Federal Preemption of Local Government Telegraph Franchise Entry Barriers

Abstract

The United States central government enactment of the 1866 Post Roads Act preempted state and municipal telegraph franchise entry barriers. Like present-day telecommunication companies, local franchise regulations were an entry barrier to United States telegraph companies. These pre-1866 state and municipal telegraph laws were barriers of both entry and trade between states. Trade barriers reduced the benefits of a common market and undermined market-preserving federalism (Weingast 1995). I document what laws were preempted by the 1866 Post Roads Act, explain how these laws increased entry barriers, provide evidence that preemption was enforced, and uses two counterfactuals to calculate rough estimates of the decrease in entry costs from enforcement of the act.

Keywords: Telegraph, Telecommunication, Telecommunication Regulation, Franchise Laws and Regulations, Municipal Regulations, Regulated Industries, Contestable Markets, Federalism, Competition, Antimonopoly, Preemption, Entry, Deregulation, Regulation, Economic History

JEL Classification: H11, H77, K21, K23, L12, L13, L43, L51, L96, L98, N41, N42, N71, N72, O25, R53