Genius on Hold Page #3

uh, fundamentally,

a monopoly,

a regulated

telephone monopoly

in which the independents,

uh, they'd be allowed to exist

on the margins,

but they would be

no competition

at the local exchange level,

and all of these

phone companies

would be interconnected,

and Bell would fundamentally

control the interconnections

among all of these systems.

They would

be the ones

who really were

the gatekeepers

for the national flow

of telephone traffic.

And in order

to achieve this monopoly,

Vail said, basically,

"Let's make a deal

to the government."

Theodore Vail convinces

President Woodrow Wilson,

and Congress,

that no collection

of independent companies

could ever give the public

the kind of service

Bell could provide.

AT&T's extensive campaign

for One Policy, One System,

Universal Service

was a thinly veiled front

for complete control

of the telephone system

under one roof.

It is a goal

which is only achievable

with government intervention.

Vail knows the public

will never go

for a Bell monopoly,

so he invites

government regulation.

He knows this will

annihilate competitors.

He will not only

get his monopoly,

he will get

monopoly profits.

Congress passes

the Kingsbury Commitment

in 1913,

which will weed out

most competitors to Bell.

AT&T Long Lines

was responsible

for interconnecting

all these companies.

Therefore, AT&T controlled

all the little monopolies

that were sanctioned by

the Kingsbury Commitment.

While the act

had been intended

to stimulate competition,

instead, it has

the opposite effect.

Theodore Vail writes

in the AT&T annual report

that government regulation,

provided it is independent,

intelligent, considerate,

thorough, and just,

was an acceptable substitute

for a competitive marketplace.

Vail convinces Congress

that the telephone

is a natural monopoly.

The whole theory

of natural monopoly

didn't really apply properly

to the telephone industry.

Nevertheless, uh...

It was rationalized,

after the fact,

as a natural monopoly,

and for about forty years,

you know, utility economists

would sort of say,

oh, of course it's a monopoly,

it's a natural monopoly

under natural monopoly theory,

but if you looked

at the the theory,

and you looked

at the actual economics

of the telephone,

it wasn't.

There was no correlation

between the economics

of the telephone exchange

and the natural monopoly

theory.

Congress passes an act

which seals the fate

of all independent

telephone companies

in America.

After World War I,

people at the federal level

in particular,

as part of the sort of

the progressive viewpoint

of the time,

were convinced

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