structural history of local telephone business

Growth in the U.S. local telephone business has been strongly biased toward the largest companies getting larger.  From 1916 to 1942, only about a third of U.S. households had telephone service.  Hence opportunities for extensive growth in the local telephone business were relatively good.  Nonetheless, AT&T’s share of operating revenue among the 75 largest telephone companies rose from 89% to 93% from 1916 to 1942.  The growth bias toward larger-sized companies was not confined to AT&T.  The total operating revenue of the top 5 companies excluding AT&T, relative  to the total operating revenue of the top 75 companies, excluding AT&T, rose from 43% to 63%.  The number of companies with greater than $50,000 in operating revenue in inflation-adjusted 1942 dollars fell from 224 in 1916 to 73 in 1942.[1]  Roughly speaking, AT&T absorbed about half that revenue concentration, and non-AT&T companies the other half.  The bias towards bigness seems not to have been an effect just of AT&T’s market power.

Large telephone companies had complex corporate structures.  In 1916, AT&T controlled the New York Telephone Company, which controlled the Bell Telephone Company of Pennsylvania, which controlled the Chesapeake & Potomac Telephone Co., which controlled the Chesapeake & Potomac Telephone Co. of Virginia, which controlled the Staunton Mutual Telephone Co.  Large non-AT&T companies had similar corporate complexity.  One of the largest non-AT&T companies in 1942 was the General Telephone Corporation.  It encompassed 12 operating companies formed in 1935, each by consolidating groups of smaller telephone companies.[2]  Complex corporate structure suggests relatively more importance for managerial incentives, financing, input sourcing, and regulatory political economy compared to operating economies in determining business size.

tree roots

Despite the bias toward bigness, a large number of small independent telephone companies have remained in the telephone business.  In 1937, more than 40,000 small local telephone companies accounted for about 1% of total industry operating revenue.[3]  Small telephone companies seemed to have entered the business to serve specific customers that large companies did not serve.  The early telephone business apparently didn’t have cost economies of scale.  Small companies generally grew relatively slowly.  When they failed, larger companies acquired them.

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Data: structural change in the U.S. telephone industry, 1916 to 1942 (Excel version); fuller dataset of telephone operating companies in 1942


[1] The statistics for 1942 include many fewer very small telephone companies than do the statistics for 1916.  This is largely an artifact of the data reporting.  Reporting in 1916 and 1942 among telephone companies with greater than $50,000 in annual operating revenue (Class A and Class B companies) was probably universal.  Reporting for smaller companies is much less comprehensive, especially in 1942. The telephone censuses provide relevant comparative data.

[2] General Telephone subsequently became GTE.  The new Bell Atlantic (a combination of the old Bell Atlantic and Nynex) acquired GTE in 2000, and became Verizon.

[3]  The number of independently owned local telephone business in the U.S. today is probably about 800. See the NTS Cost Dataset.

COB-47: cover sheets

Nothing is more important for a bureaucratic report than its cover sheet.  The cover sheet is what people will see.  When the report has its brief moment of glory on the top of a paper stack on a bureaucrat’s desk, the cover sheet has to shine.

You know the old saying: don’t judge a book by its contents.  No one opens most books.  The cover is what matters.  It’s the same for bureaucratic reports.

In other bureaucratic reporting this month…

Terry Heaton at the PoMo Blog faults Intel for “shareholder value being put above the future of the company.” That’s a classic mistake that non-bureaucratic organizations make.  Bureaucratic organizations recognize that nothing is more important than the future of the organization.

Brad Templeton at Brad Ideas reports that a movie studio has issued a DMCA takedown notice for his Hitler parody of movie studios issuing DMCA takedown notices. We see nothing surprising here for persons without a sense of humor or irony.

University College Cork, under the expert leadership of its president Michael B. Murphy, has succeeded in creating a large problem from a small problem.  Although this success concerns a bat sex study, it has general applicability.  Such techniques are vital for preserving and expanding workforce employment.  Careful study of this technique would be valuable for bureaucrats worldwide.

Techcrunch reports on debate about whether Firefox is heading for a massive decline.  Firefox co-founder Blake Ross, now no longer with the Mozilla organization that supports Firefox development, declares:

I’m pretty skeptical. I think the Mozilla Organization has gradually reverted back to its old ways of being too timid, passive and consensus-driven to release breakthrough products quickly.

Mozilla is maturing into a fully capable bureaucratic organization.  Such a development can only help to secure the future of Firefox.

Peter at Bayou Renaissance Man reports that Texas County Judge Daniel Burkeen has sent a letter to the Texas Commission on Environmental Quality inquiring whether he should consider both urination and defecation.  We believe that defecation is more serious problem than urination, but we urge the Texas Commission on Environmental Quality to study the matter carefully.  Bureaucrats dutifully handle such work.  The public should be grateful.

Ars Technica reports on a Pew survey documenting that Internet users like government websites. Many governments have developed world-class bureaucracies.  Internet start-ups that want to be successful on the web need to invest in bureaucracy.

That’s all for this month’s Carnival of Bureaucrats. Enjoy previous bureaucratic carnivals here. Nominations of posts to be considered for inclusion in next month’s carnival should be submitted using Form 376: Application for Bureaucratic Recognition.

text messaging for kids

text messaging devices for kids

At my neighborhood CVS, for a mere $19.99 you can buy two text messengers designed for kids ages 6 and over.  The messengers include some smart phone capabilities: a data organizer that holds e-mail addresses, phone numbers, postal addresses, and memos; a calculator; an alarm clock; and the capability to be password-locked.  These devices offer unlimited messaging for the monthly flat rate of zero.

Nurturing new customers is a sensible business strategy.  But producing this product probably wouldn’t be a wise move for phone companies.  In fact, the product is offered under the brand Discovery Kids.  Discovery Communications is a media content and entertainment company.