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 here, here, 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,
(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, here, here, 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.
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.
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:
- Ditch Usage-Based Billing
- Don’t regulate new media/over-the-top (OTT) services (e.g. Netflix)
- Strengthen Net Neutrality
- Turf Foreign Ownership Restrictions
- Spectrum Set Aside for New Players
- Don’t Regulate Cross-media market power (aka vertical integration)
- 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.
Here is a forthcoming review essay that will appear shortly in the journal, Business History. The book that inspired the review is: John, Richard R. (2010). Network Nation: Inventing American Telecommunications. Cambridge, MA: Belknap Press of Harvard University Press, i-viii, 520pp.
Network Nation is an important book by one of the most highly-regarded communication and media historians in the U.S., Richard R. John. It is probably the most substantive and innovative book to come out on the telegraph and telephone in all their business, political and cultural aspects in years. In the following essay, I review the book and place it within the scholarly literature on the topic, while critically examining some of its key arguments.
Situating the development of the telegraph and telephone into a longer history than usual, this outstanding book takes its point of departure not from the advent of the telegraph in the 1830s or 1840s, but decades earlier with the Post Office Act in 1792, which John dubs “one of the most far-reaching pieces of legislation enacted in the early republic” (p. 18). The book finishes with the consolidation of the ‘regulated natural monopoly’ regime for telecommunications and market segmentation between the telegraph, telephone and radio in the 1920s, a situation that stayed remarkably stable for most of the rest of the century.
John uses the Post Office Act of 1792 to set the scene because its capacious and open-ended mandate gave the government-owned Post Office a huge role in facilitating the flow of ‘intelligence’ and cultivating republican democracy. In its wake, the Post Office became the first national ‘medium’ to bring correspondence and news to “every man’s door” (p. 20). Its exchange system allowed publishers to swap newspapers and magazines across the country free of charge. It also established the notion that an integrated network operated under unified administrative control – i.e. a network monopoly – and guided by enlightened civic ideals could be a useful support for a multiplicity of commercial uses as well as a diversity of voices, a sturdy pillar in other words of a dynamic market economy, a democratic society and a free press. Most observers, including the early developer of the electric telegraph, Samuel Morse, simply took it for granted that the telegraph would become an arm of the Post Office.
Together, these factors set down several durable principles: first, that networks tended toward monopoly, and that whether that was a good or bad thing depended on how they were managed and regulated; second, that single networks supported a multiplicity of uses and thus whether a monopoly was managed and regulated poor or well was crucial to the commercial and social life of the nation; third, and perhaps most surprising in light of prevailing opinion, the U.S. government can take whatever steps its citizens approve of to improve the media environment. Indeed, the first amendment, as John stresses more than once, poses few obstacles to doing just that. Network Nation crystallizes these vitally important principles between the late-18th and early-20th centuries, while their relevance in the 21st century is underscored by ongoing debates today over ‘network neutrality’ and broadband internet development (Benkler, 2010) and the so-called ‘crisis of journalism’ (McChesney & Nichols, 2010). Indeed, the latter authors, in particular, draw very heavily from John’s work to make their case for the steps needed to shore up what they see as the deteriorating state of the U.S. press in the age of the Internet.
Despite the wide scope for government intervention established by the history of the Post Office, government ownership never did extend to the telegraph or telephone in the U.S., other than for a brief and deeply unsatisfactory period at the end of the First World War. Why?
According to John, several factors conspired against the idea of the ‘postal telegraph’. Initially, lingering memories of failed public works projects in the late-1830s as well as the high expense of the US-Mexico War (1846) were two such factors. A more important and enduring consideration was the popular view that the telegraph was the luxury of a wealthy few for whom private enterprise would serve just fine rather than a necessity of the masses requiring public intervention. The same view hung over the development of the telephone until the push for its popularization began to yield fruit after the turn-of-the-20th century. Last, and most importantly, the broadly held belief that competition and regulation were better than any monopoly, government or private, consistently stood in the way of efforts to extend the Post Office’s mandate to include the telegraph or any other means of electrical communication.
