 1880s (see Richard R. John’s Network Nation or my review of it).

All of these entities worked in tandem to advance the interests and intrigues of the movers and shakers arrayed around Jay Gould. They served the Republicans in the 1876 elections especially well, too, essentially throwing the outcome to that Party’s candidate over the Democratic opponent.

Upton Sinclair revived the indictment of the media mogul in his hugely popular The Brass Check, first published in 1920 and already in its ninth printing with over a 150,000 copies sold by 1928. As the power of the media mounted in the 20th century, Orson Welles’ 1941 film Citizen Kane updated the indictment of the press baron for the cinema, with its key protagonist, Charles Foster Kane, a media mogul cut from the mould of William Randolph Hearst. The film, like Orson Welles’ War of the Worlds radio drama before it, served as a meditation on power and persuasion in the age of the mass media.

The basic problem of the media mogul form of ownership and organizational structure stems from the fact that it personalizes power and politics. It colonizes public space and discourse with powerful personal agendas.

Its very form and the unremitting flash of all-too-many of those who occupy the role clash with popular and journalistic sensibilities. The ‘free press’, as A. J. Liebling (1947) famously quipped, as a result belongs mostly to those who one. Criminality is not foreign to the role, but at least episodically seems endemic too it, as the Corporate Fraud Task Force’s Report to the President put into place after the collapse of the dot.com bubble regularly demonstrate (see, for example, pp. 25-30 in the 2008 report)

The ‘familial model’ of ownership, control and politics that are the hallmark of News Corp, as the Financial Times stated the other dah in direct reference to the events at hand, are midieval in character, opaque and impenetrable. News Corp has always been close to the centres of political power in the US, UK and wherever it operates, it brazenly wields its influence in way that are as much opportunistic as they are ideological. That company’s owners do use political influence for their own commercial ends, there is no doubt.

News Corps’ board of directors is also one of the most politicized of the leading global media conglomerates. Whereas bankers, financiers and commercial goods purveyors such as Proctor and Gamble stack the boards of most major media conglomerates, of the seventeen members of News Corps’ board, three are from the Murdoch family (James, Lachlan & Rupert) and two are ‘global war on terror’ veterans closely aligned with the Bush II Administration (2000 – 2008):  Viet Dinh, a Georgetown University law school professor and one of the main architects of the Patriot Act, and former Spanish President during the ‘war on terror years’, José María Aznar.

The sprawling global media behemoth’s second largest share-holder is Prince Alwaleed bin Talal, the nephew of the King of Saudi Arabia. He is also one of the Murdochs’s steadfast allies on the board and business partner in other joint Arabic media ventures with News Corp (see News Corps’ Annual Report, 2009, p. 112). All of these murky political ties irretrievably compromise News Corp’s ability to live up to the standards of autonomy from governments demanded by the most mainstream theories of a free press.

The fact that the Murdochs have played their political connections opportunistically and ideologically in equal measure has served them well. To the untrained eye, the fact that the company endorsed Tony Blair’s ‘third way’ Labour Party in the UK at the same time that it stood behind the rabidly conservative Bush II Administration in the US might seem to be ideologically incoherent. However, such a stance has the virtue of allowing News Corp to further its commercial interest regardless of the political context that prevails at any single moment in time.

In Britain, these ties have persisted with the discredited NWOT editor Andy Coulson having served as advisor to Brit PM Cameron before the 2010 election and then as his director of communication after the election, until is resignation last week. Indeed, News Corp is a fixture of the deep state, the buried channels of political communication within the countries in which it operates. These are the grounds that breed things such as the phone hacking scandal.

The News of the World telephone hacking scandal is not new but has been doggedly pursued by the Guardian journalist, Nick Davis, for the past half-decade or more. The story of calumny, political intrigue and the over-inflated egos of media moguls, senior and junior – i.e. Mssrs. Rupert and James Murdoch – continues to have legs and may be growing in scope.

Davis provides an excellent account of the history behind the phone hacking scandal and many of the other woes facing the British press in his 2009 book, Flat Earth News. Over the past few weeks the re-igniting of the phone hacking scandal has also spread across the Atlantic, where James Murdoch, the deputy chief operating officer of News Corp and son of the company’s famous public face, Rupert, could face criminal charges in the US as well.

The fact that the events occurred at all and eventually saw the light of day is probably also due in no small measure to the fact that the UK newspaper market is more competitive and ideologically robust than anything we’d find in Canada or the US. The fact that it targeted the cellphones of the Royal Family, dead soldiers, celebraties, politicos and murdered school girls also thrust the scandal into the limelight, pissing off a broad spectrum of the powerful and popular alike as a result.

The subject has stayed at a steady boil throughout the two weeks we were in Istanbul, and a Parliamentary Inquiry in the UK is looking into these events is now under way and releasing testimony and documents pretty much as it occurs. Call this the acceleration of the political cycle and scandal laundering.

