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date: 25 February 2018

Economics of International Communication

Summary and Keywords

Generally considered one of the central driving forces behind globalization, communication has provided the backbone for deep integration of global trade, finance, culture, and so on. Although the importance of knowledge, information, and communication has been widely accepted in contemporary economic and political thought, their economic function only became the subject of scientific interest from a variety of disciplinary perspectives during the 1930s and 1940s. From the early 1950s on, a growing body of scholarly work from various disciplines began to investigate the role of information and communication for the political economy of empires, states, business enterprises, and individuals. Aside from the generally growing economic significance of information and communication for the economic development of societies, the commodification of information itself has become the subject of investigation by political economists. And since various technologies form the basis of international communication, technology studies in recent decades have tried to explain processes of technological invention and innovation and the impact of new information and communication technologies (ICTs) on the architecture of international communication. A growing number of scholars have also analyzed the role of individuals, states, and multinational corporations in the political economy of communication and in a broader sense in international relations.

Keywords: international communication, globalization, political economy, information and communication technologies, ICTs

Introduction

In recent decades, international communication has developed into a central issue of global politics, economics, and culture. Although communication has always influenced the development of human consciousness and societies, communication’s impact only began to increase on a globally significant level during the mid-nineteenth century. Generally considered one of the central driving forces behind globalization, communication has provided the backbone for deep integration of trade, finance, culture, and so on. Constant invention and innovation, resulting in new information and communication technologies (ICTs), as well as geographic expansion, therefore became the fundamental driving force of systemic transformation in the global political economy, especially during the second half of the twentieth century.

The microelectronic or digital revolution since the 1970s, combined with rapidly changing global politico-economic frameworks, has resulted in the next development stage of the capitalist market economy, which has become deeply embedded in the collective memory through terms such as the “knowledgeable society,” the “information age,” the “postindustrial society” or “digital capitalism.” As a result, global information and communication; the underlying infrastructure of large technological systems for its production, distribution, and storage; and related content-delivering industries have all been the focus of growing academic and public discussions for two reasons. First, dynamic business sectors revolving around ICTs are increasingly seen as vital to the economic welfare, security, and cultural reproduction of societies across the world (Hanson 2008). Second, they have been identified as major driving forces behind the fundamental transformation of structures, interaction processes, actors, and relevant policy issues in the global political economy (Rosenau 1990; Skolnikoff 1993; Talalay et al. 1997). Therefore it comes as no surprise that scholarly attention to issues of international communication has grown remarkably during the last decades and can generally be characterized by an unusually high degree of interdisciplinarity, involving disciplines like economics, international relations and international political economy, communication and technology studies, sociology, cultural studies, geography, urban studies, history, and law. The goal of this essay is to introduce the reader to the basic theoretical discussions, concepts, actors, structures, processes, and policy issues that together make up the study of international communication.

Knowledge, Information, and Communication

Although the importance of knowledge, information, and communication has been widely accepted in contemporary economic and political thought, their economic function only became the subject of scientific interest from a variety of disciplinary perspectives during the 1930s and 1940s. Until the mid-1960s, knowledge and technology were largely defined as external variables, or as quasi-given (Rosenberg 1976; Fagerberg 1994). This represents an interesting blank spot, taking into consideration that Adam Smith already wrote in 1776, with regard to the importance of education and knowledge, that “man educated at the expense of much labor and time […] may be compared to one of those expensive machines” (Smith 1776/2003). From the 1930s on, economists would begin to investigate the effects of knowledge creation – in the sense of (vocational) training and education and technological innovation – for capital formation and productivity increases (Schumpeter 1935; Walsh 1935).

Public and academic discussions revolving around the growing importance of knowledge, information, and their communication often use those terms interchangeably. In order to clarify terms one has to separate knowledge from information. Machlup (1962:7), as one of the first, defines knowledge as “anything that is known by somebody, and the ‘production of knowledge’ as any activity by which someone learns of something he has not known before even if others have.” Bell (1973:175) defines knowledge more narrowly as “a set of organized statements of facts or ideas, presenting a reasoned judgment or an experimental result, which is transmitted to others through some communication medium in some systematic form.” Porat (1977:2) defines information similarly as “data that have been organized and communicated.” What transforms knowledge into information is the process of communication, the proactive sharing of information with others. During the last two decades, economics has investigated more closely the role of information for business as well as the development and organization of information markets and the behavior of market actors in rapidly changing technological environments (Stigler 1971; Evans and Wurster 2000).

