Check out The Economist’s review of Tim Wu’s timely, if flawed, book The Master Switch. Wu doesn’t like the way information-based industries – think software or wireless networks – tend to grow more concentrated after an initial blossoming. As remedy, he recommends building regulatory walls to prevent vertical integration (as in, say, Apple going into the entertainment business.)
We think concentration is usually a natural consequence of the economies of scale inherent in information businesses. It costs a fortune to produce the first copy of a modern PC operating system, but virtually nothing to replicate it a billion times. And, anyway, the resulting market power seems to be fleeting: You don’t hear much about the dominance of Microsoft’s Internet Explorer anymore. So, like the anonymous author of the review, we’re inclined to judge each case on the merits, applying antitrust remedies when there is a real threat to efficiency or innovation.
