In his book WTF,
Tim O’Reilly tells the story of MSN and AOL in the early days of the internet
(well, the mid- to late-90s anyway). Both were trying to be exclusive content
providers, or “walled gardens.” Both failed when they realized that their
customers wanted access to the broader internet. In The Fallacy of Net Neutrality, Thomas Hazlett argues that the same
thing happened in the Japanese market for internet service providers.
(There is a short narrative description of the MSN/AOL
walled garden episode in The Rate and
Direction of Inventive Activity Revisited on Google books, page 647; you should
be able to find it free online.)
This might have been a good opportunity for O’Reilly to
point out the implications for the wider “net neutrality” argument, but he
declined to do so. I know, I know, Microsoft and AOL weren't literally ISPs in the
sense of supplying and maintaining the physical infrastructure. They weren’t
natural monopolies like the cable company. But the episode shows that big
players can’t simply throw their weight around and run roughshod over their
customers’ preferences. These were effectively internet choke points at the time, and the
major players failed to exploit their supposed market power. They tried to constrain
customers to their walled gardens, but were unable to.
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If you use any of those programming books with animal
drawings on the cover, Tim O’Reilly is that
O’Reilly. Some of my readers can probably crane their heads to their bookshelf
and see a few books published by his company. Many of his books have added
tremendous value to my life. WTF was
not one of them. The book has some terrible economics in it, which I may
discuss in a future post.
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