Besides destroying wealth, the scandal has put media moguls on trial. Indeed, the whole British Media System, is on trial. The British Press Complaints Council, for example, has been thoroughly discredited for its previous whitewash of widespread and systemic uses of phone hacking in 2007 and 2009. The rot runs deep and is, as they say in sociological circles, it is systemic.

The Press Complaints Commission (PCC) first report, for instance, stated categorically that “the activities . . . of two people [private investigator Glenn Mulclaire and Royal Affairs editor Clive Goodman] working for the News of the World in 2006 were deplorable, illegal and unethical”.

And the PCC kept its head stuck in the sand the next time around, in 2009, when its second report on phone hacking stated: there was “no new evidence to suggest that the practice of phone message tapping was undertaken by others beyond Goodman and Mulcaire, or evidence that News of the World executives knew about Goodman and Mulcaire’s activities.”

In other words, according to the PCC, phone hacking by News of the World journalists was the product of two bad apples: the Royal page editor Goodman and one-time petty criminal, Mulclaire. Once the ‘two bad apples’ story line was taken, the PCC stuck to it and, for all intents and purposes, abdicated its responsibilities.

The Murdochs are now trying to extend this argument by claiming that the ‘organizational complexity of modern media conglomerates’ is so Byzantine, that they cannot possibly know what is going on in every nook and cranny of the company. According to this tale, the two Murdochs – Rupert and James — were unaware of the goings on at the NOTW. This was pretty much the line that the PCC took. Others say they turned a blind-eye. The first tact injects a sense of humility into events that may now be spinning out of company and its owners’ control, while the latter looks just clumsy and neglectful. Stupid yes, but not a crime.

The scale of global media corporations like News Corp. does mean that the Murdochs cannot be, and are not, privy to every single act that takes place across its sprawling operations. Indeed, with $40 billion plus in annual revenues and interests spanning the globe, News Corp and others of its kind cannot be run on a day-to-day basis by just two people, no matter how omnipotent. However, the Murdochs have also over-played their hand on this score.

Owners do control the media they own indirectly through their control of resources (i.e. allocational control) and long-range decision-making. They sometimes also intervene directly on a day-to-day basis (i.e. operational control).

The Murdochs, in fact, are hands-on owners, in the classic mogul type, not just passive investors and dividend takers. Some former executives have stepped forward to argue that the Murdochs were complicit in, paid for, consented to and helped cover up illegal behaviour. As a result, the Murdochs’ testimony to Parliament has already been tainted and even PM Cameron as admonished them to double-check the accuracy of their testimony at last week’s Parliamentary hearings.

The idea that moguls, or at least editors’ interpretations of their interests, can set the agenda and output of a company like News Corp can be seen in the current phase of the phone hacking scandal. As a timely Project for Excellence in Journalism study released in the past week shows, Fox News has aired much, much less coverage of the phone hacking scandals as CNN and MSNBC, the two other major cable tv news outlets in the US.

Whereas CNN and MSNBC each gave about 130 minutes to the topic from July 6-8 and between the 11-15th, Fox News gave just a fifth of that amount, with only 23 minutes of airtime devoted to the subject. Coincidence, or the guiding hand of the owners and News Corp. interests in setting the editorial agenda? News Corp and the Murdochs have interests, and the flagship of their ideological enterprise in the US, Fox News, is helping to set the parameters of public knowledge and debate on the topic.

So, whether by the structure of interests or direct editorial intervention, it comes to pass that editorial policy within News Corp. is being bent to personal and political imperatives. It is just this reality that not only leads to congenital suspicions of media barons, but which have a corrosive effect on journalism as a whole.

Thus, while newspapers elsewhere flourish, and even enter something of a ‘golden age’ in Turkey, South Africa, India, China, Brazil, Indonesia and Russia, among other places, the crisis of journalism in parts of Europe, Britain and the US is being aggravated by self-inflicted wounds. The crisis may also reflect the deadhand of the media mogul – a figure that is well-past its past due date — running companies for power and personal profit, rather than standards of good journalism or corporate governance.

In sum, it is still far too early to erect the RIP epitaph over the grave of the last media mogul just yet. However, one thing is for sure and that is that the phone hacking scandal does so much portend the death of the mogul but rather reminds us of the dangers of media moguls and media concentration.

Dream Bıg: Some Modest Reforms for the Telecom-Medıa-Internet (TMI) Industries in Canada

I’m taking a break for a few weeks, but before here ıs a slightly extended versıon of my column ,ın te Globe and Mail yesterday.

It’s time to step back for a bit from trying to explain, first, that the telecom-media-Internet (TMI) industries in Canada are concentrated, second that they are poorly regulated and, lastly, that this is problematic, not from the perspective of utopian ideals, but of a digital free press in a liberal capitalist democracy like ours.

