Orwell's Revenge (34 page)

At about this time, Theodore Vail, a brilliant administrator, took over at Bell and resolved to recapture Bell's monopoly. The Bell System had lost its original patents on the telephone, but it had acquired new ones, which gave it a critical edge at the other end of the network, in providing good long-distance connections. Vail believed passionately in “universal service,” to be supplied by one company: his own. Bell therefore offered its superior long-distance service exclusively to its own local affiliates. The company refused to sell equipment or to provide interconnection even to independents that did not directly compete with it. In rapid succession, telephone companies not affiliated with Bell
either folded or were acquired.

Bell's activities attracted the attention of antitrust lawyers at the U.S. Department of Justice. In a 1913 agreement with the U.S. attorney general, a vice-president of Bell, N. C. Kingsbury, committed Bell to cease its acquisition of independent telephone companies and to permit the remaining independents to interconnect with Bell's long-distance service. But the “Kingsbury commitment” did nothing to promote competition in telephony. Local exchange monopolies were left intact, free to continue to refuse interconnection to other local competitors. Bell's monopoly long-distance service was accepted and indeed reinforced: Bell would be required to interconnect with all local exchanges, but there was no provision for any competition—or interconnection— among long-distance carriers.

Thus, markets were carefully carved up: one for each of the established monopoly local telephone exchanges and one for Bell's
monopoly long-distance operations. Bell might not own everything, but some monopolist or other would dominate each discrete market. The ministries of the day had no objection. All they wanted was to keep the commercial monopolies at a size that they could manage.

Theodore Vail understood that perfectly. By 1915, when Bell had established transcontinental service, Vail could describe the Bell System as “an ever-living organism” that possessed “one of the largest laboratories of the application of science to industrial development in the world.” Bell's slogan was: ONE POLICY, ONE SYSTEM, UNIVERSAL SERVICE.

According to the summer issue of his school magazine, in 1914 Eric Blair's
cricket game was improving rapidly.

•  •  •

Bell had Theodore Vail; IBM had Thomas J. Watson. Watson trained as a salesman at National Cash Register, an organization that loathed competition and suppressed it almost as successfully as Bell. NCR's president, along with Watson and several other executives, were convicted of antitrust violations in 1912. The government later dropped the case on appeal.

In 1914, Watson became general manager of the Computing-Tabu-lating-Recording Company. Invented at almost the same time as the telephone to speed data analysis for the 1880 U.S. Census, the tabulating machine was an electromechanical device that processed information stored on punch cards. CTR's business boomed during World War I; by 1918, the company was selling more than 80 million blank cards a month. A few years later, Watson gained total control of the company. In early 1924 he changed its
name to International Business Machines. Before long, IBM had established a complete monopoly in the market for commercial data processing.

Much of IBM's market power lay in
the humble punch card itself. A large customer typically acquired millions of these a year. The investment in cards, and the plugboard configurations needed for processing them, grew in step with the business itself. After a certain point, replicating the data in some other format, retraining staff, and reworking procedures
became prohibitively expensive.

This was exactly as Watson intended. IBM viewed business
machines in much the same way as Bell viewed telephones. To function properly, calculating machines required central provision, maintenance, and oversight; one company was therefore better than many. Like Bell, Big Blue didn't sell its machines at all; it sold service, with the machines provided only under tight lease. There was no secondhand market in IBM tabulators. Like Bell, IBM had a motto, almost sinister in its simplicity: THINK.

In June 1922, nineteen-year-old Eric Blair took the civil service examination that would qualify him for the post of probationary assistant district
superintendent of police in Burma.

•  •  •

By 1895, when Bell's major patents on the telephone had just expired, the new wonder of the technological world was not communication with wire but communication without it. That year, Guglielmo (“G.M.”) Marconi produced the first practical radio. The following year Britain granted Marconi a patent on the device that was still known for precisely what it did not require—wires. It was the wireless telegraph, or wireless for short.

Radio appeared to be a major new competitive threat to the telephone. Marconi himself had conceived of it as
a messaging system for ships. In short order, the wireless telegraph became a wireless telephone. Radio communication of human speech first occurred on Christmas Eve 1906, between Brant Rock, Massachusetts, and ships in the Atlantic Ocean. Soon the vacuum tube amplifier (the “audion”) would improve radio transmission as dramatically as it improved telephony. In 1909, Bell's chief engineer sought research funds to put the company “in a position of control with regard to the art of wireless telephony, should it turn out to be
a factor of importance.”

The military was interested too. In a letter to Congress dated March 30, 1910, the U.S. Navy denounced the “chaos” prevailing in the airwaves. Various government departments had “for years sought the enactment of legislation that would bring some sort of order out of the turbulent condition of radio communication,” the navy pointed out. The navy favored “the passage of a law placing all wireless stations under the control of the Government.” A 1918 congressional bill to that effect would have given the navy exclusive control over all wireless
communication for commercial purposes. Radio, a navy secretary would explain, was “the only method of communication which must be dominated by one power to prevent interference.” “My judgment is that in this particular method of communication the government ought to have a monopoly.” “There is a certain amount of ether, and you cannot divide it up among the people as they choose to use it; one hand must control it.”

The navy's wishes were not met, however; private broadcasters multiplied. Fearing that Britain would become the world hub for radio, as it was already for undersea cables, the U.S. government backed the formation of a strong radio manufacturing company, the Radio Corporation of America (RCA).

With the early technologies, radio's great advantage was not in point-to-point messaging like telephone but in point-to-everywhere broadcast. David Sarnoff, who started as a telegraph operator for the Marconi Wireless Telegraph Company of America, was the first to recognize this potential. In 1916 he submitted his idea for a “radio music box” to the management of Marconi. Westinghouse inaugurated the nation's first true radio station, KDKA in Pittsburgh, in 1920. Bell put its own station, WEAF, on the air in New York City in 1922.

