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A guaranteed monopoly lasting eighty years or so isn't a government subsidy? It's not clear, and Cato's document doesn't explain, how anyone outside of major c

A guaranteed monopoly lasting eighty years or so isn't a government subsidy? It's not clear, and Cato's document doesn't explain, how anyone outside of major cities would have been able to get telephone service in the absence of monopoly guarantees. Universal service would have taken decades otherwise. There is some hand-waving in the document comparing telephone service, which required expensive and widely distributed equipment, easements and infrastructure, with radio and TV (which itself was regulated out the wazoo). This comparison doesn't survive even momentary scrutiny. The Bell System was the envy and standard of the world, and I don't see how it could have been anywhere near as successful at meeting the needs of the entire US population without those initial monopoly guarantees. Contrast the telephone system's universal service mandate with privately-operated electrical distribution networks: sizable chunks of New York City and Boston were still using DC power until the 1960s. I think the biggest problem with the AT&T monopoly was that they were allowed to milk it for decades longer than was good for anyone, including the AT&T companies themselves. The company should have been broken up the minute they showed a net profit. Even that opinion is debatable, though -- we didn't get the first laser from General Electric, or the first transistor from Hewlett Packard. Both these inventions and countless more came from a company that, by government fiat, could engage in long-term research beyond that needed to show an immediate profit. So, yeah... that Cato position paper is pretty goofy, IMHO, and it's one of several that will be on my mind when it's time to re-up my own membership.

WalterBright 16y ago
Just goes to show there is another side of the story besides the AT&T version. I've never found a company yet that didn't believe that free market competition was good for everyone else, but that their market was unique and they should be protected from competitors. The irony here is that at the time of the Kingsbury Commitment, phone networks were spreading across the country like wildfire. AT&T had already built its long distance network - it obviously didn't require a monopoly guarantee in order to do so. From the article, there were 3,000 phone companies. Surely with that number plenty would do very well in places other than major cities where there weren't 2,999 competitors. Just as obviously, with so many competitors there were not high cost barriers to entry.
- CamperBob 16y ago
  The irony here is that at the time of the Kingsbury Commitment, phone networks were spreading across the country like wildfire. That's not good enough, though. The phone system was something that needed to be everywhere, including areas where poverty and/or population density could never have justified a business case. Were those 3,000 phone companies all building compatible equipment? I don't know, but I'm guessing not. This would have been a problem when it came time to tie them into a single long distance network. Perhaps some compromise could have been reached in which they would all agree to deploy compatible equipment... but is there really an economic advantage in having 3,000 regional monopolies all doing exactly the same thing, as opposed to one mega-monopoly? Either way the individual customer is going to have to deal with a monopoly.

WalterBright 16y ago

Just goes to show there is another side of the story besides the AT&T version. I've never found a company yet that didn't believe that free market competition was good for everyone else, but that their market was unique and they should be protected from competitors. The irony here is that at the time of the Kingsbury Commitment, phone networks were spreading across the country like wildfire. AT&T had already built its long distance network - it obviously didn't require a monopoly guarantee in order to do so. From the article, there were 3,000 phone companies. Surely with that number plenty would do very well in places other than major cities where there weren't 2,999 competitors. Just as obviously, with so many competitors there were not high cost barriers to entry.

CamperBob 16y ago
The irony here is that at the time of the Kingsbury Commitment, phone networks were spreading across the country like wildfire. That's not good enough, though. The phone system was something that needed to be everywhere, including areas where poverty and/or population density could never have justified a business case. Were those 3,000 phone companies all building compatible equipment? I don't know, but I'm guessing not. This would have been a problem when it came time to tie them into a single long distance network. Perhaps some compromise could have been reached in which they would all agree to deploy compatible equipment... but is there really an economic advantage in having 3,000 regional monopolies all doing exactly the same thing, as opposed to one mega-monopoly? Either way the individual customer is going to have to deal with a monopoly.