However, economics has always defined information and its production and distribution through liberal market mechanisms as neutral. Classical economic theory has several fundamental problems with the analysis of global communication industries and markets, such as – among others – “the absence of an adequate quantitative measure of information, and hence, of the value per unit of information” or “that the sharp division between ‘producers’ and ‘consumers’ necessary for the application of neoclassical efficiency and optimality (or ‘welfare’) theorems is inapplicable in the process of production and distribution of knowledge” (Parker 1994:48).

For the political economy of communication, the question of who controls and regulates information and communication (channels), and how the process of information exchange is structured and organized, forms the center of scholarly curiosity in the study of the political economy of communication.

The Economic Significance of Communication

From an Industrial to a Postindustrial Information Society

From the early 1950s on, a growing body of scholarly work from various disciplines began to investigate the role of information and communication for the political economy of empires, states, business enterprises, and individuals. The general observation has been that technologically advanced economies since the late 1960s have been in the process of moving beyond industrial capitalism to information-based economies that will bring profound changes in the form and structure of the economic system, in the sense that information and communication represent major input factors in practically all economic sectors. As Melody (1994:21) observes, “The state of information in the economy has pervasive effects on the workings of the economy generally.”

As one of the first, Innis investigated the influence of media, from oral communication of preliterate cultures, through writing and print, to electronic media, for the establishment, stabilization, and reproduction of societies and their politicoeconomic interactions with others (Innis 1950/2007). In the 1950s and 1960s, economists such as Machlup (1962), Boulding (1966), and Drucker (1969) were among the first to recognize and further investigate the growing economic importance to national economies of information and its production, storage, and distribution through large information and communication networks. They came to the realization that knowledge production and distribution, as well as the large-scale incorporation of information and communication services into industrial production processes, had begun to generate a growing portion of national gross domestic products (GDPs). An ever-increasing number of highly skilled jobs, prominently termed “knowledge worker” (Bell 1973) or “symbolic analyst” (Reich 1991), revolved around the production, dissemination, and management of knowledge, information, and communication. As Bell (1973:126) summarizes in his seminal work:

In preindustrial societies – still the condition of most of the world today – the labor force is engaged overwhelmingly in the extractive industries: mining, fishing, forestry, agriculture. Life is primarily a game against nature. One works with raw muscle power, in inherited ways, and one’s sense of the world is conditioned by dependence on the elements – the seasons, the nature of the soil, the amount of water […] Industrial societies […] are goods-producing societies. Life is a game against fabricated nature. The world has become technical and rationalized. The machine predominates, and the rhythms of life are mechanically paced […] A post-industrial society is based on services. Hence, it is a game between persons. What counts is not raw muscle power, or energy, but information.

Bell and others have repeatedly been accused of technological determinism, which perceives technology as the dominant source for sociopolitical and economic conditions and their change. Technology, so their critics say, has been interpreted as an agent of domination and oppression rather than liberation, as the source of the problem rather than the solution. However, crude forms of technological determinism have been rejected by most scholars (Smith and Marx 1994; Castells 2000; Kaplan 2004).

The need to analyze the extent to which ICTs and various information and communication-related products and services have changed the structure of national economies generated a number of pathbreaking studies. Seminal works by Porat (1977) and Nora and Minc (1980) defined more precisely what became known as the “information society” and in extensive quantitative studies tried to assess the economic contribution of ICTs, and the services produced and distributed through them, to national economies.

The importance to various economic processes of information and communication as input factors became the center of attention for a growing body of economic literature concerned with the formulation of a new “techno-economic paradigm” (Freeman 1987; Dosi et al. 1988; Archibugi and Michie 1997), which investigated the relationship between information, communication, technological innovation, and the necessary prerequisites for competitiveness in an postindustrial, information-based global political economy. Empirical research during the 1990s investigated the contribution of ICTs to economic growth and development (World Bank 1999; Collecchia and Schreyer 2001; OECD 2002; Jalava and Pohjola 2002; Schreyer 2002), and showed that ICTs not only contribute significantly to economic growth in general or in newly established service (tertiary) sectors, but also improve performance – i.e., the productivity – in “old” (secondary/manufacturing) sectors (Ark 2001; Pilat and Lee 2001).

