Telegraph Antitrust Enforcement Spurred the Creation of the Telephone: How the 1866 Post Roads Act Encouraged Technological Innovation

Abstract

United States Federal telegraph antitrust policy incentivized telegraph companies to invest in research and development which unintentionally led to the creation of the telephone. The 1866 Post Roads Act granted a de facto national telegraph franchise that preempted entry barriers created by state and municipal government franchise regulations. The reduction in gaining an edge through local government entry barriers increases the relative return on investing in technology. In particular, the competition by companies for telegraph technology to increase wire bandwidth led Elisha Gray and Alexander Bell to work on the multiplex harmonic telegraph where they stumbled upon the key innovations for the development of the telephone.

Keywords: Telegraph, Telecommunication, Telephone, Antitrust, Competition, Technological Innovation

JEL Classification: K21, L21, L40, L96, N00, N40, N71, N81, O31