Regulation

The Secret History of the Telephone Network

The public utility model of telecommunications was not as inevitable as it seems today.

|

The People's Network: The Political Economy of the Telephone in the Gilded Age, by Robert MacDougall, University of Pennsylvania Press, 344 pages, $55

Since the early days of the telegraph, North America has seen titanic struggles to define the government's role in telecommunications. The major players in these battles have been policy makers, progressives, and corporations, and the results, for the most part, have been a sort of mutually beneficial collusion. Progressives got universal service and regulation, corporations got government-backed monopolies and other privileges, and policy makers got another lever of power to pull.

In The People's Network: The Political Economy of the Telephone in the Gilded Age, the Western University historian Robert MacDougall provides a detailed history of how this regulatory-industrial complex took different forms in the United States and Canada from the earliest days of telephone networks in the 1870s to the eventual consolidation of national networks in the 1910s and 1920s.

After the telephone was patented in 1876, the Bell Telephone Company licensed the technology to tiny, local-only exchanges-the first phone directory contained just a few individuals and a few dozen listings-which were later interconnected (and eventually owned) by the American Telephone & Telegraph Company, a Bell subsidiary. From the beginning, the embryonic industry was criticized by people who worried that the telephone system would undermine local autonomy and expose seemingly stable communities to the increasing volatility of the interconnected world around them. Many of the populists who fought against the emerging American Bell system, MacDougall writes, "were hardly the proletariat. Yet they…wrapped their complaints about service and rates in the garb of democratic resistance to monopoly."

These anti-Bell activists advocated "an alternative capitalist order, one more open to cooperative and state-based enterprise." They were joined by smaller competitors, independent telephone operators, and cooperatives that arose throughout the country, frequently in cahoots with municipal authorities attempting to preserve local control over the telephone system.

Such control was sometimes regulatory, sometimes financial, and often both. Across the country, MacDougall writes, local governments "seized what powers they did have—sovereignty over their own streets, sidewalks, and skies—and leveraged those for every advantage they could exact."

In 1890, for example, Muncie, Indiana, "passed a 'civic beautification' law that ordered the removal of all telephone poles" from a downtown area where, it so conveniently happened, the local Central Union switching office was located. The Muncie City Council backed down only when the telephone company agreed "to supply free telephone service to the mayor, the fire chief, and every schoolhouse in the city." As MacDougall wryly notes, "Consumer protection and municipal graft, went hand in hand."

Industry learned to play this crony capitalist game. The history of telecommunications is a long story of progressives and populists demanding "public interest" regulations that produce and protect monopolies, followed by progressive and populist demands for regulations to fix the problems that their earlier regulations created. At each step, activists were coached and coaxed by the political and business interests in question.

In the early days, the telephone system was a patchwork of local networks, some built by the Bell system, others by smaller local companies. In one sense, the struggle between Bell—eventually known as AT&T—and the independents can been seen as a competitive fight for customers, standards, and technologies that eventually died down when the government chose sides. This view is not wrong, but it is incomplete. The early days of telecom can also be seen as a cultural struggle between an interconnected society and a society that wanted to retain sovereignty at the edges.

Many communities and independent telephone providers were wary of "foreign"—that is, out of town—corporations providing their telephone service. Some were even opposed to a telephone network that connected beyond their local community. But with an interconnected society increasingly inevitable, the only question was how a universal, interconnected network would be achieved.

Interconnection and universal service took different paths in the U.S. and in Canada. In the United States, AT&T's Theodore Vail argued that "no aggregation of isolated independent systems not under common control…could give the public the service that the interdependent, intercommunicating, universal system could give." The Kingsbury Commitment, a grand regulatory bargain reached in 1913, was followed by gradual consolidation, hastened by the temporary nationalization of the telephone system during World War I. The U.S. road to interconnection and universal service, in other words, established a regulated national monopoly.

Canada, on the other hand, saw a patchwork but reasonably functioning system of interconnected independents and regional telephone systems. As MacDougall writes, there were "seven major regional systems, each enjoying a monopoly or near monopoly within their own territory, but also interconnecting with dozens of much smaller local systems. And Canada's patchwork network has served for over a century. Its alleged impossibility did not prevent Canada's public and private telephone companies from establishing uniform standards and practices for interconnection." Instead of attempting to create a single public utility system, regulators and providers were able to work out standards for interconnection and price.

The phone monopolies, of both countries' varieties, helped to speed us toward universal service, but they did so at a very great cost. Protection from competition led to high prices and relatively slow innovation. It is no accident that the greatest innovations in telecommunications have come in areas—cable and the Internet—that largely avoided traditional telephone regulation. Nor is it a coincidence that so many telecom policy issues are essentially debates over how to eliminate the lingering effects of past monopolies.