The Commodifiaction of Information and Communication

Aside from the generally growing economic significance of information and communication for the economic development of societies, the commodification of information itself has been the subject of investigation by political economists. First analyzed by classical political economists like Smith and Marx, commodification describes a transformation process by which a product’s value is not determined by its use value – i.e., the satisfaction of specific human needs and wants – but instead through the price a product can command in exchange – i.e., its exchange value (Smith 1776/2003; Marx 1867/1976). According to these scholars, commodification is a fundamental characteristic of capitalist development, geared towards the generation of surplus value or profit.

With regard to the commodification of information and communication, one can distinguish two cases. In the first, information is the final product. In the second, information is an intermediate component of production. In either case, scholars have scrutinized the means “whereby capitalist social relations are insinuated or accepted into what had earlier been non-capitalist forms” (Schiller 2007:21). As will be shown below, the commodification process has been one of the major trajectories in the political economy of communication, especially as a result of the liberalization and deregulation of information and communication sectors since the late 1970s, which transformed communication from a public into a private good (Schiller 1999). This has resulted in new conceptions of public and private information, in the development of information and communication markets, and in the development of property rights associated with marketable information.

Primarily, scholars influenced by critical theory have highlighted the special and particularly powerful character of communication as a commodity: Besides its ability to generate profit, “it contains symbols and images whose meaning helps to shape consciousness” (Mosco 1996:147). That is, mass media and ICT industries in capitalist society not only serve the goal of profit generation, but also provide the outlet for (ideological) messages that reflect and advance the interests of capital as a whole and for specific class fractions and so serve the successful reproduction of capitalism (Schiller 1973; 1976; 1984; 1989; Herman and Chomsky 1988). Ideological and economic aspects, however, cannot and should not be separated in order to avoid simplifying analysis (Garnham 1979; 1990).

Further research investigated the process of “extensive commodification” of previously only lightly touched areas, like public education, government information, media, culture, and telecommunication. This topic has been researched in communication studies (Schiller 1989; Garnham 1990), geography (Harvey 1989), urban studies (Davis 1990), and cultural studies (Davis 1986).

Technology and International Communication

Since various technologies form the basis of international communication, technology studies in recent decades have tried to explain processes of technological invention and innovation and the impact of new ICTs on the architecture of international communication. ICTs and media industries form the very beginning have been defined by “creative destruction,” a metaphor for constant technological and organizational innovation. As Schumpeter (1942:83) argued, “Revolutions are not strictly incessant; they occur in discrete rushes which are separated from each other by spans of comparative quiet. The process as a whole works incessantly, however, in the sense that there is always either a revolution or absorption of the results of revolution.”

Although the political economic literature on communication often speaks of technological revolution, research in recent decades has pointed to the rather evolutionary aspects of technological innovation. A central concept revolves around the notion of “path dependence”; i.e., technological progress often builds on previous inventions and innovations, which predetermine, to some extent, the next steps (Rosenberg 1994). Innovation studies have developed explanatory models that differentiate between market-pull (demand) and technology-push in order to understand which factors contribute to basic research as well as the development and market introduction of new technologies (Mansfield 1974; Gilpin 1975).

Understood as a loose chain of innovations, one can distinguish several development stages in the technological evolution of ICTs: (1) telegraph, (2) telephone, (3) wireless telegraphy (later radio or broadcasting), (4) television, (5) geosynchronous satellites, (6) computers (including personal computers or PCs), (7) fiber-optic cables, (8) the internet, and (9) mobile communication (cell phones, wireless internet). Some of these inventions or innovations happened almost simultaneously, others clearly developed on the basis of previous technologies. They all had particular development histories and were introduced in specific historical and economic situations (Noble 1977; Aitken 1985; Wasserman 1985; Douglas 1987; Hughes 1989; Saxby 1990). However, they all share some basic characteristics, which came to define ICTs and the broader structures of contemporary international communications.

