The Willis Graham Act of 1921 effectively establishedtelephone companies as natural monopolies, citing that "there is nothing to be gained by local competition in the telephone industry." This repealed the Kingsbury Commitment, allowing AT&T to merge with or acquire competing telephone companies if the ICC approved.
Background
was incorporated in 1885 as a wholly owned subsidiary of American Bell. On December 30, 1899, AT&T acquired the assets of American Bell and became the parent company of the Bell System. In order to extend service nationwide, some inventions had to be developed to propagate the telephone signal, since the signals weaken as they travel through the telephone wires. Until Bell's second patent expired in 1894, Bell Telephone was the only company that could legally operate telephone systems in the USA. Between 1894 and 1904, after Bell's patents expired, over six thousandindependent telephone companies arose in the US. The rise of these new companies brought new problems. Telephone customers on different carriers had no way of contacting each other—there was no inter-connectivity between carriers. In order to connect all of the telephone customers, AT&T began acquiring independent telephone providers, much to the dismay of remaining independents. These independents complained to the attorney general that AT&T was eliminating the competition. In response to this, the attorney general referred the case to the Interstate Commerce Commission, which began an investigation. AT&T then agreed to a settlement, now known as the Kingsbury Commitment. This consisted of a letter from AT&T stating that "Bell agreed to provide interconnection to the independents and to refrain from further acquisitions." However, AT&T continued to acquire more noncompeting companies. The Willis-Graham Act, which was passed in 1921, shifted merger oversight to the ICC, lessening AT&T's constraints on the acquisition of competitors. This essentially repealed the Kingsbury Commitment. Because of this, by 1924 AT&T had acquired 223 of the 234 independent telephone companies with approval of the ICC.
