Digital Phoenix: Why the Information Economy Collapsed and How It Will Rise Again (review)

What do the Microsoft antitrust trial, the music industry's suppression of the music file–sharing company Napster, and the tech-stock meltdown of 2000 all have in common? Nothing, really, but Bruce Abramson asserts that they fit into a single conceptual model he calls "network economics." In the end, his book boils down to an apologia for the free-software movement, best represented by the Linux open-source operating system. Abramson's analysis of the Microsoft trial is original and sometimes useful. His conclusions about the internet bubble are probably right even though the case itself is almost too simple to be useful. His Napster example, on the other hand, is a muddled, misinformed screed.

After years in court, Microsoft effectively won because nobody could figure out how to enforce the order finding the firm to be an abusive monopolist. Leveraging a 1980s partnership with IBM to develop the IBM PC into a leading position in personal-computer operating systems, Microsoft used supposedly overprotective American intellectual property (IP) rights to turn advantage into monopoly. Abramson maintains that the suit was hopeless; IP law so tilted the field in Microsoft's favor that the outcome was preordained. When the internet came along, everyone thought history would repeat itself, with the first to gain market share in browsers or retailing similarly grabbing a monopoly. However, unlike the situation with operating systems, early entry and a large market share created no entry barriers. There wasn't, and won't be, a pure internet Microsoft.

Abramson cites three types of IP protection. Copyright protects the expression of an idea. If I publish a pamphlet with my independent discovery of the Coca-Cola recipe, its text is copyrighted the moment I write it. Patent laws protect unique and useful things. Coke, if it chose, could patent its syrup, but it hasn't, preferring perpetual secrecy. Trade-secrets laws make me a criminal if I steal or embezzle Coke's formula. In a free software regime, a platform developer surrenders some of these rights by giving away his or her source code, allowing customers to modify the product and share the result with others, in exchange for long-term IP protection. Alternatively, he or she can elect to retain all three rights in exchange for a short three-year tenure.

This book participates in a distressing trend I call digital exceptionalism: the assumption that the field of personal computing is so revolutionary and powerful that any comparison to previous technologies is pointless. In his development of network economics, Abramson barely glances at the Bell Telephone System, and ignores the scholarship on standardization dynamics in fields as varied as electrical power distribution, railroad track gauges, threads for nuts and bolts, and grooves on phonograph records.

Furthermore, his libertarian-capitalist bias is so strong that he is incapable of even considering the neoclassical economic solution to distribution-network market failure: government takeover or franchise of the network, with private ownership of individual conveyances, be they telephones, trucks, or PCs.

Digital exceptionalism completely overwhelms the Napster study. Lacking a compliant history of the music business, Abramson simply makes one up. The complex structure of performance, mechanical, and composition rights that has evolved in America and Europe is dismissed as "Byzantine and impenetrable" (p. 221). Guess what? Those rights are the history of music IP law. The way that technology has affected them is the story told by Russell Sanjek in his seminal three-volume American Popular Music and Its Business (1988), and in more recent works by James P. Kraft, William Howland Kennedy, and Mark Katz, among others. Abramson doesn't even mention this nation's greatest experiment in shareware: radio. Metallica's Lars Ulrich got a couple of kids' wrists slapped for ripping MP3 files; in the 1940s, James C. Petrillo of the American Federation of Musicians pulled every instrumentalist in the nation out of the recording studios for thirteen...