A year to forget

Enron, WorldCom, United; the war between Hollywood and Silicon Valley; a droopy stock market; and more, more, more spam. 2002 was not a whole lot of fun in the world of business and technology.


Katharine MieszkowskiAndrew LeonardFarhad Manjoo
December 21, 2002 1:30AM (UTC)

Anyone remember Enron?

The wheels fell off of so many highflying corporations in 2002 that it's already almost hard to remember that back at the beginning of the year, the shocking business story grabbing everyone's attention was a Texas-sized tale of corruption, greed, and pure idiocy known by the name of Enron. Now, as the year closes, and Ken Lay's pride and joy has been joined at the bankruptcy trough by the likes of United Airlines, WorldCom, Arthur Andersen and scores of other companies, Enron's adventures have grown moldy. Committee investigations toil on, but the flag bearer for deregulated chicanery has fallen from the headlines.

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The ongoing economic woes in the United States can be traced to many factors -- the fallout of Sept. 11, mismanagement by Bush's now completely departed economic team, and the still painful hangover from the go-go '90s. But when we look back on the big stories of 2002, Enron's travails should be the story that astute economy watchers hang on to. Business cycles come and go, but structural changes wrought by dedicated lobbying and ideologically motivated administrations can do permanent damage. Enron's rise and fall, more than any other company, exposed for everyone to see what happens when government purposefully looks the other way, and greed is allowed to fully flower. Enron was not an aberration, and not an exception. It was the natural consequence of years of deregulation and special-interest lobbying on the part of politically well-connected corporations. Everyone plays this game, of course, but Enron was the best at it (although, ultimately, one could argue that it was also the worst.)

As for the technology half of the technology and business equation, 2002 turned out to be still another year in which Silicon Valley laid low, waiting for a comeback that never quite seemed ready to materialize. Sure, the Internet kept growing, or at least everybody connected to it saw their spam load continue to surge, and sure, computers continued to get cheaper and faster and capable of more neat things, but overall, to the probable consternation of science fiction writers everywhere, 2002 confirmed yet again that so far, the 21st century isn't quite yet a futurist amusement park. Forget about the jetpacks we were all supposed to have by now -- instead, everyone's worrying about whether it's legal to copy an episode of "Seinfeld" onto a DVD!

Read on for a summary of some of the year's top stories.

The year in copyright

Napster finally died in 2002, but the file-trading phenomenon it sparked continued unabated on other peer-to-peer networks. In response, the entertainment industry went a bit nutty with its anti-piracy efforts. It cajoled some members of the U.S. House into introducing one bill requiring electronics manufacturers to embed copy protection in their devices, and another allowing copyright owners to hack into copyright-infringing trading networks. Mercifully, neither effort got very far -- but there's always next Congress.

The recording industry also hinted that it may start suing individual file traders, and it stepped up pressure on colleges and universities to go after song-swapping students. Like much else the music industry does, those moves caused it more than a little embarrassment, and the industry now seems hated by everyone -- consumers as well as artists. (To the labels' credit, though, they do seem to be slowly changing their ways. By year's end, they had licensed music to many subscription-based, legitimate song-downloading services -- though none offered the illegal services' range.)

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There were some bright spots for the foes of out-of-control copyright law. In October, Stanford Law School professor Lawrence Lessig argued for the repeal of the Sonny Bono Copyright Term Extension Act at the Supreme Court; justices are expected to issue a decision in 2003. And on Tuesday, Elcomsoft, the Russian software firm that was the first criminal defendant prosecuted under the Digital Millennium Copyright Act, was acquitted of any wrongdoing.

Spam, I am

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This year, American Online won the largest judgment ever against a spammer -- $7 million. And even now-Senator-elect Elizabeth Dole caught flak in court for her unsolicited e-mail solicitations to North Carolina voters during her Senate campaign.

If you feel like you're getting more exciting news about septic tanks and hot bestiality pics in your inbox than ever before, that's because you are. One anti-spam software company, Brightmail, reported that 40 percent of all e-mail received by its customers was spam as of November 2002, while that same figure was just 8 percent in September 2001.

