Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.3 4.3bsd-beta 6/6/85; site ucbvax.ARPA Path: utzoo!watmath!clyde!burl!ulysses!ucbvax!fagin From: fagin@ucbvax.ARPA (Barry Steven Fagin) Newsgroups: net.politics Subject: Supposed monopolies: AT&T (article 4 of 4) Message-ID: <9563@ucbvax.ARPA> Date: Thu, 1-Aug-85 18:43:22 EDT Article-I.D.: ucbvax.9563 Posted: Thu Aug 1 18:43:22 1985 Date-Received: Sat, 3-Aug-85 02:45:55 EDT References: <974@umcp-cs.UUCP> <7800361@inmet.UUCP> <1038@umcp-cs.UUCP> Reply-To: fagin@ucbvax.UUCP (Barry Steven Fagin) Organization: University of California at Berkeley Lines: 51 Regarding Charley Wingate's conjecture that Ma Bell was (is?) monopolistic: (Taken from Gabriel Kolko's book *The Triumph of Conservatism*. I hate to keep repeating that, but I don't want to take credit for work that isn't mine) True enough, from 1877 to 1894, Ma Bell did indeed exercise a virtual monopoly over the telephone industry. But once its patents expired (most libertarians, by the way, are in favor of time limitations on patents), independent companies multiplied like rabbits, with the result that Bell initiated twenty-seven patent infringement lawsuits against them in 1894 and 1895. This policy of litigation failed because many of the new companies had important patents of their own, and were very aggressive in R & D. Bell also refused to allow its subsidiary, Western Electric, to sell equipment to the new companies, but new firms like Kellogg Switchboard, Stromberg-Carlson, and the Automatic Electric Company sprang up to sell what W.E. would not. These independent companies, no fools they, reliazed that mutual cooperation was crucial if any were to survive, and organized a national association in 1897 to establish long distance serivce between their cities. (Note that this is exactly the sort of thing that supposedly can't happen without coercion). In spite of AT&T's superior capital position, it faced intense competition and began losing control of the industry. In 1902, there were *9100* independent telephone systems, and by 1907 there were *22000*. That same year, AT&T had 3.1 million phones in service, while the independents had 3 million. What halted this trend was the passage of the Mann-Elkins Act of 1910, lobbied for by AT&T (and, in all fairness, by others as well), which placed telephones under the jurisdiction of the ICC. Bye-bye rate wars. Telephones were perceived as a public necessity, and AT&T chairman Theodore Vail embarked on a massive public relations campaign on the necessity of centralized regulation of the phone system, using the standard "public necessity" arguments. In 1914 Mr. Vail proclaimed the virtues of regulation: "We believe in and were the first to advocate state government control and regulation of public utilities...there should be a centralized general administration in close communication with and having general authority over the whole on matters common to all or matters of general policy." This makes the breakup of AT&T so ironic. I personally think it was a good idea, but what would our phone system have been like if we had just left it alone? --Barry -- Barry Fagin @ University of California, Berkeley