Apple to Start Selling New iPhones, iPads, and Watches Through Amazon

11 November 2018

From Fortune:

Finding Apple products on Amazon isn’t easy. Most are either unavailable or only sold through third-parties, a result of the rivalry between the two companies.

But that should change soon now that Apple has agreed with Amazon to directly list more of its products in its online marketplace.

In the coming weeks, Apple will start selling the new iPad Pro, iPhone XR, XS, and XS Max, Apple Watch Series 4, and Beats headphones on Amazon, CNETreported on Friday. The countries included in the deal are the U.S., U.K., Germany, France, Spain, Italy, Japan, and India.

. . . .

The agreement comes after some bad blood between Apple and Amazon. In 2015, Amazon removed Apple TV from its marketplace, though Amazon brought the device back last year after a public outcry.

Of course, Amazon sells its own Fire TV Stick streaming device, which competes with Apple TV, raising questions about what sparked the initial decision to remove it.

Third-parties that currently sell Apple and Beats products on Amazon will have to apply to Apple to become authorized sellers, or their listings will be removed by Jan. 4, 2019, CNET reported. Sellers have already been notified about the change.

Link to the rest at Fortune

New MacBook Air

31 October 2018

PG has been a Windows user for a very long time and an MS-DOS user prior to that.

All of the PG offspring are Mac users.

On many occasions, PG has had the Windows vs. Mac discussion. Several years ago, with the help of one of his offspring, he purchased a lightly-used top-end Mac desktop and appropriate software to see if he had the potential to become a Mac guy.

After about six months of trying, he was feeling no buzz and one of his offspring inherited the Mac.

He won’t go into detail, but, over the years, PG has collected a variety of Windows software programs and utilities, both widely-used and obscure, that, for him, make his use of a Windows computer quite efficient. Every few years, he upgrades his hardware for more speed/memory/storage/virtue. (For computer geeks, PG’s current desktop contains a healthy i7 processor,  32 GB of RAM, 3 TB of internal storage, including a 1 TB SSD and 16 TB of external storage, so you can see he suffers from an advanced case of something.)

OTOH, PG owns and has owned and enjoyed several iPhones, so he’s not constitutionally anti-Apple.

For visitors to TPV who don’t pay attention to such things, Apple introduced a new MacBook Air yesterday, the first refresh of a popular entry-level Mac laptop in several years.

As with many things Apple, the price increased. For $1199 (up from $999) you get a 13-inch hi rez display (nice, but not large), an i5 processor (middling performance), 8 GB of memory (not much) and a 128 GB SSD (teeny, at least by PG standards). Its built-in camera (Skype, Facetime) is 720p (low rez lame, could impair your online image if you don’t buy an external webcam which will impair the sleek MacBook Air’s appearance).

One commentator on all things Apple opined that Apple’s overall strategy is to raise the Average Selling Price (ASP) of all of its products. The latest iteration of this strategy began with the new iPhones introduced a couple of months ago – $100 or so more expensive than last year’s comparable models. The MacBook Air continues the +ASP strategy.

Over the last several years, based on sales, Apple has evolved into a phone company rather than a computer company.

In terms of unit numbers, Apple sold about the same number of phones in late 2017/early 2018 as it did a year earlier. Increased iPhone revenue occurred during that period because of increased prices.

PG read somewhere that cellphone users in the US are keeping their existing phones for a longer period of time than they have in previous years.

Apple’s competitors in the smartphone and laptop/desktop computer markets have been adding features, but not increasing prices like Apple has.

So here’s the question (PG promises to get back to books shortly): Where’s the tipping point for Apple? When are its products going to cost more than they’re worth, technically and as a lifestyle statement?

“How did you go bankrupt?”
Two ways. Gradually, then suddenly.

