Telephone Monopoly

Report Outline
Antitrust Action in Telephone Industry
Development of the Telephone Monopoly
Federal and State Regulation of Rates
Special Focus

Antitrust Action in Telephone Industry

Objectives of the Government's Antitrust Suit

Filing of an antitrust suit against the American Telephone and Telegraph Company and its wholly-owned manufacturing subsidiary, the Western Electric Company, has directed attention to the nation's largest private monopoly and to questions of rate regulation that ultimately concern every telephone user in the United States. The telephone monopoly covers the manufacture of telephone equipment as well as provision of telephone service. The Department of Justice asserts that absence of effective competition in the manufacturing branch of the industry tends to defeat public regulation of telephone rates. When the antitrust suit was filed last month, Attorney General Clark said its chief purpose was “to restore competition in the manufacture and sale of telephone equipment now produced and sold almost exclusively by Western Electric at non-competitive prices.”

Clark contended that restoration of competition would lower equipment costs and “create a situation under which state and federal regulatory commissions will be afforded an opportunity to reduce telephone rates to subscribers.” His statement was doubly significant in view of the fact that A. T. & T.'s operating subsidiaries are now seeking rate increases which, if granted in their entirety, would bring the increase in the country's annual telephone bill since the close of the war to more than $400 million.

A. T. & T. President Wilson, in comment on the antitrust action, insisted that telephone users had benefited from the relationship between his company and Western Electric, and that they would be the ones to “suffer most if there were to be any change.”