I know why the ICC was formed to regulate railroads but why the FCC was needed to reg phone companies in 1930s?

Some time ago I read “The Octopus” by Frank Norris. It’s an American classic set in 1880’s California. The premise of the book was a railroad (the Southern Pacific but not named as such in the book) that was using its monopoly to drive the farmers in central CA out of business. The book was fictional but based on actual events. I’m not sure if these events had anything to do with subsequent economic regulation or the formation of the ICC.

http://www.fcc.gov/what-we-do

Can’t forget the West Shore…

Thanks, Jeff - that’s exactly what I had in mind. I’d left the ‘pool’ part out, too, but your description reads better and brings it more to life than even Hilton’s. [bow]

  • Paul North.

The FCC sets standards for communications. One of the problems with sending a signal in the electro magnetic range is the problems of interference with other nearby users. The FCC sets the standards so that different users do nit interfere with each other. As an example if one has a “noisy” hair dryer it is possible to interfere with wire telephone lines and under certain conditions cell phones computer data signals internet data lines aircraft radios and transponders and all manor of things. Setting standards is an important part of what the FCC does. And it has become a goodly sized bureaucracy. Dealing with telecommunications issues is the FCC 's reason for existence. Sometimes the issues can be something only government can deal with. Unless you want ti to back to the 1870’s and 1880’s when railroads dealt with the issues by use of guns bullets and dynamite. For good or bad some regulation is needed. The alternative is anarchy. Try also to remember the CAB’s predecessor also promoted air travel amongst other things. Now the blue sky is close to the wild west and caveat emptor. Rgds IGN

Thank you for the link. There are many ways to explain things and this link is a good primer.

I’d like to add some things.

The link’s author says that this type of government price control was used for regulated industries. He gives that “Value of Service/Commodity” system used by the Interstate Commerce Commission as an example.

I’ll state that it is the cost structure of the organization, not its regulatory status, that determines the use of Ramsey pricing. I think the author is conflating the “Natural Monopoly” type cost structure (which railroads have) with regulatory status. He seems to assume that all firms with such cost structures will be declared natural monopolies and regulated as such.

The governments sure tried to do this with railroads. The failure of such regulation was spectaculor. Railroads may be natural monopolies in cost structure, but they can’t be granted monopoly status by law or regulation. They cannot be granted exemption from competiton based on a geographic service area. They are always in some sort of competitive situation. It is impossible to geographically isolate a railroad as can

It’s work of fiction that stands reality on its head. Norris wrote a sensational novel with the railroad as the vilain. It may have been good fiction but it was not good history.

Unfortunately, people continue to treat it as a history text instead of what it is. It is sensationalized fiction.

See “Sunset Limited: The Southern Pacific Railroad and the Development of the American West, 1850-1930” by Richard Orsi for a historian’s account.

Orsi’s (a PhD historian retired from Cal State Hayward) history differs greatly from the fiction of Norris.

Yes, The Octopus is fiction, but Norris was able to interview many farmers who were impacted. The novel is based on the actual Muscle Slough tragedy. It has more to do with real estate than railroad operations. Although Norris was a so-called muckraker, to dismiss him is foolish. Orsi is a revisionist, and makes a useful contribution. But even in favorable reviews in journals, it is clear he was unable to show the o

Just as an addendum to Greyhound’s post discussing Ramsey pricing, another factor influencing higher freight rates for high valued items is that unfortunate item known as Freight Claims. Whether by petty theft or complete destruction in a derailment, that hypothetical business of carloads of Swiss watches has the potential to cost the railroad a lot more than carloads of grain or coal.

I have no idea if there is any attempt to adjust freight rates for intermodal to accommodate differences; most likely it is just assumed that most of that traffic tends to the higher end of the value spectrum.

John

I’d like to see a source for this writing.

I’d also like to see some specifics regarding the “manifold sins and transgressions of the railroad”, which the writer leaves unspecified.

I do not claim that the SP was run by a bunch of little angles. But here they’ve been pronounced guilty with no specific charges. There are two sides to a story and unless we know what is being charged it is impossible to understand what really happened. What, specifically, did they do and when did they do it?

I’ve seen too many cases where a legitimate, honest, normal business practice has been vilified because people either don’t like the result or don’t understand what is being done and/or why it is being done.

In making charges such as these, there need to be some specifics.

Ok AT&T aka Ma Bell was loath to service rural areas and such there are a number of small phone co-ops and companies out there. Did the State PUCOs and the FCC had to make sure that the small towns got service even at a loss??From what I know we had Chatuaqua Phone Company out at my cottage in the 1980s in Mayville NY.

Illogical and counterintuitive - instead, carry that premise to its conclusion: If the SP had succeeded in driving the farmers out of business - then what traffic would be left for SP to carry from there ? What would it gain from that ? A lot of track and railroad, but no traffic ?

“Charging all the traffic would bear” I can believe - that’s still with us today (see above). There’s an important difference between maximizing profit, and going too far and losing it entirely. But not putting a whole class of shippers in a region - the SP’s customers - out of business. That just makes no sense from a business perspective. The SP’s management - the successors to the “Big Four” - was too smart to make that kind of a mistake. Would any of us do such a thing ?

  • Paul North.

