taking on at&t -- 2/12/24

Today's selection -- from The Competition Solution: The Bipartisan Secret Behind American Prosperity by Paul A. London. The entrepreneur who took on the giant monopoly AT&T:

“In the early 1960s, about the time that Ken Iverson started Nucor Steel, Jack Goeken was selling two-way radios in Joliet, Illinois. His principal customers were truckers, many of whom drove between Chicago and St. Louis and used two-way radios to keep in touch with their head offices. Goeken thought he could provide a service by building microwave repeater towers to give the radios he was selling more range. Barges along the Illinois River and businesses in the towns along the way were also potential customers.  

“Goeken had been toying with ideas like this for several years, and he knew he would have to apply to the Federal Communications Commission (FCC) to build the towers. So he got an FCC application, filled it out, and mailed it to the regulatory agency. A few weeks later, trucks began pulling up to his door to drop off packages. In them were copies of briefs addressed to the FCC that had been filed by various regional Bell Telephone operating companies. These companies were owned by AT&T, and they all opposed his application. 

“In a regulated industry like communications, potential new entrants had to show the federal regulatory agency that additional service was needed to do business. In all the briefs, the various local Bell companies emphatically told the FCC that Goekens microwave service for two-way truck radios was not needed. 

“The packages got Goeken's attention, and he did what savvy challengers did in every industry; he started looking for a lawyer. He had read about Michael Bader, a telecommunications specialist, and he flew to Washington, D.C., to visit him. Why, Goeken asked Bader, was he getting legal documents from all over the country attacking his proposal to build a couple of towers in downstate Illinois? Bader replied that AT&T always tried to stop potential competitors before they got off the ground. In 1957, for instance, it had fought an entrepreneur who was selling a plastic device called a ‘Hush-A-Phone’ that merely slipped over the mouthpiece of phones owned by AT&T so that conversations could be more private. The Federal Communications Commission had decided against AT&T, so it was clear that the company was not invulnerable. But Ma Bell had a near-monopoly on long-distance communications and controlled most local service; it was not about to let Goeken build his towers. AT&T's stable of lawyers was always geared up to fight anyone who dared to challenge its monopoly, and they could spend whatever it took to wear their would-be rivals out. 

1983 AT&T logo designed by Saul Bass

“But Goeken was not intimidated. AT&T's opposition suggested that his microwave towers could turn into something much bigger. If the monopoly was spending this much money to block a couple of towers, there had to be a lot of money to be made in beating it. Goeken decided to fight for his licenses. This was the beginning of Microwave Communications, Inc., the company that would become MCI. It was also the beginning of a fight to bring competition to telephone service that is still going on forty years later. 

“Goeken relished the idea of taking on AT&T, and the media loved the ebullient entrepreneur. To those who covered communications issues, Goeken was ‘Jack the Giant-Killer,’ David against Goliath. He became an American hero, one of those happy warriors the public has long celebrated. The joke in Washington was that ‘MCI was actually a law firm with an antenna on its roof,’ but it survived in the late 1960s and early '70s largely by winning law cases. The Giant-Killer was extraordinary, but he and Bill McGowan, who later headed MCI, were not one of a kind. Similar challengers rose up against the regulated monopolies in other areas, and there were people in the government and at regulatory agencies like the FCC, the Civil Aeronautics Board, and the Interstate Commerce Commission who believed in the benefits of competition. Like Goeken, they were willing to take on some of the most powerful interests in America—the special interests that supposedly dominate the country's politics with their money.” 

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Paul A. London


The Competition Solution: The Bipartisan Secret Behind American Prosperity


Aei Press


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