PublishedOctober 26, 2010

Wu’s Advice On ‘The Internet’s Midlife Crisis’

At Monday’s New America Foundation event, “The Internet’s Mid-Life Crisis,” Tim Wu of Columbia University Law School offered a preview of his upcoming book The Master Switch:  The Rise and Fall of Information Empires and called for a separation between Internet content and service providers. He said consumers are harmed when content and delivery become vertically integrated.

Firms that attempt such integration try to reduce consumer choice by boxing in consumers.

A current example is the proposed Comcast-NBC Universal merger, where an ISP with near monopoly power in several markets would have the capability to box in consumers with Comcast-NBC owned and distributed content to the detriment of both consumers and other content creators.

Wu warned of the dangers of monopolization, closed networks, and closed systems within the technology and telecommunications sector.

Taking aim at Apple’s business model and last week’s statements on Google’s Android operating system by Apple CEO Steve Jobs, Wu acknowledged that in the short term Apple’s closed system may lead in the product and service markets. However, he said the closed model eventually shifts from focusing on producing better products and services for consumers to protecting market share by suppressing technologies that threaten the company’s dominance.

While closed systems provide convenience, that convenience often comes at the price of limiting consumer choice and stifling innovation.

Wu mentioned several prescriptions for keeping the Internet open for competition and innovation, including:  strong government oversight of market power in the technology and telecommunications sectors, net neutrality, and enforcement of antitrust laws against restraints of trade and monopolists in the hi-tech industry.

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