Kingsbury Commitment

The Kingsbury Commitment is a 1913 out-of-court settlement of the United States government's antitrust challenge against the American Telephone and Telegraph Company (AT&T) for the company's then-growing vertical monopoly in the telecommunications industry. In return for the government's agreement not to pursue legal action against the company as a monopolist, AT&T agreed to divest the controlling interest it had acquired in the Western Union Telegraph Company, and to allow non-competing independent telephone companies to interconnect with the AT&T long-distance network.

In 1907, Theodore N. Vail became president of AT&T for the second time. Immediately, he steered the company into a new direction, in terms of vision, company organization, and technology. He envisioned telephone service as a public utility, and the future of the American telephone industry as a unified system of companies under the lead of his company. This required technical standards understood and accepted by all players in the industry. He opened the market for the Western Electric Company, its manufacturing unit which the company had previously restricted to sell products only to the Bell System companies, so that independent operators could buy compatible apparatus. He organized a distinct research division within Western Electric to focus on basic research and development. AT&T had bought Bell-associated companies and organized them into new hierarchies. AT&T had also acquired many of the independents, and bought control of Western Union, giving it a monopolistic position in both telephone and telegraph communication. These efforts and Vail's vision were communicated to the public by marketing campaigns under the slogan One System — One Policy — Universal Service.

AT&T increasingly became a vertically integrated conglomerate. The government had been increasingly worried that AT&T and the other Bell companies were monopolizing the industry. A key strategy by the Bell System was to refuse to connect its long-distance network—technologically, by far the finest and most extensive in the nation—with independent carriers. Without the prospect of long-distance services, the market position of many independent operators became untenable. AT&T's strategies prompted complaints and attracted the attention of the Justice Department.

Faced with a government investigation and a possible suit for antitrust violations, AT&T entered into negotiations that carried on for several months in 1913. The conclusion came in form of a voluntary commitment in form of a letter by AT&T's Vice President Nathan Kingsbury, who secured approval by executives and the government representatives before submittal. In the letter, dated December 19, 1913, AT&T agreed with Attorney General James Clark McReynolds to divest itself of Western Union, to provide long-distance services to independent exchanges under certain conditions, and to refrain from acquisitions if the Interstate Commerce Commission objected. Justice Department officials opined that the plan gave the government everything and more than they could have hoped to obtain in court, and it found the approval of President Woodrow Wilson, who expressed his admiration for the attitude and vision of the telephone company:

My Dear Mr. Attorney General,

Thank you, for letting me see the letter from the American Telephone and Telegraph Company. It is gratifying that the company should thus volunteer to adjust its business to the conditions of competition. I gain the impression more and more, from week to week, that the business men of the country are sincerely desirous of conforming with the law, and it is gratifying, indeed, to have occasion, as in this instance, to deal with them in complete frankness and to be able to show them that all that we desire is an opportunity to co-operate with them. So long as we are dealt with in this spirit, we can help to build up the business of the country upon sound and permanent lines.

Cordially and sincerely yours,

Woodrow Wilson