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Telegraph :: Postal Telegraph Dont be a FOOL; The Law is Not DIY

The war between Jay Gould and Western Union was over. Jay Gould won. The war between Western Union and Baltimore & Ohion Telegraph was over. Jay Gould won. The Atlantic Cable Cartel was bolstered with Gould's Atlantic Telegraph and Cable Company joining the cartel. The telegrapher's strike of 1883 was over. Gould had won. The collusion between Western Union and the Associated Press continued; newspapers chaffed at the fees they had to pay to AP and Western Union for wire-service. The railroad bubble had burst leading to the Depression of 1882 and the Panic of 1884. Gould's finances tied to railroads and Wall Street would be strained and not available for battle against potential rivals. A new competitor had emerged: Alexander Graham Bell and the Telephone. And the Country entered the Progressive Era, with increased challenges to industrial monopoly abuse, and the Postmaster again pushing for telegraph to be nationalized under Post Office Control

Enter John Mackay. John Mackay was a self-made immigrant, making his fortuning mining in the West. He was known as the Bonanza King. [Gregory Couch, The Bonanza King: John Mackay and the Battle over the Greatest Riches in the American West, 2018] He disliked Gould and Gould's Western Union. His mining business made significant usage of expensive telegraph service. [Coe at 90]. Mackay had very deep financial pockets with which to back his ventures.

Mackay was joined by James Gordon Bennett, editor of the New York Herald. Bennet also had no love of either the Associated Press' market power or Jay Gould [Coe at 90 ("Bennett published a story in the Herald labeling Gould as 'the skunk of Wall Street.'")]. Mackay and Bennett set out to solve their consternations by building a rival telegraph service to Gould's Western Union. However.... unlike almost every other rival... the Mackay - Bennett network would not be based on railroad right-of-way. Instead, attacking the Atlantic Cable Cartel, Mackay and Bennett laid their own transatlantic cables. This was their anchor, their source of strength in the market. In order to bypass the Western Union market power and have their telegraphs delivered domestically, they acquired a ragtag collection of defunct telegraph networks.

Source: Wikicommons

Quickly, the Atlantic Cable Cartel attacked with a rate war. When the dust settled, Postal Telegraph remained standing, international rates had been slashed, and Jay Gould said "There's no beating John Mackay. If he needs another million or two he goes up to his silver mine and digs it up." [Coe at 91]

Postal Telegraph made a splash. Perhaps not much more. The market-share it captured was based on its transatlantic cables and cherry-picked long-distance routes useful to newspapers. [Sobel at 59 ("Much of Postal Telegraph's revenues derived from Commercial Cable... Western Union's domination of the domestic market scarcely could be challenged")] It never gained significant market share. Postal Telegraph operated local service at a loss. It constantly entertained being acquired by Western Union. [Wolff at 283 ("Thanks to the rate ware, the cables earned no profits, while the Postal lines pulled perhaps $15,000 a month from Mackay's pocket.")] [Freemont, 255 U.S. at 124 (local service operates at a loss and cannot cover local license fee)] [Postal Telegraph v. Richmond, 249 U.S. at 252 (local service operates at a loss)] In 1909, Western Union - which itself was financially struggling - was acquired by AT&T. When a customer picked up the phone and asked for a telegraph, AT&T routed the call to Western Union services. Postal Telegraph sued. Five years later, AT&T agreed to the Kingsbury Accord and to divest itself of Western Union. In 1917, with World War I coming, telegraph demands grew but Postal Telegraph lost market share to Western Union, which had a better domestic network. Postal Telegraphs share of government telegraph traffic went from 15% in 1917 to 10% in 1919. [The daily times. (Wilson, N.C.), 12 June 1919. Page 2. Chronicling America: Historic American Newspapers. Lib. of Congress.]

Postal Telegraph struggled forward. It was acquired by ITT in 1928. It went into bankruptcy in 1935. It was finally acquired by Western Union in 1943.

In the 1970s, there was a small computer company called ITEL which sold mainframes to state governments. When a senior executive was asked why IBM did not just squeeze them out of the market, the executive responded, "IBM permits us to continue to exist in order to prove that IBM is not a monopoly." In many ways, this may be the story of Post Telegraph; Western Union may have suffered its existence in order to prove - in the growing Progressive Era with the regular din of a government take over of Western Union - that Western Union was not a monopoly. And to prove that Associated Press was not a monopoly. It is also true that Postal Telegraph's strength was undersea cables - not railroads which Gould was so adept at manipulating; undersea cables presented a clear arbitrage opportunity. And, as the story so frequently goes, Jay Gould now had another problem demanding his attention: AT&T. At this point, Western Union was no longer on the prowl for market acquisitions, and was more the prey of a competitive market, fighting for survival. [Wolff at 286 ("one other factor may have been more potent than all the others: the persistent danger that the government would step in and dismantle Western Union if it pursued a monopoly.")]

1881: Gould Acquires Western Union





1886: Rate War

1889 :: Collusion

1902: John Mackay dies



[Investigation of Western Union and Postal Telegraph-Cable Companies: Letter from the Secretary of the Department of Commerce and Labor, Transmitting, Pursuant to a Senate Resolution of May 28, 1908, a Partial Report Showing the Results of an Investigation Made by the Bureau of Labor Into the Western Union and the Postal Telegraph-Cable Companies, GPO 1909]

1909: AT&T Acquires Western Union

1921 advertisement for the Postal Telegraph-Cable Company, Wikipedia

Messenger boy working for Mackay Telegraph Company. Said fifteen years old. Exposed to Red Light dangers. Location: Waco, Texas. 1919. LOC.



Postal Telegraph had about 17% of the market; WU had the rest. [Coe at 94] [Sobel at 59]



Even after merger with ITT, Postal Telegraph struggles. Discussion of a merger between Postal Telegraph and WU fails. [Coe at 94]



1943: Acquired by Western Union.

[Coe at 94 ("The ultimate absurdity came in 1937 when the Justice Department charged Western Union and Postal, both fighting to stay alive, with conspiring to monopolize the telegraph industry. Reorganizing in 1939, Postal Telegraph limped along for a few years before bowing to the inevitable and merging with Western Union in 1943. This time there was no protest from the government, by now wise enough to recognize that a powerful monopoly would not emerge from the death struggles of two corporate giants.")]
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