Doug Henwood wrote:
>
> Wall Street Journal - June 21, 1999
>
> THE OUTLOOK
>
>
> Technology enthusiasts say there's no need to worry. The new economy may
> lead to more monopoly-like concentrations of economic power, says Kevin
> Kelly, editor at large of Wired magazine and author of "New Rules for the
> New Economy." But "they will be temporary concentrations that are quickly
> overthrown by other concentrations." Just as Web-based portals may loosen
> Microsoft's hold on computer operating systems, so too will other shifts in
> technology keep others from feeling too secure about their market dominance.
>
>
> "The industrial economy was populated with oligopolies: industries in which a
> few large firms dominated their markets," argue business economists Carl
> Shapiro and Hal Varian in their book "Information Rules." "In contrast, the
> information economy is populated by temporary monopolies. Hardware and
> software firms vie for dominance, knowing that today's leading technology
> or architecture will, more likely than not, be toppled in short order by an
> upstart with superior technology."
The OTC derivative and arbitrage market has been dominated by a handful of large money center banks, which are getting larger through mergers. The information age is moving toward a iniverse in which every field is dominated by less than five players. Technological imperative's counter concentration impact is very short lived.
>
> The danger comes, however, if the pace of innovation slows and temporary
> monopolies become more permanent, stifling innovation.
>
> Another potential problem for the new economy is what Mr. De Long and Mr.
> Froomkin call the absence of "excludability." In order for Smith's economy to
> work, sellers must be able to force consumers to become buyers, and pay for
> what they use. But digital data are cheap and easy to copy. As a result,
> getting users to pay could become increasingly difficult.
>
> The history of network television offers a case study in how businesses deal
> with such a problem. Unable to exclude viewers from the airwaves, broadcasters
> turned to advertisers to pay for their product. Many Web-based companies take
> a similar approach. But it's unclear just how much of the new economy can
> survive on advertising alone. And in any event, the invisible hand works best
> if the people using a product are also the ones paying for it.
>
> Mr. De Long and Mr. Froomkin say television's economics make advertisers
> demand the lowest common denominator. They offer the example of "two programs,
> one of which will fascinate 500,000 people, and the other of which 30 million
> people will watch as slightly preferable to watching their ceiling."
> Advertisers will want the maximum audience, but the other show might do better
> if its half a million fascinated viewers were willing to pay for it.
This is only one segment of the information industry - the entertainment sector. The commerical sector is driven not exclusively by number of users, but also the quality of the users, usually measured with the dollar volume assciated with users transactions. This sector is value-added driven. People will pay for Bloonberg real time financial data because they make money from it. Advertizers on on on-line trading web site pay for concentrated access to high purchasing power exposure.
>
> All this suggests that Smith's ideas will need some rethinking in the years
> ahead. Just as the Gilded Age gave rise to antitrust law and labor unions, the
> information age may require new arrangements to ensure the greatest benefits
> to all.
>
> --Alan Murray
The legislative trend is not toward populist directions in IT. The just announced ruling against internet access providers in favor of cable giants like ATT and Time Warner on high speed internet access over cable is an example.
Henry C.K. Liu