The Telegraph And Natural Monopolies In Communications

from the how-do-you-deal-with-them? dept

A bunch of folks have sent in Matthew Lasar’s excellent look back at some of the early days of the telegraph system and how it parallels some questions that we face today over things like net neutrality. The basic story is that Western Union worked out a way to gain a monopoly on the telegraph, and then worked out a deal with the Associated Press, whereby all AP papers would use Western Union, and none would support the creation of a competing telegraph company. From all of this, there is even the suggestion that a presidential election was stolen. It’s a worthwhile read.

Of course, the parallels are not perfect, and there are lots of other questions to be raised, but there are some good points to think about, when you’re dealing with a communications system that is, effectively, a natural monopoly. As the FCC suddenly seems open to the concept of line sharing again, after being down on it for so many years, it’s at least worth looking at the history on things like the telegraph, to understand why competition really is a good thing, especially when it comes to the major means of communication.

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Companies: western union

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Comments on “The Telegraph And Natural Monopolies In Communications”

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Anonymous Coward says:

Monopolies are always bad.

They distort the market and always end up benefiting one side more then the other.

Still some claim that it helps.

There are natural monopolies that form and take over the market that have some checks but they don’t drive innovation as they kill all competition(Standard Oil and the Telegraph).

There are coercive monopolies or De Jure monopolies that are coercive monopolies that take all options from others inside society.

Michael Price (profile) says:

Aint no natural monopoly.

If Western Union managed to get a monopoly with government help it’s a breakthrough in economic theory since no other natural monopoly appears to have existed. All monopolies were the result of government interference and the claim that e.g. electricity is a “natural monopoly” contrasts sharply with the facts. Thomas DiLorenzo’s “The myth of natural monopoly” sets out those facts including “natural monopoly” business that competed for 80 years.

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