[p2p-research] Monopolisation as anti-innovation, and some alternative approaches

[Michel Bauwens]

   *Monopolisation as anti-innovation, and some alternative
approaches<http://feedproxy.google.com/~r/P2pFoundation/~3/CwIaJihl9NA/18>
*
http://blog.p2pfoundation.net/monopolisation-as-anti-innovation-and-some-alternative-approaches/2010/07/18?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+P2pFoundation+%28P2P+Foundation%29

Today, America’s five largest banks control a stunning 48 percent of bank
assets, double their share in 2000 (and that’s actually one of the less
consolidated sectors of our economy). Similarly, the debate over health
insurance reform awakened many of us to the fact that, in many communities
across America, insurance companies enjoy what amounts to monopoly power.
Some of us are aware, too, through documentaries like Food, Inc., of how
concentrated agribusiness and food processing have become, and of the
problems with food quality and safety that can result.

In a recent conversations with a Silicon Valley enthusiast, I mentioned
monopolization as a big problem of neoliberal capitalism, in terms of
hampering innovation and keeping small businesses out of the equation, which
my conversation partner saw as a non-issue. It’s indeed to see America as
the land of the Silicon Valley entrepreneurs and to lose sight of the larger
issue of the deep structure of the economy.

So here<http://www.washingtonmonthly.com//features/2010/1003.lynn-longman.html>
is
the argument of why monopolization is one of the big issues, playing a big
role in the current crisis and in particular, the lack of creation of new
jobs. It is also a powerful force against innovation.

The argument is made in the Washington Montlhly by *Barry C. Lynn*, author
of the new book *Cornered: The New Monopoly Capitalism and the Economics of
Destruction* and *Phillip Longman* of the Montlhly Review:

*“While the mystery of what killed the great American jobs machine has
yielded no shortage of debatable answers, one of the more compelling
potential explanations has been conspicuously absent from the national
conversation: monopolization. The word itself feels anachronistic, a relic
from the age of the Rockefellers and Carnegies. But the fact that the term
has faded from our daily discourse doesn’t mean the thing itself has
vanished—in fact, the opposite is true. In nearly every sector of our
economy, far fewer firms control far greater shares of their markets than
they did a generation ago.
Indeed, in the years after officials in the Reagan administration radically
altered how our government enforces our antimonopoly laws, the American
economy underwent a truly revolutionary restructuring. Four great waves of
mergers and acquisitions—in the mid-1980s, early ’90s, late ’90s, and
between 2003 and 2007—transformed America’s industrial landscape at least as
much as globalization. Over the same two decades, meanwhile, the spread of
mega-retailers like Wal-Mart and Home Depot and agricultural behemoths like
Smithfield and Tyson’s resulted in a more piecemeal approach to
consolidation, through the destruction or displacement of countless
independent family-owned businesses.*
**

*It is now widely accepted among scholars that small businesses are
responsible for most of the net job creation in the United States. It is
also widely agreed that small businesses tend to be more inventive,
producing more patents per employee, for example, than do larger firms. Less
well established is what role concentration plays in suppressing new
business formation and the expansion of existing businesses, along with the
jobs and innovation that go with such growth. Evidence is growing, however,
that the radical, wide-ranging consolidation of recent years has reduced job
creation at both big and small firms simultaneously.”*

The article continues with an in-depth explanation of how monopolization
destroys jobs and innovation in practice.

The same argument can be made in a more positive way. On what was the great
electronic revolution that is the PC and the internet predicated? According
to *Alfred Chandler*, cited
by<http://scrawford.net/blog/the-electronic-century/1343/>
 *Susan Crawford*, it was the vigorous anti-trust policies that preceded it
as a necessary condition:

*“In “Inventing the Electronic Century,” Alfred Chandler lists antitrust
actions that opened up the data processing, consumer electronics, and
telecommunications fields to U.S. and other competitors. Chandler’s text is
dry and factual (and he is inordinately fond of the word “epic”), but he
gets his points across:*
*

1. Consent decree with IBM in 1956 mandates the licensing of “existing and
future patents” to any “person making written application.” As a result, all
the peripherals and other hardware created during the development of the
System 360 become available to all manufacturers. Epic. Clones produced in
huge numbers.