 

When I come back I’ll write about other things, I promise (maybe). Before I leave, though, a few thoughts for your consideration.

 

We live in what Ron Diebert and Rohan Rohozinski of the Citizen’s Lab at the University of Toronto call a ‘constitutive moment’. This means that actions taken now will help lock in the structure, look and feel of the digital, networked mediaspace for years ahead.

 

Three matters are coming to a head as they wind their way through the CRTC and body politic:

 

  • The CRTC will decide the fate of the pay-per model of the Internet (UBB and bandwidth caps) (starting at CRTC hearings July 11) imposed by the ‘big six’ ISPs on Canadians while they were sleepwalking until all hell broke lose last January when the incumbents got regulatory approval to pin their hated pay-per model on the independent ISPs that serve the five percent of Internet users not served by the incumbents.
  • We will see if the CRTC has the wisdom and courage to pick the right tools to effectively deal with vertical integration and concentration across the TMI sectors as a whole.
  • a CRTC “fact finding inquiry” will examine whether online video distributors such as Netflix, YouTube, AppleTV and so on will be freely accessible in Canada or regulated like broadcasters.

 

By my estimation, each hearing involves about a hundred submissions of thirty or so pages each. That’s nearly 10,000 pages. It would be great if you could keep up to speed on these matters while I’m away by bumbling your way through the “truly primitive” website of the CRTC, as Cardozo Law School Professor Susan Crawford refers to it.

 

But who has the time and resources to do this? The incumbents and their well-heeled lobbyists, that’s who! I am on sabbatical, but still exhausted tracking this stuff day after day.

 

Others such as the Public Interest Advocacy Centre also take part in these processes as much as they can. For PIAC it’s a real problem, because late in the game it just learned that the CRTC’s fast-tracked “fact finding” expedition on new media isn’t a real hearing, so no funding for them.

 

The rabble-rousing group, Open Media, is marshalling its resources for this week’s UBB Hearings. Rightly so, since it put the issue of the pay per Internet model on the public radar to begin with. They are boycotting the OTT ‘fact finding’ mission, though, because their resources are stretched thin and to protest the fact that the CRTC buckled to vested interests’ pleadings to have the proceeding advanced from 2014 to now, even though similar examinations occurred just two years ago.

 

Google and Apple also scolded the CRTC for allowing matters to get all bungled up in a kind of regulatory trench warfare. The CBC and NFB want to deliver their content to as many people, anywhere, anytime and across as many platforms and devices as possible, as well, not new regulations. Mirko Bibic, Bell’s regulatory front man, called this idea “preposterous” at the vertical integration hearings two weeks ago.

 

This battle over the future of media is not the result of new industrial arrangements, digitization, or newfangled economic theory, but endemic to situations where those who control the medium also control the messages (content).

 

In the 1900s, for example, the Canadian Pacific Telegraph Co. and Great Northwestern Telegraph Co. (the latter owned by the New York-based goliath, Western Union) had exclusive distribution rights for the Associated Press news wire service in Canada. To fortify their dominant position in the lucrative telegraph business against smaller rivals (e.g. the Dominion Telegraph Co in Canada and Postal Telegraph Co. in the US), the Canadian Pacific Tel. Co. and Great Northwestern Tel. Co. gave away the AP’s news service to the dominant daily newspaper in each town across the country for free.

 

AP’s service was so cheap because instead of paying the cost for the news service and the telegraph charges for delivering it, the companies only charged for the ‘transmission costs’. This was a boon to established members of the press and AP and a useful tool for the companies’ own efforts to stitch up their lock on the telegraph business. It was also a menace to network competition, rival news services and a diverse press.

 

Any rival news service that tried to enter the market was at a disadvantage because its subscribers had to pay the ‘transmission costs’ plus the cost of the news service. When the Winnipeg-based Western Associated Press set up a news service in 1907, it found its opportunities blocked because there was no way its subscribers could afford to pay two costs — transmission and for the news service — and stay in business, while AP’s new service was given away free to competitors.

 

Leveraging control over the wires, the telegraph companies choked the messages flowing through them. As one muckraking journalist, W. F. Maclean, wrote in the Toronto World,

 

“attempts on the part of public service companies [the telegraph companies] to muzzle free expression of opinion by withholding privileges that are of general right cannot be too strongly condemned.”

 

The matter was brought to a head by one of the first regulatory bodies in Canada, the Board of Railway Commissioners in 1910. Canadian Pacific Tel. Co. came out swinging, arguing that the BRC had no authority over news services or to compel them to separate the costs of the news service from their transmission costs.

 

The BRC didn’t wilt for a moment but shot-back that the law compelled it to insure that rates were ”just and reasonable”. Unless transmission rates were separate, explicit and equitable, “telegraph companies could put out of business every newsgathering agency that dared to enter the field of competition with them”, it declared matter-of-factly.

