Two decades after the Civil War, the Post Office Committee of the House of Representatives punted demands that the United States develop a postal telegraph to a sub-committee, according to the New York Times on 26 April 1884.
“[S]ending mails by electricity” would be analogous to shipping letters by rail or “steam power” according to the uncredited author. In other words, the government could contract with an existing telegraph company. The contract would drive down the price and make it easier for people to send a telegram, which should boost business.
Nearly everybody knows where the Post Office is, what its rates are, and how a letter may be posted… But it is a rare exception for anyone to know where the nearest telegraph office is, or what its rates are, or how a message should be counted and reckoned. These are considerations which would influence a vast amount of traffic, and might speedily make the present volume of business seem infantile.
No company would have any right to complain of such competition. All would have the same right to compete for the Post Office contract, and the Government would not be in any sense a competitor with the corporations deriving franchises from it.
Article I, Section 8, Clause 7 of the United States Constitution gives Congress the power to “To establish Post Offices and post Roads.” Although the postal clause “left the principal information-transmitting institution in government hands,” almost every nation except the United States treated the telegraph as an extension of state mail monopoly.
The nationalization of the British telegraph in 1869 reinvigorated the U.S. campaign for a postal telegraph. British experience was frequently invoked in the American debate, both because it provided a precedent for nationalizing an established industry and because of the relative congruence of the two nations’ values. When the Royal Post Office assumed control of the British telegraphs in 1870, it left the United States and Canada as the only major industrial nations with telegraph systems largely in private hands (emphasis added).
In 1876, the Supreme Court decision in Kohl v. United States ended debate about the postal clause definition of “establish.” The Court ruled that the United States could “appropriate a parcel of land in Cincinnati as a site for a post office and courthouse.”
Yet in 1884 the debate was still alive on the subject of telegraph messages: should they be considered “mails” and managed by the Post Office? Should the Post Office own telegraph lines or contract with a private firm?
Arguments for nationalization centered on the telegraph being a natural monopoly. John Stuart Mill (1806-1873) “explain[ed] that natural monopolies are ‘those which are created by circumstances, and not by law’.”
“Most postmaster generals after 1870” supported a postal telegraph as did agrarian groups such as the Grange, Farmers’ Alliance and the Populists.
Western Union’s own operations and rhetoric suggested that competition in telegraphy wasted resources and yielded inferior service. And yet competition was the touchstone of private-sector enterprises.
Wasted resources is a key characteristic of natural monopolies when they are not treated (regulated) as such. Imagine having two lighthouses, side by side, “competing” to protect ships. Or fire stations. Or power, telephone, cable and gas lines.
Infrastructure is a natural monopoly.
So why Congressional reluctance to have the Post Office run the telegraph system?
Part of the answer, of course, may stem from the reservations Americans supposedly harbor about government ownership of industries or commercial services… [such as] the Revolution’s legacy of opposition to state authority… an individualism nurtured by the frontier experience; the early inroads of laissez-faire economics; and suspicion of an eastern-governing elite by the rest of an expansive nation.
We know how the story ends.
Congress did not establish a national telegraph system.
Congress did not establish a national telephone system.
Congress did not establish a standard for cellular telephony. Instead, we let “the market” decide between two incompatible technologies, CDMA (1995) and GSM (1991), both of which are retiring. US carriers now support 4G and are migrating to 5G; after almost 30 years, they (finally) understand the importance of global standards.
To learn more about the 19th century telegraph, read The Victorian Internet by Tom Standage.