Political Economy Of Communication Essay Topics

ICOM 816 Communication & Political Economy

Sebastian Plappert

Political Economy of the global media business:

Why corporate interests shape the news.

In traditional liberal thinking the press operates as “the people's watchdog” who critically evaluates political decisions (Hudson 1999). Thereby, the media has to be organised by private citizens or organisations independent of government censorship and control (Pasley 2001). As long as government intervention is prevented, the free press will guarantee the free flow of information and ideas (Martin 2001). Since democracies build upon “popular sovereignty” the citizens as the ultimate decision makers have to rely on public access to information in order to make sound political choices (Meiklejohn 1960, pp. 8-28). Following conventional wisdom, the government and the private media are by nature in conflict with one another, and therefore, public interest is served best by letting the balancing forces of the market regulate the media system (Lichtenberg 1987). As a consequence “the communication system has emerged as a central area for profit making in modern capitalist societies” (McChesney & Schiller 2003, p. 1).

Much has been written about media corporations growing in size and reach, but since theoretical framework and findings correlate with each other, there is a wide range of research from various perspectives (Wasko 2005). Whereas an array of authors perceives these developments as unavoidable for the media operating in an era of globalisation (Bauman 2000; Stiglitz 2002; Gledhill, 2004), others point to the dangers for democracy and call for public interference (Schiller 1981; Parenti 1993; Barnouw & Gitlin 1998; Bagdikian 2000; McChesney 2000a, 2000b, 2001; Herman and Chomsky 2002). Closely connected to critical and Marxian theory (Murdock & Golding 1979), a political economy approach has to consider “the social relations, particularly the power relations, that mutually constitute the production, distribution, and consumption of resources” (Mosco 1996, p. 25). Accordingly, this paper will briefly trace recent developments in the media industry, before examining the role of the state and neo-liberal ideology in shaping the global communication system. After analysing the effects of media concentration, special focus will be put on the concept of commodification in the media industry and the notion of cultural hegemony and dependency of media. Thereby, it will be argued that elitist corporate interests shape the news content in order to guarantee a profit friendly political environment.

Media concentration

During the past decades, the global communication system has undergone a variety of dramatic changes, shifting power to commercial interests. Technological improvements in digital communications created an increasingly global market for corporations looking for investment (Schiller 1999). Thereby, predominantly western companies engaged themselves in “conglomeration and transnationalization” through corporate takeovers, mergers and acquisitions of unprecedented scale (Jin 2007, p. 185). These ongoing processes of vertical and horizontal integration fostered the emergence of huge media conglomerates (Jamison 1998; Schiller 2001). Vertical integration, the acquisition of related businesses in the process of profit generating (Gomery 1986), enables corporations to effectively produce, distribute and broadcast its products under one roof and, therefore, minimise transaction costs (Stigler 1964). In other words, a corporation owning production companies and distribution outlets, as well as TV stations and movie theatre chains, simultaneously provides itself with its own supply and demand. Horizontal integration, on the other hand, aims at obtaining a greater share of the market by acquiring companies in the same field of business in order to maximise profit through price control (Gomery 1986). Hence, only a hand full of globally operating corporations remained, with the majority of them based in the US (Jin 2007, p. 191). Since “many of the largest media firms have some of the same major shareholders, own portions of one another or have interlocking boards of directors” (McChesney & Schiller 2003, p. 12), eventually, “the global media system is fundamentally noncompetitive in any meaningful economic sense of the term” (McChesney 1998, p. 5). Whereas “the ownership structure of the news industry purportedly aligns the news media’s coverage of the economy with the overall business interests of the corporate community” (Kollmeyer 2004, p. 435), the “oligopolistic control of much of the world communication market by a few giant corporations” renders it not only practically impossible for newcomers to penetrate the market (Jin 2007, p. 148), but, in consequence, enables these firms to “behave as if a monopoly were operating” (Gomery 1989, p. 50). Lacking any effective competition, the intertwined ownership structure of the media industry cultivates the shaping of media content according to underlying corporate interests.

Neo-liberal ideology and the role of the state

The rise of this global commercial media system is closely linked to the assertion of neo-liberal capitalism as the dominant theory of economics. Being “significant beneficiaries” of the current global structure, the media giants have a particular interest in supporting the perpetuation of neo-liberal capitalism (McChesney & Schiller 2003, p. 13). Since the unregulated free market as the fairest and most effective way of wealth distribution is the essential precondition for a prospering democratic society (Harvey 2005), there is no need for the public to interfere in the current organisation of media ownership (Touraine 2001). Thereby, both consumerism and corporate concentration are depicted as natural (Bauman 2000), inevitable consequences of globalisation (Cowling & Tomlinson, 2005; Sklair, 2002). However, since globalisation, and thereby neo-liberal ideology, “was restored by [US] military force and national policy, it was not a ‘natural’ state of affairs” (Hirst & Thompson 2002, p. 249). Economic neo-liberalism strongly relies on governments forming a global regime that “defines and guarantees, through international treaties with constitutional effect, the global and domestic rights of capital” and enterprises (Panitch 1994, p. 64). Hence, there is no reason for Hirst and Thompson (2002, p. 248) to assume that all the processes linked to globalisation “have an inherent dynamic that prevails over all countervailing forces”. Neo-liberalism is not a dogmatic consequence of globalisation, and despite the general perception of globalisation representing “an unstoppable historical force in the face of which politics is helpless” (Scott 1997, pp. 1-2), it remains reversible (Williamson 1998, p. 70), always dependent on governmental backing (Scholte 1997, p. 442). Moreover, as an instrument of an overarching ideology of free market capitalism, neo-liberalism “is grounded in the [ever-increasing] power of multinational corporations arguing for free trade by means of removing political and governmental rules and regulations that may inhibit the movements of goods, services and capital across borders” (Nafstad et al. 2007, p. 316). In summary; “the centerpiece of neoliberal policies is invariably a call for commercial communication markets to be deregulated” (McChesney 2001, p. 2).