Progressives today are traveling the well-worn policy path of trying to fix old mistakes by making new ones. They demand competition while promoting municipal public utility broadband systems. "Open access creates competition," they claim, never minding that the unbundling requirements that force providers to lease their systems to competitors only create "competition" by turning an existing provider into a de facto monopoly. The goals of the modern net neutrality movement—which in effect seeks to prevent Internet Service Providers from providing anything but lowest-common-denominator service—might as well adopt the same early slogan of monopoly-era AT&T: "One System, One Policy, Universal Service."

The urge to make carriers a public utility or regulate them as such remains deeply embedded in telecommunications policy today. After all, if the telephone networks required the guiding hand of regulators, how could the Internet possibly work without regulations to mandate interconnection, to require settlement-free peering, to set prices, or to dictate which services providers are allowed to offer?

And yet the comparative regulatory anarchy of the Internet does work. We all enjoy a global network of independent systems that interconnect almost entirely through contractual agreements. And yet activists seem determined that, in order to prevent gatekeepers from "destroying the Internet," the Federal Communications Commission must become the gatekeeper of the World Wide Web.

MacDougall's book is a rich trip through some forgotten history. He shows that the telephone network's commercial history was more contentious than the stock narrative pulled from the corporate archives of AT&T and Bell Canada; that its cultural history was inextricably linked to the shift from farm to city; that its political history was forged by opportunistic interests and shortsighted policy makers. And crucially, he reminds us that there was a time when commercial telephone competition thrived, and the public utility monopoly model did not seem inevitable.

But while MacDougall pulls these threads together, he never weaves them into a narrative. "This book is a work of history," he writes, "and I have…tried to avoid drawing direct parallels between the early history of the telephone and our own era of rapid change and innovation in communication technology….But I will not be unhappy if readers make their own connections." I have not been shy about drawing my own connections here, but The People's Network might have been a more accessible book if MacDougall had drawn a few more of his own. At times, his book felt like being shown a series of road signs, not in any particular order, and then being told, "and that is how we got where we are today."

Robert MacDougall is a thorough historian. If you start with some knowledge of telecommunications history and policy, The People's Network can add real depth and insight. But as a starting place for understanding telecommunications, you might just skip to the end, where he asks, "Are there lessons in the history of the telephone for us to learn or use today? I hesitate to suggest that twenty-first-century technologies will or should develop like the telephone in any detailed or determining way….Earlier systems like the railroad, the post, and the telegraph shaped ideas about the telephone [which] obscured original thinking and narrowed possibilities at least as often as they provided useful strategies or ideas."

Whether or not we have learned from the history of the telephone, it is instructive to see how many people are eager to repeat it.

NEXT: St. Louis Prosecutors Accused of Waiting Until Last Minute to Process Dismissal of Charges

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. …the embryonic industry was criticized by people who worried that the telephone system would undermine local autonomy and expose seemingly stable communities to the increasing volatility of the interconnected world around them.

    Little did they know it would be them posting photos of themselves at mundane endeavors for their friends and the world to see that would eventually destabilize society as we know it into the chaos known as social media. But with no wires.

    1. Wires are ugly

      /direcTV

      1. I’ve been with DirecTV for 2 decades. Great company. But I just don’t watch that much tv anymore. I’m thinking of sticking with Amazon prime and dropping tv altogether.

      2. Those may be the creepiest commercials I’ve ever seen. Why is that man fucking a puppet?

        1. Why don’t you take your judgments elsewhere?

        2. Hey, if they both consent, and no one’s getting a splinter in his dick hurt, it’s their business and no one else’s.

    2. The social media are a plot to get humanity to accept an invasion by the Cat People from Planet W.

      1. W.

        I knew it was Bush’s fault.

  2. CAPTION:

    The first dirty telephone call, to Miss Elise Halbertson, June 6, 1905, Boston, MA.

    1. You mean the first dirty call that led to a complaint?

  3. The history of telecommunications everything is a long story of progressives and populists demanding “public interest” regulations that produce and protect monopolies, followed by progressive and populist demands for regulations to fix the problems that their earlier regulations created.

    FTFY.

  4. Universal service was such a scam, anyway. The rural locations that were supposedly not getting service were getting service through rural co-ops. The market was well on the way to getting phones available for everyone. But the government wanted one company to regulate, rather than hundreds, and one company wanted to rule them all and in the darkness bind them.

    Note that TVs are ubiquitous without any government monopoly given on TV distribution.

    1. SHHHHH!!!! Stop giving them any ideas!

    2. Attach “universal” to anything and I’m immediately skeptical.

      Unless it’s Universal Blowjobs, then I might just hop on board with the idea.

