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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

consumer empowerment? « Previous | |Next »
March 6, 2011

Bruce Guthrie's ongoing troubles with Telstra raise the question why bother with them. ISP’s are the only entry point to the Internet and digital networks and Telstra's behaviour is that of a monopolist. Why not shift to an ISP that routinely provides better service?

The deeper issue that this saga raises is that we are dealing with the way that capitalism shapes the internet. The incentive is to “privatize” the Internet as much as possible, and to use their control over broadband access as a bottleneck where they can exact additional tolls on users. That is the argument for the “information superhighway” to be a public network analogous to the national or interstate highway system.

The tendency for capitalism is not towards cut throat competition and increased consumer empowerment --as proclaimed by the free market economists-- it is to consolidate monopoly power, create artificial scarcity, and erect fences wherever possible. Wired editor Chris Anderson put the matter succinctly:

Monopolies are actually even more likely in highly networked markets like the online world. The dark side of network effects is that rich nodes get richer. Metcalfe’s law, which states that the value of a network increases in proportion to the square of connections, creates winner-take-all markets, where the gap between the number one and number two players is typically large and growing.

Google is one example. Apple another. The latter's devices such as the new devices, such as the iPhone and the iPad, carry with them applications specific to a given device that are designed to lock customers in a whole commercial domain that mediates between them and the Internet.

The more that a particular device becomes the interface for whole networks of applications, the more customers are drawn in, and the exponential demand-side economies of scale take over. This directly translates into enormous economic power, and the ability to determine much of the technological landscape. Once such economic power is fully consolidated and people become increasingly dependent on a new device, network prices can be leveraged up.

Those within the walled garden are fleeced. The internet is not simply a generator of competition and consumer empowerment. Just as the internet is not impervious to control or censorship, and is just the tool of the democratic activism.

| Posted by Gary Sauer-Thompson at 6:43 AM | | Comments (3)


John Naughton in Forget Google – it's Apple that is turning into the evil empire spells out the reasons for Apple's success:

On the product side, Apple creates beautifully designed, highly functional and user-friendly devices that delight customers and provide fat profit margins; it has a corporate culture that reliably delivers these products by specified dates; it's much more innovative than any of its competitors; and it has a unique mastery of both hardware and software.
On the strategic side, the company has displayed a deep understanding of technology and a shrewd appreciation of potential devices and services for which people will pay over the odds.

ITunes illustrates the monopolists beahviour:
its iTunes Store gives it control of the tollgate through which billions of paid-for music tracks and albums, videos and apps cascade down to millions of customers worldwide. It levies a commission on everything that passes through that gate. And every Apple mobile device sold can only be activated by hooking up to the gate.
This gives Apple unparalleled power. Lots of other organisations offer paid-for downloads, but none has the credit card details of so many internet users who are accustomed to paying for stuff online.

This allows Apple to flex its muscles --if you want to do business on the iTunes store, then they have to do it Apple's way.

A year ago, the whole context was about the death of publishing. The complete failure of traditional publishers to monetise their work online. And they've had years to get their heads round this problem. And the best the old guard have come up with is... well nothing worth talking about really.

Enter Apple's iPad as a magazine or newspaper reader and the game changes. Publishers are lining up. Apple did it for the publishers, just like it did it for the big record companies with ITunes.

Sort of reminded me of the 4 Corners on the Murray Darling tonight.
The real problem, from what I can see is the coalition of agribusiness and politicians like Joyce, that are whipping up fear and loathing amongst the less well informed for their own ends.
Wherever you have some sort of system up, there will gather rentseekers and gatekeepers expropriating community wealth on the flimsiest and most bogus of justifications. These people dont want to just use a workable system,in pursuit of some thing else productive, they just want control of it, to live off other people.
Aristotle spotted this trait two and bit thousand years ago and it seems little has changed.