of AT&T was that it was a protected and regulated monopoly. As a regulated monopoly, the company may have favored vertical control of any and all activities related to telecommunica- tions. Another explanation is that many firms in the early 1900s favored extensive vertical integration. For example, General Motors, which was founded in 1908, pur- sued extensive vertical integration under Alfred P. Sloan, and Henry Ford wanted the Ford Motor company to be "From Mine to Finished Car; One Organiza- tion" (Thompson 1954, p. 12). AT&T's leader Theodore Vail expressed a similar philosophy in 1908: "One Policy, One System, Universal Service" (AT&T 1911, pp. 18-19). Modern telecommunications firms such as SBC and Verizon are also vertically integrated, combining retail, wholesale, and manufacturing. This might be an accident of history, because the RBOCs are the offspring of AT&T. It might also be that telecommunications firms such as the RBOCs share a legacy of regu- lation with other network industries that are also vertically integrated, particularly electric power and natural gas. Because telecommunications companies such as the RBOCs are still subject to state regulation by PUCs and to federal regulation by the FCC, it is difficult to determine what effect regulation has had on their extent of vertical integration. However, some inferences may be drawn by observing the many diverse types of carriers in telecommunications. These companies are subject to different degrees of regulation in the United States and in other countries. The fact that these firms fre- quently combine retail services with network operation in different market settings and under different regulatory regimes suggests that there are some transaction cost advantages from vertical integration downstream. It is possible that vertical integration at the retail distribution level in telecommunications also may be the result of economic efficiency rather than regulation. The three stages of production of network services described in the previous secti