TELECOM Digest OnLine - Sorted: Re: Western Union History

Re: Western Union History

Jim Haynes (
Tue, 28 Jun 2005 19:28:11 GMT

In article <>,
<> wrote:

> [Other perspectives welcome. public replies please]

I composed the following a few days ago and was going to take it to
private email, which bounced. So here it is.

Oslin also repeats the Western Union article-of-faith that the Bell
System broke its agreement with W.U. when it began offering TWX
service. And he accuses the U.S. govt., probably correctly, of
favoritism toward ITT, which had something to do with the merger with

One could say that Western Union's goose was cooked when they were
offered the chance to buy the Bell patents and turned it down. Of
course it was a perfectly reasonable decision for them. They were in
the long distance communication business, and the early telephone
wouldn't transmit very far. And it was fair enough at that stage to
say the telephone was a curiosity rather than a useful business
machine. Further they had the operational view that people brought
them telegrams and their operators transmitted them and they delivered
them. It was hard for them to understand that customers might wish to
speak directly to each other (in an age when people of good breeding
sent handwritten notes to invite their friends to meet with them, and
to reply to such invitations).

Their goose was cooked because the telephone was destined to outgrow
the telegraph in bandwidth and distance, and would have the advantage
of economy of scale.

A second opportunity was lost when the government forced AT&T to
divest its controlling interest in W.U. Without that we might have
had a coherent national system of voice and record communication,
instead of forcing the two so use separate plant facilities and
compete with each other. Seems like Postal was the main beneficiary
of that action, since it could not have competed effectively with the
AT&T-WU combine.

I presume AT&T didn't "really" violate any agreement with W.U. when it
introduced TWX. Otherwise W.U. could have sued an won. W.U. could
have started a competing service at that time, but they lacked the
local loops it would have required, and would have had to put in their
own or lease from Bell. Or maybe they considered it and found they
couldn't make it pay. (Bell getting local loops for TWX at the
marginal cost of loops for telephony; while W.U. would have had to
construct them from scratch.)

Following the tenure of Newcomb Carlton, Vail's hand-picked successor
at W.U., the company seems to have gone through a long period of
lackluster leadership. One who is more interested in business than I
could see who were the directors at the time and perhaps what their
motives were.

Seems like I read somewhere that W.U. was once offered the opportunity
to buy Teletype and turned it down. They didn't want to be in the
manufacturing business.

The merger with Postal is portrayed as being both government mandated
and as being on terms very costly to W.U. If this is true then it is
another instance of the government hobbling a company that was not in
very good shape to begin with. W.U. did get some good people out of
Postal -- their president W. P. Marshall and engineer Gilbert Vernam
are two I can think of.

W.U. got into the microwave business, which provided a lot more
bandwidth than they needed. For whatever reason they were not able to
sell their excess bandwidth to the TV networks. Maybe they didn't
have the capital to serve the places the networks wanted to go; and
again AT&T had the economy of scale to their advantage. W.U. could
have done what MCI later did, selling bandwidth in competition with
AT&T on high-traffic routes. AT&T put MCI through a bruising legal
fight on that one, and maybe W.U. didn't have the stomach for it. And
then W.U. was a member of the club of common carriers, while MCI was
an outsider trying to get in.

The government forced W.U. to divest their cable business.

Then W.U. brought Telex to the U.S. This seems like a major mistake
to me. It put them into head-to-head competition with TWX, and AT&T
owned all the local loops. They couldn't profit from the ability of
Telex to work internationally because they had been divested of their
cable business. They had to buy a lot of switching equipment to
establish the service, and it was equipment about to be obsoleted by
electronic switching. Meanwhile AT&T proceeded to put TWX onto the
voice switched network, where it was just a marginal cost.

W.U. operated a lot of local telegraph offices long after they had
ceased to pay for themselves. In some cases the FCC required the
company to keep the offices open. W.U. should have had a plan to
convert them to contract agencies; although the best way to do this
would probably involve having the agencies use TWX.

W.U. spent tons of money developing FAX technology. Not much ever
came of it. They had their Desk-Fax machines, which relied on the
model of using dedicated local loops and having customers send
messages to the W.U. office for further transmission rather than
direct to their destinations. Today's fax, very successful, makes use
of technologies that were not available when W.U. was in the business
and of end-to-end connections made possible by the excellence of the
telephone system and by the Carterfone regulatory ruling.

W.U. built the Plan 55 message switching system for the Air Force; but
then after a few years it was replaced by AUTODIN which W.U. also
supplied. I wonder if the lost a lot of money on Plan 55 because of
the short life of the system and the amount of equipment that was made
surplus. AUTODIN used computer switching technology and I suspect
they took a bath on that because computers were generally overpriced
and became obsolete in such a short time. And then there's the matter
of software always turning out to be a lot more costly than expected.

Then W.U. got into the business of remote data processing, but didn't
make a go of it. I don't know what went wrong there; other companies
succeeded (G.E. Information Services for one).

They introduced a dialup data service where you could choose the
bandwidth at the time you dialed the connection. This seems like a
goofy thing to me. Some business machines were only capable of
operating at one particular data rate anyway, so the availability of
other rates at different prices was not useful. It must have been
very costly to provide a switching system that accomodated variable
bandwidth selection. (It would be fairly easy to do today now that
transmission is digital; but at the time it was not easy.)

They did other goofy things in the consumer area, such as CandyGrams
and Gift America. Maybe the failure of those didn't entail much of a
writeoff; I don't know. And they tried some rather pitiful service
offerings in the voice business.

've always wondered if perhaps W.U. was too New York centric in its
management attitudes. I know that AT&T had the practice of bringing
in middle managers on temporary duty from the Bell operating
companies. Thus they kept headquarters aware of what like was like
out in the faraway regions, and took the systemwide perspective back
with them when they returned to their home companies. I wonder if
W.U. did anything like that with its managers. Also AT&T had the New
York Telephone Co. to run the business in the city, whereas W.U. had
its corporate headquarters and its major operating activity in the
same building in the city where it did most of its business, along
with most of its R&D organization. There may have been a tendency to
overlook the problems out in the hinterlands in favor of those at 60
Hudson St. That's enuf for now.

jhhaynes at earthlink dot net

[TELECOM Digest Editor's Note: I always thought most of the smaller,
less profitable Western Union offices were run as contract agencies;
the 'agent' (or person who put up the money to pay the rent on the
location, the phone bills and the payroll) was also the person who got
the twelve to eighteen percent commission Western Union paid on
'sent paid' and 'received collect' traffic through the office. WUTCO
did supply the big, bulky, very noisy, each one weighed a ton
teletypewriter machines for the locations, and the telco circuits to
operate them. The business was usually marginal enough that the agent
would pay his clerks minimum wage and stay financially alive by
locating his office around other 24/7 facilities such as bus stations
and train depots. _If_ the agency started making any _real_ profit
as evidenced by the monthly reports the agent had to submit to the
company, then WUTCO would yank the agency back and turn it into a
corporate location, although usually retaining the agent and his
employees as WUTCO employees instead. I know Greyhound Bus has done
that since its beginning: _if_ there is any money to be made, then we
will make it; if not, then _you_ run it as an agency location, living
off the 12-15 percent commission we agreed to pay you along with
whatever sundries and other items you sell there on your own, assuming
_we_ approved of that part as well. PAT]

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