Kingsbury Commitment

The Kingsbury Commitment of 1913 was an out-of-court settlement of the government's antitrust challenge of AT&T's growing vertical monopoly over the phone industry. In return for the government's agreement not to pursue its case against AT&T as a monopolist, AT&T agreed to divest the controlling interest it had acquired in the Western Union telegraph company, and to allow non-competing independent telephone companies to interconnect with the AT&T long distance network.^[1]

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 Vice President Nathan Kingsbury of December 19, 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.^[2]

The Commitment did not settle all the differences between independents and Bell companies, but it did avert the federal takeover many had expected. AT&T was allowed to buy market-share, as long as it sold an equal number of subscribers to independents. Crucially, while the Kingsbury Commitment obliged it to connect its long distance service to independent local carriers, AT&T 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, AT&T was able to consolidate its control over both the most profitable urban markets and long distance traffic. The Willis Graham Act allowed AT&T to begin acquiring more local telephone systems, with the genial oversight of the Interstate Commerce Commission. By 1924, the ICC approved AT&T’s acquisition of 223 of the 234 independent telephone companies. Between 1921 and 1934, the ICC approved 271 of the 274 purchase requests of AT&T. With the creation of the Federal Communications Commission in 1934, the government regulated the rates charged by AT&T.

The entire network was nationalized during World War I from June 1918 to July 1919. Following re-privatization, AT&T resumed its near-monopoly position. In 1956, AT&T and the Justice Department agreed on a consent decree to end an antitrust suit brought against AT&T in 1949. Under the decree, AT&T restricted its activities to those related to running the national telephone system, and special projects for the federal government.

In 1968, FCC regulators intervened when the Bell System tried to prevent a mobile communications system, the Carterfone, from connecting to telephone lines. That decision established the principle that customers could connect any lawful device to the telephone network, even to offer a competing service. In the mid 1970s, emerging long distance competitors like MCI and Sprint faced the same tactic of denying interconnection, which regulators quashed, followed by a series of efforts by the Bell System phone companies to escalate the costs of interconnection as an indirect means of excluding competition. These battles resulted a large amount of antitrust litigation and ultimately led to the 1982 breakup of the Bell System. In 1982, AT&T and the Justice Department agreed on tentative terms for settlement of anti-trust suit filed against AT&T in 1974, under which AT&T divested itself of its local telephone operations, which became known as the "Baby Bells." In return, the Justice Department agreed to lift the restrictions on AT&T activities contained in the 1956 Consent Decree.

References

↑ Milestones in AT&T History
↑ Adam D. Thierer, UNNATURAL MONOPOLY Cato Journal, Fall 1994

John Brooks (1976) Telephone: The First Hundred Years, p 136, Harper & Row ISBN 0-06-010540-2 .

Bell System

Parent company

American Telephone and Telegraph Company

Local telephone companies still extant

Wholly owned	Bell Telephone Company of Nevada The Bell Telephone Company of Pennsylvania The Chesapeake & Potomac Telephone Company The Chesapeake & Potomac Telephone Company of Maryland The Chesapeake & Potomac Telephone Company of West Virginia The Chesapeake & Potomac Telephone Company of Virginia Diamond State Telephone Illinois Bell Indiana Bell Michigan Bell Mountain Bell New England Telephone New Jersey Bell New York Telephone Northwestern Bell Ohio Bell Pacific Northwest Bell Pacific Telephone South Central Bell Southern Bell Southwestern Bell Wisconsin Telephone

Partially owned	Southern New England Telephone Cincinnati Bell

Other subsidiaries

Manufacturing	Western Electric

Research	Bell Labs

Long distance	Long Lines

Wireless	Advanced Mobile Phone Service

Regional Bell Companies	Bell Canada (1880-1975)

Historical

Commemorative	Alexander Graham Bell National Historic Site Bell Boatyard Bell Homestead National Historic Site Bell Telephone Memorial Telephone Pioneers of America Spirit of Communication

Defunct	Bell Telephone Company New England Telephone and Telegraph Company International Bell Telephone Company The Bell Telephone Company of Canada Northern Electric Bell Telephone Manufacturing Company AT&T Technologies, Inc.

Kingsbury Commitment

See also

References