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100 Years of Monopoly Phone Service

Brough Turner

Today is the 100th anniversary of the Kingsbury Commitment which effectively established AT&T, a.k.a. The Bell System, as a government sanctioned monopoly.

It was on December 19, 1913 that AT&T agreed to an out-of-court settlement of a US Government's anti-trust challenge. In return for the government agreeing not to pursue its case, AT&T agreed to sell its controlling interest in Western Union telegraph company, to allow independent telephone companies to interconnect with the AT&T network and to refrain from acquisitions the Interstate Commerce Commission did not approve.

This was part of AT&T president Theodore Vail's strategy to make telephony a public utility run by AT&T. It was AT&T Vice President Nathan Kingsbury who signed the letter to the US attorney general, but the strategy was that of Theodore Vail and the credit for resulting Bell System monopoly goes to him above all others.

The official monopoly was finally sanctioned and regulated in 1934 (after yet another round of anti-trust investigations) under the Communications Act of 1934 (which set up the Federal Communications Commission as the regulator), but by then the monopoly was complete. It's start was the Kingsbury Commitment exactly 100 years ago today.

While that monopoly was supposedly broken into seven pieces by the Bell System breakup of 1984, in fact none of these "Baby Bells” ever competed with each. After successive acquisitions, these seven local monopolies are now owned by either Verizon Communications or AT&T. And, despite promises of competition made to entice regulators into accepting various acquisition, none of these local exchange operations has any meaningful business outside of their original monopoly footprint. They were and are monopolies today. The only difference is the local telephone monopolies are less and less regulated today.

Yes, there is local competition today, but local competitors don't have access to the wire or fiber that the monopolies have installed, at rate payer expense and with preferential access to the rights of way. This means companies like netBlazr are reduced to using wireless links for most of our connections.

The lesson: Monopolies once established are extremely hard to revoke.

By Brough Turner, Founder & CTO at netBlazr. More blog posts from Brough Turner can also be read here.

Related topics: Broadband, Policy & Regulation, Telecom


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