Ringing in the 20th Century: The Effects of State Monopolies, Private Ownership, and Operating Licenses on Telecommunications in Europe, 1892-1914

Countries around the world are liberalizing their telecommunications networks by privatizing incumbent state-owned firms and introducing competition. This change actually represents a return to private provision and competition in many countries, rather than a new phenomenon. The beginning of the 20th century saw great variation in sector structure around the world, with some countries operating state monopolies, and other countries--especially in Scandinavia-- allowing vigorous private competition. This paper uses data on countries around the world in 1913 and on European countries from 1892 through 1914 to test the effects of government monopoly service, private provision, and operating licenses on telephone development. Controlling for capital income and, where possible, country and year fixed effects, the analysis finds state monopoly provision correlated with substantially worse overall telephone penetration and higher consumer long-distance prices than privately-owned monopolies. Operating licenses that gave the state the right to appropriate firms' assets also lead to lower telephone penetration and higher prices.