John calls this latter set of beliefs the ‘antimonopoly view’ and places a great deal of emphasis on it. He argues that the ‘antimonopoly creed’ should not be seen as either synonymous with, or as being led by populist, agrarian movements in the 1860s or 1870s, or as belonging to the progressive era. Instead, the creed appealed to a disparate cross-section of interests; it was also a mainstay of liberal political economy. According to John, antimonopoly movements had already flourished in cities as well as in state and federal politics for decades before rural populist and labour movements made telegraph and telephone monopolies a target of their criticisms and reform efforts during the 1860s and 1870s (rural populism) or the progressive era (1880-1920), respectively, as most historians claim (e.g. Fischer, 1992; Gabel, 1969; Schiller, 1996).
By the early-1840s, as John observes, “the telegraph business [had] congealed around . . . the [federal] patents that Morse obtained in 1840 and 1846” (p. 43). Indeed, these patents propelled the efforts of two of Morse’s business partners, the former Postmaster General Amos Kendall and Maine Congressman, Francis O.J. (Fog) Smith, who set up companies along the U.S. Atlantic coast and into Canada, while licensing individual franchisees to extend the lines in every other direction. Kendall and Smith attempted to cobble these separate lines into a single, albeit loosely federated system in the early-1850s, but failed. Nonetheless, their attempt to create a ‘single system’ borrowed the vision of a universal integrated network from the Post Office, but also raised the spectre of a private telegraph monopoly, and one buttressed by the Federal Government’s strong defense of the Morse patents. Antimonopolists reacted to such a prospect by appealing to state governments to charter general corporations to foster greater competition, with the New York Telegraph Act (1848) emblematic of the trend. A flood of rivals entered the field, but most quickly failed and/or were acquired by Western Union (est. 1855) and the American Telegraph Company (est. 1859), before being folded into a six-member cartel created in 1857 and led by Western Union: the North American Telegraph Association.
Early ‘network builders’ essentially created a “rich man’s mail service” as well as vastly over-capitalized firms that paid handsome dividends to themselves. However, by the late-1860s a new managerial type began to emerge, as typified best by William Orton who became President of Western Union after his predecessor Hiram Sibley’s ouster in 1867. Far more the professional manager than financial speculator, Orton and others like him play a star role in Network Nation. This is because, according to John, they built the early prototypes of the modern corporation, created complex technological systems, embraced modest civic goals, and steadily committed to more research and development – decades before these phenomenon usually appear in the economic and business history literature (Berles & Means, 1932/1968; Chandler, 1977).
The rise of the professional manager also marked the potential triumph of expertise over speculative finance, although the pendulum continued to swing back and forth between the two until the 1910s when the ‘regulated natural monopoly’ and ‘market segmentation’ (i.e. the lines drawn between telegraph, telephone and radio) regime was finally locked into place for the next seventy years, and with expert managers in charge. Professional managers such as William Orton and, later, Theodore N. Vail also served to fragment the antimonopolist voices because while these two icons of the modern manager shared the latter’s disdain for financial speculators and greedy private monopolies, they believed that well-run monopolies would inevitably be a fixture of late-19th and 20th centuries’ capitalism, and a good thing to boot. As time passed, the earlier experience of the 1840s and 1850s only seemed to confirm such views by demonstrating that the various attempts by individual states to create competition were contrived, and that monopolies in telecommunications were, as it were, natural, and thus in need of competent, uniform regulation, which meant regulation by the federal government. In sum, the initial question of which political economy would prevail — individual states and contrived competition or a strong federal state and regulated ‘natural monopoly’? – gave way by 1910 to a firm answer fully in favour of the latter option. John’s sustained focus on how these two distinct political economies played out during the development of the telegraph and telephone is another major contribution of this volume.
