Category Archives: Monopoly

The Master Switch

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My review of Tim Wu’s new book.

At the heart of this fascinating book is one of the central questions of our age – rendered more urgent by recent events in the Arab world. The question is this: is the internet a revolutionary innovation, something that will overthrow the established order? Or will it turn out to have been just an unruly technology that the ancien regime will eventually capture and subdue?

Faced with the upheavals triggered by the network so far in economics, social life and politics, most people would probably say that the internet is indeed sui generis. But Professor Wu is not so sure, and therein lies the importance of his book. If the internet does indeed succeed in escaping the controlling embrace of corporations or governments, he argues, then it will be a historic first. For every other modern communications technology – telephone, radio, cinema and TV – has eventually succumbed to these forces…

Federated social networking

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There’s a useful piece on the Electronic Frontier Foundation’s site about federated networking, seen as a way of counteracting the centralising power of outfits like Facebook.

To understand how federated social networking would be an improvement, we should understand how online social networking essentially works today. Right now, when you sign up for Facebook, you get a Facebook profile, which is a collection of data about you that lives on Facebook's servers. You can add words and pictures to your Facebook profile, and your Facebook profile can have a variety of relationships — it can be friends with other Facebook profiles, it can be a ‘fan’ of another Facebook page, or ‘like’ a web page containing a Facebook widget. Crucially, if you want to interact meaningfully with anyone else’s Facebook profile or any application offered on the Facebook platform, you have to sign up with Facebook and conduct your online social networking on Facebook’s servers, and according to Facebook’s rules and preferences. (You can replace “Facebook” with “Orkut,” “LinkedIn,” “Twitter,” and essentially tell the same story.)

We’ve all watched the dark side of this arrangement unfold, building a sad catalog of the consequences of turning over data to a social networking company. The social networking company might cause you to overshare information that you don’t want shared, or might disclose your information to advertisers or the government, harming your privacy. And conversely, the company may force you to undershare by deleting your profile, or censoring information that you want to see make it out into the world, ultimately curbing your freedom of expression online. And because the company may do this, governments might attempt to require them to do it, sometimes even without asking or informing the end-user.

How does it work?

To join a federated social network, you’ll be able to choose from an array of “profile providers,” just like you can choose an email provider. You will even be able to set up your own server and provide your social networking profile yourself. And in a federated social network, any profile can talk to another profile — even if it’s on a different server.

Imagine the Web as an open sea. To use Facebook, you have to immigrate to Facebook Island and get a Facebook House, in a land with a single ruler. But the distributed social networks being developed now will allow you to choose from many islands, connected to one another by bridges, and you can even have the option of building your own island and your own bridges.
Why is this important?

Why does this matter?

The beauty of the Internet so far is that its greatest ideas tend to put as much control as possible in the hands of individual users. And online social networking is a powerful tool for the many who want a service that compiles all the digital stuff shared by family, friends, and colleagues. But so far, social networking has grown in a way that concentrates control over that information — status posts, photos, and even your relationships themselves — with individual companies.

Distributed social networks represent a model that can plausibly return control and choice to the hands of the Internet user. If this seems mundane, consider that informed citizens worldwide are using online social networking tools to share vital information about how to improve their communities and their governments — and that in some places, the consequences if you’re discovered to be doing so are arrest, torture, or imprisonment. With more user control, diversity, and innovation, individuals speaking out under oppressive governments could conduct activism on social networking sites while also having a choice of services and providers that may be better equipped to protect their security and anonymity.

Old Europe takes on Google

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The news that the EU has decided to investigate whether Google is abusing its dominance of the market for internet searches naturally led your columnist to type "Google abuses market dominance" into, well, Google. In 0.19 seconds it reported 4.4 million results.

The same query typed into Bing, Microsoft's search engine, produced only 362,000 hits. On the other hand, typing "Microsoft abuses market dominance" into Bing produced only 218,000 results, whereas the same query produced 665,000 results in Google. From which we can draw two conclusions. The first is that the algorithmic machinations of search engines, like the Peace of God, passeth all understanding. The second is that the EU is about to spend a few years, and several million euros, coming to the same conclusion…

This morning’s Observer column.

Apple’s Suez canal

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This morning’s Observer column.

At the centre of the Appleverse sits a single, crucial piece of desktop software – iTunes. You can do very little with an Apple device without hooking it up to iTunes. Until now, this has given Apple a key strategic advantage over all other competitors. But, as Britain discovered with the Suez canal in the 1950s, being unduly dependent on a single strategic asset can also have serious downsides.