The spam onslaught has grown so massive and irritating that some netwags on Slashdot found a novel way to fight back. One industry-scale sized spammer was furious when he started receiving huge amounts of unsolicited junk mail, thanks to some anti-spam vigilantes. Of course, he's now threatening to sue.

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If there's any upside to the ever-increasing spam onslaught, it's for the anti-spam software and technology companies. This year, such software, like the free SpamAssassin, became a necessary feature of many corporate e-mail accounts. But automatically labeling messages that are likely spam caused concern among free-speech advocates, such as the Electronic Frontier Foundation, since so-called "false-positives" often catch innocuous messages, such as Evites and e-mail newsletters, in the spam net as well.

The rise of the blogosphere

Blogs have been with us for years, but 2002 was the year that blogging as a movement came together. Everyone stopped worrying about explaining that "blog" was short for "Weblog" and defining it each time the subject came up as "a frequently updated personal Web page with new entries added at the top and older entries in reverse chronological order." New or newly improved software tools made it easy for non-technical users to make their voices heard. The political intelligentsia -- spurred by the profusion of "warbloggers" who emerged in the wake of 9/11 and the Afghanistan war to drum a conservative beat -- began to accept the notion that new ideas, valuable dialogue and even original news could bubble up from this newly democratized "chattering class." And in December, it was largely the blogging class that kept alive the story of Trent Lott's scandalous pro-segregation comments at a Strom Thurmond birthday bash, after the mainstream press dropped the ball. Lott's now-shaky grip on power is proof that, though the Internet economy may have fallen on hard times, the Internet polity is just beginning to flex its muscles.

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Microsoft, bloodied but unbowed

If your company had $40 billion in cash and was making about a billion more every month, what would you do? Anything you wanted, probably. You would think big -- look beyond your traditional markets, and try to remake the world in your technology. Perhaps it's that sort of thinking that accounts for Microsoft's expansion in all directions this year; the company introduced so many products in so many industries that it doesn't seem accurate to think of it as just an operating system monopoly anymore. The firm continued its quiet assault on Hollywood, releasing a new version of its Windows Media "platform," which furthers its long-term, increasingly successful, goal to make Windows Media the dominant file format for digital audio and video files. The company also released a new "flavor" of Windows -- a "Media Center Edition" -- bundled with TV-recording capabilities, a feature that media companies have never been fond of. The year also saw the release of such non-PC products as a Windows cellphone, the Tablet PC, and Xbox Live, an online service for the company's game console.

Microsoft still faces threats -- it cellphone business, for instance, has hit some snags, and Linux is an ever-present danger to the Windows line of servers. But what may have been its biggest obstacle -- strong governmental policing of its activities -- fizzled in November, when a federal judge approved Microsoft's slap-on-the-wrist antitrust settlement with the Justice Department. Now the company is ready to go wherever it wants to.

Free software: Don't call it a comeback

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There were no headlines for free software in 2002, at least not on the order of the glory years of the late '90s. But a funny thing happened while Wall Street and the mainstream media stopped watching: Free-software programmers continued to go about their business, improving their code, releasing new products and expanding their domain.

The slow-moving Mozilla browser project finally delivered a usable browser. Yes, it took a lot longer than anyone expected, but the end result is quite competitive with Microsoft, and still improving bit by bit, every week. 2002 was also the year when desktop productivity applications started to enjoy a higher profile. The coders at work on projects like the AbiWord word processor aren't necessarily concerned with dethroning Microsoft from its software hegemony (though some of them wouldn't mind!) -- they're just having fun, doing what they like to do, writing code without having to worry about what features the marketing department wants, or the possibility that a corporate downsizing might wipe out two years of work.

The free-software dot-coms are mostly gone and will probably never return, but the free software is still out there, getting better all the time.

AOL Time Warner's merger troubles

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It's hard to remember why, a couple years ago, anyone thought it might have been a good idea to bring together America Online and Time Warner under the same corporate banner. We can probably chalk it up to tech-bubble delirium -- at the time, every idea seemed pretty good. Since the merger, which coincided with the bursting of the bubble, the combined company has seen nothing but trouble. Revenues at the online service have been hurt by a terrible ad market and fewer people willing to sign on for dial-up service; the company has also been criticized for the slow growth of its broadband service, and it's being investigated by the SEC for allegedly overly aggressive accounting practices. And the troubles at AOL have damaged the rest of the company, whose stock price has fallen more than 70 percent since the merger.

