AT & T: Legalized Monopoly In The 20th Century

One of the most famous and influential market failures in the 20th century was the legally sanctioned monopolies behind the AT&T and its Bell System. This was a system of companies that were owned by the Bell Telephone Company. According to AT&T, the Bell Telephone Company was founded in the early 20th century, and was the first telephone exchange, and up until its dissolution had a legalized monopoly over its industry (A Brief History). At the time this was likely the best option since competitors attempting to work together would likely not be a seamless system considering the technology was so rudimentary and new. For almost a hundred years the Bell System was regarded as an ideal natural monopoly, however that idea changed in the nineties.

Though the telecommunications industry was previously regarded as a natural monopoly, this has changed with prices in technology decreasing over the 20th century. In the beginning, following the lapse of the initial patents expiration more than 80 independent competitors invaded the market (Thierer, 1994). Prior to the new competitors AT&T was more akin to a natural monopoly, however once these began popping up all over the nation the idea of it being a monopoly wavered as these competitors begin taking bigger shares of the profit. In the early 20th century, while competition was just beginning to start up against AT&T, they faced the fiercest competition that they ever had prior. As with many markets, the added competitors drove prices down for consumers while expanding the ever-growing telecommunications market (Thierer, 1994). Though this period was a prime example of why the telecommunications industry

Without competition finally given the opportunity to advance the entire communications and even internet providing would be completely different today. Though the government took decades to finally react appropriately to the Bell System, in the end they did enact a strong yet effective solution to the monopoly that was taking place. While we have made progress since this monopoly others in this realm still exist. Most recently with the potential merger of Time Warner and Comcast, however in this situation the government called for a halt of the merger since it would reduce too much competition in many parts of the United States. For many industries there can be a large barrier to entry, however as technology decreases in price and once the infrastructure is laid, the cost is reduced. Eventually new companies can join into the industry and begin to take a market share if they offer benefits to the previous company’s customers. In the case of AT&T however, this was halted by the regulations that were put in place to keep in a supposed natural monopoly. Once the government realized the centralization of business they acted swiftly and appropriately in splitting apart the nations largest monopoly at the time,