First, they all share the character of large technological networks. Information and communication networks are basically open systems. They tend to grow, because the larger the network – i.e., the more nodal points or system participants a system contains – the larger the economies of scale, defined as lower costs per unit of information, and the higher the usefulness for the network participants in terms of connectivity with other participants. That is, the transaction costs decline with the growing size of a network. This observation has been named Metcalf’s law after its discoverer. Following the logic of path-dependence, authors have pointed to so-called lock-in effects or “positive network externalities” that represent another characteristic of large information and communication networks (Rohlfs 1974; Oren and Smith 1981). Since the usefulness of a network for participants grows with its size, the economic incentives for leaving a network decrease as more users join it, because leaving the network could result in higher transaction costs or loss of specific product applications. This observation has also been made for various electronic consumer products and the technological standards they are based on and explains why the role of technological standards is so central to market success (Katz and Shapiro 1985; 1986; 1994).

Second, since the 1960s the microelectronic or digital revolution has helped to overcome the former separation of ICTs into different media (telephone, internet, PC, TV, radio) and information sectors (language, text, pictures, data, video) through the introduction of computer technology, fiber-optic cable and communication satellites into existing communication infrastructures. This new technology, which was based on the encoding of information in binary digits, largely replaced the previous technologies (which were based on analogue electrical wave technology) and allowed for the convergence between formerly separate categories of information industries and distribution channels (Negroponte 1996). Higher speed and reliability of information distribution as well as constant growth of data volume through expanded network capacity (bandwidth) caused dramatic price reductions in global communication (Singh 2002) and new applications and information services. The accelerated speed of innovation in software and computer chip technology has led to Moore’s law, which predicts that the capacity of microprocessors and memory devices doubles roughly every eighteen months while the price per operation stays the same (Moore 1996).

Third, networked digital information and communication technologies are characterized by high fixed costs, such as investments in infrastructure or other technical components such as microchips, and low variable costs, such as the addition of new network participants or the copying of music CDs from an original digital recording. That is, the exploitation by a number of parties does not degrade a digital artifact’s quality (Mowery 1996). This explains why the networks have to grow as much as possible in order to amortize the high initial investments and lower the costs for each participant.

Fourth, another major policy issue in global communication is the protection of intellectual property and the centrality of technological standards, both of which are directly related to the previous issue. Since knowledge represents the core product of ICT and media content industries, both aim for strong intellectual property laws to protect their initial investments in technological standards and content. The regulation of intellectual property protection has primarily been a matter of national jurisdiction. However, as will be shown below, corporate lobbying with governments has resulted in a growing number of bilateral and multilateral agreements and regimes for the global protection of intellectual property (Leaffer 1991; West 1995). This explains the rising number of lawsuits revolving around issues of patent or intellectual property infringement and the growing importance of these issues on national and global levels (Clapes 1993; Moore 1997). However, in order to remain at the cutting edge of technological innovation without losing proprietary knowledge or market share, companies often apply the strategy of open, yet owned, standards. They pursue a strategy of limited licensing of architectural standards to other manufacturers, in order to increase equipment or software interoperability and create positive network externalities (Borrus and Zysman 1997).

Individuals as Commodities, Consumers, and Political Actors

A growing number of scholars have analyzed the role of individuals in the political economy of communication and in a broader sense in international relations. One aspect that has generated a number of studies revolves around individuals’ important role as consumers of global communication services and media content. From this point of view, the audience of the message or the consumer of a communication service has been analyzed as part of the broader commodification process (Garnham 1979; Mosco 1996).

On the demand side, consumers decide their media consumption taking into account budgetary and time constraints, ideological preferences, and individual characteristics. On the supply side, media corporations choose story content, format, and attributes to maximize the number of readers, viewers, listeners, etc. and therefore profit. The role of the audience has generated one of the most interesting discussions, focusing on the commodification process, which revolved around the character of the audience either as commodity or as labor. This discussion helped to highlight the reciprocal relationship between media, advertising industry, and audience in the broader context of media commodification (Smythe 1977; 1978; Murdock 1978; Jhally 1990). This discussion added new insights into the audience’s role, which went beyond earlier mass society theories (Gasset 1957) which conceived of the audience as an inert mass, as well as pluralist positions which went to the opposite extreme by emphasizing the audience’s role as coproducer of media content (Fiske 1989; Ang 1991). The later, however, overestimated the audience’s level of control over the media production process.