~ Ernest Hemingway

You Don’t Own the Music, Movies or Ebooks You ‘Buy’ on Amazon or iTunes

15 September 2018

From Two Cents:

When you purchase music, movies or books from Amazon or Apple’s iTunes store, you might be under the impression that that material is yours to enjoy forever; that’s how CDs and paper books work, after all. Why rent You’ve Got Mail for $3.99 every few months when you can “own” it and watch it whenever, forever, for $9.99?

But you’d be mistaken. Anything digital is temporary, even if you clicked “purchase” rather than “rent.” One unfortunate side effect of that you won’t experience with a physical book or record: Your purchases may just disappear if licensing agreements change.

. . . .

As outlined in the Twitter thread, Apple states the content provider of the movies in question removed them from the store. And that removed them from the user’s library, even though he had paid money to buy them. It’s easy to see why that’s frustrating (especially since Apple wasn’t willing to cough up a refund for the purchases he no longer has).

“This wouldn’t happen in the physical world. No one comes to your door and demands that you give back a book,” Aaron Perzanowski, a Case Western Reserve University law professor, who studied these digital purchases, told the LA Times in 2016. “But in the digital world, they can just go into your Kindle and take it.”

. . . .

For example, Amazon notes in the fine print that “Kindle Content is licensed, not sold, to you by the Content Provider. The Content Provider may include additional terms for use within its Kindle Content.” You also can’t sell or redistribute your ebooks, as you might with a physical copy. Apple’s fine printstates that the licensor “reserves the right to change, suspend, remove, disable or impose access restrictions or limits on any External Services at any time without notice or liability to you.”

. . . .

The best option? If you can, buy a physical copy of a movie or TV show that comes with a digital download. At least you’ll have a backup in case your digital copy disappears—assuming you still have a player to watch it on.

Link to the rest at Two Cents

When PG read the OP, one of the first things to pop into his mind was, “born yesterday”.

The author of the OP apparently discovered licensing of intellectual property shortly before writing the article and assumed at least a portion of the Lifehacker audience didn’t know much about the topic either.

“Born Yesterday” was the name of a Broadway play with two revivals plus three different movies.

Here’s a plot summary of the original Broadway play, Born Yesterday, which premiered in 1946, from Wikipedia:

An uncouth, corrupt rich junk dealer, Harry Brock, brings his showgirl mistress Billie Dawn with him to Washington, D.C. When Billie’s ignorance becomes a liability to Brock’s business dealings, he hires a journalist, Paul Verrall, to educate his girlfriend. In the process of learning, Billie Dawn realizes how corrupt Harry is and begins interfering with his plans to bribe a Congressman into passing legislation that would allow Brock’s business to make more money.

As a general proposition, the creator of intellectual property is its owner. Everybody else who wants to observe, read, listen to, etc., etc., that intellectual property is not the owner of the IP, but only has limited rights created by statute or license to do some things with their copy of the IP.

The owner of a physical book can’t make copies of the book and sell them to others because the book’s owner doesn’t own the IP depicted in the book. He/she is only the owner of the paper, ink and binding of that particular copy of the book. The copyright law (statutory and otherwise) which creates and defines the IP in the first place permits the book’s owner to do certain things with the physical book – read it, lend that copy to someone else, sell that copy to someone else, donate it to a library, deface the book, use excerpts or quotes from the book for various purposes, etc., etc.

The same basic rules, adapted to different media by which IP can be duplicated, transmitted, etc., govern copies of the IP in digital form. Just as making a copy of a book to give or sell to someone else is a violation of the creator’s IP rights, generally speaking, making a copy of a CD, a digital file, a photograph, or other protected medium incorporating such IP to give or sell to someone else is, absent permission from the creator or permission granted via copyright law, a violation of the creator’s IP rights.

Enough of this type of blathering.

The OP caused PG to wonder whether an author self-publishing with Amazon via KDP could make digital copies of his/her ebooks disappear from Kindles everywhere by unpublishing the ebook.

The short answer is probably not.