    3. “Note that TVs are ubiquitous without any government monopoly given on TV distribution.”

      Brits take note!

    4. This is not quite true. The FCC licenses TV stations, because there is a limited amount of spectrum, and too many stations would interfere with one another. This is one reason we now have our wonderful cable system (think Comcast). The govt therefore limits the number of TV stations that are permitted, and it controls (thru the licensing process) who gets to broadcast.

  5. But net neutrality will be great!

  6. But this time, we’ll get stronger, faster, smarter Top Men.

  7. When I bust out the “corporo-fascism” that our economy is, it’s not to be provocative. It is the 100+ cohesion between special interests within the private sector and the public sector. While it may have, once upon a time, been here and there (railroads, shipping) it soon pushed its way into every sector of the economy and pretty much every transaction we make is with such elements. And there is/was nothing like an emerging technology for the vampire bats to attach to.

    1. Do you have a day job? Don’t quit.

    2. Needs more CAPS and [brackets].

  8. When I bust out the “corporo-fascism” that our economy is

    When you start with that line, nobody reads anything past it.

    1. I know I didn’t.

  9. Hmph, the telephone… one might as well shout on the street. Merely represents the further erosion of the written word.

    1. If a word is not in written form I refuse to acknowledge it. And that, sir, is why I am here.

  10. Sounds like an interesting book! I agree with Mr. Henke that Network Neutrality is basically about making the Internet a public utility a la Ma Bell and the old broadcast networks. But Network Neutrality has not gotten very far. Why?? I think the reason is that the Internet, unlike old telephone and broadcast technologies, does not need government regulation either to regulate a monopoly or to allocate rights in the use of radio waves. My own 2 cents on Network Neutrality are available at http://papers.ssrn.com/sol3/pa…..d=2144208.

    For what it’s worth, I am a former FCC employee, private sector communications lawyer, and adjunct law professor teaching communications law; and a great-grandson of Theodore Vail.

    John Berresford

  11. Getting the government out of Telecom, or “deregulating” the industry, is good, period.

    I’m sure many readers are too young to remember, “what color black do you want your phone?”

    One of the few times consumer demand actually forced some level of deregulation in the telecom industry was when CPE (customer provided equipment) came around in 1968 (although it didn’t have much impact until the 70s) through the Carterphone deregulation.

    This opened the door for all kinds of devices to be connected to the network – speakerphones, answering machines, business phone systems, etc. In the business area, costs for businesses went down tremendously as they could then buy their equipment instead of having to pay a perpetual lease to the Regional Bell Operating Company (RBOC).

    This lead to other deregulation that created long distance competition, thus bringing the cost down on long distance calls (remember MCI?).

    This is precisely why we need to keep the FCC’s grubby little paws off the internet (no net neutrality!).

    1. In the mid-1970s, I was well on the way to becoming a Phone Phreaker when the explosion of Customer Provided Equipment hit the marketplace. I continued to learn more technical information about the phone system, but not to get free long distance calls (as per-minute prices were dropping rapidly) or other benefits of Phreaking. Rather, I wanted to know how to successfully interface my own gear to the network, and to understand how the cornucopia of new devices used the network to provide new and better services for people. A lot of the appeal for Phone Phreakers was akin to sneaking into a private club via the back door, then enjoying the activities and luxuries inside that were routinely denied to non-members. Once the system was opened up, that thrill evaporated, but the technical challenge and fascination remained.

  12. A decent article as far as it goes, but it leaves out important parts of the story. The same “big 8” media companies that own the vast majority of TV and radio stations, movie studios, book and music publishers, and telephone, cable, and satellite networks are trying to drive everyone else out of the business of providing Internet service so they can turn it into a regulated system like the phone network, complete with regulatory barriers that will halt further innovation. The “net neutrality” supporters, led by the otherwise-libertarian EFF, are fighting to make this happen, and are portraying any deals by the industry to let some content-producers buy faster connections as evil.

    Somebody at Reason needs to educate the EFF on this topic, pronto, before its campaign gets any farther. Yes, it’s important that all non-harmful use of the Internet be allowed, but no cartel of a few giant corporations can be trusted to ensure that. Only a data-transport business that stays open for anyone to enter will.

    1. Wasn’t the whole layout of the Internet intended to be one of many independent but interconnected nodes thereby creating a network that couldn’t be shut down since the loss of any number of the various nodes would not affect the connectivity of the remaining ones?

      If that’s correct, then any network that relied on a small number of choke points, regardless of the reason why, would be something else other than the Internet.

  13. This article’s first paragraph nails it.

  14. Someone lend me $55. Capitalist pig Amazon refuses to accept my White Privilege as payment.

Please to post comments

Comments are closed.