Google as the new AT&T?

As an economic historian, I know that my colleagues often seek to interpret new firms in terms of historical analogies. With their love of precedent, it appears that lawyers do too — most recently in the case of Google.

I know that during the Microsoft antitrust trials of the 1990s, many analogies were made to the breakup of Standard Oil almost a century earlier — one of the main reasons the US has “antitrust” laws in the first place like the Sherman Act (1890) and the Clayton Act (1914). As Google increasingly faces antitrust scrutiny, it’s also being compared to Microsoft and earlier monopolists — something that interests both economists and lawyers who study antitrust.

Now Tim Wu, a professor at Columbia Law School, has released a book entitled The Master Switch: The Rise and Fall of Information Empires. I haven’t had a chance to read the book, but I caught his explanation in an interview just before Christmas on California’s socialist progressive radio network, Pacifica.

Wu argues that Google is the next AT&T, wanting to be a complete, integrated communications utility. Meanwhile, his analogy is that Apple is like an old-time (pre-war) movie studio, vertically integrated soup-to-nuts. These are interesting analogies, but both seem to be a bit of stretch.

From 1920-1970, AT&T was the US telecommunications industry, dwarfing the combined size of all the remaining telecom companies (whether GTE, ITT or Motorola.) Google dominates search, and makes some other cool technologies, but it’s hard to imagine away the new (faux) AT&T, Verizon — or Apple, Cisco, Microsoft, Nokia, or a half dozen cable companies.

Similarly, Apple has been delivering an integrated experience for more than 30 years, but the nature — and economic impacts — of integration are substantially different for software and systems than for distributing movies. Also, Apple doesn’t create the content — and deliver it on an exclusive basis — but redistributes 3rd party entertainment and applications generally available on multiple platforms.

Still, both analogies seem more plausible than the analogy of another law school professor — my friend Mike Madison of Pitt — and his post entitled “Google as Switzerland.”

Yes, Google would like to be seen as a neutral party, and to avoid being in the middle of the wrenching fights over copyright, fair use, and 21st century information business models. But given its role in shaping our expectations of free content — and the billions it captures from selling ads around that content — it seems as though its claims of neutrality are about as plausible as (say) President Roosevelt’s in 1941.

To me, Google does seem like Switzerland — but more like the Switzerland that once profited by selling arms to all sides of military conflicts. First with smartphones, and now with tablets, Google’s Android is enabling entry (as well as mobile connectivity and application availability) by four of the five traditional handset leaders and more than a dozen minor players.

What do these analogies hold? Once upon a time, AT&T’s scope was unrivaled, but its competitors used the legislative and judicial branches to hobble it and eventual bring its breakup. The expensive studio system died off when the studios could no longer capture all the profits from their investments. And while Switzerland was once an industrial powerhouse — and still plays a major role in pharma and finance — it was eventually eclipsed by the economic growth of its larger rivals, particularly Germany.