The End column, the Australian Industry Standard
Issue 1, 19 May, 2000
by Neale Morison
Bubbles are devious. With a cunning arrangement of tubes, you can create two bubbles, one larger, one smaller, with the connection between them closed by a tap. What happens when you open the tap? Level playing field, all things being equal, the bubbles reach equilibrium, right? No. The little bubble disappears and the big one gets bigger. Try it at home. The Internet is a cloud of bubbles with more connections than you can nuke, but the general trend remains: big bubbles grow bigger until they burst. Sometimes bubbles burst due to natural causes, and sometimes it's regulation.
US District Court Judge Thomas Penfield Jackson applied a large and pointy pin to a great big bubble in April, and the pop will reverberate for some time.
Jackson was backed in his decision by the US Antitrust Act, version 1 of which, codename Sherman, was released in 1890. It was a vague expression of a general sentiment that monopolies are unfair. Other versions followed, as bugs were identified and loopholes were found and exploited. The game of regulatory cat and corporate mouse will go on forever. A company feels compelled to maximise the return to its investors, and a government has an obsessive need to stay more powerful than the bodies it's trying to regulate. Bless them, we wouldn't want them any other way.
In the late seventies there was an IBM internal document which responded to the antitrust cases brought against what was then the world's biggest computer company. Like the ten commandments, it listed all the things thou shalt not do if thou wantest to avoid falling foul of the authorities. And like the top ten, if you searched and replaced the "thou shalt not"s with "thou shalts", it became a detailed manual for being the biggest and baddest. Companies are going to exploit their position to gain an advantage over their competitors. Dogs lick their tackle. They do it because they can. Whether they can or not is a matter of fashion. Kings routinely gave a mate a monopoly, the deal being that his highness got a big chunk of the booty. Beats taxes. Kings went out of style and the English parliament put the boot into the royal monopoly scam in the early 17th century. However cartels are still considered chic in many parts of the world, as anyone who puts petrol in their car will have noticed.
They don't like monopolies where Judge Jackson lives, so pop goes the weasel. Sticking a pin in a bubble is like precision bombing: consequences unpredictable and no responsibility taken; and even if the entire world is affected, very few of us can express our feelings by voting about it. One of the many consequences of the DOJ decision is to greatly reduce the paper wealth of Bill Gates. Sorry, Bill, regulations. It's Larry's turn. Andy Warhol cannily said we would all have our fifteen minutes of fame, although it's looking more like fifteen frames of MPEG, or fifteen MB of Web site storage. Let's have fifteen milliseconds of being richest: a Committee for Riches Allocation to Persons, a quango standards authority, run by US academics and senators. They'd wildly tweak a few volatile and influential parameters and we'd each float randomly to the top.
Another consequence of the DOJ decision was to throw the stockmarket into a downward spin. Random redistribution of wealth again. However the bubble law demands that the redistribution favours the wealthy.
Could it happen here? We have Allan Fels.
In February the ACCC blocked Telstra from becoming the largest ISP by acquiring Ozemail. If Eisa ever raises the funds to complete the purchase we may find out if competition has won the day. The ACCC has been pushing Telstra around a fair bit, demanding it open up its local call network and lower its network charges to third party carriers. It's all supposed to be on our behalf. But what about the little battlers who invested their tiny all in Telstra? What about short term gain, what about simple, honest greed?
Microsoft's power stemmed, illegally as it turns out, from its control of the operating system on the vast majority of personal computers. Whoever gave them that control in the first place deserves a thorough flogging. Funnily enough, it's possible to make a case that antitrust regulations did it. IBM could have attempted to take ownership of the operating system on the personal computer it launched in 1981, but it was still smarting from the savage duffing-up it had suffered at the hands of the DOJ since 1956. Could tiny Microsoft have cut such a great deal with enormous IBM without those regulations?