The Willis Graham Act of 1921 effectively established telephone companies as

natural monopolies A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming adv ...

, citing that "there is nothing to be gained by local competition in the telephone industry." The law effectively released AT&T from terms of its

Kingsbury Commitment The Kingsbury Commitment is a 1913 out-of-court settlement of the United States government's antitrust challenge against the American Telephone and Telegraph Company (AT&T) for AT&T's then-growing vertical monopoly in the telephone industry. In retu ...

, allowing the company to acquire competing telephone companies under the oversight of the

Interstate Commerce Commission The Interstate Commerce Commission (ICC) was a regulatory agency in the United States created by the Interstate Commerce Act of 1887. The agency's original purpose was to regulate railroads (and later trucking) to ensure fair rates, to eliminat ...

(ICC).

Background

The

American Telephone and Telegraph Company AT&T Inc. is an American multinational telecommunications holding company headquartered at Whitacre Tower in Downtown Dallas, Texas. It is the world's largest telecommunications company by revenue and the third largest provider of mobile tel ...

(AT&T) was incorporated in 1885 as a wholly owned subsidiary of American Bell. On December 30, 1899, AT&T acquired the assets of American Bell and became the parent company of the Bell System. For extending telephone service nationwide, new technologies had to be developed to propagate telephony signals over ever-increasing distances. Until Bell's second patent expired in 1894, Bell Telephone was the only company that could legally operate telephone systems in the United States. Between 1894 and 1904, after Bell's patents expired, over six thousand independent telephone companies arose in the US. The rise of these new companies brought new problems. Telephone customers on different carriers had no way of contacting each other—there was no inter-connectivity between carriers. In order to connect all of the telephone customers, AT&T began acquiring independent telephone providers, much to the dismay of remaining independents. These independents complained to the attorney general that AT&T was eliminating the competition. In response to this, the attorney general referred the case to the

(ICC), which began an investigation. AT&T then agreed to a settlement, now known as the Kingsbury Commitment. This consisted of a letter from AT&T stating that "Bell agreed to provide interconnection to the independents and to refrain from further acquisitions." However, AT&T continued to acquire more non-competing companies. The Willis-Graham Act, which was passed in 1921, shifted merger oversight to the ICC, lessening AT&T's constraints on the acquisition of competitors. This essentially repealed the Kingsbury Commitment. Because of this, by 1924 AT&T had acquired 223 of the 234 independent telephone companies with the approval of the ICC.

References

{{Reflist 1921 in law Monopolies Telecommunications in the United States