The war between Jay Gould and Western Union was over. Jay Gould won.
The war between Western Union and Baltimore & Ohion Telegraph was over. Jay Gould won.
The Atlantic Cable Cartel was bolstered with Gould's Atlantic Telegraph and Cable Company joining the cartel.
The telegrapher's strike of 1883 was over. Gould had won.
The collusion between Western Union and the Associated Press continued; newspapers chaffed at the fees they had to pay to AP and Western Union for wire-service.
The railroad bubble had burst leading to the Depression of 1882 and the Panic of 1884. Gould's finances tied to railroads and Wall Street would be strained and not available for battle against potential rivals.
A new competitor had emerged: Alexander Graham Bell and the Telephone.
And the Country entered the Progressive Era, with increased challenges to industrial monopoly abuse, and the Postmaster again pushing for telegraph to be nationalized under Post Office Control
Enter John Mackay. John Mackay was a self-made immigrant, making his fortuning mining in the West. He was known as the Bonanza King. [Gregory Couch, The Bonanza King: John Mackay and the Battle over the Greatest Riches in the American West, 2018] He disliked Gould and Gould's Western Union. His mining business made significant usage of expensive telegraph service. [Coe at 90]. Mackay had very deep financial pockets with which to back his ventures.
Mackay was joined by James Gordon Bennett, editor of the New York Herald. Bennet also had no love of either the Associated Press' market power or Jay Gould [Coe at 90 ("Bennett published a story in the Herald labeling Gould as 'the skunk of Wall Street.'")]. Mackay and Bennett set out to solve their consternations by building a rival telegraph service to Gould's Western Union. However.... unlike almost every other rival... the Mackay - Bennett network would not be based on railroad right-of-way. Instead, attacking the Atlantic Cable Cartel, Mackay and Bennett laid their own transatlantic cables. This was their anchor, their source of strength in the market. In order to bypass the Western Union market power and have their telegraphs delivered domestically, they acquired a ragtag collection of defunct telegraph networks.
Quickly, the Atlantic Cable Cartel attacked with a rate war. When the dust settled, Postal Telegraph remained standing, international rates had been slashed, and Jay Gould said "There's no beating John Mackay. If he needs another million or two he goes up to his silver mine and digs it up." [Coe at 91]
Postal Telegraph made a splash. Perhaps not much more. The market-share it captured was based on its transatlantic cables and cherry-picked long-distance routes useful to newspapers. [Sobel at 59 ("Much of Postal Telegraph's revenues derived from Commercial Cable... Western Union's domination of the domestic market scarcely could be challenged")]
It never gained significant market share. Postal Telegraph operated local service at a loss. It constantly entertained being acquired by Western Union. [Wolff at 283 ("Thanks to the rate ware, the cables earned no profits, while the Postal lines pulled perhaps $15,000 a month from Mackay's pocket.")] [Freemont, 255 U.S. at 124 (local service operates at a loss and cannot cover local license fee)] [Postal Telegraph v. Richmond, 249 U.S. at 252 (local service operates at a loss)]
In 1909, Western Union - which itself was financially struggling - was acquired by AT&T. When a customer picked up the phone and asked for a telegraph, AT&T routed the call to Western Union services. Postal Telegraph sued. Five years later, AT&T agreed to the Kingsbury Accord and to divest itself of Western Union.
In 1917, with World War I coming, telegraph demands grew but Postal Telegraph lost market share to Western Union, which had a better domestic network. Postal Telegraphs share of government telegraph traffic went from 15% in 1917 to 10% in 1919. [The daily times. (Wilson, N.C.), 12 June 1919. Page 2. Chronicling America: Historic American Newspapers. Lib. of Congress.]
Postal Telegraph struggled forward. It was acquired by ITT in 1928. It went into bankruptcy in 1935. It was finally acquired by Western Union in 1943.
In the 1970s, there was a small computer company called ITEL which sold mainframes to state governments. When a senior executive was asked why IBM did not just squeeze them out of the market, the executive responded, "IBM permits us to continue to exist in order to prove that IBM is not a monopoly." In many ways, this may be the story of Post Telegraph; Western Union may have suffered its existence in order to prove - in the growing Progressive Era with the regular din of a government take over of Western Union - that Western Union was not a monopoly. And to prove that Associated Press was not a monopoly. It is also true that Postal Telegraph's strength was undersea cables - not railroads which Gould was so adept at manipulating; undersea cables presented a clear arbitrage opportunity. And, as the story so frequently goes, Jay Gould now had another problem demanding his attention: AT&T. At this point, Western Union was no longer on the prowl for market acquisitions, and was more the prey of a competitive market, fighting for survival. [Wolff at 286 ("one other factor may have been more potent than all the others: the persistent danger that the government would step in and dismantle Western Union if it pursued a monopoly.")]
- Postal Telegraph Company established by James Keene and George D. Roberts utilizing Elisha Gray's patents. It struggled to operate one line NYC-Chicago. [Coe at 91] [Crouch at 397]
1882
- Postal Telegraph Company files its acceptance of the terms of the Post Roads Act.
