Impact of Federal Preemption on Competition in the United States Telegraph Market

Abstract: The United States federal government preempted state telegraph regulations it deemed as anti-competitive by enacting the 1866 Post Roads Act. The 1866 Post Roads Act granted a de facto national charter and franchise to build and operate a telegraph system anywhere in the United States to any telegraph company organized within any state. The act also outlawed certain types of contracts that had prohibited other companies from acquiring telegraph right of way access. The paper shows that rival firms took advantage of the 1866 Post Roads Act to enter the telegraph market and compete with Western Union. This historical evidence supports that the 1866 Post Roads Act likely increased competition.