Here are some excerpts from the current Kindle Direct Publishing Terms and Conditions that describe what rights an author grants to Amazon:

Paragraph 3 Term and Termination (excerpt with PG highlights)

Following termination or suspension, we may fulfill any customer orders for your Books pending as of the date of termination or suspension, and we may continue to maintain digital copies of your Digital Books in order to provide continuing access to or re-downloads of your Digital Books, as well as digital copies of your Books to support customers who have purchased a Book prior to termination or suspension. . . . All rights to Digital Books acquired by customers will survive termination.

Paragraph 5.1.4 Book Withdrawal (excerpt with PG highlights)

All withdrawals of Books will apply prospectively only and not with respect to any customers who purchased the Books prior to the date of removal.

Paragraph 5.5 Grant of Rights (excerpt with PG highlights)

You grant to each Amazon party, throughout the term of this Agreement, a nonexclusive, irrevocable, right and license to print (on-demand and in anticipation of customer demand) and distribute Books, directly and through third-party distributors, in all formats you choose to make available through KDP by all distribution means available. This right includes, without limitation, the right to: (a) reproduce, index and store Books on one or more computer facilities, and reformat, convert and encode Books; (b) display, market, transmit, distribute, sell, license and otherwise make available all or any portion of Books through Amazon Properties (as defined below), for customers and prospective customers to download, access, copy and paste, print, annotate and/or view online and offline, including on portable devices; (c) permit customers to “store” Digital Books that they have purchased from us on servers (“Virtual Storage”) and to access and re-download such Digital Books from Virtual Storage from time to time both during and after the term of this Agreement

It appears to PG that Apple’s agreement with the owners of the copyrights to some iTunes movies did not include anything like the language in the KDP T&C’s and that the movie owners could force Apple to terminate rights of its customers who had paid for licenses to those movies.

It appears to PG that an author or publisher operating under the KDP T&C’s or something similar can’t force Amazon to terminate a customer’s rights to access an ebook they bought through Amazon. Amazon can decide to do so, but an author can’t make Amazon pull a digital move like iTunes did.

As usual, PG is a lawyer, but nothing PG posts on TPV is legal advice. If you would like to obtain legal advice, you need to hire an attorney to give you that advice, not read what a lawyer might post on a blog.

PG invites comments that agree or disagree with his half-baked (or fully-baked) blatherings on this topic.

Apple and Amazon Have the Most Annoying Ongoing Feud in Tech

27 August 2018

From Gizmodo:

The world’s most valuable company and a business run by the richest man in modern history have been engaged in an irritating cold war for years, and they need to knock it off.

When I say that Amazon and Apple are engaged in tech’s most annoying feud, I don’t mean it’s the most important battle in tech—it’s not. From a business perspective, Amazon and Apple’s squabbles make a certain amount of sense, but that doesn’t mean the whole thing isn’t obnoxious. I’m referring to the little ways these two giant companies have tried to kneecap each other over the years just to slug their users instead.

Today, one glaring example of these obscenely rich companies giving everyone a headache is the fact that Amazon apps for iPhone won’t allow you to buy e-books or audiobooks from the apps themselves. You can browse Amazon’s Kindle or Shopping apps and have a comfortable mobile experience on iOS—everything is laid out nicely and is easily accessible—but as soon as you decide on the perfect e-book, you’re forced to go to a browser to finalize your purchase. This isn’t an issue on Android.

I have two Kindles, but I usually end up reading books using the Kindle app on my iPhone just because it’s always with me. The first time I realized I couldn’t purchase a book on the Kindle app, I moved over to the main Amazon app where I was foiled again. Eventually, I had to navigate to the Amazon site in my mobile browser and go through the whole process of logging in and checking out. A few months later, I tend to forget about this annoyance and repeat the process. This being 2018, I also tend to spend more time buying books than reading them because the world has broken my brain.

. . . .

Amazon doesn’t disclose how many Kindle devices it sells, but in 2013, research firm Consumer Intelligence Research Partners estimated 20.5 million Kindles were in use in the U.S., and those sales have declined while reading on a phone or tablet has become more common. Let’s just say 20.5 million people have spent five minutes bumbling with the checkout in a browser every year. That would mean people waste over 1.7 million hours in a year because of this problem. This isn’t so much a blood feud in which these companies are trying to mortally wound each other, it’s more like a competition to inflict paper cuts that only hurt users.