Hundreds of other new stations began broadcasting in the 1920s. With modest help from the courts, a spontaneous market order began to evolve. Once a broadcaster had occupied a certain frequency and begun to use it productively, the station's right to exclude interfering broadcasts would be affirmed. The early broadcasters were thus settling the airwaves in much the same way as pioneers on the prairies had created private property out of unbounded space, by settling on the land and putting it to use. The chaos of the airwaves began gradually to crystallize into an orderly, functioning market.

This spontaneous privatization met with fierce resistance from government officials. A 1925 Senate resolution declared radio spectrum to be “the inalienable possession of the people of the United States.” In July 1926, a joint congressional resolution, expressly intended to prevent licensees from establishing property rights in frequencies, announced that no license should be granted for more than ninety days for a broadcasting station or for more than two years for any other type of station. The Radio Act of 1927 finished the job. The new Federal
Radio Commission was empowered to issue licenses only insofar as the “public interest, necessity or convenience would be served” by doing so. Licenses could not be bought or sold without the commission's approval.

The logic behind this sweeping assertion of governmental power seemed strong. Spectrum, it was said, was inherently scarce. Two radio stations could not broadcast simultaneously in the same area without interference, and there was some natural physical limit to how many radio stations could be on the air at the same time. So radio spectrum should be treated like a commons, a public park, to be managed exclusively by the federal government. Private rights to graze on the ether would be doled out sparingly, and only for short periods of time, to worthy, loyal citizens. The Radio Commission would be the national trustee of the scarcity and the reversionary owner of all rights to spectrum. Private stations would broadcast at the commission's pleasure, like peasants tending their cattle on the pastures of the crown.

In June 1927, shortly after celebrating his twenty-fourth birthday, Eric Blair boarded a train in Katha, Burma, heading for Rangoon. On July 14
he sailed back to England.

•  •  •

By the late 1920s, support had also begun to emerge for sweeping federal control of the telephone industry. Monopoly telephone service had become so familiar it seemed inevitable. Several ponderous studies officially confirmed that it was, a conclusion perfectly consonant with the New Deal political winds then blowing. Bell itself wanted to consolidate its dominant position
and legitimize its monopoly. Vail spoke publicly in favor of regulation, sounding a theme (“cream skimming”) that would become a Bell rallying cry for the next half-century. “If there is to be state control and regulation,” Vail argued, “there should also be state protection—protection to a corporation striving to serve the whole community . . . from aggressive competition which
covers only that part which is profitable.”

On February 26, 1934, President Franklin Roosevelt asked Congress to
create a separate Federal Communications Commission. By June 9 of that year, both houses
had passed legislation. The president signed the Federal Communications Act of 1934
into law on June 18. The
Act's objective, as stated in its opening section, was to “make available, so far as possible, to all the people of the United States a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with
adequate facilities at reasonable charges.” The Act incorporated the 1927 Radio Act, largely unchanged, leaving the federal government with absolute control of the airwaves. The Act also tilted strongly in favor of monopoly telephone service. New competitors would be permitted to enter telephone markets only if they could persuade the government that the “public convenience and necessity” so required.

In 1934, Eric Blair stopped writing magazine articles
under his own name. He had published Down
and Out in Paris and London
under a pseudonym the year before. With the success of that book, Eric Blair died, and George Orwell was born.

•  •  •

The monopoly owners of wire, spectrum, and calculating machines swelled and swelled from the 1930s until the 1970s. They accumulated corporate flesh as symbols of their greatness. They had once been obscure and hungry; now they grew fatter, richer, and more feared year by year. They grew swollen
on the bodies of their enemies.

IBM's defining battle of the era was fought against cardboard. IBM customers were strictly forbidden to buy blank computer
cards from anyone but IBM. In 1932, the federal government brought a first antitrust suit to overturn this practice. IBM responded that bad cards from independent suppliers would likely damage the machines IBM owned and serviced. The quality of service would deteriorate. Machines would jam. Businesses would fail.

In telephony, the FCC became a thoroughly servile agent of Bell's monopoly. The pinnacle of this collaboration came with the Hush-A-Phone, a small plastic device that snapped onto the mouthpiece of the telephone to provide some privacy and quiet in
crowded office environments. The problem with the Hush-A-Phone was simple: it hadn't been invented or built by Bell. Bell, its lawyers argued to the commission, sold service—end-to-end service, with no loose ends, no forgotten comers. Service included all equipment on customer premises. Bell's tariffs expressly forbade any and
all “foreign attachments.” Such
devices might send destructive pulses of electricity through the network, or degrade signal quality, or otherwise subvert the entire system. Moreover, Bell insisted, there was “no appreciable public demand”
for the Hush-A-Phone. “[W]here privacy is needed,” Bell assured the FCC, “it may be obtained . . . by cupping a hand around the transmitter and
talking in a low tone of voice.” The FCC agreed.

Meanwhile, in the radio business, the logic of scarcity expanded insatiably. Because of scarcity, the commission could direct radio stations to carry editorials, or responses to editorials, or political advertising. Because of scarcity, the commission could forbid stations from selling off blocks of airtime to the highest bidder. Because of scarcity, the commission could forbid stations to broadcast anything from tobacco advertising to children's cartoons. By the 1960s, the problem of scarcity would even supply the logic for regulating . . . abundance. The new technology of cable television offered limitless new transmission capacity. The FCC claimed jurisdiction over this capacious new medium anyway. The new abundance, the commission reasoned, threatened the well-being of established licensees of over-the-air scarcity, and that was reason enough to regulate it. Wealth was poverty. The courts agreed.