[...]

 

Introduction

Political Economy of Communication

The Political Economy of the Internet

Conclusion

Bibliography

 


 

 

Today, I have read my mail, watched a video clip, listened to a CD, done some research, played a game, and wrote this paper. All this was done on one machine, my personal computer at home. My computer is hooked up to the Internet via a telephone line. The computer cost me $4,000 two years ago, and a telephone line and Internet connection costs about $600/year. This is a considerable sum, but because this technology has become an important part of my work, it is worth it. I am only one of millions in the same situation, who, with our money, are fueling the single largest media transformation in history, the convergence of social interactions into a digital format on the Internet.

It is vital that we understand this transformation of the way we communicate, as it has immense ramifications in almost every aspect of our lives, from the way we work, to how we play, learn and participate in civic life. We should not be complacent, trusting that the decision-makers shaping these new systems of communication will look after our interests. They are being driven by a systemic momentum that will, if unchecked, produce a society in which people will interact solely on the basis of economic consumption, with manipulative, commercial intrusions into daily life undreamed of a generation ago. Immediate action is required to ensure that the current trend for the commercialization of the Internet does not result in a global consumer society, but instead preserves at least some vestiges of a civil society.

This paper is written to clarify the processes involved in the commercialization of the Internet. It is divided into two main sections. In the first section, I attempt to present a critical analysis of the political economy of communication, using some conceptual tools designed by Vincent Mosco, a noted communications researcher. This will provide the ‘larger picture’ of the information and communication sector in the world today. The second section continues this analysis, but focuses in on the Internet itself, to show how it is becoming increasingly commercialized and shaped by the agendas of the corporate world. In addition, a number of issues are presented, which serve to highlight some of the more pressing concerns.

 

In his recent book, The Political Economy of Communication (1996), Vincent Mosco provides insight into the forces that are shaping the way we communicate. He does so through the analytical method of trying to understand the political economy of the evolving information and communications sector, which is to say he attempts to uncover the realities of the current situation: the players, their activities and environments, and their motives and effects. He prefers to study social processes, rather than structures and institutions, and while he realizes that no analysis can encompass the totality of events and relationships, one can focus attention on particular ‘entry points’ in the field to provide a theoretical framework for understanding those social processes.

Mosco’s three ‘entry points’ for analysis are commodification, spatialization and structuration. Each will be explained and elaborated on in the subsequent sections.

 

Mosco (1996: 143-144) defines commodification as "the process of transforming use values into exchange values, of transforming products whose value is determined by their ability to meet individual and social needs into products whose value is set by what they can bring in the marketplace". Commodification is the primary means by which social relations become economic relations. Schiller (1996a: 18) applies this idea to the exchange of information when he writes:

The commodification of media content involves the transformation of messages into marketable products. Items produced by a series of creative processes, such as the development of a film, newspaper article, or recording, are packaged up and distributed to consumers. In some cases, the consumers pay directly for the movie tickets and CDs, in others, they pay indirectly through higher costs for general merchandise and service required to reimburse those companies for the expenses of advertising, which in turn pays for the ‘free’ TV or radio program consumed.

Realization of profits depends on the extent to which labour, consumer, and capital markets can be controlled: labour via increasing workhours for the same pay, and increasing the productivity of the worker through work measurement and monitoring systems; consumers by aiming for market monopoly, use of advertising, and diversification of product line; and capital by allowing for replacement of labour with machines and expansion of the commodity form, i.e., new content venues.

Regardless of the processes involved, the commodification of media products are especially important field of research since they are immediately involved in shaping consciousness, both at the individual and collective levels. Television, in particular, has become one of the major influences in people’s lives, with more time spent watching TV than practically any other activity.

Most of the research into communications has focussed on how media messages are shaped to reflect the interests of capitalist enterprises. Though the standard rationale is that the media are just giving people what they want, it is more the case that the media are giving advertisers what their corporate customers want, namely to induce people to buy their products. So, in addition to the ideological role of the communications industry, and that of being a site of commodity production in its own right, it also supports the commodification processes in society as a whole, through the provision of advertising services.

 

Though people generally think the purpose of mass media is to serve them with information or entertainment, those in control of the media know their primary function is to sell audiences to advertisers (Smythe 1981). Television, radio, magazines, and to a lesser extent newspapers, provide content that has been carefully selected to appeal to particular segments of the population, each with its own consumption habits. The ‘sale’ of these various audiences to advertising companies constitutes the main revenue stream for these media corporations.

Dallas Smythe elaborates on the reasons the system has been tremendously successful in promoting the consumer ethic:

A number of researchers have commented on the nature of advertising. Stuart Ewan (1976) provides the argument that advertising grew in importance as a means of promoting a consumption-oriented social ideology in order to resolve the problems of social control and the need for increased production in the 1920s and 30s. William Leiss (1976) criticizes this ethic of consumption on the basis that it does not produce satisfaction, but rather creates a permanent on-going dissatisfaction that can only be momentarily assuaged by buying more things. Jhally (1988) continues this line of exploration in his writings on commodity fetishism.

The evolution of the consumer society has another ramification, a major one. Current consumptive lifestyles in the wealthier nations are environmentally unsustainable. The resources required to produce the goods are either non-renewable, or are being used up faster than they can replenish themselves. Waste products are being dumped into the soil, air and water faster than they can be absorbed. The energy fueling this cycle of production and consumption is largely derived from the burning of fossil fuels. The megatons of carbon dioxide waste resulting from this process has led directly to global warming and climate change. The magnitude of the probable effects is appalling, including a rise in sea level, reduction in biodiversity, and more severe floods, droughts and storms. It seems ironic that, in light of this knowledge, that the world automobile fleet recently surpassed the five hundred million mark (Worldwatch 1998). No doubt the advertising industry, for which the automobile is the single largest advertised commodity, must bear some of the responsibility for that.