The primary reason for this spat is that Amazon apparently doesn’t want to cough up the 30-percent cut that Apple demands from in-app purchases, which includes e-books through Amazon’s apps.

Link to the rest at Gizmodo

PG buys lots of stuff from Amazon using his iPhone, but never realized that he couldn’t buy books on the device.

If Apple had put 10% of the effort Amazon expended in selling books, iBooks wouldn’t be an asterisk in the book business. After Steve Jobs and the Price-Fix Six got caught, Apple evidently didn’t want to get cooties by actively competing for the book business. Evidently, Apple doesn’t understand that it can compete in the book business without violating antitrust laws.

Apple’s Sticky Keyboard Triggers Offer For Free Repairs

23 June 2018

From The Wall Street Journal:

Apple Inc. sought to head off customer complaints about defective keyboards on its latest MacBook models, saying it will offer free repairs for qualifying devices in the latest overture to users concerned about the performance of one of the company’s signature products.

The company on Friday said it would replace the keyboard or keys on some MacBook and MacBook Pro models released since 2015 if those devices had letters or characters that didn’t appear when pressed, felt sticky or didn’t respond consistently to typing. Prior to the offer, Apple was quoting customers with out-of-warranty keyboards a cost of $300 to $475, according to the company.

. . . .

The MacBook issues can be traced back to 2015 when Apple introduced a new keyboard system with a “butterfly mechanism” that it said was 40% thinner and more responsive. The butterfly system, which has been used in MacBook updates since then, uses V-shaped underpinnings rather than an X-shaped scissor connection, a change Apple says allows it to bounce back “with a crisp motion that you’ll appreciate the moment you start typing.”

However, customers have complained that dust and debris, such as crumbs of food, cause the keyboards to stop working on devices with starting prices ranging from $1,299 to $2,399.

Link to the rest at The Wall Street Journal

PG expects he is not the only writer (legal stuff and blogging) who has a close and intense relationship with his keyboard. He wishes he had found some type of software to record his cumulative keystrokes since starting with personal computers. It would be a very large number.

His first love was a clicky Northgate keyboard which, with the function keys on the right left side, was an ideal companion for WordPerfect software.

Alas, WordPerfect was acquired by Novell and promptly ruined.

After holding out for as long as possible with his doddering Northgate and increasingly outdated WP software, PG switched to MS Word and tried a variety of ergonomic keyboards before finding the Microsoft Ergonomic Keyboard. It was not love at first sight, but PG’s fingers and wrists came to appreciate this experience after a few days of interaction.

Remembering his earlier Northgate experience, PG has stashed a few MS Ergo keyboards in a closet so he can have a transition period on his schedule rather than Microsoft’s if things change again.

PG still wants to be able to talk to his computer and have really usable results appear on his screen and tries the latest dictation options from time to time, but hasn’t found that nirvana yet.



How Apps, Music and More Can Buoy Apple Beyond the iPhone

6 February 2018

From The Wall Street Journal:

Contrary to popular belief, Apple isn’t a hardware company. Nor is it a software company. Apple is, fundamentally, an ecosystem company—one that, with the help of millions of developers world-wide, has created a vast web of software and services that run on its 1.3 billion active devices.

Apple revenue has been dominated by the iPhone, but thanks to the services side of its business, the company is proving to be more durable than any single iPhone generation.

The trouble is, as Apple increasingly emphasizes device prices over volumes for revenue gains, it confronts a fundamental tension—between charging people more for hardware and, simultaneously, more for services to access through it.

The former puts profit margins ahead of prevalence, while the latter emphasizes maximizing the number of gadgets in customers’ hands.

. . . .

