ad established themselves in these unserved areas, it was they and not the Bell System who benefited from network economic effects. The traditional account is also belied by the business strategy pursued by the independents. If AT&T had been in a dominant position, one would expect the independents to have been clamoring to interconnect with it. In fact, the indepen- dents did not want to interconnect with AT&T any more than AT&T wanted to interconnect with the independents. It was only after the Bell System changed policy and liberalized its interconnection policies that it began to reassert its dominance. The early telephone industry thus most closely resembles the type of competi- tion, identified in the theoretical literature and described in Chapter 4, in which two equal-sized players refuse to interconnect and instead engage in a race for the market in which "[t]he successful competitor strives to become the surviving monopolist" (Gabel 1969, p. 354). Interestingly, though, this type of competition does not lead The discussion that follows draws on the excellent, but often overlooked revisionist literature on the early telephone industry. See Gabel (1969); Bornholz and Evans (1983); Weiman and Levin (1994); Mueller (1997). Smith V. Ill. Bell Tel. Co., 282 U.S. 133, 147 (1930). See also Mueller (1997). Networks in Telecommunications to the delays in technology adoption and supracompetitive returns associated with refusals to interconnect by dominant firms. It also has the virtue of promoting the rapid buildout of new network technologies (Besen and Farrell 1994). Spurred into a race for the market, both the Bell System and the independents began investing heavily in expanding their networks. Annual growth rates, which had been languishing at around 6 percent during the monopoly period, skyrocketed to over 20 percent during the competitive era. By 1907, the independent telephone industry had captured more subscribers than the Bell System and competed with Bell in 59 percent of cities with populations over 5,0