Despite the rising class of professional managers, however, Western Union’s ongoing penchant for meddling in elections, political interference in its operations by Congress (e.g. the ‘dragnet subpoenas’ case), as well as its tight ties to the New York Associated Press continued to stir the antimonopoly forces. Indeed, the only thing worse than the telegraph monopoly, many contemporaries felt, was the ‘double-headed news monopoly’ between Western Union and the NYAP (p. 147; also Blondheim, 2004). This situation broadened the range of antimonopoly voices by raising the ire of newspapers and many journalists outside the NYAP umbrella alongside the already existing, and intensifying, calls for reform by other critics. The situation also, as Menahem Blondheim illustrates, captured the attention of Congress between 1866 and 1900, a period that he and John generally see as a crucial time in the development of the commercial media and media regulation in the US.
Ironically, however, the mounting opposition in the 1870s arguably played into the hands of the era’s most reviled robber baron, leading to Jay Gould’s hostile take-over Western Union in 1881. John does not denounce or demonize Gould, but methodically picks apart his seven-year campaign (1874–1881) to gain control of Western Union. Over the course of this time, John stresses how Gould manipulated antimonopoly sentiment, Wall Street, the press, and the prevailing state-centred political economy to compete with Western Union before finally taking it over. Gould was already the owner of two or three New York newspapers (the Tribune, the World, and Mail and Express) at the time, and used those as vehicles to advance his own ends. His acquisition of Western Union tightened the company’s ties to the press even further. For all this, however, and crucially as John observes emphatically, the long-term rivalry preceding the take-over played out on the frontiers of technological innovation as Gould and Orton at Western Union threw vast sums of money at the leading technological geniuses of their time – Thomas Edison, Elisha Gray, and Alexander Graham Bell. The results produced several cutting-edge innovations that shaped the communication and entertainment industries into the 20th century: (1) the quadraplex technology that doubled the speed of telegraphs, (2) the telephone, and (3) the phonograph.
Historians often point to Orton’s decline of an offer to buy all of Bell’s telephone patents for $100,000 in 1876 as proof of Western Union’s status as a stodgy monopolist adverse to technological progress. John’s remarkable account, however, turns prevailing wisdom on its head by explaining that Orton initially spurned Bell only because he was backing Elisha Gray and Thomas Edison in a far bigger struggle over the telegraph and telephone industries. Far from shying away from the telephone business, Orton rushed headlong into it. In fact, by late 1879, Western Union’s municipal telephone exchanges were competing head-to-head with, and even growing faster than, those of the National Bell Telephone Company in several major U.S. cities (p. 169).
Competition in telephony, in other words, did not emerge from small, rural outfits after the expiry of Bell’s telephone patents in 1893, as most scholarly accounts would have it (e.g. Fischer, 1992; Gabel, 1969). Instead, it had emerged nearly fifteen years earlier in major U.S. cities – New York, Boston, Chicago (and Montreal in Canada, one might add) – and between the two biggest corporations of their day: Western Union and Bell. Rather than continuing to compete, however, the two companies struck a deal in November 1879 intended to keep Gould at bay. Consequently, all of Western Union’s telephone patents and municipal exchanges were given to Bell in return for annual royalties and mutual pledges to stay out of one another’s turf. While John does not say so, the agreement’s reach led to a similar outcome in some of Canada’s larger cities, notably Montreal. By this point, John’s account has completely upset the settled view of Western Union and technological innovation. Equally impressive, it has drawn the telegraph and telephone into a far vaster sweep of history than usual that stretches back to the origins of the postal system in 1792, on the one side, and then forward to the modern entertainment industries in the late-19th and early-20th centuries, on the other. It is an expansive canvas, indeed, and the author fills it in with masterful, colourful and detailed strokes.
John supports these radical departures from conventional knowledge with a wealth of archival evidence, some of which has been previously unavailable. He also invites us to see many familiar things from striking new angles: e.g. semi-autonomous Bell operating companies scattered in cities across the country and loosely affiliated with National Bell, the grubby role of crooked politicians who used their ability to grant municipal telephone franchises to line their own pockets (most notoriously in Chicago), the politics of rate caps that began in the cities in the 1880s (not the countryside, contra Fischer, 1992; Gabel, 1969, etc.) but which paved the way everywhere for the popularization of telephone service after 1900. By the 1920s, the early principles of ‘government ownership and ‘regulated competition’ were replaced by regulated monopolies and market segmentation between the telegraph, telephone and radio, divisions maintained until the passage of the Telecommunications Act (1996) seventy years later.