 

Personal information is also becoming a commodity. Corporate means of obtaining feedback about preferences for media products, such as audience ratings for TV programs, is becoming more sophisticated, making use of advanced communication and information technologies. This use is not constrained to the mass media - it is now a major part of most economic transactions to collect information about those transactions and sell it to others. Credit card purchases are a good example; they provide the credit card company with information on your buying preferences. This becomes the basis for categorizing you into a database of demographic profiles, which are then sold to companies whose products and services are purchased most by consumers with your profile. Besides opportunities for direct marketing and sales, companies’ decisions regarding such things as pricing, location of stores, inventory, and product development are also enhanced with such information, hence its value as a commodity.

This type of electronic ‘surveillance’ of transactions and activities has been extended beyond economic feedback on purchases. Clement (1992) relates how it is increasingly being used to monitor employee performance via automatic data collection on tasks related to computer use. As the use of computers expands in our information society, the threat of ‘Big Brother’ cannot be ruled out, although it may not be government but big business that holds ultimate power.

 

Commodification processes are intruding into public information and cultural areas traditionally outside of the commercial realm. Libraries and schools, suffering under government cutbacks, are cutting deals with corporations to allow marketing and sales to take place on their premises in return for much-needed revenue. Publicly-owned communication venues such as postal, telephone and broadcasting companies are being increasingly privatized. Public spaces are also being encroached upon by advertising, on streets, in museums, and sports arenas, to name a few. Even clothing is used for advertising - witness the popularity of ‘Club Monaco’ and ‘Roots’ brandnames emblazoned on sweatshirts and handbags. People are even sporting Nike tatoos.

 

Spatialization, according to Mosco, refers to "the process of overcoming the constraints of space and time in social life" (1996: 173). In reference to the political economy of communication, it refers to the constraints on the movement or flow of information, goods and services, and also to the effects of communication on the processes of differentiation of corporate operations and their subsequent reintegration.

 

"The political economy of communication has specifically addressed spatialization chiefly in terms of the institutional extension of corporate power in the communication industry. This is manifested in the sheer growth in the size of media firms, measured by assets, revenues, profit, employees, and share value. Political economy has specifically examined growth by taking up different forms of corporate concentration" {Mosco 1996: 175}

Corporate concentration proceeds along paths of horizontal and vertical integration. Horizontal integration occurs when a media enterprise buys a significant part of another company that is not a direct competitor. In some cases, the bought company is outside the industry altogether, however, in most instances, it is a related media corporation. Examples of such cross-media conglomeration include News Corporation’s takeover of the Twentieth Century Film Coporation, Time-Warner’s purchase of Turner Broadcasting, and Disney’s acquisition of Cap Cities/ABC.

Vertical integration takes place when a company extends control within a line of business, often to provide competitive advantage due to security of production. Forward integration refers to the purchase of companies to which one sells, as in the case of MCA’s purchase of Cineplex-Odeon, a large theatre chain through which MCA could distribute its films. Backward integration occurs when a supplier is bought, such as when The New York Times acquired paper mills in Quebec to reduce market uncertainties in the supply of paper for its presses.

The desire to increase profits and reduce risks has led, through a spate of mergers and acquisitions mostly over the past 10 years, to an oligopolization of the industry worldwide. Edward Herman and Robert McChesney, following the work of Jeremy Tunstall (1977) and Ben Bagdikian (1992), trace the rise of this oligopoly in The Global Media (1997). They conclude

A recent example illustrates this very well:

Regarding the influence of the state on the evolution of the media industry, Mosco outlines four processes that relate to both spatialization and commodification: commercialization, liberalization, privatization, and internationalization. Support for commercialization has the state moving away from policies and regulations that serve the public interest, such as the principle of universality, toward those that favour commercial interests, such as the deregulation of the telephone companies. Government liberalization of restrictions in the number of media service providers, such as allowing private competitors entry into a market previously controlled by a state-owned monopoly, is seen as beneficial by supporters of competition, but as a relinquishing of control by the state to business oligopolies. Privatization of state-owned media enterprises has been commensurate with market liberalization, and is indicative of government’s push toward commercialization, notwithstanding potential effects on political and cultural sovereignity. Internationalization, often in the form of inter-governmental agreements to promote trade (e.g., the North American Free Trade Agreement, trans-national integrations (e.g., the European Union), or agencies for managing inter-state commerce (GATT, World Bank, etc.), has been effective in giving the richer nations, and their resident trans-national corporations, more control over global communication policies. Governments, via these four processes, show themselves to be facilitators, rather than opponents, of the trend toward social dominance by commercial media oligopolies.

 

The push toward globalism by large-scale business interests has been matched, and fueled by, the globalism of trans-national media corporations. This has led to a number of social effects, but has been particularly marked in terms of what Schiller (1976) calls "cultural imperialism", i.e., the domination of the poorer nations by the richer ones in areas of culture and social policies. It is worth exploring this aspect in more detail, since not only does three-quarters of humanity live in the poorer ‘South’, but because the hegemonic processes are also illustrative of the controlling influences of the large media within the North itself.

Most of the efforts made by UNESCO in the 1970s and 1980s to establish a New World Information and Communication Order, were designed to improve the parity in information fows between North and South. The following quotes by highly regarded researchers show why these efforts were needed:

The proliferation and commercialization of such mass media as television, magazines, radio and newspapers were once hailed as positive signs of "development" by most Third World governments. Their political and economic leaders were no strangers to First World culture and economic systems, having either spent many years studying in the universities of the industrialized nations or grown up in the wealthy Westernized enclaves of the colonial elite. To them development was synonymous with economic growth stemming from an adoption of the Western model, i.e., capital-intensive industrialization and urbanization. The mass media, and television in particular, were seen as the most important means to induce the necessary socio-economic changes in their 'traditional' societies.

