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. It was also a useful tool for the companies' own efforts to stitch up their lock on the telegraph business. Crucially, however, it was a menace to network competition, rival news services and a diverse press.
Any rival news service that dared 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.
Leveraging their control over the wires, the telegraph companies choked the messages flowing through them. As one muckraking journalist, W. F. Maclean, wrote in The World, "attempts on the part of public service [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, saying it was compelled by law to ensure the 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."
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 and we now live in an age of information abundance, not scarcity. Yet, as Tim Wu's Master Switch, and the mounting evidence before us, attests, the logic of leveraging content and networks to confer advantages on one's own services is as strong as ever.
Australia, Argentina, Belgium, Brazil, Britain, New Zealand and many other countries are dealing with their own contemporary experiences of networks being used to trample competition competition and diminishing the range of voices as a result. Australia created the National Broadband Company in 2009 with $43-billion in funding to spur competition and open networks, for instance.
In Canada, 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 of roughly $30-million per year, 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 the organization'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 on a strong regulator to bring BT, kicking and screaming, into the new regime 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 think big, but between my dreams and reality, there is a middleground 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 and involve a middle-of-the-road choice, not a radical one. They force the market to deliver a minimum level of social justice, but their primary aim is to cultivate a free press fit for a liberal capitalist democracy, rather than chasing after abstract utopian ideals or bowing to the status quo.