Once Upon a Time in America
Cheap communications has changed our society more than any other of our inventions and it has removed more tyrants from power than any weapon. Let’s take another step into the history books, back to May 1st, in 1844. Alfred Vail, working with Samuel Morse, was setting up the first telegraph line, and on that day sent the world’s first ever electronic message down the 24 miles of cable that were working, from Annapolis Junction to Washington D.C., to report the results of the Whig Party presidential nominations (Henry Clay won that nomination, and lost the subsequent election).
Just a decade later in 1855, the New York and Mississippi Valley Printing Telegraph Company and the New York & Western Union Telegraph Company merged to create Western Union. One assumes new-york-and-mississippi-valley-and-western-union-printing-telegraph-company.com was already taken by domain name squatters.
By 1900, Western Union operated a million miles of telegraph lines, and by 1945 it had an effective monopoly over the US market. As the New Yorker wrote, monopolies make spying easier. It is an easy and obvious trade: the government allows, by inaction or by intervention, a powerful telecommunications company to become dominant in a market through mergers and acquisitions. In return that company provides the government with surveillance.
The New Yorker explains how Western Union used its monopoly to serve those in power:
What we now call electronic privacy first became an issue in the eighteen-seventies, after Western Union, the earliest and, in some ways, the most terrifying of the communications monopolies, achieved dominion over the telegraph system. Western Union was accused of intercepting and reading its customers’ telegraphs for both political and financial purposes (what’s now considered insider trading).
Western Union was a known ally of the Republican Party, but the Democrats of the day had no choice but to use its wires, which put them at a disadvantage; for example, Republicans won the contested election of 1876 thanks in part to an intercepted telegraph. The extent of Western Union’s actions might never be entirely known, since in response to a congressional inquiry the company destroyed most of its relevant records.
It is quite visible how cost gravity drove communications down from an experiment for the wealthy to a mass market product so cheap even Western Union couldn’t make profits from it. By 1980 its telegraph business was dying, and the old Western Union business was finally closed in 2006, after 151 years of operation. The name was, as we know, reused for a financial services company which today enjoys a government-sanctioned monopoly.
Curiously, Western Union’s long telegraph monopoly seems to have had only a small impact on the size of communications networks. If cost gravity was operating fully, at 29% a year, and telegraph costs were in free-fall, there would have been 37M miles of telegraph by 1900. Instead, assuming Western Union had half the market, there were 2M miles. That is a factor of 16 over 55 years, which is not much, and a part of that can be accounted for by quality improvements.
I’m also not sure what to do with the random figure of 113 million kilometers of fiber optic cable produced in 2010. A cable is a bundle of fibers, and the traffic rates are rather higher than Western Union’s old stock. Has cost gravity been working?
One smoking gun pointing to a century and half of cost gravity being hijacked by telecoms monopolies back through AT&T and Western Union is the cost of the modern equivalent of a telegraph, the text message. Let’s say the cost is one cent per message today. The purchasing price of $1 was 30 times greater in 1850 than it is today. If we apply cost gravity backwards, doubling that cost every two years, it would have cost over two million trillion dollars in 1850, allowing for that 30 times fall in the dollar.
Clearly cost gravity stops working when monopolists run the table. Not only do we pay taxes to be spied on, we are also grossly overcharged for using the tapped lines.