Although Western Union had eliminated its most formidable competitor (A&P) in 1877, a number of opposition telegraph companies persisted. One such company was the Central Union Telegraph which was constructing a line from Oswego to New York City in 1878, and would have attracted little notice except for a rumor that Jay Gould and Russell Sage had demonstrated interest in Central Union, perhaps as a stock speculation. History suggests that even if Gould had it in mind to pour money into another opposition line and drive rates down until reaching another buyout settlement with Western Union, Norvin Green was hesitant to believe that Gould would go through with the scheme. But Gould forged an agreement with Central’s Joseph Owen, and the Central Union Telegraph formed the core of Gould’s new enterprise. On May 15, 1879, Gould incorporated the American Union war was about to begin.
The initial reaction at Western Union was to dismiss the notion that Jay Gould would once again build a new telegraph venture to compete with the formidable giant. American Union’s amazingly rapid growth, however, soon forced Norvin Green to have second thoughts about discounting American Union as a serious competitor. Whether Gould’s new venture was to be a legitimate business or merely another stock market ploy, Green likely feared that if Western Union paid “handsomely” in an American Union buyout, as they had with Gould’s A&P, similar schemes would continue to plague Western Union. opposition telegraph until American Union’s backers tired of losing money.
By mid-1879 Western Union was witnessing the tremendous speed at which their new foe was building up their national telegraph plant. Upwards of 5,000 men were at work in their construction contracts. Western Union still maintained the great advantage of exclusive with railroad telegraph operators. Challenging this advantage with the railroads became a priority for Jay Gould in his second war. The ammunition that Jay Gould would need to counter Western Union’s railroad advantage was in work long before American Union was launched in a case known as Pensacola Telegraph Co. v. Western Union Telegraph Co.
The Telegraph Act of 1866 was created with the intent to promote telegraph competition by granting access to post roads and rights-of-way, including those of the railroads. In practice, however, the provisions of the act were largely unenforced. The law was ambiguous in that it did not dictate whether railroads with exclusive contracts were entitled to open their rights-of-way to competing telegraphs or obligated to do so. In addition, telegraph regulation had for the most part been left to the states, and telegraph companies were state- chartered organizations. The Telegraph Act of 1866 thus presented a potential expansion of federal power and intrusion on states’ rights. As a result, the constitutionality of the Telegraph Act was not tested for several years.
Then in 1877 the constitutionality of the Telegraph Act of 1866 became a subject for consideration by the U.S. Supreme Court in Pensacola Telegraph Co. v. Western Union Telegraph Co. The regional Pensacola Telegraph was erected along the right-of-way of the Alabama & Florida Railroad (later the Pensacola & Louisville Railroad) from the Bay
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