The Second Information Revolution (review)

At a recent hearing in South Dakota, FCC Chairman Michael Powell described teenagers today as the first "digital generation" in history. Between desktops, laptops, cell phones, and mp3 players, they live in an "always on" era with vast quantities of information accessible at the click of a key. For them, information moves effortlessly from device to device, continually shaping an integrated cyberspace that occupies vast landscapes in their minds. For earlier generations, however, cyberspace was only a science fiction dream.

This digital generation's experience is the product of what Gerald Brock calls the Second Information Revolution, a social and economic transformation shaped by the convergence of computing and communications in the second half of the twentieth century. Brock's book, however, is not about the consequences of that revolution. Instead, he provides a remarkable synthesis of the developments in technology and the evolution of institutions that made this revolution possible, a book in line with much of his previous work, The Telecommunications Industry (1981) and Telecommunications Policy for the Information Age (1998), both published by Harvard University Press.

Framing his analysis within the constructs of institutional economists like Douglass North and Oliver Williamson, Brock argues that new technologies create opportunities for entrepreneurs to lowercosts and compete with existing products and services. Institutions—including Congress, regulatory agencies such as the FCC or state public utilities commissions, the Department of Justice, and others—define the landscape of both explicit and implicit property rights that encourage or discourage potential innovators. To appreciate the history of the Second Information Revolution, one has to understand the processes of technological innovation and invention and the ways in which policy-making institutions respond to the entrepreneurial pressures generated by these innovations.

Given the complexity of the story lines that Brock weaves together in this book, the structure is remarkably straightforward. After a short history of the First Information Revolution of the nineteenth century and an overview of the technological innovations—particularly the invention of the transistor—that provided the foundation for the Second Information Revolution, Brock organizes the history into three eras. In the first, which extends from 1950 to 1968, computers and communications existed in essentially separate universes. Innovation focused on improving the efficiency and capacity of centralized, hierarchical systems in both telecommunications and computing. AT&T and IBM were the major players in separate spheres. In this era, policymakers supported the concept of a single, monopoly telecommunications company providing transmission, switching, and equipment services.

The separation between computing and communications began to break down in the second period (1968-1984), when technical innovation created opportunities for entrepreneurs to take advantage of falling prices in selected markets. Entrepreneurs in long distance transmission (MCI) and equipment manufacturing put pressure on regulators to allow competition. Just as important, AT&T sought to expand its services into computing and mass market mobile communications, sparking companies like IBM and Motorola to resist the Bell System's efforts to extend its market power. Responding to these pressures, lawmakers and the courts changed the institutional structure of the communications industry to allow competition at the margins and to contain the expansion of the Bell System's monopoly. Once established, these competitors pressed for entry into AT&T's core markets. This pressure led to the realignment of institutional structures— particularly with the breakup of AT&T in 1984.

In the third era, which began with the breakup, we have witnessed the rise of interconnected competition and integrated services. Distributed computing, represented most dramatically by the Internet, has blurred the line between traditional common carrier telephone service and unregulated data communications. Regulatory institutions, however, from Congress (Telecommunications Act of 1996) to the FCC, have struggled to keep pace with the communication opportunities created by fiber optics and wireless.

Brock's efforts to reconcile the twin trajectories of technological and institutional change are extremely useful, and suggest many lines of deeper research and analysis, particularly within the realm of regulatory politics. Brock is right, for...