When the FCC was formed in 1934, radio stations were interfering with other radio stations signals. Regulation by the FCC was both to serve the public AND to protect the radio stations signals. Radio stations in Denver, Louisville, Fort Worth, and Minneapolis all were broadcasting on a frequency very close to each other on the AM band. The FCC regulated the signal patterns so that these stations so that these stations could conduct their broadcasts without interference. These radio stations could not have conducted business without FCC regulation because the listeners would not have tolerated interference from out of town radio stations.

The United States has opted for the private sector in broadcasting unlike most of the rest of the world. THe British created the BBC as a government entity which allowed no competition with it until the 1970’s. Since the airwaves belong to the public in the United States; The FCC regulations serve both the public and the companies that want to serve the public, or at least they are supposed to. Today communications are far different than when the telephone industry was deregulated in 1983. It was a world without home computers and cell phones.

Well, no. Charging what the traffic will bear generally doesn’t lead to a bloodbath like Mussel Slough. There would have to be a little more to the story don’t you think? It was a land dispute between the farmers and the SP which led to the conflict known famously as Mussel Slough. I don’t think SP was opposed to farmers or food or the cultivation of the

[quote user=“Ulrich”]
Paul_D_North_Jr

Ulrich
[snipped; emphasis added - PDN.] Some time ago I read “The Octopus” by Frank Norris. . . . The premise of the book was a railroad (the Southern Pacific but not named as such in the book) that was using its monopoly to drive the farmers in central CA out of business. . . .

Illogical and counterintuitive - instead, carry that premise to its conclusion: If the SP had succeeded in driving the farmers out of business - then what traffic would be left for SP to carry from there ? What would it gain from that ? A lot of track and railroad, but no traffic ?

“Charging all the traffic would bear” I can believe - that’s still with us today (see above). There’s an important difference between maximizing profit, and going too far and losing it entirely. But not putting a whole class of shippers in a region - the SP’s customers - out of business. That just makes no sense from a business perspective. The SP’s management - the successors to the “Big Four” - was too smart to make that kind of a mistake. Would any of us do such a thing ?

  • Paul North.

Well, no. Charging what the traffic will bear generally doesn’t lead to a bloodbath like Mussel Slough. There would have to be a little more to the story don’t you think? It was a land dispute between the farmers and the SP which led to the conflict known famously as Mussel Slough. I don’t think SP was opposed to farmers or food or the cultivatio

One version of the Mussel Slough story was that the SP was clearing the squatters to allow the people who actually pay for the land to move in. Another side of the story is that the farmers’ crops wouldn’t be worth much without transportation to a market.

FWIW, I did read “The Octopus” as part of the Califonia History course at UC Berkeley.

For the purposes of the discussion I brought up SP and Frank Norris’s book to show that perhaps events leading up to Mussel Slough served as a catalyst for change i.e in more economic regulations, antitrust laws, curtailment of monopolies, and even in the formation of the ICC.

Sorry it was a summary review of his book, putting it in the context. I neglected the link. It is a balanced review, taking into account the previous research. I am trying to get a link to a long review in a a scholarly history journal through a friend. I have not read the book, but it seems that its author made a career of a revisionist aprroach to looking at the SP, with some acceptance and success. However, his research was conducted by examining the SP archives, not through first-hand accounts of the people involved in the Mussel Slough incident.

This summary was written by a historian, for readers (mostly other historians) already familiar with the historiography on the topic. I or you would have to do a lot of reading of journals and monographs and some books to look at that.

A. You people certainly interfere in my life; here I am, re-reading The Rise and Fall of the Third Reich, and you induce me to re-read The Octopus .[:)] The blurb on the front cover of Bantam edition that I have reads, “A monument in the course of realistic writing in America, THE OCTOPUS is a vivid picture of the struggles of California’s wheat farmers against the encroaching railroad, their only road to the market” On the back cover, we find the following, “Etched in sharp, pitiless detail, here is the Nineteeth Century’s historic clash between the men who grew the wheat that made America rich and strong. and the ruthless, power-hungry railroads, thrusting their steel tentacles relentlessly across the fertile California valleys. Frank Norris’s THE OCTOPUS is America’s first big novel of social protest, a milestone in modern realism.”

B. As to broadcasting stations, AM stations were limited to 50,000 watts of radiated power.

I grew up 50 miles south of Charlotte, N.C., and we listened to the CBS station (50,000 watts) there, quite clearly. For a time, I went to sleep listening to WWL in New Orleans–and woke up to a station in Kannapolis, which is about 30 miles north of Charlotte–the same frequency. Many local, lower-powered stations broadcast during the day only, on the same frequencies used by more powerful stations far away.

I’m going to read it again too. I read it back when I was 19 years old. Norris may have had his biases, and I’m sure there were good people with the railroad. But railroads and big business in particular were fairly recent developments in 1880, and there were few laws to govern behavior (and consequently few laws that could be broken). It was possible for large companies (who often had the local elected representatives in their pockets), to run roughshod over the interests of common people. Apparently that’s what happened in California. Since then laws as well as checks and balances have been developed to prevent this from happening again. Nevertheless large corporations still push the envelope in terms of skirting tax laws and walking that very thin line between tax minimization and downright tax evasion. Now imagine if we had no laws at all.