Just as Chief Executive Tim Cook predicted in 2016, Apple has increased revenue from its intangible services into a Fortune 100-size business. In the 2017 calendar year, Apple reported $31.15 billion in revenue from services including Apple’s music (both downloads and subscriptions), video sales and rentals, books, apps (including in-app purchases, subscriptions and advertising sold by Apple), iCloud storage and money Google pays Apple to be the iPhone’s default search engine.

Another way to think of it: Apple is on track to take in about $26 a year in revenue from each of its 1.3 billion active devices.

. . . .

Mr. Cook says by 2020 he wants Apple’s services revenue to double from its 2016 level. Between now and then, if revenue from iPhone sales holds steady or declines, which would be a natural consequence of people holding on to their devices longer, then growth in services could become the primary driver of Apple’s overall revenue growth—or even the one thing that keeps it from declining. Services, and the millions of developers and thousands of companies behind them, are the reason the iPhone is so sticky, says Horace Dediu, an Apple analyst.

. . . .

When iTunes was king, the bulk of Apple’s services revenue was music and movie downloads; with the arrival of the iPhone, it soon became apps. As Apple rolls out more gadgets, its services revenue will continue to diversify.

. . . .

Apple already offers an upgrade program, where users can pay off an iPhone after 24 months or trade it for a new one after a year. Imagine a service where you simply subscribe to a regularly updated iPhone, Apple Watch, AirPods or some subset of these devices. Mr. Dediu estimates that for every Mac or iPhone, the average Apple customer spends on average a dollar a day on hardware plus services.

Link to the rest at The Wall Street Journal 

Thoughts on Apple Books

25 January 2018

From Digital Book World:

The news of Apple rebranding the iBooks Store to Apple Books, and preparing a fresh new entry in the digital publishing landscape, is welcome.

Apple’s bookstore, much like many other parts of the company these days, has suffered from neglect. The store, as it is currently, evokes a vision of tumbleweed blowing through an empty desert: nobody’s home, nobody cares, and it’s quite clear there is no larger strategy present.

Apple did the right thing by going outside the company and hiring Kashif Zafar, by all appearances an accomplished publishing business mind, originating out of an engineering background. That is, frankly, exactly what Apple needs, as their digital book store needs to be re-engineered from the ground up.

. . . .

1) Deploy iBooks Author anew

Apple, believe it or not, comes right out of the gate with one strong competitive advantage: they have a relatively-easy-to-use, vertically-integrated, HTML5-based authoring tool that has grown an international user base since it was introduced in 2012.

When iBooks Author was first released, it was ahead of its time. And like everything that is ahead of its time, it was poorly understood and not nearly as well utilized as it should have been.

Fast forward six years later, and digital book readers are clamoring for new types of experiences.

The biggest problem with iBooks Author has always been the mediocrity of the iBooks Store. Publishers producing phenomenal content using iBooks Author have met poor sales, thanks to poor searchability and poor discoverability, over and over and over again.

. . . .

3) Apple Books needs to match Amazon on key criteria

The Apple Books Store needs to be as searchable as Amazon. Historically, the search function within the iBooks Store has been flat-out broken.

The Apple Books Store needs to be creative in how it makes books discoverable.  Undoubtedly, this will be a combination of algorithmic competency and human curation.

With both searchability and discoverability, Siri needs to play a role as Apple ramps up their voice-first computing efforts. Intelligent voice integration needs to be part of the fabric of the Apple Books experience.

The Apple Books Store needs to be author and publisher-friendly. This means giving authors and publishers deep flexibility with pricing (including bundling / discounting), deep flexibility in how their books are represented within the store (control over author-specific landing pages would be a good place to start), and deep flexibility in marketing (including ability to have hosted video book trailers, deep control over sample content, and more).

There is plenty of opportunity for Apple to compete here. Every single product page on looks precisely the same way, in exactly the same format. Amazon’s practical blandness can be bested by a highly-functional, colorful and vibrant, individualistic approach that holds serve in key areas while innovating beyond what Amazon offers in others.

. . . .

