Kingsbury Commitment
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The Kingsbury Commitment of 1913 marked the beginning of AT&Ts monopoly. The Bell System and independent telephone operators reduced competition out of concern for government intervention. The government had been increasingly worried that AT&T and the other Bell Companies were monopolizing the industry.
Under Theodore N. Vail from 1907 AT&T had bought Bell-associated companies and organized them into new hierarchies. AT&T had also acquired many of the independents, and bought control of Western Union, giving it a monopolistic position in both telephone and telegraph communication. A key strategy was to refuse to connect its long distance network -- technologically, by far the finest and most extensive in the land -- with local independent carriers. Without the prospect of long distance services, the market position of many independents became untenable. Vail stated that there should be "one policy, one system (AT&T's) and universal service, no collection of separate companies could give the public the service that [the] Bell... system could give."
AT&T's strategies prompted complaints and attracted the attention of the Justice Department. Faced with a government investigation for antitrust violations, AT&T entered into negotiations.
In the Kingsbury Commitment, actually a letter from AT&T VP Nathan Kingsbury of December 9, AT&T agreed with the Attorney General to divest itself of Western Union, to provide long-distance services to independent exchanges under certain conditions and to refrain from acquisitions if the Interstate Commerce Commission objected.
The Commitment did not settle all the differences between independents and Bell companies and averted the federal takeover many had expected. However the Commitment played into AT&T's hands - the company was allowed to buy market-share, as long as it sold an equal number of phones. Critically, while with the Kingsbury Commitment, AT&T agreed to connect its long distance service to independent local carriers, it did not agree to interconnect its local services with other local providers. Nor did AT&T agree to any interconnection with independent long-distance carriers.
Consequently, while AT&T was able to consolidate its hold on the most profitable urban markets, and interconnection only strengthened its hand in long-distance traffic. Between 1921 and 1934, the ICC approved 271 of the 274 purchase requests of AT&T.
The entire network was nationalised during WW I from June 1918 to July 1919. Following re-privatization, AT&T resumed its near-monopoly position. In 1934, the government acted to set AT&T up as a regulated monopoly under the jurisdiction of the Federal Communications Commission. This was maintained until AT&T's divestiture in 1984.
[edit] See also
- Hall Memorandum
- United States Telephone Association
- Sherman Antitrust Act
- Willis Graham Act
- Communications Act of 1934
- Telecommunications Act of 1996
