d that merger was their best option. This change in strategy reversed the downward trend in the Bell System's market share. The number of noncompeting independent telephone systems that had accepted the Bell System's offer of accommodation jumped from 25 percent to 79 percent between 1907 and 1909 and rose to 89 percent by 1913. The number of cities with population of over 5,000 in which competition existed plummeted from 59 percent in 1907 to 37 percent in 1913. By 1934, the Bell System's market share had once again reached 80 percent. With a few exceptions, the independent companies that remained served discrete areas in which the Bell System did not operate. Thus, monopoly was not the justification for regulation. Regulation was instead the justification for monopoly. Regulation, moreover, proved ineffective at curbing rates. Consider first state regulation of intrastate rates. Debates over the proper method for determining the rate base prevented state regulatory authorities from developing a coherent basis for setting rates. The complexity of the corporate struc- ture, in which the parent company owned the operating companies and rented telephone equipment to them through Western Electric, made it difficult for indi- vidual state authorities to discern each operating company's actual financial results, let alone regulate their profits. The regulatory challenge was made all the more difficult by the facts that state commissions were almost completely dependent on the Bell System for the information they needed and that the parent company was regulated at the federal level, whereas the operating companies were regulated at the state level and Western Electric was not regulated at all (U.S. House 1934). Thus, even histories of the early telephone industry that are largely sympathetic to the Bell System agree that "regulation, coming late and still almost non-existent in several of the States, has had relatively little effect in influencing the growth and financial success of the Bell telephone system" (Stehman 