A second group of primarily international relations scholars, which became interested in individuals and their usage of information and communication, rather focused on their political empowerment through new ICTs like television, videocassettes, the internet, or mobile communication. These “technologies of freedom” (Pool 1983) enable citizens to gather more information outside state- or corporate-controlled media outlets and lead to a pluralization of content production and distribution, causing a “skill revolution” through which individuals are better informed about local and global issues and increasingly able to organize with like-minded people around the world in order to channel their demands, for example in the form of nongovernmental organizations (NGOs) (Rosenau and Fagan 1997; Rosenau 2003; 2007).

However, recent research has put more emphasis on the difficulties for individuals to gather reliable information in a global media system. The central problem is related to the question of media ownership and the selective and biased provision of information to media consumers. Explicit attention has been paid to the relationship between media ownership and production, media bias, and the effects of media reports on public awareness regarding specific policy issues (McCluskey and Swinnen 2004; Strömberg 2004; Swinnen and Francken 2006).

The State in a Globalized Knowledge Society

The Post-Westphalian State

States, as one of the main actors in the global political economy of communication, have been extensively analyzed in the last few decades. Until the invention of the printing press with moveable type by Johann Gutenberg, the production, storage, and dissemination of information in Latin through a European network of seminars and monasteries were largely controlled by the Catholic Church (Dudley 1991). The cheap mass production of books in common languages not only challenged the monopoly of the church, but also made the reduction of language pluralism as well as the formation of national identities much easier (Eisenstein 1979; Anderson 1991). Worldly rulers quickly realized the usefulness of this new medium to extend their control over citizens and strengthen state authority. The following centuries would further strengthen the state as a central organizational agent of information and communication.

ICTs and global communication take a central role in discussions about the role of the state in the contemporary global political economy, since they have generally been identified as the main drivers of the process of globalization, defined as growing complex interdependence between individuals, national economies, and corporations (Morse 1976; Keohane and Nye 1998; 2001; Rogerson 2000).

A vital discussion revolves around the question of system modification versus transformation by ICTs. Globalization sceptics, mainly represented by state-based realism or neorealism, doubt that technology-driven globalization has transformed the structures and processes of the global system and reject the observation that states’ sovereignty – i.e., their autonomous ability to control economic processes – has eroded and is increasingly shared with various international organizations and nonstate actors on multiple levels (Weiss 1998; Hirst and Thompson 1999; Rugman 2001; Gilpin 2002).

Hyperglobalists have emphasized the dramatic transformation processes in the global system driven by technological progress, mainly new ICTs, which undermine system-building and system-stabilizing principles of political sovereignty. Territoriality and autonomy have been significantly eroded (Strange 1994; 1995; 1996), thereby making it necessary to search for new modes of political organization (Ohmae 1993; 1994). According to a third perspective, which might be called transformationalist, globalization processes further the establishment of newer, as well as re-strengthening older, spheres of authority or polities, which cause increasingly complex structures on the global level (Held et al. 1999; Rosenau 2003; Ferguson and Mansbach 2004; Held and McGrew 2007).

The state-centric world, represented by the “Westphalian” state, is enriched by a multicentric world consisting of actors who are less bound by sovereignty or territory, but rather organize along the logic of global networks in which concepts of time and space are radically modified (Innis 1950/2007; 1964; Carnoy and Castells 2001). In some aspects the resulting patterns of global politics resemble earlier forms of political organization during the Middle Ages, with complex and overlapping patterns of politicoeconomic governance (Friedrichs 2001; Slaughter 2004). For example, ICTs have contributed to two parallel developments in the global system, namely integration and fragmentation, resulting in the paradox of fragmegration (McPhail 1989; Rosenau 1997).

The Post-industrial Competition State

Most observers, though, agree on the growing relevance of information and communication-related issues for state survival in a broad sense. With regard to the relationship between power/influence and information and communication, Strange (1994) developed the concept of structural power, which emphasizes the importance for states to control knowledge generation, storage and distribution in order to stay at the cutting edge of technological innovation and competitiveness. Another form of power, which gains more importance in the knowledge society, is soft power or cultural-communicative power, which is defined as a state’s ability to disseminate its cultural, societal, ideological, and political core values into other countries so that their societies can accept and internalize them (Nye 1990). Instead of classical power categories such as military power, new power categories such as patents, technological standards, size and capacity of communication networks (broadband width, PCs per capita, number of cell phones or landlines, etc.), and levels of interconnectivity between states become vital for measuring state power in a globalized knowledge economy (Porter 1990).