 

The regulator had all the authority in the world it needed to break up the ‘double headed news monopoly’, and it did.

 

To be sure, the modalities of communication have changed tremendously since and we now live in an age when information is plentiful, not scarce. Yet, as Tim Wu’s Master Switch, and the mounting evidence before us attests, the basic logic of leveraging content and networks to confer advantages on one’s own services whilst driving others into submission, if not out of business altogether, is alive and well.

 

Australia, Argentina, Belgium, Brazil, Britain, New Zealand and many others are dealing with their own contemporary experiences of networks being used to trample competition and diminish the range of voices and expression available. Australia created the National Broadband Company in 2009 with $43 billion in funding to spur competition and open networks, for instance.

 

We have the publicly-owned and financed CANARIE with its ultra fast networks serving hospitals, schools, universities and researchers across the country. However, its modest funding ($30 million/year, roughly), uncertainty about funding levels after March 2012, and its executives’ squeamish view of how little they should compete with the incumbent commercial providers all limit CANARIE’s ability to offer much by way of an alternative network.

 

In Belgium and Britain, respectively, Belgacom and British Telecom have been forced to give more generous access to their facilities to speed the development of next generation networks. The level of functional separation adopted in the UK is unmatched elsewhere and depended heavily a strong regulator to force it upon a kicking and screaming BT in 2006. It has already led to more telecoms competition, broadband Internet services with greater speeds and capabilities, and lower prices relative to most countries, including Canada.

 

As an academic, I can dream big, but between my dreams and reality, there is a middle ground represented by measures that the FCC and Department of Justice in the U.S. put in place when they approved Comcast’s take-over of NBC-Universal earlier this year. In return for their blessing, Comcast must meet four fairly tough demands:

 

  • its television and film content must be available to Internet competitors and online video distributors (OVDs), a new category designed to cover Netflix, Hulu, AppleTV, etc.;
  • adopt open Internet principles generally;
  • “offer broadband services to low-income Americans at reduced monthly prices;
  • provide high-speed broadband to schools, libraries and underserved communities, among other benefits”.

 

These are practical measures that the CRTC could implement. It is a middle of the road choice, not a radical one. It does force the market to deliver a minimum level of social justice, but first and foremost it tries to foster a digital free press fit for a liberal capitalist democracy, rather than striving for abstract utopian ideals or bowing to the status quo.

 

American Newspapers, Canadian Company Towns: Conversations and Despatches from the Archives with Media Historian, Michael Stamm (Part II)

Another dispatch from the scenic reading room on the third floor of the Library and Archives Canada building in downtown Ottawa.

Dateline: July 7, 1011. Post filed at 4:42pm, live to blog at 7:18.

In our first conversation last week, I introduced a new friend of mine, Michael Stamm, a media historian at Michigan State University and author of an excellent new book, Sound Business: Newspaper, Radio, and the Politics of New Media,

I’m glad to say that we’ve shared a few more beers and some fantastic conversations since. Michael’s here for the summer, and after a hard day of slogging at Library and Archives Canada, well, he seems up to a good bs session, and some valuable insights into, well, a lotta stuff.

A couple of weeks ago I asked Michael to think about doing a post to my blog every once in a while, something along the lines “cool thing I found in the archives this week”, kinda thing. I think it’s great; it also adds a nice conversational element to my blog, too.

Without any further adieu, here’s this week’s despatche from itinerant scholar and MSU media historian, Michael Stamm.

MS:  In last week’s post, I mentioned that the Chicago Tribune’s activities in Canada helped to build of a different kind of community than the kind we normally think about when we think about newspapers. We usually think about newspapers creating a kind of ‘reading public’, or cultural community, not the ‘real thing’, as the Robert McCormick did with Baie Comeau starting in the late-1930s.

The Tribune literally created a community when it built the city of Baie Comeau around its Quebec newsprint mill beginning in 1936-37. The city still exists to this day, and is probably on the mental landscape of most Canadians, if for no other reason, because it is the hometown of former PM, Brian Mulroney.

In researching the development of this newspaper-owned company town during the past week, I came across a letter written by Tribune publisher Robert McCormick. The letter outlines a number of happenings in the town that brought images to my mind of the fictional media mogul Charles Foster Kane in Orson Welles’ Citizen Kane, and George Pullman (who I mentioned last time). All of these men display different varieties of paternalism as they go about building company towns, and in two of these cases – McCormick and Welles’ fictional Citizen Kane — the newspaper industry is at the centre of these enterprises.

George Pullman is an infamous figure in American history.  Pullman, a builder of railroad cars, decided in 1880 to build a town just south of Chicago to house his workers.  Pullman wanted the town that bore his name to be pretty and orderly and in building it exhibited a domineering paternalism.

