The Box Author Speaks

February, 2007

I caught up with Marc Levinson, author of The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, at his office in midtown Manhattan recently. We talked about the potential parallels between the changes in shipping brought about by the standardization of the container, and the transformation already under way in telecommunications, triggered by the TCP/IP packet standard. Excerpts:

Green: Your book shows some amazing changes brought about by shipping standardization. What could the shipping lines have done differently if they'd known what was going to happen?

Levinson: The shipping lines saw the container only as an opportunity to cut costs, and did not see the container as a business opportunity?thus they were slow to pick up on the larger issues.

You're asking about lessons: there's definitely a parallel here in telecommunications. I don't think anyone in transportation anticipated the additional demand for transportation services that arose as prices fell. There were learned studies at the time that took the current total amount of trade as a given?not realizing that it would be price-sensitive but instead assuming that it would stay the same under any circumstances.

There are a lot of things in telecom for which pricing models are changing rapidly. Content for free? Did you see the story Brian Roberts told about Mel Karmazin ordering him out of his office after Roberts asked for his content for free? The final chapter is obviously not yet written, but the guys who give it away may make more money from it than those who insist on being paid.

If shipping lines had foreseen the growth in demand that was unleashed, it might have triggered closer relationships between shipping and land transport sooner. These days, the shipping line calls the shots across the entire transport process: Maersk Line's web site quotes prices from one inland point to another, including the entire route.

There's an obvious parallel in telecommunications?the convergence of separate fixed and wireless networks.

They need to integrate to serve the increased demand created by lower costs. The market is smarter than they think.

If some of the largest commercial users of shipping had had the benefit of foresight, what could they have done differently?

I think that if they'd seen the box coming, US manufacturers would have moved their operations out of big cities much earlier than they did. There were issues in those days in moving overseas, and in particular it was not an opportune time to invest in Southeast Asia. But there was a lot of manufacturing investment in the '50s and '60s in the U.S. that was still based on an old view of transportation costs. Knowing how costs were going to change could have started business suburbanization and the move to the US South, ten or fifteen years earlier than it actually got under way.

Are there any parallels with regulation in the transformation of the shipping industry and telecommunications deregulation? What do you think of the current net neutrality debate?

It was different in transportation than in telecommunications. The regulators in transportation were under orders to not upset the apple cart. From at least 1957, the ICC was operating with clear direction from Congress to allow a little competition, but not too much. You can see it in the Congressional debates of the time: they didn't want job loss or bankruptcies. Foresight would not have allowed the regulators to do anything differently unless Congress had changed its own direction to the agencies.

But there is one parallel with telecom deregulation: A lot of things have gone wrong in that effort as well! It's not clear to me that it could have been avoided. It's not apparent right now what will turn out to have been the best approach.

The internet issues are in some ways closer to the situation facing coal shippers. I say that because, from the consumer's point of view, the internet service providers are monopoly providers. Coal is the one part of the transportation system that today is not competitive. If you own a power plant, you can't get the coal by truck?it's too expensive. And if your plant is old, you're stuck with whatever rail line services it. As a consumer, you probably only have one broadband option still. That makes me supportive of enforcing net neutrality. Maybe that will change; maybe five years from now the satellite dish will offer broadband.

Tell us something about you as a consumer of communications services.

The cost of telecom services has fallen so rapidly that I'm paying four to five times as much for telecommunications as I used to. Regrettably, I'm paying for multiple mobiles in my household, and I'm very unhappy about that. I have two different mobile providers; one is my landline provider, too. They're charging me 30 cents a text message!

The computer is just something I use to do work. I don't web surf. I've taken a look at YouTube. I have an iPod but I got it for free. We have no cable TV, no TiVO or DVR. It's not a good use of money; my kids spend too much time watching TV anyway.

As we look for clues in the impact of connectivity change, any other thoughts about unintended consequences in the shipping transformation?

In the end, one of the most interesting things to my mind was that the people that everyone thought would be the most harmed by the changes in containerization?dockworkers?came out the best. In many cases, they were paid off pretty well. The people that really got hurt, the ones that no one thought to negotiate on behalf of, were local factory workers whose jobs went away when cheaper manufacturing was married to cheaper transportation.

Could the equivalent labor casualty of the global connectivity revolution, triggered by IP packets, be the producers of premium local media, marginalized by low-cost or free content reaching us from other locales? Easily. Don't much care for the Boston TV news anchors anyway.

Emily Green