Scholars from diverse theoretical backgrounds agree that the role of states in the governance of global information and communication has changed dramatically over the last 150 years and generated a large body of scholarly literature. States have played a central role in the creation of all major ICTs – the telegraph, radio, telephone, satellite technology, internet and mobile communication (Deibert 1997; Abbate 1999; Hanson 2008) – as well as in their domestic and global regulation. They were responsible for extending them globally, e.g. to improve control over colonial territories and to further their national-security and economic interests (Headrick 1988; Hugill 1999). Importantly, though, state bureaucracies often controlled ICTs directly in the form of public postal, telegraph, and telephone administrations (PTTs), while in the US, for example, the government allowed AT&T to develop the national telephone system on the basis of a private monopoly.

The Liberalization of International Communication

State control of information and communication networks in the form of universal public services would persist in most states until the 1970s as part of the Keynesian welfare state and embedded liberalism, which tried to combine liberal global market principles with domestic welfare systems to absorb external shocks (Ruggie 1982). From the 1970s on, liberalization policies originating in the US and Great Britain incrementally spread throughout the world and would cause a fundamental reorganization of global information and communication along liberal market principles. The consequences for states have been far-reaching. Direct state control and intervention in markets was replaced by a focus on structuring liberal regulatory frameworks within which market transactions took place. As competition states (Cerny 1990), they try to become attractive to foreign direct investment (FDI) in education, infrastructure, and research and development capacities, and so increase their world market share (Stopford and Strange 1991; Rosecrance 1996; Lawton et al. 2000), or they merge with other states to form larger politicoeconomic units in order to regain control (Castells 2000).

In these transformation processes, the state has always played a double role. As Mosco (1996:200) states, there is “certainly ample evidence to support the view that the contemporary state has reacted to changes in corporate and industry structure, as well as to changes in technologies and services. Nevertheless, there is also support for the view that these changes have come about with the active legal, regulatory, and policy directions of the state.”

This has also been the main topic of another school of thought, the neo-Marxist regulation school, which tries to overcome the fruitless (in their opinion) discussion about the loss of state power in a globalized economy. For regulation scholars, the “policy debate over deregulation is disingenuous at best, because deregulation is not an alternative. Rather, the debate comes down to the choice among a mix of forms that foreground the market, the state, or interests that lie outside of both. Eliminating government regulation is not deregulation but, most likely, expanding market regulation” (Mosco 1996:201).

Successive developmental periods in capitalism are rather based on specific combinations of regimes of accumulation and modes of regulation. According to this view, capitalism – and with it information and communication – is undergoing a transition from monopolistic to flexible regulation (Boyer 1986; Lipietz 1988; Bowles et al. 1990; Jessop 1990).

Multinational Corporations: In the Hurricane’s Eye

Technology, Communication, and Structural Adjustments

Besides states, the global political economy of communication has most deeply been affected by the activities of multinational corporations (MNCs). A vast literature has analyzed MNCs and their role as drivers of global FDI, intra- and interindustry trade, technological innovation, and the development of transnational production and distribution structures (Dunning 1974; Vernon 1977; Daniels and Lever 1996; Caves 2007).

The MNC itself has been described as a result of industrial modernization processes, which required new organizational structures to effectively manage processes of mass production and distribution by eliminating problems such as imperfect market information and market insecurities (Coase 1937; Chandler 1977; Beniger 1986). MNCs have been of central importance to the development of global information and communication industries as (1) producers of telecommunication equipment and information and communication networks (Chandler 2001), (2) producers and distributors of media content (Mosco 1996) and (3) large-scale consumers of various information and communication services (Charles 1996; Junne 1997). The microelectronic revolution of the 1970s and accelerated technological innovations have resulted in a dramatic fall of prices for international communication services, which enabled MNCs to reorganize their economic activities on a global scale and thereby improve their productivity. Those productivity increases were largely based upon a transformation of industrial production processes from vertically integrated Fordist modes of standardized mass production to transnational production networks based on “flexible specialization” (Sabel 1982; Piore and Sabel 1984; Sabel and Zeitlin 1985). ICTs thereby enabled companies to respond rapidly to changing consumer demand and concentrate on their core business (Harrison 1994).