Workers rented their homes from the company, had little say in local government, and felt the company’s influence everywhere, to the point of being informed on a daily basis that their town curfew was in effect by the chime of a loud bell.  Over time, a built environment meant to inspire sobriety and create stability among the workers succeeded only in creating alienation and resentment.

Worker frustration peaked with a riot beginning in May 1894, and the unrest lasted into early August, when federal troops were eventually dispatched to the town.  Pullman’s urban planning effort proved to be a spectacular failure, and future builders of company towns like Robert McCormick learned to eschew Pullman’s aggressively paternalistic version.

In less directly coercive ways than Pullman, newspaper publishers exhibited a ‘softer’ degree of paternalism toward their communities.  They believed that they had the serious duty to serve the daily news and information needs of their communities. And they prided themselves on fulfilling that duty.

As Pullman paternalistically built a town that he thought would benefit his workers, many publishers contributed to a public discourse with their own preferred visions of how things were and should be. Publishers cared, too, for these communities, but this concern with the public interest could form a relationship that was in practice less reciprocal than the public itself might like.

We must remember that, to be paternalist, is to not to necessarily always be overbearing, but only occasionally so, and to provide a genuine kind of care – one does not have the option of simply choosing to neglect. McCormick stepped into this mould easily.

We can also get a sense of Robert McCormick – the early 20th century Chicago newsbaron and family heir to the Tribune papers – if we take a look at things through the lens of the fictional Charles Foster Kane in Orson Welles’ 1941 film
Citizen Kane.  In the film, Kane is clearly meant to be a reference to media mogul William Randolph Hearst.

Perhaps I’m just too big of a fan of Welles’ film, but as I plucked my way through the material at Library and Archives Canada during this last week, I’ve been struck by the ways Welles’ Citizen Kane character looks a helluva lot like Robert McCormick, both as a publisher and as a town builder.

In the film, when Kane first starts publishing his newspaper, he pens an impromptu declaration of principles.  Pointing to a gas lamp in his office, Kane tells his friend Jed Leland, “I’ve got to make the New York Enquirer as important to New York as the gas in that light.” And in his declaration, he promises to serve readers “the truth…quickly and simply and, entertainingly.”

He also promises to be visible as the owner and the point where the buck stops. Power with Responsibility is the slogan, not domination and neglect.

“People are going to know who’s responsible,” Kane states.  In Charles Foster Kane’s mind, he cares about the people and knows what is best for them.  As a publisher, he promises to work in their interests.

Later in the film, Kane and Leland have a heated exchange in which an intoxicated Leland accuses Kane of having proven himself to be far less noble than he claimed.  Kane, Leland told him, was aloof and acted paternalistically toward the people of New York.

“You talk about the people as though you owned them, as though they belonged to you,” Leland rails.

“You’ve talked about giving the people their rights as if you could make a present of liberty, as a reward for services rendered.  Remember the working man?  You used to write an awful lot about the working man.  He’s turning into something called organized labor.  You’re not going to like that one little bit when you find out it means that your working man expects something is his right and not your gift.”

To really serve the public interest, Leland argues, involves actually listening to the public.  It involves some dialogue with citizens.  It requires being attentive to peoples’ views and desires rather than simply assuming one knows them or can create them.  It demands understanding oneself as a part of a community, not as a paternal figure looming above it.

Kane, Leland concludes, cares little about doing any of this.  “You just want to persuade people that you love them so much that they ought to love you back,” Leland concludes.  “Only you want love on your own terms.  Something to be played your way according to your rules.”

Robert McCormick’s career brings these two strands of paternalism – George Pullman and Charles Foster Kane – together.  As the publisher of an American newspaper and the developer of a Canadian company town, McCormick trafficked in both varieties of paternalism.

As of February 1955, not even twenty years after McCormick broke soil, Baie Comeau was thriving. The population has swelled to almost 4,000. The area began to need new schools to serve the local children.

As company officials worked with local people and provincial politicians, and sought ways to finance the construction, they found that their plans did not always mesh with what the people who actually lived in Baie Comeau wanted.  At one point, during a particularly contentious part of the process, Robert McCormick became frustrated about having to listen to concerns about what the company was planning to do.  Why could the Tribune not just do what they wanted?  Why did it have to negotiate with anyone?

In a memo to one of his executives in Canada, McCormick writes, “When we were not there it was just a little forest.  We built them a big civilization.” The locals, including politicians, he exclaimed, were being “bitterly ungrateful” about all that had been done for them.

Just as Charles Foster Kane was disappointed when his idealized “working man” turned into “organized labor,” Robert McCormick was clearly and similarly frustrated when the good people of Baie Comeau failed to give him the thanks he felt he was due.

Compromising can be difficult.  So is listening to other people. McCormick evidently had trouble doing both.

Ulitimately, in founding and essentially running, or at least have a strong influence on what went on in Baie Comeau, the Chicago publisher soon discovered, to paraphrase Jed Leland from Ciizen Kane, that doing things on one’s own terms is much less difficult than harnessing his sails to someone else’s expectations.