2. Threat of another antitrust suit against IBM in 1969 prompts the company
to unbundle its packaged software for the System 360 and 370. Epic. Huge
revenues for software companies between 1968 and 1980.
*

*3. Consent decree with AT&T in 1956 mandates that the company stay out of
the computing business.”*

Is there an alternative to the kind of monopolistic privatization decried by
Barry Lynn and Phillip Longman?

One answer is smart public ownership, and a new report on municipal
broadband <http://www.muninetworks.org/reports/breaking-broadband-monopoly>
highlights
the advantages of this approach.

The *Institute for Local Self-Reliance* has just released a comprehensive
report on the practices and philosophy of publicly owned networks. *Breaking
the Broadband Monopoly* which explains “*how public ownership of networks
differs from private, evaluates existing publicly owned networks, details
the obstacles to public ownership, offers lesson learned, and wrestles with
the appeal and difficulty of the open access approach*.”

The report authors offer the conclusion that:

*“Communities that have invested in these networks have seen tremendous
benefits. Even small communities have generated millions of dollars in
cumulative savings from reduced rates – caused by competition. Major
employers have cited broadband networks as a deciding factor in choosing a
new site and existing businesses have prospered in a more competitive
environment.
Residents who subscribe to the network see the benefits of a network that
puts service first; they talk to a neighbor when something goes wrong, not
an offshore call center. At the municipal fiber network in Wilson, North
Carolina, they talk of the “strangle effect.” If you have problems with
their network, you can find someone locally to strangle. Because public
entities are directly accountable to citizens, they have a stronger interest
in providing good services, upgrading infrastructure, etc., than private
companies who are structured to maximize profits, not community benefits.
Residents who remain with private providers still get the benefits of
competition, including reduced rates and increased incumbent investment.*
*

Some publicly owned networks have decided to greatly increase competition by
adopting an “open access” approach where independent service providers can
use the network on equal terms. Public ownership and open access give
residents and businesses the option of choosing among many providers,
forcing providers to compete on the basis of service quality and price
rather than simply on a historic monopoly boundary.
*

*Perhaps the greatest benefit communities have gained from owning their
telecommunications networks is self-determination. Recent court rulings
enable private network owners to set their own rules, including increased
charges for accessing some sites – much like a cable bill charges more for
some programming. The rules are made far from where the customer resides and
the criteria used to design such rules maximizes benefit to the private
firm, not the community.”*

An *additional alternative is user-led innovation*, following the models of
peer production, co-creation and co-design, in particular, student-led
innovation <http://www.cra.org/ccc/docs/Student_Achievements.pdf>, as outlined
and proposed<http://www.whitehouse.gov/blog/2010/03/25/role-student-led-innovation-killer-apps-broadband-networks>

by *Tom Kalil and Aneesh Chopra* (respectively Deputy Director and Associate
Director for Technology in the *White House Office of Science and Technology
Policy*):

*“Students have contributed some of the most important advances in
information and communications technologies—including data compression,
interactive computer graphics, Ethernet, Berkeley Unix, the spreadsheet,
public key cryptography, speech recognition, Mosaic, and Google.”*

Focusing on broadband development, they propose the following strategy:

*“The initiative could have a number of elements, including:*
**

*• Campus-based incubators for the development of broadband applications,
with access to high-speed networks, cutting-edge peripherals, software
development kits, and cloud computing services.
• Relevant courses that encourage multidisciplinary teams of students to
design and develop broadband applications.
• Competitions that recognize compelling applications developed by students.
Some existing competitions that could serve as models include Google’s
Android Developer Challenge, Microsoft’s Imagine Cup, and the FCC-Knight
Foundation’s “Apps for Inclusion” competition.”*
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