Corporate Control of Global Communication

Much attention has been paid to MNCs, especially in the communication, media, and high-technology industries, as main drivers of liberalization and privatization of domestic and global communication since the 1970s (McChesney 2008). Historically, as Smith (1991) and Tunstall (1977) have demonstrated, transnational media enterprises are as old as the mass media themselves. So the production and distribution of news in the nineteenth century was controlled by three press conglomerates, the British Reuters, the French Havas and the German Wolf, which divided global markets into monopoly zones that kept out competition at least temporarily (Cooper 1942; Schiller 1976). The same can be said for manufacturers of telecommunication equipment and consumer electronics, which often were protected by their special relationships with national governments, either through direct state ownership or as “national champions” that became the backbone of innovation and competition policies (Peterson 1993; Peterson and Sharp 1998).

Other studies have pointed to the dominant role of corporate demand for the development of wireless signal transmission (radio telegraphy) and telephone services (Herring and Cross 1936; Dilts 1941; Edelmann 1950; Smythe 1957). The increasingly private and global (domestic and international) corporate control of communication and media industries, however, also nurtured fears of reduced public access to information and communication networks and services and the ability to cross-subsidize between local and international services in order to lower the prices of local service access, a main goal of state policies during the era of state-owned or state-controlled communication systems (Stone 1993; McPhail 2006; McChesney 2007). Various studies (Mansell 1993; Mowlana 1997; Wilkin 2001) investigated the primacy of ICT service provision for large corporate information consumers over the provision of universal and cheap access to communication for individual or noncorporate consumers, which together with corporate control over communication networks “translates into less societal control and reduced democratic accountability” (Schiller 2007:96).

Opinions regarding their position in and impact on the global political economy of communication range widely. Some scholars point to the positive effects of higher efficiency and the potentially lower costs for consumers as a result of intense competition between corporate market participants (Thurow 1992; Ohmae 1994; 2000). Others, however, point to various problematic consequences of market concentration. According to still others, the formation of global oligopolistic market structures in various communication and media markets, consisting of a relatively small number of global MNCs (e.g., Microsoft, Intel, Disney, Time Warner, Sony, Vivendi Universal, Bertelsmann, NTT, Vodafone, Telefonica, T-Mobile, etc.), actually reduces market competition, as foreseen in neoclassical models. The merger-mania of the mid- to late 1990s in the telecommunication and media industries was a clear signal for market and capital concentration, which resulted in ever larger and powerful MNCs or “behemoths” (Smith 1991; Korten 2001).

ICTs provided MNCs with unprecedented opportunities to restructure their activities globally. Outsourcing and offshoring labor-intensive production processes allowed them to focus on their core business. Hierarchical structures emphasizing vertical integration have given way to flat horizontal and globally integrated network structures consisting of many value-generating entities within larger profit-generating networks (Casson 1990; Phillips 2000; Scholte 2000). ICTs thereby enable MNCs to make use of time arbitrage, defined as the exploitation of “time discrepancies between geographic labour markets to make a profit” (Nadeem 2009:21), as well as lower labor costs or geographically concentrated technological competence in the form of innovation clusters (Saxenian 1994; Koski et al. 2002). Another strand of research has more specifically focused on this concentration of technological, communicative, and politicoeconomic activity in urban centers or “global cities,” and the consequences in terms of growing inequalities between rural and urban and between global core and peripheral regions (Sassen 2001; Neal 2008). Despite the often differing opinions regarding the effects of MNCs for the global political economy of communication, as for other sectors of the global economy, most scholars agree that the sociopolitical struggles over their role and impact will most likely increase (Vernon 1998; Chandler and Mazlish 2005).

Transforming the Global Governance of International Communication

International Governmental Organizations (IGOs) or functional organizations help states to manage complex interdependence. Since international communication is one of the driving forces behind globalization, defined as growing interdependence, scholarly attention has regularly turned to IGOs as the global arena for negotiations concerning issues of international communication.