Telecom-Media-Internet Politics in Canada: Evidence, Theory & Ideology

We are at a fundamental turning point, a constitutive moment when decisions taken now will set the course of developments across the telecom-media-Internet ecology for years, maybe decades, to come. We’ve just finished one set of hearings, and two more are on the immediate horizon: the CRTC’s hearings on Usage-Based Billing that begin Monday, July 11 and its upcoming so-called ‘fact finding’ hearings on Over-the-Top/new media.

In an interesting and helpful post today, Peter Nowak argued for 7 fundamental guiding rules for telecom issues in Canada, by which he meant the full gamut of issues right across the TMI (telecom-media-internet) spectrum. They are very useful guides and starting points for discussion, and easy to remember to boot. They are:

  1. Ditch Usage-Based Billing
  2. Don’t regulate new media/over-the-top (OTT) services (e.g. Netflix)
  3. Strengthen Net Neutrality
  4. Turf Foreign Ownership Restrictions
  5. Spectrum Set Aside for New Players
  6. Don’t Regulate Cross-media market power (aka vertical integration)
  7. Plan ahead for ‘shared networks’.

I find these very useful starting points; perhaps because I agree with most of them wholeheartedly (1, 2, 3, 5). Others I’d endorse with some caveats (4). Some I would expand on greatly (7). Others I would reject completely because they lack any basis in evidence, history or theory (6).

In terms of foreign ownership, Nowak proposes to drop all of the current limits on ownership of telecoms industries in Canada. He suggests that doing this will increase ‘real competition’ in the market by adding new players. This is not an uncommon position and in my view, its goal of increasing competition is basically a good one. Michael Geist and Mark Goldberg, each in their own way, make much the same point.

There are at least three or four problems, some of which I’ve outlined in another recent post, however, with this notion of dropping foreign ownership, although I am, to repeat, not against the idea in principle. First, there’s a good chance that we could drop the rules and nobody would come. These times are not those of the high-tide of foreign investment, in case anybody has been sleeping under a rock for the past few years.

Second, even if new investment does occur, this doesn’t necessarily mean that new competitors will enter the market. It’s more likely that they’ll just take over one of the incumbents, thereby switching the ‘title’ to the underlying telecom property but not doing anything at all to increase the market, unless the new owners turn out to be better than the current ones.

This is exactly the point made by a recent report by the C.D. Howe Institute. Despite its exuberant support of the idea that all foreign ownership rules across the telecoms-media-Internet board should be dropped, the Howe report was forthright that this would probably not result in more competitors. Instead it would lead to something much woolier: “performance gains” (p. 3).

Good luck assessing that, I’d say. Like “beauty”, performance would mostly be subjective and in the eyes of the beholder. Besides, with all of the existing telecom and broadcast players clamouring for less information disclosure, less regulatory oversight and less transparency, as they did one after another during the vertical integration hearings, how could we possibly know whether this nebulous objective was achieved?

Third, Nowak’s piece is couched in the idea of being a “pragmatic” set of proposals, rather than one that dogmatically sticks to what he sees as the right or left of the political spectrum. Thus unlike the Howe Report’s suggestion to drop foreign ownership rules across the board, he argues that if an integrated telecom-media player wanted to sell to foreign investors, say a US telco like AT&T or Verizon or, just as likely, a private equity group, then Bell Media, for example, would have to sell off its television interests, e.g. CTV (and 28 specialty channels, 28 local television stations and 33 radio stations, although he doesn’t spell that out).

Quebecor would have to do the same with respect to TVA, for example, and its extensive holdings of newspapers and magazines. Rogers would do the same with CityTV, 17 specialty channels and stable of magazines, while Shaw would have to part with its assets in television (Global) and specialty channels (Corus). Fat chance that’ll happen, I’d say.

Moreover, because there is a much broader range of media involved than just telecoms and television due to the fact that the ‘big four’ vertically-integrated media companies (VIMCos) (Bell, Rogers, Shaw, Quebecor) also all have, in different combinations, extensive holdings in radio, newspapers and magazines, it’s not going to be so easy to simply hive of telecoms from television. Indeed, with newspapers and magazines swaddled in their own bundle of tax and investment incentives designed to shore up Canadian ownership, unravelling this stuff will be messy and complicated.

To my mind, this part of the proposal not might have been as fully thought through as it could have been. The C.D. Howe Institute report at least has the virtue of purity and clarity: drop the barriers on everything, telecom, broadcasting, media in general.

Fourth, a very significant problem and one that strikes deeply at whether we want to further allow our culture to be ‘securitized’ and ‘militarized’, US telecom-media-Internet companies and investment capital comes with a lot of national security baggage, particularly so in the telecoms-media-Internet space. Their operations are subject to the Patriot Act and US telecom providers and ISPs have shown a propensity to cooperate with national security agencies in a very murky zone outside the rule of law and without cover of authorized warrants in ways that subsequent courts have found illegal (here, here, here and here).