Early researchers in the field of communications in development (Lerner, 1961; Pye, 1963; Schramm, 1964) focussed on the power of the media to alter people's ways of thinking, to mentally prepare them to accept and welcome the social and technical innovations needed to 'modernize'. They thought by aiding the diffusion of Western ideas and technology, the mass media would help to improve the living conditions of the poor people in 'backward' nations.

Such conclusions were overly optimistic and basically flawed, according to later commentators (Rogers, 1976; Hedebro, 1982). Their main basis of criticism was that the earlier proponents accepted the premises of the 'dominant paradigm' of developmental thinking; i.e., that the cause of underdevelopment lay in the Third World nations themselves. As they saw it, the ‘under-developed’ nations lacked not only modern facilities such as capital, skilled labour, transportation and industrialized production infrastructures, and mass media, but also a progressive mindset - the citizens, especially the peasantry, were tradition bound, fatalistic, prejudiced and unresponsive to innovation. Like the political and economic thinkers who created the notion of 'development' as a world ideal, these early researchers ignored the historical reality of the centuries-old, unjust and exploitative relationships between the wealthy and poor countries, relations established by the old colonial powers primarily to benefit their economies at the expense of the diversification and expansion of the economies of the colonized nations.

The majority of global media conglomerates are US-based, particularly in the entertainment industries of film, television and music. What are the reasons US cultural fare is preferred by people in other countries? Media products are very similar to any other item of merchandise traded between nations. If those from the US are of higher quality and cheaper to buy than locally produced products, they will be preferred by the local retail merchants and consumers. The advanced technological expertise of American producers of film, TV programmes, magazines, and advertising or news copy, coupled with their long history of leadership in innovation has allowed US productions to become the ultimate 'definitions' of quality. Even the successful local products are often copies of American format.

Economies of scale also give the US a decided advantage over their competitors. The giant American media corporations are oligopolies, carving up the North American market among themselves and ensuring handsome profits by making the startup costs of any would-be competition economically unfeasible. They can afford to spend millions of dollars on a movie, TV show, or news story, knowing the great size of their market in the US alone would cover the costs of production. It is generally the 'software' (the information) that constitutes the bulk of their expenditures. The 'hardware' (e.g., celluloid, videotape, etc.) is relatively inexpensive to produce and distribute. Once the production costs have been satisfied by the market in the US , export sales are almost pure 'gravy'. Profit margins are so high for US companies in Latin America, they can afford to consistantly undercut the prices of the local producers.

And why have the local governments not imposed more severe restrictions on the distribution of American cultural products? The answer has been provided by many critical theorists (notably Stavrianos 1981 and Galtung 1980). The reason that US cultural domination has been tolerated to the extent it has is that the regional power elite identify more closely with their US counterparts than they do with their fellow citizens. Not only do they share the ideologies of the local American businesspersons, they also share their consumptive lifestyles. The money to pay for such status-conscious materialism often comes from acting as the local agents of the US multinational corporations. The managers of the Latin American 'cultural industries' are generally part of the compradore elite, made wealthy by sharing the profits of imported media fare. It has not been in their interests to bite the hand that feeds them.

Jorge A. Schnitman (1984) has given us an insight into such political and economic machinations in his review of the historical development of the film industry in Argentina. In 1946, Argentina was under the control of the strongly nationalistic government of Peron. Because of the power of the media to promote a sense of national identity, the local film industry was aided by protectionist measures. Laws were passed to ensure that 25% of all films shown in theatres in Buenos Aires, and 40% of films shown elsewhere, must have been produced in Argentina. When the Motion Picture Export Association of America refused to accept reciprocity trade in films, Peron suspended film import permits. The Argentine theatre owners and film distributors became alarmed at a 30% drop in attendance, with a corresponding drop in profits. They claimed, with some justification, that local films were of too poor quality, being hastily produced and heavily censored. They became part of a lobbying effort to allow foreign films back into the country. In 1952, after pressure was applied by the financial leaders of Argentina to remove import restrictions as a condition for receiving loans from the US Export-Import Bank, Peron relented. Within a few years, Peron was overthrown in a coup and US films had regained their position of dominance. The Argentine film industry has never recovered.

George Gerbner, who has been involved in a long-term study of the contents of film and television production, gives us one indication of why the production of programs for a global market may not be beneficial to any audience, either in the US or abroad.

Structuration, as used by Mosco, refers to the "process by which structures are constituted out of human agency, even as they provide the very ‘medium’ of that constitution". By this he means to incorporate the study of concrete social institutions and the dynamics of social processes. He proposes that class, gender, race and social movements be seen as categories of media impact, useful for describing the social relations of communication practices.

 

Social class, once a system of rigid demarcation of rights and privileges based on occupation in feudal times, is nowadays a somewhat nebulous concept of self-identification with a larger social grouping predicated on one’s level of wealth and income. In general, the ‘upper’ class, by virtue of their individual and collective wealth, have a disproportionate amount of ownership and control over the productive infrastructures in society, including that of the media.

Neo-conservative state policies for the past twenty years has led to an increase in the disparity in wealth in the richer nations. Tax cuts in the Reagan and Thatcher era primarily benefitted the rich, and corresponding cuts to social programs placed an undue burden on the poor. The wealthy, following the principle of ‘enlightened self-interest’ that is the foundation of the capitalist system, invest their money in the stockmarket and demand that profit and security of investment constitute the prime directive for corporate managers. Commercial media do not exist to serve the public in general, but only those who own them.

