Preying for Monopoly? The Case of Southern Bell Telephone Company, 1894-1912

David F Weiman and Richard C Levin

Journal of Political Economy, 1994, vol. 102, issue 1, 103-26

Abstract: Focusing on the Southern Bell Telephone Company, the authors propose a modified version of the predation hypothesis to explain Bell's 'natural' monopoly over local telephone service. Southern Bell effectively eliminated competition through a strategy of pricing below cost in response to entry, which deprived competitors of the cash flow required for expansion even if it failed to induce exit; investing in toll lines ahead of demand, isolating independent companies in smaller towns and rural areas, and forcing them to consolidate on favorable terms; and influencing local regulatory policy in larger cities to weaken rivals and ultimately to institutionalize the Bell monopoly. Copyright 1994 by University of Chicago Press.

Date: 1994
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