The International Telegraph Union (1865) and the World Radiotelegraph Conference (1906) merged in 1932 into the International Telecommunication Union (ITU). The ITU became one of the cornerstones in the global governance of international telecommunication in all its aspects in order to ensure the openness and interoperability of national telecommunication systems (Codding 1972; Codding and Rutkowski 1982; Savage 1989). Between 1865 and the 1970s, the global regulation of telecommunication was primarily driven by states and geared toward the provision of universal (public) service and cross-financing between international and domestic telephone and telephony and other services. The primary tasks of the ITU were the regulation of technical standards, market-entry rules, and prices (Zacher 1996). As Cowhey (1990:169) describes,

Like other service industries, telecommunications was traditionally oriented toward domestic markets, and competition in both services and equipment was limited. There were three important rationales for the system: it would increase reliability in the performance of tasks central to the public order (such as the provision of communications), would tap economies of scale or scope in the provision of services (the network thesis), and would advance considerations of equity expressed in the ideal universal service.

While the regulation and adaptation of national or international technological standards in the telecommunications sector was relatively easy, technological standard harmonization for consumer products remained difficult (Zacher 2002). Various studies have investigated so-called “standard wars” in various areas of consumer electronics (video, TV), PCs or mobile communication (Dai et al. 1996; Chandler 2001; Gandal et al. 2003; Steinbock 2003).

It is interesting to note that with regard to technological standard harmonization, the ITU increasingly delegates the negotiations to either regional regulatory bodies or even sectoral members (MNCs), who have to balance tensions between standardization and competition. This means that standard setting increasingly happens in a bottom-up mode, driven by markets and consumer demand, instead of the more traditional state-dominated top-down process (Salter 1999).

Another major interest for scholars has been the increasing liberalization and privatization of national and global communication networks, which has also impacted the ITU and other organizations. Beginning in the USA during the 1960s, the introduction of digital telecommunication technologies (packet-switching), their convergence with computers and the resulting cost-saving effects, as another outcome of increasing market competition, offered corporations and various business alliances arguments for a continuous loosening of state regulations that further blurred the lines between voice and data transmission and local, national, and intra- and inter-firm networks (Krasner 1991; Schiller 1999).

Finally, these liberalization and privatization efforts were brought to the international level within the Uruguay Round negotiations that established the World Trade Organization (WTO). The General Agreement on Trade in Services (GATS) and several additional agreements resulted in a far-reaching liberalization of domestic and global telecommunication markets (Aronson and Cowhey 1988; Drake and Noam 1997; Krein-Fredebeul and Freytag 1997).

Besides the developments described above, in which states and IGOs remained – in a formal sense – in the center of the policy-making and negotiation process, although heavily lobbied by corporate interests, scholars have also paid increasing attention to governance issues that do not directly involve states or functional organizations. Areas of interest have been the increasing dominance of strategic alliances between MNCs in pre-market research and development (R & D) and other business areas (Sharp 1997; Inkpen 2001), the creation of networked “knowledge oligopolies” (Mytelka and Delapierre 1999), and the process of technological standard setting, as for example the alliance between Microsoft and Intel, also described as “Wintelism” (Kim and Hart 2002). All these processes represent new modes of “governance without government” (Rosenau and Czempiel 1992).

Future Issues and Research

Recent scholarly research has addressed several issues, which most likely will become more salient in the near future. One revolves around the growing tensions between the concept of intellectual property protection and that of freedom of information/public access, and the integration of selective or temporal access/ownership into the technological architecture of communication networks and consumer products (Lessig 1999; 2001; 2004).

Another problem, which will likely become more important, is the problem of “digital gaps” between information-rich and information-poor people, states, and regions and how information technologies or their lack affect human development. This is not only a specific aspect of the larger north–south problematic, but also is of growing domestic concern for industrialized countries (Persaud 2001; UNDP 2001).

Finally, the question of democratic control of global governance structures and processes in the field of information and communication has been the focus of research activities. The question is, how can the tensions between the increasing demand for global governance solutions, caused by complex interdependence, and democratic control of those be solved. This is a special aspect of the larger globalization debate and of the impact of ICTs on globalization. Research suggests that ICTs have a double character: they can lead to greater homogenization, but at the same time provide the means to conserve surprising cultural and political diversity (Held et al. 1999; Hanson 2008).

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