McChesney (1997) gives an example of how class differences have affected even non-commercial broadcasting in the United States. In 1967, Congress passed the Public Broadcasting Act which created PBS (the Public Broadcasting System) and NPR (National Public Radio) to meet public interest needs, but dropped plans for a tax on TVs and radios that would have provided a stable income for programming. Instead, revenues must come from donations from corporations and listener/viewer contributions.

But it is perhaps the effects of the high cost of advertising that offers the best illustration of the inequality regarding access to the public ear. Herbert Schiller (1996a) writes:

A major part of the structure of our society is linked to one’s identity, and two of the more salient attributes of self-identification are gender and race. There is ample evidence that social institutions assign differential roles and opportunities on the basis of these two attributes. This is indeed the case in the communications industries.

Though much of communications research has tended to ignore gender issues in the area of the media system of production, there has been some attention paid to the portrayal of women in advertising. Goffman, in Gender Advertisements (1979) uses magazine ads to illustrate that women, much more than men, shown in situations and postures of subordination, and with greater display of self-consciousness and lack of control over things. Gerbner (1996), in his content analysis of television programs, has found that in prime time shows males outnumber women three to one, and that women were generally portrayed as weak satellites to men.

The question of race, like gender, has been studied more as an aspect of class divisions, though some media researchers have looked at it in a more exclusive manner. In general, blacks, hispanics, aboriginal peoples, and other non-whites have not fared well in the media industries. Mosco (1996) lists various studies on how race is a factor in ownership and control of communication companies, in access to jobs, to possession of the means of communication (e.g., telephone service), to presentations of minorities in media programs. More work is needed in this area to correct these imbalances.

 

Social movements are characterized by a focus on a change in the status quo, particularly with regards to power relations in society. Whatever the issue, be it gender, race, environment, or politics, such movements are typically diverse in the makeup of their participants. This, plus the fact that participation is frequently international in scope, has made communications very important.

Some activist organizations base their operational strategy around the mainstream media, both to highlight issues and to increase their public profile. Dale (1996) traces the highly successful evolution of Geenpeace in this regard, noting that campaigns are designed around short, dramatic confrontations that are well-suited to the needs of television newsrooms. In general, however, social movements do not make use of mainstream media except for sporadic news coverage of large events such as marches and conferences. Due to the relatively high cost of media use, less expensive alternatives are preferred, including community radio and television programs, the telephone, the underground press, postering, organizational periodicals, and alternative computer networks.

Social activists have also been active in debates on media policy. In the US, trade unions, church groups, and civic organizations joined forces in the 1920s to counteract the worst excesses of an unregulated commercial radio industry, leading to the Communications Act of 1934, which oversaw the creation of the Federal Communications Commission (McChesney 1997). More recently, parents and educators have organized to oppose television violence, and a wide spectrum of groups is currently attempting to influence policy around the ‘Information Superhighway’, to ensure that it maintain a democratic public space among the online shopping malls.

 

"Digitization reinforces a social process in which the production and distribution of information evolves into the most important economic activity in a society, in which information technology begins to function as the Key infrastructure for all industrial production and service provision, and in which information itself becomes a commodity tradable on a global scale." {Hamelink 1995: 73}

The introduction of computing technologies into the workplaces of information producers has led them to realize that the end-product need not be distributed via a physical analogue, such as a newspaper or CD, but can remain in its original computerized pattern of digital bits. All that is required is the means of transmitting this new form of information from the producer’s computer to the recipient’s computer, hence the incredible attention recently focussed on telecommunications in general, and the Internet in particular.

This is the digital age, and the byword is ‘convergence’ - whereby the functions of the various media are merging, and the activities of the corporations in the telecommunications, media and computing industries are overlapping. This convergence is important in two ways, according to McChesney and Herman (1997). The first is the size and growth of the merging global info-communications sector. In 1994, it was worth $1.5 trillion, and has been growing at twice the rate of the rest of the global economy throughout the 1990s, with international communications leading that growth. "The importance of this sector for global capitalism can hardly be exaggerated. Sixteen of the sixty largest companies worldwide in terms of market capitalization fall into this sector. In terms of annual revenues, eleven of the fifty largest firms in the world fall into the communication sector category." (p. 108)

The second has been the uncertainty in the markets caused by this convergence. This uncertainty has been the impetus for the recent wave of mergers and acquisitions, joint ventures and strategic alliances, both for avoiding being outflanked by competitors, and for financial gain in new areas. "In times of technological upheaval where nobody has a clear idea of exactly where things are heading, the smart course for a firm is to hedge its bets by getting involved inseveral options so it can be prepared to pounce on any one of them that shows commercial potential." (p. 108)

 

 

There are unmistakeable signs that the Internet is emerging as the mother of all mediums, one that offers huge rewards to those who develop its economic potential and

threaten those who do not with oblivion. It has been given enough hype, with enough creedence, that all companies now see themselves as potential buggy-whip makers at the dawn of the automobile era. To sit still is to lose the evolving market to your more technically-savvy competitors.

The hype has been created by the mass media, since the Internet is important to their corporate customers and interesting to their audiences. Governments have been promoting it because in addition to funding its creation, and they are afraid to have their economies become uncompetitive due to a dearth of infrastructure. Businesses and the general public have been ambivalent, but the herd mentality is prevailing.

That the Internet has grown quickly there is no doubt.

Morgan Stanley estimates that there will be 150 million users by the year 2000, while Killen & Associates, a market research firm, puts that number closer to 250 million. Even though all of these numbers differ by as much as 227 million users, the underlying assumption is the same: the Internet will continue to boom in terms of consumer usage." (StrategyAlley 1998)

What most people might not realize, however, is the nature of its growth - it is exponential. This means, barring major social disruptions, the majority of the populations of the richer countries will be online within the next 10 years. The changes this will bring about are only dimly perceived at present, but will surely have an impact on almost every aspect of our lives.

