Preying for Monopoly? The Case of Southern Bell Telephone Company, 1894-1912
Journal of Political Economy
1994
Focusing on the Southern Bell Telephone Company, we propose a modified version of the predation hypothesis to explain Bell's "natural" monopoly over local telephone service. Southern Bell effectively eliminated competition through a strategy of pricing below cost in response to entry, which deprived competitors of the cash flow required for expansion even if it failed to induce exit; investing in toll lines ahead of demand, isolating independent companies in smaller towns and rural areas, and forcing them to consolidate on favorable terms; and influencing local regulatory policy in large cities to weaken rivals and ultimately to institutionalize the Bell monopoly.
- DOI
- 10.1086/261923
- Volume
- 102 (1)
- Pages
- 103-126
- Language
- en
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