Microsoft’s acknowledgement in Britain this past week that all U.S. companies like it, whether they admit it or not, are subject to the Patriot Act, was the first real candid acknowledgement of the extra-territorial reach of U.S. national security policy when it comes to matters of the information infrastructure. As Gordon Frazer, managing director of Microsoft UK, admitted, data stored in the cloud was well within the reach of the PATRIOT Act.

The acknowledgement came in response to a question posed by ZdNet journalist, Zack Whittaker. Whittaker asked,

“Can Microsoft guarantee that EU-stored data, held in EU based datacenters, will not leave the European Economic Area under any circumstances — even under a request by the Patriot Act?”

No, Fraser explained, “Microsoft cannot provide those guarantees. Neither can any other company”.

Tying networks, servers, the Internet and everything else in Canada that runs through and on top of these facilities to US national security policy is to sell out fundamental principles regarding open media, transparency and a networked free press for the feint hope that we might achieve a modicum of more competition than we have now, and even then, not ‘real competition’, but rather the kind of newfangled Schumpeterian ‘innovation economics’ pushed by the C.D. Howe report.

But let’s move beyond the issue of foreign ownership to Nowak’s sanguine approach to vertical integration, an approach that I also find problematic. Why? Because he offers no evidence, lessons from history, or theory to support his case.

This is problematic because current evidence shows that concentration across the spectrum of telecom-media-Internet services in Canada is high, in absolute terms, and relative to comparable international standards. I offered a snapshot of this evidence in an easy-to-digest form in my Globe and Mail column last week.

I’ll repeat that here for convenience. In Canada, the ‘big 4 VIMcos’ — Bell, Shaw, Rogers, Quebecor (QMI) — account for:

  • 86 per cent of cable and satellite distribution market
  • 70 per cent of wireless revenues
  • 63 per cent of the wired telephone market
  • 54 per cent of Internet Service Provider revenues
  • 42 per cent of radio
  • 40 per cent of the television universe
  • 19 per cent of the newspaper and magazine markets
  • 61 per cent of total revenues from all of the above media sectors combined.

These numbers are not trumped up in the slightest, and in fact on the matter of the Internet and television services they are actually lower than those offered by the CRTC because of the different methodologies we use. Nowak doesn’t refute these numbers; he just doesn’t deal with them.

Theory tells us that media concentration, for which vertical integration is just one manifestation, embeds a bias for trouble in the ‘structure of the media’. Tim Wu, in the Master Switch, gets things right when he sets up the simple premise that it is important for regulators to curb the potential for companies to leverage power and resources across the three main layers of the telecom-media-Internet system: networks, content/applications and devices.

In theory, I think he is right and, based on the current and historical record, strong measures are needed to prevent companies from leveraging control over any one of these three layers — networks, content, devices — to curb competition and diversity in any other layer.

Nowak is clearly aware of the connection in this regard and he hopes that his first and second principles — ditching UBB and leaving ‘new media’/OTT untouched by regulators — will take care of vertical integration problems by removing the ability of Bell, QMI, Rogers and Shaw from using bandwidth caps and the pay-per Internet model to basically undermine the viability of rival online video distribution services (AppleTV, GoogleTV, Netflix, etc.) that they see as a threat to their own broadcast services. I think that these are important steps, but insufficient to deal with the full range of ways in which leverage across the three layers of the telecom-media-Internet system can be used to hogtie competitors and stifle the fullest range of voices and expression possible.

This is not just hypothetical potential, either, but rather documented by case after case of examples where either access to content or to networks is deployed in the strategic rivalry between less than a handful of players in oligopolistic markets. And when highly capitalized Netcos such as Bell own much smaller content companies like CTV, they have every incentive to use the latter to shore up the position of the former.

The recently completed vertical integration hearings at the CRTC were replete with example after example of this, from network companies such as Telus, SaskTel, MTS Allstream and Public Mobile as well as media content companies, whether the CBC or smaller production companies like Stornoway Productions.

These examples are not just limited to Canada either, but global in scope. They are behind the recent detailed regulatory framework put into place in the US by the FCC and Department of Justice that blessed the merger between Comcast and NBC-Universal, but not before taking comparatively stern steps, especially by Canadian standards, to ensure that NBC-Universal content could not be locked up or used by Comcast to the disadvantage of rivals in the broadcasting business. Furthermore, Comcast was also required to make its television and film content available to Internet competitors and ‘online video distributors’ (OVDs), a new category designed to cover services such as Netflix, Hulu, AppleTV, and so on, and to adhere to open Internet requirements generally.

