The Wires Go to War: The U.S. Experiment with Government Ownership of the Telephone System During World War I

69 Pages Posted: 2 Apr 2012 Last revised: 8 May 2013

Michael A. Janson

Federal Communications Commission

Christopher S. Yoo

University of Pennsylvania Law School; University of Pennsylvania - Annenberg School for Communication; University of Pennsylvania - School of Engineering and Applied Science

Date Written: April 1, 2013

Abstract

One of the most distinctive characteristics of the U.S. telephone system is that it has always been privately owned, in stark contrast to the pattern of government ownership followed by virtually every other nation. What is not widely known is how close the United States came to falling in line with the rest of the world. For the one-year period following July 31, 1918, the exigencies of World War I led the federal government to take over the U.S. telephone system. A close examination of this episode sheds new light into a number of current policy issues. The history confirms that natural monopoly was not solely responsible for AT&T’s return to dominance and reveals that the Kingsbury Commitment was more effective in deterring monopoly than generally believed. Instead, a significant force driving the re-monopolization of the telephone system was the U.S. Postmaster General, Albert Burleson — not Theodore Vail, President of AT&T. It also demonstrates that universal service was the result of government-imposed emulation of the postal system, not, as some have claimed, a post hoc rationalization for maintaining monopoly. The most remarkable question is, having once obtained control over the telephone system, why did the federal government ever let it go? The dynamics surrounding this decision reveal the inherent limits of relying on war to justify extraordinary actions. More importantly, it shows the difficulties that governments face in overseeing industries that are undergoing dynamic technological change and that require significant capital investments.

Keywords: telecommunications, antitrust, government ownership, natural monopoly, universal service, Kingsbury Committment

JEL Classification: H11, H82, K0, K23, K31, L96, N72

Suggested Citation

Janson, Michael A. and Yoo, Christopher S., The Wires Go to War: The U.S. Experiment with Government Ownership of the Telephone System During World War I (April 1, 2013). Texas Law Review, Vol. 91, pp. 983, 2013; U of Penn, Inst for Law & Econ Research Paper No. 13-14; 2012 TRPC. Available at SSRN: https://ssrn.com/abstract=2033124 or http://dx.doi.org/10.2139/ssrn.2033124

Michael A. Janson

Federal Communications Commission ( email )

445 12th Street SW
Rm. TW-B204
Washington, DC 20554
United States

Christopher S. Yoo (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom St.
Philadelphia, PA 19104-6204
United States
(215) 746-8772 (Phone)

HOME PAGE: http://www.law.upenn.edu/faculty/csyoo/

University of Pennsylvania - Annenberg School for Communication ( email )

3620 Walnut St.
Philadelphia, PA 19104-6220
United States
(215) 746-8772 (Phone)

University of Pennsylvania - School of Engineering and Applied Science ( email )

3330 Walnut St.
Philadelphia, PA 19104-6309
United States
(215) 746-8772 (Phone)

Paper statistics

Downloads
116
Rank
196,472
Abstract Views
1,588