While John cuts many new paths, I also felt there were several points where he should have given more credit to others where it is due. The concept of market segmentation is a good case in point. Scholars have examined the factors that have separated different media along technological lines for decades, but none are referenced. Erik Barnouw (1975), for example, discussed the division of radio broadcasting from the telephone, telegraph and electronics industries in the 1920s long ago. Ithiel de Sola Pool (1983) likewise examined the segmentation of the telecommunications, broadcasting, computing and publishing industries over the course of the 20th century, before visiting the potential for media (re-)convergence today, as has Robert Babe (1990) and others, including this author. The common point behind these sources and John’s Network Nation is that the separation of media along technological and functional lines is primarily an artifact of corporate strategy, government policies and popular pressures, rather than underlying technological conditions. While the point is reasonably well-known, it is not so common as to not warrant citing at least some of the relevant scholarly literature.
The concepts of ‘methodless enthusiasm’ and ‘ruinous competition’ that also play a significant role in John’s account were first used, to the best of my knowledge, in a systematic way in Robert L. Thompson’s (1947) classic, Wiring a Continent, which also is not cited. Add in that author’s third concept, ‘strategic consolidation’, and the trilogy of concepts nicely captures the trajectory and tenor of developments in the telegraph industry and, as John shows in detail and with due regard to the specific twists and turns, the telephone and radio industries. John also spars with some phantom foes regarding agrarian populism and the progressive era, but seems too polite to name them. A few small errors are important. For instance, on page 184 John states that Gould owned three newspapers, but on page 187 he claims it was two.
Finally, John fails to seriously consider how the “network nation” is intertwined with global, or at least trans-Atlantic trends, cutting short his analysis in important ways and betraying an implicit methodological nationalism as a result. The ‘cheap telegraph rates’ movement in the 1880s, for example, did not just reflect intensified angst with Western Union after its take-over by Gould, but a broader global, or at least trans-Atlantic trend. Henniker Heaton, the Australian born British Member of Parliament, for example, was influential in U.S. circles and quoted often in the New York Time and New York Herald on the topic (see Winseck & Pike, 2007, ch. 5).
John’s examination of the post-WWI re-organization of the electric communication industries in chapter 10 betrays the same limitation. Here, John problematically uses the assertion that “every cable linking the United States and Europe in the First World War was under British control” (p. 398) to explain why Theodore Vail stood solidly behind the Wilson Administration’s take over of the telegraph, telephone, radio and international cables. The problem is, however, that Vail had announced Western Union’s take-over of the British trans-Atlantic cables nearly ten years earlier, when he was President of the company. According to the New York Times, the acquisition gave Western Union “a real system of competitive cables, free of the stigma . . . of foreign domination” (“Letters by cable is . . . .”, 1911, p. 6). The pre-eminent British cable expert, Charles Bright, agreed, but bemoaned the fact (Bright, 1911, p. xvii; also Winseck & Pike, 2007, pp. 187-190).
As a matter of fact, Western Union and another predominantly U.S-based company, the Commercial Cable Company, had been staking out ever-stronger positions in the trans-Atlantic cable market since the 1880s. Adding this element to John’s otherwise brilliant account would not diminish it one iota, but actually enrich it by showing how characters that are already significant in his story – e.g. Jay Gould, James Gordon Bennett, the New York Herald, the Postal Telegraph Company — fit into the global picture. By WWI, the British did leverage their control over cable landing rights to implement a comprehensive system of cable surveillance, but this was not unusual and both companies begrudgingly went along.
These shortcomings aside, Network Nation is a ground-breaking work. Its account of the importance of bringing ‘intelligence’ and communications innovations to “every man’s door” from the late-18th century onwards has a great deal of relevance to current debates about broadband Internet access and the ‘crisis of journalism’, among many others. It is also part and parcel and on the leading edge of a welcomed renewal that is taking place in media history. Wonderfully written, brilliantly told, and beautifully illustrated, Network Nation will quickly assume its place alongside other seminal works, such as Paul Star’s (2004) The Creation of the Media.
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