Other countries such as Australia, Belgium, Britain and New Zealand have dealt with their own experience of networks being used to trample competition and diminish the range of voices and expression possible by going even further to set up rival ‘unbundled’ open networks (Australia) or by mandating ‘structural separation’ between incumbents’ networks (layer 1) and other layers (services, content, devices) in the system. In an important post yesterday, Bill St. Arnaud also talks about the development of networks that are essentially based on pick and choose access to capabilities and functionalities that respond flexibly and recursively to  user generated communication and information needs

The problem, thus, is one that is buttressed by evidence, by theory and by global experience. In light of this, robust measures rather than a sanguine approach to vertical integration is most definitely needed.

And to bring this to a close, the issues raised by vertical integration are not the consequence of innovative, new industrial arrangements or newfangled theory, but rather deeply entrenched historically and indeed endemic to situations where those who control the medium (networks) are also in a position to control the messages (content) flowing through those networks.

Thus, in the first decade of the 20th century in Canada, the Canadian Pacific Telegraph Co. and Great North Western Telegraph Co (the latter under ownership control of Western Union) had exclusive distribution rights for the Associated Press news services in Canada. As part and parcel of the telegraph companies’ bid to buttress their dominance in the highly lucrative telegraph business against a couple of smaller rival upstarts (the Dominion Telegraph Co in Canada and Postal Telegraph Co. in the US), the Canadian Pacific Tel. Co. and Western Union-backed Great North Western Tel. Co. offered one of their premier set of clients — newspapers across the country — access to the AP news service at a very cheap rate. In fact, they gave it away “free”. Sound familiar? (observant readers might also note the persistent recurrence of ‘network infrastructure duopolies’, too)

The AP news service was so cheap because instead of paying the cost for both the news service and the telegraph charges for delivering it from one place to another, Canadian Pacific Tel. Co. and Great North Western Tel Co only charged newspaper subscribers the ‘transmission costs’ for the AP service. The content, under such arrangements, was ‘free’. Of course, this was a real boon to established members of the press and to AP, while it also helped to stitch up the companies’ lock on the telegraph business.  It was a menace to rival news services and a competitive press or telegraph system, however.

The fly-in-the-ointment was that any competitor news service was at a huge disadvantage because its subscribers had to pay the ‘transmission costs’ plus the cost of the news service. Thus, when Winnipeg-based upstart, the Western Associated Press, tried to set up a rival Canadian news service to that of the Associated Press in 1907, it found it’s opportunities blocked at every step of the way because there was simply no way its subscribers could pay two costs — transmission and for the news service — while the AP service was essentially given away free after subscribing newspapers paid the telegraph companies their fees for distribution.

As one muckraking journalist W. F. Maclean wrote in the Toronto World,

“attempts on the part of public service companies [the telegraph companies] to muzzle free expression of opinion by whitholding privileges that are of general right cannot be too strongly condemned.”

The matter found its way before one of the long-lost predecessors to today’s CRTC, and one of the first regulatory bodies in the country, the Board of Railway Commissioners. Canadian Pacific Tel. Co. came out swinging, arguing that the BRC simply had no authority over the news services or to compel it to separate the costs of the news services from transmission costs.

Times were different then, it seems, and the BRC didn’t wilt one bit amidst the hot-heated rhetoric but blasted back that it was compelled by  law to insure that rates were “just and reasonable” and that unless transmission rates were separate, explicit and equitable “telegraph companies could put out of business every newsgathering agency that dared to enter the field of competition with them” (BRC, 1910, p. 275).

The upshot was separation of control over the wires from control over the news business. The regulator had all the authority in the world it needed to break up the ‘double headed news monopoly’.  It is a lesson that the CRTC and everybody else interested in ensuring that we oversee the creation of the most open media with the maximum range of voices and creative expression possible should pay close attention to.

Of course, the modalities of communication have changed tremendously and we now live in age of information abundance rather than scarcity, but as Tim Wu’s Master Switch and the mounting evidence before our very eyes attests, the basic logic of leveraging content and networks to confer advantages on one’s own operations whilst driving others into submission, if not out of business altogether, is alive and well.

This is a basic and easy-to-grasp point, and until we firmly implant it at the heart of the structure and regulation of the telecom-media-Internet system, we will continue to forgo the economic, political, cultural and personal benefits of the most open network media system possible and which further the goals and values that define a free and democratic society.

On that score, Nowak is right, these are not ‘left’ and ‘right’ issues. They are issues, principles and values of concern to all who take the precepts of liberal capitalist democracy seriously and who see in the status quo a condition that is badly lacking by even that non-ideological/utopian standard.

Source:

Board of Railway Commissioners (BRC). (1910). The Western Associated Press v. The Canadian Pacific Railway Company’s Telegraph and the Great Northwestern Telegraph Company of Canada. In Sessional papers of the Parliament of Canada. Ottawa: J. De Labroquerie Tache, Printers to the King’s Most Excellent Majesty.
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