5) Go cross-platform anywhere and everywhere

Apple’s walled-garden approach is not compatible with the interests of readers, who want to be able to read their purchased books on whatever device they choose.

. . . .

The publishing industry – the ENTIRE publishing industry, which goes far, far beyond just traditional publishers obviously – desperately needs a viable competitor to Amazon.

Link to the rest at Digital Book World

PG says competition is always good.

Apple used to be a fierce competitor and achieved dominant success in the iPhone/iPad markets.

Apple also did a phenomenal job of linking its products to a cool personal style/lifestyle image. You might be working a temp job for minimum wage and living in a sub-basement closet, but when you hit the street, your iPhone instantly improved your image so much you took a selfie.

Because of high product quality and that image thing, Apple managed to price its products higher than its competitors and still maintain a dominant sales position.

In some categories.

In personal computers, Apple had a 7% share worldwide in 2016 compared to Lenovo at 21%, HP at 20% and Dell at 16%. Apple makes great computer hardware, but it’s dominant only in some niche markets in a Windows world. iPhone and Windows desktop/laptop is a typical tech combination.

For a growing number of small web startups, Chromebooks are the thing for everybody who is not a programmer. Marketing doesn’t need Macs to run the blog, build a presence on Twitter and Instagram and check out what competitors are doing online.

Apple is really a phone company. It doesn’t dominate any other significant markets. (And Apple is definitely not dominant in major Asian phone markets.)

PG isn’t the only one who suspects that Steve Jobs was the head magician who made all the sub-magicians at Apple work right and not do ordinary things.

The most important post-Jobs product launch happened with the iPhoneX in September.

Apple-watchers more expert than PG think the Apple magic that usually accompanies a major iPhone launch just wasn’t there. Apple fanboys and fangirls all stood in line and jumped in right away, but the far bigger wave that usually follows may not have been so large. Apple’s first post-iPhoneX earnings report is anxiously awaited.

Back to the main point, PG thinks the ebookstore ship has sailed – from Seattle. As the old saying goes, you only get one chance to make a good first impression and Apple blew that chance with its first store. From an author standpoint, PG marked it as undesirable right after its opening when it appeared that Apple hardware was necessary to prepare books for the store.

The Amazon bookstore is 100% platform agnostic and Amazon doesn’t care if you access it from an iPhone or a homebrew Linux computer. Amazon works hard to create a single great customer experience without spending any time or money on enhanced Apple-only features.

Plus Amazon has a huge cache of data about how to sell books and what the world’s largest collection of online customers buys – both inside and outside of the bookstore. In the US, in France, in Canada, in Scotland, in Chicago, in Dayton, in Boulder, in Bel Air, in Steamboat Springs, in Rocky Comfort and Rhyolite.

PG doesn’t see many people talk about the huge value for prospective customers that lives in Amazon’s product reviews, including the millions of book reviews it has collected.

It’s easy to make snide comments about the intelligence, education and motivation of some of the reviewers, but most book buyers have developed a pretty good filter to distinguish quality Amazon reviews from those that originated in a packed room in India.

PG suggests that large numbers of reviews and the metadata Amazon presents when a book has received a large number of reviews – Top Customer Reviews, Most Recent Customer Reviews, Also Boughts and Rated by Customers Interested In, which shows how the customers interested in specific topics rated the book PG is considering, are valuable assets for shoppers of all tastes.

Even if Apple copies all of Amazon’s bookstore features, the lack of this giant pile of data from previous buyers will produce an inferior experience.

As far as indie authors are concerned, the key indicator for PG will be whether Apple is willing to meet or beat Amazon royalty rates.

He noted that the latest (and last?) version of the Nook Store has a top indie royalty rate of 65%. That the big brains at Barnes & Noble couldn’t bring themselves to go all the way to 70% is one of the many reasons why the company is circling the drain.

When the big brains at Apple hit speed dial to call PG about their new bookstore, he’s going to say, “75%. 80% for bestsellers.”