1883
- Commercial Cable Co founded by Mackay and Bennett to leverage interconnection with undersea cables. Western Union refuses interconnect with and complete the delivery of Commercial Cable Co. messages (messages from the transatlantic cables). MacKay acquires controlling interest in Postal Telegraph Company and the remnants of other defunct telegraph companies - permitting the Commercial Cable Co. to domestically deliver telegraphs (instead of relying on Western Union). [Coe at 91] [Wolff at 282] Mackay and Bennett directly market their service to newspapers as an alternative to the Western Union.
[Hubbard 1883 p. 521]
[Pacific Postal Telegraph Cable Company, at Virtual Museum of SF (1887)]
[Postal Telegraph Calendar.1896.]
[Pacific Postal Telegraph Cable Company, SFMuseum ("where a direct message was sent—say from London to San Francisco—the Western Union Company, as a common carrier, was obliged to accept it from the “Commercial” Cable Company, but at the same time such business was subjected to delays and inconveniences, which would soon be ruinous. In order to overcome this difficulty, Mr. John W. Mackay resolved to organize the Pacific Postal Telegraph Cable Co., and to endow it with appliances and resources which would enable it to compete with any and all existing lines.")]
[EHA ("Mackay did what many of his telegraph predecessors did in the 1850s: create a network by buying out existing bankrupt firms and merging them into a network with large enough economies of scale to compete with Western Union. Postal never challenged Western Union’s market dominance, but did control over 10-20% of the market at various times.")]
[Banker's Magazine at 653 ("Land lines were gradually acquired throughout the United States, rebuilt and organized into the great Postal Telegraph system, which with its connections now comprises over 330,000 miles of wire.")]
[Crouch at 397 (after the telegraphers strike of 1883, Gould testifies before Congress against nationalizing Western Union, referencing competition from Mackay's 'gigantic opposition.' "a fortune build on corporate paper tied Gould's fortunes to the ups and downs of the financial markets, and Wall Street's downward trend in the later half of 1883 limited Gould's ability to counterattack.")]
[Clarence Mackay at 266 ("The (Mackay) Postal Company was organized in 1886 and immediately began to build telegraph lines and also purchase various lines which had become insolvent.")]
- Bankers and Merchants' Telegraph Company Established. In 1883, makes agreement with American Rapid Telegraph and with Southern Telegraph Company, attempting to consolidate into one company. Bankers and Merchants "failed to meet its obligations" and went into receivership. In 1885, Southern Telegraph Company and American Rapid Telegraph form agreements with Western Union. In 1885 Union Lines Telegraph was formed as a successor to Bankers.
[John G. Farnsworth, Receiver of the Bankers' and merchants' telegraph co. vs. Western Union telegraph co. :Robert G. Ingersoll's opening speech to the jury : delivered May 21st, 1886.]
[Farmers' Loan & Trust Co. v. Bankers & Merchants' Telegraph Co., 23 N.E. 173 (N.Y. 1890) ("There has been a bewildering maze of legal proceedings affecting the Bankers and Merchants' Telegraph Company and its property")] [United Lines Telegraph, The Financial Review: Finance, Crops, Railroads, Trade, Commerce, p. 96 1886]
John Mackay acquired Bankers and Merchants in 1890. [Telegraph Company Sold; John W. Mackay Buys the Bankers and Merchants, NY Times, November 29, 1890, Page 1]
[Testimony of Norvin Green March 1, 1890 at 24 ("The Postal Telegraph Company , under the friendly intervention of Mr . Mackay , who did not want it to lose anything , was organized without much litigation , I believe . He took in the Bankers and Merchants and established a new company.")]
1884
- Cable laid between Nova Scotia and Rockport, Mass. 2nd Cable installed from Novia Scotia to NYC. Dec. 24, Service opened for public service. [Banker's Magazine at 649 ("On December 24, 1884, the cables were opened for public use, at a twenty per cent. reduction in rates—from fifty cents to forty cents a word.")]
