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12/24/08

Words That Cause People Who Are Cool With The Vision Thing Cringe: "We’re from the Federal government…we’re here to help"

...unless you're the military protecting my homeland, no thanks, I don't need your kind of government help. You've done enough in my life with the regulated monopoly Bell System, Affirmative Action Consent Decree, Divestiture, Telecommunications Act of 1996...

This holiday week here's another reprint, this time from The Telecommunications History Group by Herb Hackenburg, "We're from the federal government...we're here to help." He makes relevant points about bailouts and the banking industry on the precipice of nationalization.

I foresee the banking industry as some new form of regulated behemoth much like the Bell System was only morphed into a form for this era and that industry. Regardless of how the situation develops the end will be the same, giant organizations that will eventually somehow have to be weaned off taxpayer subsidies because the burden is too much. Likely it will not be pretty either, much like the Divestiture of the Bell System, fraught with problems that eventually bring it all down.

(Does anyone really believe that the current incarnation of AT&T is remotely anything like the original one in spite of reacquiring some of their former companies?)


The government created, aided and abetted the regulated utility monopoly, whether or not that was a good or bad idea became irrelevant decades after the monopolies were established. At the time the regulated monopoly and Universal Service Fund seemed to make sense to some people in order to build out the communications system. It sufficed for it's era but inevitably it became stagnant and needed reform. It's a classic example of why "sunset laws" are effective and necessary, to avoid self-perpetuating entities not realistically dealing with current situations.

The bottom line still is the government created the regulated Bell System and Independent telephone system, good, right, wrong, bad or indifferent and was irresponsible in the manner divestiture and deregulation occurred. In this case, when the government had for decades regulated a private sector industry integral to the economy as a matter of policy, the government should not have walked away as fast as they did without a sensible (not Washington DC or US Court) orderly business unwinding.

It was actions like this, in several major industries in the same era, that very possibly is one of the major early triggers of the current Economic Crisis.

The phone companies were more than just the wires that connect to make people talk, it was also a lot of paychecks to people across all wage scales and in communities across the entire land. The company was vital in multiple ways to the macro-economy.

While there is no doubt that the decades of government intervention need to be reconfigured or unwound in the telephone, airline, trucking and other industries because it was no longer relevant and impeding progress...

was it smart to bust the whole thing in oddball parts with such ineptitude?

Whenever the government steps in to help, that help is institutionalized forever and cannot be untangled once the conduit for the bureaucratic lines has been laid. No matter the originating circumstances and cause and nature of a crisis that may have caused a reaction of government intervention, before it is undertaken we must take into consideration how that intervention will be undone. We learned from a rapid unwinding of the Bell System and subsequently, the telcom and tech crash and the current Telcom Nuclear Winter, what government intervention and subsequent extrication, that nether side was really prepared for, can do destructively. Sunsetting of regulations and policies, after scheduled periodic review and action in a timely manner, is crucial to stop the regulations and policies attendant bureaucracies from snowballing into self-perpetuating money-wasters.

Hindsight on utility monopolies and government help is 20/20 but the lesson is there to be learned for all, so it is not repeated. If you were a pessimist and a betting person, regardless of the obvious lessons, you should bet that we're going to repeat these mistakes. Actually, we have already started.

We should not go down the road of government help no matter how afraid we are of current conditions without checks and balances. We've recently made two giant moves in the wrong direction by effectively nationalizing major banks and creatively bailing out the auto industry. The consequences will be, at the minimum, problematic to the macro-economy in the future.

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an aside about preserving telephone history:

We are possibly in danger of losing a lot of our industry history, by collection or a lack of ability and resources to preserve it, since a great deal of it is maintained by retiree-volunteers and the economic crisis has affected all similar organizations. These retiree-volunteers are growing older and fund-raising as well as existing funds are tighter. There is a real possibility these retirees may also be losing retirement benefits and will be less able to afford to contribute more than just their time.
In my mind I see the current caretakers doing excellent jobs in their work but a large gap exists in the use of new technology, the internet, for both research and preservation records. The challenge is in transitioning not only the articles of history but the sense of what the industry was about besides just the wires that connected for people to talk.
Video online is one tool to consider in preserving the sense of the industry.Young people and boomers must get more involved to continue the work.