The problem is that iTunes is now a pretty ancient piece of software. When it first appeared in 2001 as a reworking of SoundJam, a program Apple bought from a Californian company in 1999, it provided an elegant way of doing just one thing: getting songs from CDs on to your computer’s hard drive. But over the years, more and more functions have been added: first the management of iPods, then the Apple online store. Then iTunes became the conduit for managing one’s iPhone. The latest addition is the Ping social-networking function.

This is what the industry calls “feature creep” on an heroic scale…

Growing pains

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This morning’s Observer column.

Over the past two months, Apple’s market capitalisation (ie its value as measured by the stock market) averaged out at $229.8bn.

The corresponding figure for Microsoft was $215.9bn. And yes, you read those numbers correctly: Apple is now worth significantly more than Microsoft, and the difference isn’t just a flash in the Wall Street pan.

This has implications for all of us who follow these things. The mainstream media, for example, need to discard the rose-tinted spectacles through which they have viewed Apple ever since Steve Jobs returned to the helm in 1997. Apple is no longer the Lucky Little Company That Could but a looming, secretive, manipulative corporate giant.

Recent developments suggest that Apple itself also needs to adjust to its new status as just another company…

Apropos the Microsoft comparison, Randall Stross has a useful piece in today’s NYT. Microsoft continues to be a formidable company, but from the viewpoint of investors it’s become more like GE or Big Oil (excepting BP, perhaps) — a good ‘banker’ stock for a part of one’s pension portfolio.

Dell and its Intel Habit

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This is lovely.

On Thursday, the Securities and Exchange Commission released some communications between Dell and Intel executives that shed more light on this matter. It shows Dell executives telling investors one thing and telling each other the exact opposite.

According to the S.E.C., Kevin Rollins, Dell’s chief executive for part of the period in question, bragged in 2004 that Dell’s ability to meet or exceed Wall Street expectations for 12 quarters in a row was “driven by our tightly controlled supply chain, highly efficient infrastructure and direct relationships with customers.”

And yet, at around the same time, Mr. Rollins wrote to Michael S. Dell, the company’s founder, that “for 3 qtrs now, Intel money has made the qtr. A bad way to run the railroad,” according to the S.E.C.

Later, Mr. Rollins wrote to Mr. Dell about Intel, saying “We are going to have to get off their drug . . . “. There was much more.

The information disgorgement came as the S.E.C. hit Dell with accounting fraud charges, and the company settled the matter with a $100 million fine and no admission of any wrongdoing.

At the heart of the S.E.C.’s complaint against Dell was the claim that Dell hid its reliance on rebates from Intel from investors. Intel rewarded Dell for not using A.M.D. chips, and Dell became more and more dependent on payments from Intel to meet quarterly financial targets, according to the S.E.C.

Dell’s management highlighted how the company was tweaking its supply chain or dealing with changes in component costs when it explained swings in quarterly results to investors. These executives, including Mr. Dell, failed to stress that Dell’s quarters were being made or broken by rebates from Intel that fluctuated depending on Dell’s financial needs and loyalty, according to the complaint.

Other e-mail messages talk about Dell needing to beg Intel for money to meet quarterly goals and show Mr. Rollins being less than direct when asked about effect Intel’s rebates had on Dell’s quarterly performance.

Interesting also how this addiction was entirely unnoticed by Tom Friedman, one chapter of whose The World is Flat: The Globalized World in the Twenty-first Century was devoted to a gripping paen of praise for Dell’s lean, mean and tightly-integrated supply chain.

The Google problem

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Christopher Caldwell is a terrific columnist. His FT essay this week — a meditation on the implications of the complaints lodged with the EU Commission this week by e-Justice, Foundem and Ciao! — is a model of thoughtful analysis, and a good reminder of why the weekend FT is such a good buy.

There is either a big problem with Google or there is none at all. If you believe that Google is engaged in open competition, many of the complaints against it look like sour grapes. The Initiative for a Competitive Online Marketplace, a Microsoft-funded study group, issued a white paper last summer on “Openness and the Internet” that, in one sense, is little more than a grab-bag of gripes. The paper notes that Google “operates in a manner that shields it from scrutiny by the other actors” (as if other businesses do not), that it is hard to gather data on Google advertising campaigns and to make them interoperable with other search engines (which is an inconvenience for Google’s advertisers but not a duty for Google), and that Google’s pricing policies are opaque (ditto). On the other hand, any of these failings under monopoly conditions would be a serious problem.

