A National Monopoly


As a result of a combination of control measures by public authorities and measures taken by AT & T, the company ended up getting what most consider to be a state monopoly. In 1907, AT & T President Theodore Vail said he pursued the goal of "One policy, one system, universal service." AT & T began purchasing competitors, which attracted the attention of antitrust regulators. To avoid antitrust action, in an agreement with the government, Vail agreed to the Kingsbury Commitment of 1913. One of the three terms of the agreement allowed AT & T to acquire all of the independent telephone companies without more approval of the Interstate Commerce Commission.

GW Brock says in the telecommunications industry. Dynamics of market structure, "[The] provision allowed Bell and the independents to exchange telephones to give each other geographical monopolies While only one company was a given geographical area there was little reason to expect the price competition which will take place ". AT & T focused on acquiring companies in specific geographic areas that increase the effective control of the market for telephone systems, while selling its less desirable companies and those acquired prior to independent buyers. Also included in the Kingsbury Commitment was the requirement that AT & T will allow competitors to connect through telephone lines, which reduces the incentive for these companies competing to build trunk lines .

In 1913, after a vacuum tube inventor Lee De Forest began to suffer financial difficulties, AT & T bought De Forest vacuum tube patents for the modest sum of $ 50,000 ($ 1.18 million in 2009 dollars). In particular, AT & T has acquired ownership of the "Audion", the first triode (three) vacuum tube, which has greatly amplified telephone signals. The patent has increased AT & T control over the manufacture and distribution of long-distance telephony services, and allowed the Bell System to build the United States from coast to coast the first telephone line. Thank you to the pressures of the First World War, AT & T and RCA owned all useful patents on vacuum tubes. RCA staked a position in wireless communication, AT & T continued use of telephone amplifier tubes. Some patent allies and partners in RCA were angered when the two companies' research on tubes began to overlap, and there were many patent disputes.

Around 1917, the idea that everyone in the country should have a telephone and that the government should promote begun to be discussed within the government. AT & T agreed, saying in a 1917 annual report ". A combination of such activities under the supervision and control adequate service to the public would be better, more progressive, efficient and economical than competing systems "In 1918, the federal government nationalized the telecommunications industry, the security national and the stated intention. rates were regulated so that customers in large cities pay higher rates to subsidize those in more remote areas. Vail was appointed to manage the phone system AT & T being paid a percentage of Sales by phone. AT & T enjoyed the nationalization arrangement which ended a year later. States then began to regulate the rates so that those in rural areas do not have to pay the price high, and competition is restricted or prohibited in local markets. Moreover, potential competitors were forbidden from installing new lines to compete with state governments wishing to avoid "duplication". The request was that telephone service was a "natural monopoly", which means a company can better serve the public of two or more. Finally, the market share of AT & T amounted to what most consider a share of monopoly.

AT & T, RCA and their allies patents and partners finally settled their disputes in 1926 by compromise. AT & T has decided to focus on the telephony sector as carrier communications, and sold its broadcasting Radio Corporation of America RCA. The assets included station WEAF, which for some time had broadcast from AT & T headquarters in New York. In return, RCA signed a service agreement with AT & T, ensuring any radio network RCA started would have transmission connections provided by AT & T. The two companies agreed to cross-license patents, ending that aspect of the case. RCA, GE and Westinghouse were now free to combine their assets to form the National Broadcasting Company or NBC.

In 1925, AT & T has created a new unit called Bell Telephone Laboratories, commonly known as Bell Labs. This research and development unit highly successful, pioneering, among other things, radio astronomy, the transistor, the solar cell, the Unix operating system and the C programming language. However, its parent company did not always capitalize on these gains. In 1949, the Department of Justice filed an antitrust complaint to force the sale of the Western Electric, which was settled seven years later by an agreement to limit AT & T products and services for telecommunications and business license its patents to "all interested parties". A main effect of this ban was AT & T selling computers despite its key role in the research and development of electronics. Nevertheless, the technological innovation continues. example, AT & T commissioned the first experimental communications satellite, Telstar I in 1962.


                 Standard Western Electric Model 500 telephone, leased (not sold) U.S. phone subscribers.

On the utility commissions in national and local jurisdictions regulate the Bell System and all other telephone companies. The Federal Communications Commission (FCC) has regulated services across state borders. These commissions controlled the rates that companies can charge, as well as specific services and facilities they could offer.

AT & T has increased its control over the phone system through its leases for telephones and handsets made by its subsidiary Western Electric. Like most phones of time in the United States, Western Electric-made phones were owned not by individual customers but by local Bell phone companies system - all of which were in turn owned by AT & T, which also owned Western Electric itself. Each phone was leased to AT & T on a monthly basis by customers, who are generally paid for their phone and its connection many times over in cumulative lease costs. This monopoly made millions of extra dollars for AT & T, which had the side effect of greatly limiting phone choices and styles. AT & T strictly enforced policies against buying and using phones by other manufacturers who had not first been transferred and leased from the local Bell monopoly. Many phones made by Western Electric and carries the following disclaimer permanently molded into their housing. "System Properties BELL - NOT FOR SALE" Telephones were also marked by a sticker marking the Bell Operating Company that owned the phone.

In 1968, the Federal Communications Commission allowed the Carterfone and other devices to be connected directly to the AT & T network, so they do not cause damage to the system. This decision (13 FCC2d 420) created the possibility of selling devices that could connect to the phone system and open market for many products, including answering machines, fax machines, cordless phones, computer modems and the beginning dialup Internet.

In the 1980, after some consumers began buying phones from other manufacturers anyway, AT & T changed its policy by selling customers the phone's housing, retaining ownership of the mechanical components - which must still pay AT & T monthly rental fee.

For most of the 20th century, a subsidiary of AT & T AT & T Long Lines and received almost total monopoly on long distance telephone service in the United States. AT & T also controlled 22 Bell Operating Companies which provided local telephone service to most of the United States. While there were many "independent telephone companies" general telephone is the most important, the Bell System was far larger than all the others, and widely considered a monopoly itself.