Constructing an Industrial Divide: Western Union, AT&T, and the Federal Government, 1876–1971

David Hochfelder

Business History Review, 2002, vol. 76, issue 4, 705-732

Abstract: An 1879 contract between Western Union and Bell partitioned the electrical communications industry between the telegraph and telephone markets. Historians typically view this contract as the start of both Western Union's decline and Bell's rise, and they have treated these as largely separate processes. This article argues instead that these processes were linked by a porous and shifting boundary between the two industries. Legal, technical, and regulatory factors interacted to shape this boundary over the next century. The 1879 contract failed to keep Bell out of long-distance communications, as Bell used its market power, geographic reach, and technological superiority to penetrate this boundary. Throughout much of the twentieth century, federal regulators and Western Union executives attempted to strengthen this divide through regulatory means. The attempt failed because AT&T controlled key telegraph technologies and had considerable market power. While regulators propped up Western Union as the only competitor to AT&T, by the 1960s it was offering only token competition.

Date: 2002
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