 

‘Bigger is better’ is the rationale behind an unprecedented spate of mergers and acquisitions in the info-communications sector in the 1990s. As we have seen, this is leading to the creation of a global oligopoly. MCA President Gerald H. Taylor concludes "There’s probably only going to be only four to six global gangs emerge over the next five years as all this sorts out." (McChesney and Herman 1997: 113)

How is this affecting the Internet? The Internet is the platform for the converging information and communication industries, and is at the centre of corporate strategic planning. Some mergers are designed to maintain control over the transmission conduits, which include telephone lines, cable, satellite, and even electrical lines. Since it is not yet clear which venue will dominate, many firms are ‘hedging their bets’, as shown by the purchase of cable companies by telephone companies. There is also the blending of access points and content. It appears likely that, in order to enhance internet access service, companies are linking up with news and entertainment providers, whose bundled content will act as a ‘draw’ for customers.

The regional Bell company, U.S.West, provides a good example of the labyrinthine cross-ownerships that are becoming the norm.

Microsoft Corporation is possibly the best example of an industry giant that is extending its base of operations to other areas, with the express purpose of monopolizing markets. Though somewhat late to realize the potential of the Internet, both as a threat and an opportunity, it has since declared it to be the prime focus of its plans.

Once it was just a company that sold operating systems, which quickly became the industry standard - first with MS-DOS and then with Windows. Using the immense revenues from the near-monopoly of that market, it has since become the major supplier of integrated business software applications (word processor, database, spreadsheet, scheduling and messaging) through its control over the PC ‘desktop’.

In 1994, after Netscape had established market dominance in the newly-formed Internet browser market with its Navigator software, Microsoft quickly released Internet Explorer as a rival. But, according to some, it did not compete fairly. In order to drive Netscape out of business, it gave Explorer away for free, and also included it with its Windows operating system. It could easily afford to do this, with a market capitalization of $250 billion, compared to Netscape’s $2.5 billion. It has also struck deals with Internet access providers such as AOL, MCI and Prodigy to have them bundle Explorer with their services, and it has exclusive agreements with Disney and Time Warner for making Explorer the only browser that can access parts of their online mega-sites. (Newman 1997a) As a result of these actions, the US Department of Justice and 13 states have filed anti-trust suits against Microsoft, charging it with uncompetitive practices. (Newman 1998c)

The power of Microsoft should not be underestimated. Of all the players, because it controls the software that in turn controls attention, it is perhaps in the best position to dominate the evolution of the Internet and all its immediate inputs.

 

Because it is a global phenomenon, national governments are also heavily involved in the formation of a new Global Information Infrastructure (GII), based on the Internet. The collapse of the Soviet Union left the world with one dominant economic ideology, that of free-market capitalism, with as little government regulation as possible. Governments, accordingly, have done as much as they can to ensure ‘their’ corporations can compete effectively in the global arena. This has meant the downsizing of government operations and cutbacks on social programs, the sell-off of publicly-owned enterprises, and the deregulation of markets. But it has also meant the facilitation of an international regulatory environment favourable to global corporatism.

The World Trade Organization (WTO) and the International Monetary Fund both are committed to encouraging a global media market to serve the needs of a global economy. In 1997, 68 countries, representing 90 percent of the $600 billion a year telecommunications market, signed the WTO’s telecommunications agreement, which requires the national governments to open their markets to foreign competition and to allow foreign companies to buy stakes in domestic operators. (McChesney and Herman 1997: 112)

The business convergence has been mirrored by a political convergence in promoting the global infrastructure. Al Gore, the U.S. Vice-President, has been one of the biggest promoters of the GII. In a 1995 speech at Harvard, he related how quickly government leaders were in adopting the GII vision:

Politicians like Gore have been careful to extol the virtues of such a world-wide communications system. At a meeting of the International Telecommunications Union in 1994, he stated:

Europeans have had these same positive messages used to justify government facilitation of the GII, but they have also been told they should not block such an initiative, lest they become uncompetitive. A European Commission Green Paper on Convergence explains it this way:

What is not mentioned in the speeches and communiques is the certain domination of these global markets by the giant corporations of the US and Europe and the resulting disparities in revenue flows. Nor is there anything said about how the billions of poor people in the world will be able to use these networks. It seems to be assumed that the technology itself will bring about global peace and prosperity.

 

In the years just prior to the development of the World Wide Web, if you wanted to hook your computer up to the Internet, you had to agree to abide by an Acceptable Use Policy, which expressly forbade any commercial activity. This is not the case today.

Commercial sites are now the single largest category of computer permanently linked to the Internet. According to Network Wizards’ January 1998 Domain Name Survey, there are almost 36 million hosts on the Internet. Of these, over 11 million are commercial enterprises (.com), 6 million general networks (.net), and 4 million educational organizations (.edu). The rest are a mix of government, military and nonprofits, plus hosts bearing a two-letter country code.

 

Advertising agencies have long been aware that the scarce resource they are all trying to obtain is people’s attention. But not just anyone’s attention - they want the attention of people who are most likely to buy the thing they are advertising. So there are really two main processes at work in the world of commercial media messages. The first is the work done by those who control the media and its content, and that is to deliver the audiences with the purchasing psychographics most in demand by advertisers. The audience ratings, such as the Neilsen ratings for TV programs, are the means by which those audience psychographics are measured. The second is the work done by the advertisers themselves, who do market research to ascertain who are the targeted buyers, and then create persuasive messages to ensure that when the purchase is made, it is their clients’ product that is sold.

This ‘attention economy’ is now infiltrating the Internet, since it is clear that the Internet is where people are going to be spending more and more of their time. It is a brand new attention space that has opened up, one that is virgin territory for the insertion of advertisements. Where are the best places to put these ads? The answer is: where the people congregate, namely the ‘portals’.