Google insists that its searches are neutral both in appearance and fact. Its “natural searches” – the ones that match up searchers with the sites they will most likely want to visit – are done through an “algorithm” that measures hundreds of variables, with no human intervention once the algorithm has been designed. But Google also carries “sponsored links” – advertisements – which appear alongside the natural-search results. Advertisers bid to be listed by Google any time a given word or phrase is searched for. And here the business gets more subjective. Google has an interest in making web-surfing pleasant and convenient. It gives “quality scores” – rankings based on attractiveness, ease of use and percentage of original content – to its bidders. So a website with a low “quality score” must bid more to be included. The nub of Foundem’s complaint is that its quality scores inexplicably fell, driving its cost per hit from 5p to £5. Was this because it is also a Google competitor?

Worth reading in full. I’ve written before that Google is “the next Microsoft” in the sense that it’s going to be the anti-trust problem of the next decade. But the issues that it raises will be much more subtle and complex than anything we had with Bill Gates & Co.

The links of O’Reilly

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This morning’s Observer column.

LIKE MANY people in his business, the technology publisher Tim O’Reilly is a heavy user of the Twitter microblogging service. He also has a Facebook account. To save effort, he has arranged things so that his Twitter posts are automatically forwarded to Facebook where they are transformed into ‘status updates’.

So far, so good; many of us do the same. But O’Reilly is a proper techie, which means many of his tweets are links to web pages containing interesting or useful information he has come upon in his daily browsing. One day recently, a friend of his noticed that something strange was happening to those links: when they left Twitter they were clickable links, but when they arrived in Facebook they were just plain text. In other words, they were no longer clickable. To follow them one had to copy and paste them into a browser window.

This led to a brief outbreak of conspiracy theorising…

Will Google be a benign foster-parent? Don’t bet on it

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When you think about the way the academic world allowed itself to be hooked by the scientific periodical racketeers, it makes sense to be wary of any commercial outfit that looks like acquiring a monopoly of a valuable resource. The obvious candidate du jour is Google, which is busily scanning all those orphan works (i.e. works whose copyright owners cannot be found) in libraries in order to make them available to a grateful (academic) world. Some people are (rightly) suspicious and are going to challenge the legal settlement which Google negotiated with publishers in the US. At the JISC ‘Libraries of the Future’ event in Oxford last Thursday, Robert Darnton of Harvard (pictures above) said some perceptive things about the potential threats ahead. So it was interesting to see this piece in this morning’s NYT.

These critics say the settlement, which is subject to court approval, will give Google virtually exclusive rights to publish the books online and to profit from them. Some academics and public interest groups plan to file legal briefs objecting to this and other parts of the settlement in coming weeks, before a review by a federal judge in June.

While most orphan books are obscure, in aggregate they are a valuable, broad swath of 20th-century literature and scholarship.

Determining which books are orphans is difficult, but specialists say orphan works could make up the bulk of the collections of some major libraries.

Critics say that without the orphan books, no competitor will ever be able to compile the comprehensive online library Google aims to create, giving the company more control than ever over the realm of digital information. And without competition, they say, Google will be able to charge universities and others high prices for access to its database.

The settlement, “takes the vast bulk of books that are in research libraries and makes them into a single database that is the property of Google,” said Robert Darnton, head of the Harvard University library system. “Google will be a monopoly.”

Yep. I’ve always thought that Google will be Microsoft’s successor as the great anti-trust test for the Obama Administration. I hope the DoJ is tooling up for it.

Ignorance scales new heights

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Fascinating insight into the mind of the invincibly ignorant. This is an excerpt from an email sent by a Texan school teacher to Ken Starks, an open source evangelist:

"…observed one of my students with a group of other children gathered around his laptop. Upon looking at his computer, I saw he was giving a demonstration of some sort. The student was showing the ability of the laptop and handing out Linux disks. After confiscating the disks I called a confrence with the student and that is how I came to discover you and your organization. Mr. Starks, I am sure you strongly believe in what you are doing but I cannot either support your efforts or allow them to happen in my classroom. At this point, I am not sure what you are doing is legal. No software is free and spreading that misconception is harmful. These children look up to adults for guidance and discipline. I will research this as time allows and I want to assure you, if you are doing anything illegal, I will pursue charges as the law allows. Mr. Starks, I along with many others tried Linux during college and I assure you, the claims you make are grossly over-stated and hinge on falsehoods. I admire your attempts in getting computers in the hands of disadvantaged people but putting linux on these machines is holding our kids back.

This is a world where Windows runs on virtually every computer and putting on a carnival show for an operating system is not helping these children at all. I am sure if you contacted Microsoft, they would be more than happy to supply you with copies of an older verison of Windows and that way, your computers would actually be of service to those receiving them…"

Karen xxxxxxxxx

xxxxxxxxx Middle School

Source: Blog of helios: Linux – Stop holding our kids back.

Thanks to Good Morning Silicon Valley for spotting it.