Please support preserving and maintaining historical items, records and archives in something that interests you. The Telecommunications History Group, Inc. is one such organization for those of us interested in the traditional telephone system.

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We’re from the federal government…we’re here to help


By Herb Hackenburg
The Telecommunications History Group, Inc.
from the Winter 2008 print newsletter "Dial-Log"
Winter 2008, Vol. 12, No. 4



2008 will probably be remembered as the year of financial disasters and large government bailouts. The United States government began to buy into the nation’s largest banks. The banks’ cost for government help was additional government oversight of how they conduct business. Not quite bank nationalization…yet.

Ninety years ago, the world was at war. The United States entered the conflict and the government took control of the nation’s telephone industry.

Woodrow Wilson was the President of the United States. Wilson’s Postmaster General was Albert Sidney Burleson, described by most people as a populist, by some as a socialist. In 1913, Burleson advocated that the Nation’s telegraph and telephone service should be “postalized.” Burleson suggested that if that idea was good enough for most of Europe, it should be good enough for the United States.


Albert Sidney Burleson


Burleson had never really sold his idea to the United States’ telephone or telegraph industry, the government, or the voters. The emergency powers brought about by the United States' entry into World War I allowed Burleson make a government operated telephone system a reality.

The marriage between the Bell System, the Independent Telephone Association, and the U. S. Postal Department was not made in heaven--it was made by edict. A press release at 1:01 am on August 1, 1918, was the “wedding announcement.”

The release said:

“Pursuant to the proclamation of the President of the United States I have assumed possession, control and supervision of the telegraph and telephone systems of the United States. This proclamation has already been published and the officers, operators and employees of the various telegraph and telephone companies are acquainted with its terms."

The next paragraph says that the telephone and telegraph companies should operate exactly as they had been, under the same leadership and financing they had in place. There are seven rather important words in this paragraph — “…unless otherwise ordered by the Postmaster General.”

“I earnestly request the loyal cooperation of all officers, operators and employees, and the public in order that the service rendered shall be not only maintained at a high standard but improved wherever possible. It is the purpose to coordinate and unify these services so that they may be operated as a national system with due regard to the interests of the public and the owners of the properties.

“No changes will be made until after the most careful consideration of all the facts. When deemed desirable to make changes announcement will be made.”

Authorization for issuing the edict came from a joint resolution from Congress designed to give the president the authority to assume control of all of the nation’s telegraph and telephone companies. In the Congressional hearings on the matter Theodore Vail, the head of the Nation’s largest telephone company, was not invited to give testimony. In fact, he was not even allowed to attend the hearings.

After the fact, Vail was invited to meet with Burleson. Privately, both men had expressed a dislike and distrust of each other. They had never met face to face. During the meeting, Vail expressed his main concern--that customer service should not be degraded under “postalization.” Burleson, in turn, asked Vail to take a major role in making mutually satisfactory financial arrangements between the phone companies and the government. By the end of the meeting both Burleson and Vail felt the other guy wasn’t so bad after all. However, it’s interesting that a search of Bell System employee publications at this time show that phone company stories concerning this government takeover at no time mention Burleson by name. He is always referred to as the Postmaster General.

While the “postalized” telephone service only lasted about a year, for the average customer it was a service and financial disaster. One of the first things Burleson did was to institute fees for installing a telephone. Vail had been trying to establish an installation fee system, but the state utility commissions would not allow it. Now federal edict instantly trumped all the state regulators, according to the United States Supreme Court. Later, the post office raised both long distance and local service rates by 20 percent.

Service was degraded because much of the newly manufactured phone equipment was being sent overseas for the Army’s use. In addition, there was a shortage of employees to maintain domestic telephone service; the Army Signal Corps had nearly 18,000 Bell System men in its ranks and nearly as many from the nation’s independent telephone companies.

And when customers would complain to the telephone company, many were told politely, “There isn’t anything we can do about it, we’re owned by the government.”

The war ended about a month after the “postalization,” but “postalization” lived on. The voters became restless.

Congress was deluged with letters demanding the end of government controlled telephone service. A new joint resolution was adopted, unique in that Congress admitted that the whole “postalization” idea was wrong and apologized to the voters for adopting it in the first place.

Meanwhile, rather quietly, AT&T enjoyed its most profitable year to date.

And those installation fees are still around.

It will be interesting to see how government ownership affects the banking industry over the next few months.