‘Portals’ refers to the Internet sites that receive the most traffic. The main ones include the big search sites (Yahoo, Alta Vista, Excite, etc.), default browser homepages (Netscape, AOL), and popular news and entertainment sites (MSNBC, Disney). Because they get millions of ‘hits’ per day, their site is ‘prime real estate’ for the positioning of what are termed ‘banner ads’, which are small graphics, usually animated, placed around the main functional areas of the page.

What is unique about this real estate is that it is not real, it is virtual. The nature of the technology is such that thousands of ads can be shown on the same ‘banner space’ by drawing them up from where they reside in a computerized database and displaying a different one to each visitor to that site. This is because the ‘visitor’ is not really ‘visiting’, but actually just having a copy of the web page transferred to their computer screen, and each copy gets sent with its own version of the banner ad. In the case of the search sites, the ad that is displayed is picked on the basis of the word or phrase that is searched on; looking for "sports car" will bring up one ad for a car dealership and another for a bookstore selling a coffeetable book on Corvettes, both of which are hyperlinked to the websites of the sellers and their products.

The price of this attention space is staggering, and portal owners are beginning to experiment with the best ways to maximize their profits, as these two recent news excepts show:

and

If the portals can command such revenues, surely the net as a whole is seeing a major surge in advertising. This is indeed the case, as shown in this recent press release:

The collection of information about individual consumer surfing habits has been developed as a standard feature within the WWW and browser software. It is called ‘cookies’, and is a very small file placed on the user’s computer by the host web server, which keeps track of the web pages visited. Though primarily created as a convenience for the user, it does have commercial benefits as well, but with potential drawbacks:

And what is it that advertising is prompting people to buy online?

The Georgia Tech Research Corporation, which since 1994 has conducted one of the more reputable yearly surveys of Internet usage, recently issued its 1998 report. The findings concerned with online shopping behaviours are worth noting:

They also found that the more years experience the user has, the more likely they are to make an online purchase, and the larger the purchase will be.

A recent United Press International poll found that computer users put more confidence in information that they find online than that gleaned from more conventional sources, such as newspapers and television. Forty-three percent of those polled said they trusted the accuracy of online information versus 35% for other media. (Gehl & Douglas 1998a)

These results would appear to indicate that the Internet will be the medium of choice for consumption-oriented interactions, particularly since the older media will be using it as their platform for convergence.

 

 

One of the more salient beliefs about the Internet is that it is in need of regulation because it is being used as a major conduit for digital pornography, which is made available to anyone with access to the Internet, including children. Though porn does exist, it is by no means as prevalent as the media hype would suggest, yet this did not stop Congress from passing a bill to censor material on the Internet. In 1997, the US Supreme Court struck down the Communications Decency Act (CDA), which would have made it a crime to communicate "indecent" materials on the Internet.

Recently, however, the Senate approved amendments to an omnibus appropriations bill that revive this notion of censorship. The amendments included the so-called "CDA 2" that creates criminal penalties for anyone who "through the World Wide Web is engaged in the business of the commercial distribution of material that is harmful to minors" and fails to "restrict access to such material by persons under 17 years of age."; and the "Internet School Filtering Act", which requires schools and libraries receiving federal Internet subsidies to install software "to filter or block matter deemed to be inappropriate for minors." (Electronic Privacy Information Center 1998) It is expected that, if enacted, this law will also be challenged in the courts.

Opponents of these amendments point out that it is not possible to determine the age of the online user, that filtering software screens out many non-pornographic sites, and that such censoring should be done through guidance and control of children’s online behaviour by parents and teachers, not left to software. (American Civil Liberties Union 1998)

 

Security is a major issue, especially if e-commerce is to become a functional reality. People do not want to give out their credit card numbers over the net, for fear that it might be intercepted by a cracker who has infiltrated a company’s customer database. Encryption, digital signatures and firewall software are in hot demand to ensure the integrity of the system is not violated. But security comes with a price, and that price is often a compromise of citizens’ rights to privacy.

Marcus Nieto, in a 1997 research report, stated that American businesses are now spending nearly $100 billion a year on high security products and equipment to help counter $200 billion in annual losses due to crime. He also reports that a recent nationwide survey of a wide variety of companies found that 75 percent utilize CCTV surveillance. But business is not the only user of this technology - local law enforcement agencies are also finding it helpful in preventing crime. According to Nieto, as of June 1997, there were "nearly 800 local public video surveillance programs in operation in the UK. The British government provides $22 million annually in matching grants." Some of these public cameras, in Britain and many other countries, are now linked to the Internet, providing real-time pictures to anyone accessing the site. For the most part, these cameras are pointed toward major thoroughfares and allow for the monitoring of traffic, but it is not unreasonable to imagine a day when all public space will be visible to anyone at any time.

Agencies charged with protecting the public are often among the first to call for measures that will erode privacy rights. The FBI are pressuring the US government to impose restrictions on the use of encryption technologies, such that businesses would have to use a special ‘Clipper Chip’ to encrypt their data, allowing US security agencies like the FBI to decode the data if there was a suspicion of illegal operations. This is just one example, - in a recent report, the American Civil Liberties Union states

The military, too, has been calling for increased funding for systems to prevent hackers from infiltrating top-secret computers. This so-called ‘infowar’ against online terrorists, according to some, may also be a massive, government-subsidized initiative for developing security of access to corporate financial systems, prior to the roll-out of a global commercial Internet that supports full e-commerce. (Brandt 1995)

Privacy regulations between countries are another potential source of conflict. European privacy legislation is much stricter than that in the U.S., and this is posing a problem in an era of global trade in personal data.

The changes wrought by the rapid deployment of information and communication technologies do not only pertain to the workplace, they are also having a negative effect on people’s family life. Don Tapscott, the Internet guru of the business community, may find it helps his two children expand their horizons and be in contact with cyber-peers around the world (Tapscott 1998), but a team of anthropologists who spent two years studying a high-tech family in the Silicon Valley of California report that the new technology is causing worklife to be being blended into homelife, leading to much more regimentation. They use a typical example to illustrate their findings.

