Telecommunications Regulation in U.S. States : Its Rise and Impacts in the Early Twentieth Century

In the second half of the 19th century U.S. states began regulating railroads, and in the early 20th century they began regulating utilities, including telephone service. In 1902, only Louisiana had a regulatory agency with authority over telephone companies, but by 1913, 39 states did. These agencies survive today, usually as public utility commissions. This paper explores their impacts on the early development of the U.S. telephone industry. I construct a unique dataset from the 1902, 1907, and 1912 U.S. Census of telephones and from detailed surveys of regulators compiled by American Telephone and Telegraph (AT&T) in 1911 and 1913. These data sources provide an opportunity to test the effects of competition and regulation on development of the telephone industry in an environment where regulations were new and the telephone network relatively undeveloped. Consistent with other research, competition between telephone providers is correlated with growth in telephone penetration. The results also suggest that the presence of state regulators slowed telephone penetration, but that certain specific regulations, such as requiring regulatory approval for mergers, may have stimulated growth