The Antitrust Case Against Facebook, Google, Amazon and Apple

16 January 2018

From The Wall Street Journal:

Standard Oil and Co. and American Telephone and Telegraph Co. were the technological titans of their day, commanding more than 80% of their markets.

Today’s tech giants are just as dominant: In the U.S., Alphabet Inc.’s Google drives 89% of internet search; 95% of young adults on the internet use a Facebook Inc. product; and Inc. now accounts for 75% of electronic book sales. Those firms that aren’t monopolists are duopolists: Google and Facebook absorbed 63% of online ad spending last year; Google and Apple Inc. provide 99% of mobile phone operating systems; while Apple and Microsoft Corp. supply 95% of desktop operating systems.

A growing number of critics think these tech giants need to be broken up or regulated as Standard Oil and AT&T once were. Their alleged sins run the gamut from disseminating fake news and fostering addiction to laying waste to small towns’ shopping districts. But antitrust regulators have a narrow test: Does their size leave consumers worse off?

By that standard, there isn’t a clear case for going after big tech—at least for now. They are driving down prices and rolling out new and often improved products and services every week.

That may not be true in the future: if market dominance means fewer competitors and less innovation, consumers will be worse off than if those companies had been restrained. “The impact on innovation can be the most important competitive effect” in an antitrust case, says Fiona Scott Morton, a Yale University economist who served in the Justice Department’s antitrust division under Barack Obama.

. . . .

“Forty percent of Google search is local,” says Luther Lowe, the company’s head of public policy. “There should be hundreds of Yelps. There’s not. No one is pitching investors to build a service that relies on discovery through Facebook or Google to grow, because venture capitalists think it’s a poor bet.”

There are key differences between today’s tech giants and monopolists of previous eras. Standard Oil and AT&T used trusts, regulations and patents to keep out or co-opt competitors. They were respected but unloved. By contrast, Google and Facebook give away their main product, while Amazon undercuts traditional retailers so aggressively it may be holding down inflation. None enjoys a government-sanctioned monopoly; all invest prodigiously in new products. Alphabet plows 16% of revenue back into research and development; for Facebook it’s 21%—ratios far higher than other companies. All are among the public’s most loved brands, according to polls by Morning Consult.

Yet there are also important parallels. The monopolies of old and of today were built on proprietary technology and physical networks that drove down costs while locking in customers, erecting formidable barriers to entry. Just as Standard Oil and AT&T were once critical to the nation’s economic infrastructure, today’s tech giants are gatekeepers to the internet economy. If they’re imposing a cost, it may not be what customers pay but the products they never see.

. . . .

The story of AT&T is similar. It owed its early growth and dominant market position to Alexander Graham Bell’s 1876 patent for the telephone. After the related patents expired in the 1890s, new exchanges sprung up in countless cities to compete.

Competition was a powerful prod to innovation: Independent companies, by installing twisted copper lines and automatic switching, forced AT&T to do the same. But AT&T, like today’s tech giants, had “network effects” on its side.

“Just like people joined Facebook because everyone else was on Facebook, the biggest competitive advantage AT&T had was that it was interconnected,” says Milton Mueller, a professor at the Georgia Institute of Technology who has studied the history of technology policy.

Early in the 20th century, AT&T began buying up local competitors and refusing to connect independent exchanges to its long-distance lines, arousing antitrust complaints. By the 1920s, it was allowed to become a monopoly in exchange for universal service in the communities it served. By 1939, the company carried more than 90% of calls.

Though AT&T’s research unit, Bell Labs, became synonymous with groundbreaking discoveries, in telephone innovation AT&T was a laggard. To protect its own lucrative equipment business it prohibited innovative devices such as the Hush-a-Phone, which kept others from overhearing calls, and the Carterphone, which patched calls over radio airwaves, from connecting to its network.

After AT&T was broken up into separate local and long-distance companies in 1982, telecommunication innovation blossomed, spreading to digital switching, fiber optics, cellphones—and the internet.

Link to the rest at The Wall Street Journal

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