A recent survey of 500 Internet users shows that ‘surfing the net’ has displaced other leisure activities, with 64% spending less time watching television or using the VCR, and 26% spending less time with friends and family. (The Strategis Group 1998) These early findings seem to indicate the advent of the Internet has not led to a more enriched family life.

 

The Internet was originally established by government funds to link military personnel, and especially those researchers working at major universities on advanced weapons systems. It was a co-operative venture, which, after other protocol-based networks such as BITNET, USENET, and FidoNet began ‘gatewaying’ into it, i.e., establishing a two-way flow of information, opened itself up to allow anyone using the TCP/IP protocol to link their computer up to it. In this way, the Internet became anarchic, as nobody could claim ownership of it.

The Internet’s anarchic nature did not mean there was no means of controlling its growth. On the contrary, there were organizations established to oversee the processes that had been set up to ensure orderly evolution.

The collaborative nature of the governing mechanisms is being strained by the increased interest in the Internet by large corporations with an important commercial stake in the way the net develops. This is true particularly for the development of technical standards. The W3C has a good process for setting HTML standards - it has 211 members, mostly representatives of large computer and software companies who pay $50,000/year to join, that develop consensus-based draft recommendations that are made public to obtain feedback from anyone. After a time, the group votes and the standard is set. Critics say that too often the standards follow the market, rather than lead. Ignoring the voices of the content developers, it caters mostly to the designs of Microsoft and Netscape, who control the WWW browser market between them (Corcoran 1997). Should Netscape continue to lose market share to Microsoft’s Internet Explorer browser and eventually cease to be a major competitor, Microsoft will effectively control the evolution of the WWW, as it has with the world’s operating systems.

 

‘The Internet will for global participatory democracy. It will make economies boom. It will provide a global educational system for all’. These are the promises of the hype artists. The reality will be different. The benefits will accrue to the minority, mostly the already educated, white professionals in the wealthy nations. They will be, as they are now, the info-rich. The world’s majority, those in most Third World nations, will remain poor and info-poor. One third of humanity lives in poverty, and one sixth live in ‘absolute poverty’, i.e., they do not have adequate food, water or shelter and live on a day-to-day basis. The poorer nations are also the ones with the highest birth rates, and this contributes to the cycle of poverty. Where, then, are the poorer countries going to get the capital to create their portion of the Global Information Infrastructure, and where will their people get the money to pay for equal access to the online information resources, most of which will reside in the rich countries?

Roberto Verzola, an expert in computer networking in poor countries, has likened the Information Highway to the highways paid for by development aid, which were used to extract resources for export. He sums up the the nature of the disparity in the following passage:

Aside from the likelihood that a GII will continue the pattern of cultural homogenization, there is the other problem that will inevitably accompany a global intensification of commercial communications - that of erosion of local languages. Already, increased global trade has made English the ‘international tongue’, and most computer programming is done in English. The vast majority of current online documents are in the English language, and the online population is heavily American. This does not bode well for minorities hoping to preserve their culture in the face of a multi-media onslaught spearheaded by American multi-nationals.

Even in the wealthy countries, there is growing evidence that some sub-cultures, often poor and non-white, will be less than full participants in the brave new world of cyberspace.

Finally, there is the question of access. When communications media, such as the telephone, were under strict government regulation, there was adherence to the important principle of universal access. This meant that rates were uniform, and service was provided to rural and remote areas, even where it was not economically optimal to do so. In the past decade, however, policy has shifted from social principles to economic ones, as Winseck points out:

The recent deregulation of the markets has all but ended the ability of governments to demand that communications companies provide equal access to all. In the coming years, the notion of universality will disappear, replaced by the realpolitik of the free-market, namely, the kind of access you get, and what you get access to, will depend on what you can afford to pay.

 

There is a major upheaval occuring in the information and communications industries around the world. This is the convergence of media due to digital technologies, centering on the Internet as the primary transmission platform. An attempt has been made in this paper to apply a critical analysis to the political economy of communications and the Internet, making use of Vincent Mosco’s three entry points of commodification, spatialization and structuration.

Commodification processes analyzed included media content as commodity, the sale of audiences to advertisers, the collection and sale of personal information, and intrusion of advertising into public spaces. Spatialization processes reviewed were the trends towards corporate concentration and globalism. Finally, structuration processes looked at included social class, gender, race, and social movements.

The analysis of the processes involved in the information and communication sector as a whole was useful in providing insight into the specific political economy of the Internet. The growth and globalization of the Internet was discussed by looking at the increase in the number of people online, the mergers and acquisitions frenzy, the Microsoft monopoly, and the push by governments to create a Global Information Infrastructure. The commercialization of the net was explored with an eye to advertising and consumption patterns, and a variety of salient issues was presented, including pornography and censorship, security and privacy, lifestyle changes, Internet governance, and the disparities between the info-rich and the info-poor.

From this short analytical overview, one can conclude that there is a great deal of activity going on in the communications sector, and that the Internet is seen as a critical component of the development plans of the major players in the field. There are definite trends: toward the formation of an oligopoly of giant corporations in response to the uncertainty and turbulence of the emerging markets; toward a deregulated global marketplace facilitated by governments in preparation for a Global Information Infrastructure; and towardcommercialization of the net, including a vast increase in advertising and the first signs of online consumption. Will these trends culminate in a better world to live in? Indications are that it will not - there will be concerted efforts on the part of big government and big business to impose censorship, intrude further on privacy, turn family time into work time, have corporate control over the Internet, create more disparity between rich and poor, and, in general, create a cyber-society based almost exclusively on consumption. For those who would like to see the Internet imbued with the values of a civil society rather than a consumer society, it will be a long and hard struggle.

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