1885
- Cable laid between Waterville and Havre [Banker's Magazine at 652]
- Merger talks between Western Union and Postal Telegraph fail. [Wolff at 282]
1886: Rate War
- Postal Telegraph reorganized (partly to fend off Gould's legal attacks)
- Rate war. Rates go from forty cents to twelve cents per word - at the end in 1888 rates stablize at 25 cents per word. (international rates) [Banker's Magazine at 649]
Postal Telegraph claims that its presence in the market reduced telegraph rates in the late 1880s domestically as follows: [Banker's Magazine at 656] [ ]
| Service | Rate before
market entrance | Present Rate |
| New York and Arkansas | $1.00 | $0.60 |
| New York and California | $1.50 | $1.00 |
| New York and Colorado | $1.25 | $0.75 |
| New York and Idaho | $1.50 | $1.00 |
| New York and Kansas | $1.00 | $0.60 |
| New York and Louisiana | $1.00 | $0.60 |
| New York and Minnesota | $1.00 | $0.60 |
| New York and Montana | $1.50 | $0.75 |
| New York and Nebraska | $1.00 | $0.60 |
| New York and N Carolina | $0.75 | $0.50 |
- [Wolff at 283 ("Thanks to the rate ware, the cables earned no profits, while the Postal lines pulled perhaps $15,000 a month from Mackay's pocket.")] [Testimony of Norvin Green March 1, 1890 at 25 ("the newly organized Postal Cable Company came to us and said : “Now, we want to live. We are making losses all the time. If you will with draw your Mutual Union which is fighting us we will come up to your rates.""" (Green appears to be referring to the rate war caused by B&O))]
- Various Lines Competing in Early Times with the Western Union, Electrical Review New York, NY, United States, Saturday, December 4, 1886 vol. 9, no. 14, p. 7, col. 1-2 (noting "the near completion of the Mackay-Bennett postal telegraph line to this coast")]
1889 :: Collusion
- [Wolff at 282 ("In 1889, Western Union and Postal Telegraph negotiated agreements on rates and rebates and amicable settlement of future disputes, creating a duopoly that lasted until Western Union absorbed Postal Telegraph...")]
1902: John Mackay dies
1905
- Postal Telegraph lays 5th line across the Atlantic, with preparations to install a 6th. [Banker's Magazine at 654]
1908
[Investigation of Western Union and Postal Telegraph-Cable Companies: Letter from the Secretary of the Department of Commerce and Labor, Transmitting, Pursuant to a Senate Resolution of May 28, 1908, a Partial Report Showing the Results of an Investigation Made by the Bureau of Labor Into the Western Union and the Postal Telegraph-Cable Companies, GPO 1909]
- AT&T acquires Western Union; AT&T directs any request to an operator for a telegram to Western Union. Postal Telegraph sues; divests its AT&T holdings. [Banker's Magazine at ] Results in Kingsbury Accord. In 1910, "The Commercial company's present sys tems in the Atlantic and Pacific comprise 28,379 miles, compared with 6,922 miles in 1885, a development of over four hundred per cent. "[Banker's Magazine at 656]
- negotiations between Postal Telegraph and Western Union to merge failed.
- The Mackay Postal, Commercial Telegraphers' Journal, Volumes 18-19, Commercial Telegraphers' Union of America, 1920 (Mackay Postal took over operations of the Texas Postal system)
- Some state laws required telegraph services to offer interstate and intrastate services - lacking a well deployed local network, Postal Telegraph was primarily an interstate (and trans-ocean) service. Postal Telegraph operated intrastate service at a loss (cross subsidizes intrastate with interstate revenue). To pay intrastate taxes and fees, Postal Telegraph had to use interstate revenue - argued therefore this was an interstate tax - and lost. [Freemont, 255 U.S. 124 (Freemont tax was $60 annually)] [Postal Telegraph v. Richmond, 249 at 255 (Richmond tax was $300 annually; pole tax was $2 per pole)]
- Would Not Attend to Government Business, The daily times. [volume] (Wilson, N.C.), 12 June 1919. Chronicling America: Historic American Newspapers. Lib. of Congress. ("The government rate is fixed at less than the commercial rates - in fact about 41 per cent of the commercial rates." Data of postal revenue from WWI; showing Postal Telegraph losing market share to Western Union)
- Nationwide Strike of Telegraphers Affects Country from Coast to Coast, The Chattanooga news. [volume] (Chattanooga, Tenn.), 11 June 1919. Chronicling America: Historic American Newspapers. Lib. of Congress. (reporting that while almost all telegraphers from Postal Telegraph walked off, shutting down the service, only some of Western Union telegraphers walked off and the service continued to operate)
1927
Postal Telegraph had about 17% of the market; WU had the rest. [Coe at 94] [Sobel at 59]
1928
- Mackay's companies, Postal Telegraph, Commercial Cables, Federal Telegraph, acquired by ITT [Coe at 94] [Sobel at 59]
- [Years of Expansion for Mackay Lines, February 16, 1924, Section FINANCIAL, Page 20, NY Times ("The annual report of the Mackay companies, presented to stockholders yesterday by President Clarence H. Mackay, showed that 1923 was a year of large expansion for the Postal Telegraph-Commercial Cables system.")]
1930s
Even after merger with ITT, Postal Telegraph struggles. Discussion of a merger between Postal Telegraph and WU fails. [Coe at 94]
1935
1938
[Coe at 94 ("The ultimate absurdity came in 1937 when the Justice Department charged Western Union and Postal, both fighting to stay alive, with conspiring to monopolize the telegraph industry. Reorganizing in 1939, Postal Telegraph limped along for a few years before bowing to the inevitable and merging with Western Union in 1943. This time there was no protest from the government, by now wise enough to recognize that a powerful monopoly would not emerge from the death struggles of two corporate giants.")]