In response, this year AOL Time Warner tried to erase all evidence that the merger had ever occurred. In July, it underwent a high-profile restructuring -- and by the end of the summer, Steve Case, the chairman, was the only former AOL executive with a senior position at the merged company. AOL also unveiled a new version of its connectivity software, and in December it announced big plans to add content from its media brands to its online service. But industry experts and investors weren't very comforted by the move -- especially as the company admitted that advertising and e-commerce revenue could fall by as much as 50 percent next year.

What's next for AOL Time Warner? Perhaps, some advise, it should go back to being boring, old-media Time Warner.

Ashcroft on the attack

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Secret arrests, poor access to attorneys, increased surveillance on American citizens, a proposal for neighbors to spy on neighbors -- in 2002, the government gave civil libertarians a lot to worry about. But in the courts and in the national discourse, activists did win many battles. Operation TIPS, John Ashcroft's much-maligned plan for civilian workers -- including truck drivers and letter carriers -- to alert authorities to any "suspicious" behavior, was explicitly prohibited by the Homeland Security bill signed into law in November. The Defense Department's Total Information Awareness system, a massive surveillance program to monitor all Americans in an attempt to spot behavior that smacks of a terrorist action, is now being widely debated in the media, and Congress could hold hearings next year. If TIA does come into operation, it won't be without a host of rules circumscribing its legal uses.

Still, people who care about the erosion of civil liberties have good reason to be worried now. This Justice Department is unrelenting in its efforts to extend acceptable law enforcement behavior, and the terrorized public seems, for the most part, on its side. If there's another attack on what's come to be called "the homeland," or if there's a war in Iraq, will Americans really worry that their government is reaching beyond the Bill of Rights? Let's hope so.

The agony of pop-ups

The backlash grew in 2002 against one of the most intrusive forms of Web advertising -- pop-up ads.

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America Online banned all third-party pop-up ads in its 8.0 release, while Earthlink provided subscribers with free software to block them.

Both new iterations of Mozilla and Netscape Navigator offered users ways to turn-off pop-ups, but Microsoft's Internet Explorer didn't get on the bandwagon.

The pop-up backlash comes when Web advertising is still struggling to find new ways to deliver company messages in a down economy.

Yet, towards the end of the year, there was a shred of good news in the online ad market; the Interactive Advertising Bureau reported that the business had improved from the second to the third quarter of this year by 1 percent. That's the first time in six consecutive quarters that the online advertising biz has shown a substantive improvement over the previous quarter -- even if it was only 1 percent.

The assault on the environment

For all the Bush administration's attacks on the environment this year, there was no new drilling for oil in the Arctic National Wildlife Refuge or in the coastal waters near California and Florida. The Bush administration pledged $235 million to buy out existing oil leases in Florida, but continued to push for drilling in the Alaska refuge and near California. A politically divided Congress meant that the energy bill that would have authorized the Alaska drilling died in the Senate, but will likely come back for a vote before the now Republican-controlled Congress next year.

While the Bush administration finally acknowledged that human-caused global warming does in fact really exist, it stalled on taking any action to do anything about it, preaching the importance of more scientific research. But Bush appointees did not drag their feet in loosening clean-air controls on polluting factories, lifting the Clinton administration's ban on snowmobiles in Yellowstone and approving more drilling for oil in Padre Island National Seashore.

A modest increase in federal fuel-economy standards means that automakers will have to get a few more miles per gallon out of SUVs in the coming years. But environmentalists scoffed at the puny increase, deriding it as yet another concession to industry.

With Republicans now heading up both federal and key congressional committees in Washington, look for U.S. environmental policy to get even more industry-friendly next year.


Katharine Mieszkowski

Katharine Mieszkowski is a senior writer for Salon.

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Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Farhad Manjoo

Farhad Manjoo is a Salon staff writer and the author of True Enough: Learning to Live in a Post-Fact Society.

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