Monopoly. Reading this word either one of two things either immediately popped into your head: either a business entity that dominates and controls one of our many free markets, or perhaps the iconic Parker Bros. board game. Focusing on the market defining bestseller which doesn’t include dice, people often almost always view this term with a negative connotation. Calling on the knowledge we obtain in high school history class, we immediately associate the term “monopoly” with that of cutthroat and ruthless business practices of men like John D. Rockefeller and Andrew Carnegie. We view companies such as Standard Oil and Carnegie Steel to only care about profit margin, wiping out local family businesses in the process. Consumers have been taught to deplore monopolies and what they stand for, as their control will ultimately hurt them at large.
This is why is so fascinating to me that perhaps the most influential and powerful monopoly in United States history was not only largely untouched by early 19th trust busting, but was absolutely adored and supported by the general populace. Although AT&T is perhaps the textbook definition of monopoly, it was left dissolved by decades due to two major reasons. First, it was necessary in the early days to this technology to have enough power as a company to be able to spend the capital to connect a network of phone lines across the nation. With AT&T doing this and bringing the United States into a new technological age, the government supported president Theodore Vail in the notion that it was necessary to have their amount of control on the industry to maintain this public utility. While his company was just as cutthroat as other famous monopolies in protecting itself as you will see later in this entry, Vail’s motives behind it were far from pure profit. Vail truly envisioned himself as a public servant, and that a monopoly was the only way to bring a united telephone service to America.
This is the motive behind the second reason Vail was left alone, is his willingness to work to control his power. “In a manner nearly unimaginable today, Vail turned to the government, agreed to restrain himself, and asked to be regulated. Bell agreed to operate pursuant to government-set rates, asking in exchange only that any price regulations be “just and fair”.” (Wu 55). This is unheard of in today’s business world, as many companies would never, ever tolerate the federal government setting their prices. With this in place, AT&T was able to provide quality service across the nation for reasonable pricing for decades. This is Wu’s vision of the “golden age” of a new technology, in which a mogul, “defines a new type of industry, integrated and centralized [while] delivering a better or more secure product.” (10). With this superior service and the security of the consumer in hand, one would naturally think that this is the way to a utopian future, where all industry follows the AT&T model of power but consumer responsibility. This would be a dark future indeed.
Yes, you read that right. Perhaps the worst thing that could possibly happen is for all industry to become government mandated monopolies. The issue isn’t even inferior quality or a high price point. When Bell was ultimately disbanded consumers actually saw in increase in price and “a drop-off in service quality utterly unexampled since the formation of the Bell system.”(Wu 161). This issue is that the current unrivaled phenomena of our technological capability doubling every few years will cease and grind to a snail’s pace. Technological innovation and development is driven by competition, as rival companies constantly try to create production that are better, faster, stronger. Competitive companies look for that new, revolutionary product that will redefine the industry and upset the balance of power in their favor. To these government regulated monopolies, innovation is the enemy. They are threatened by any technological advancement that will destroy the industry they have worked so hard to maintain, to the extent that they will attempt to destroy it. This can be seen in regulated monopolies through this time, whether it be a new competitor in the Hollywood monopoly, a new advancement such as FM radio, or even as simple as a piece of plastic shoved onto the end of AT&Ts phones. With the support of the government, each of these examples crushed or delayed their competition in order to maintain their power. The Hush-a-Phone is a forgotten memory, while the full power of FM radio is far from fully harnessed. This would provide no incentive to create revolutionary new products that will just be crushed instantly if they threaten a big industry, and innovation will cease. This practice of restricting technology can even be seen in some large corporate practices today. Now imagine if this approach was applied to all facets of our industry. It may be acceptable initially, but it presents a dark future indeed.
Really like the post, it looks like a great deal of thought went into the ideas that you have expressed. I found it particularly intriguing that you mentioned that Vail thought of himself as a public servant and not was not solely absorbed in making money. In fact Wu himself expresses this idea in that although Vail may have been a, "megalomaniac...[he] might well be redeemed by his sense of great power's great responsibilities and his avowed dedication to the public good, to which he always gave far more than lip service." (Wu, 60)
ReplyDeleteExcellent post. I agree with your assessment, which is why I fear the amount of control Comcast and Verizon have over high-speed access in the Richmond market.
ReplyDeleteI keep saying "as long as we have two," but I'd rather have 50. I remember the high price of high quality AT&T service.
But setting up a telecom business is not like opening a new restaurant. The infrastructure costs are huge. This is why I so admire mavericks like Ted Turner or, in his early days, Adolph Zuckor. I hope we keep generating more of them, because I suspect more and more will be coming out of places like China and India and Brazil. Tom Friedman taught us that we have a global marketplace now...and Finnish Nokia was the innovator in cell technology through the 90s.