The Dollar Store Economy

by Jack Hitt

Heather Mann writes a blog called Dollar Store Crafts, which evolved from her occasional trips to the extreme-discount dollar stores near her home in Salem, Ore. Her readers admire her gift for buying really cheap stuff and then making cool and beautiful things from the pile. Her knockoff “alien abduction lamp” is jury-rigged from a small light fixture, two plastic bowls (flying saucer), a clear acrylic tumbler (tractor beam) and a small plastic toy cow (abductee) — all purchased for about five bucks. When I looked up, Mann was already around the corner, having fun with a bottle of discount detergent boasting a “bingo bango mango” scent. Just up the way was a bin of brown bags marked either “A Surprise for a Boy” or “A Surprise for a Girl.” Mann’s 5-year-old niece accompanied us on our tour and was crazed with excitement over these, and the truth is, we were all in the same exact mood. All around us, strange things hung here and there, urging us on an unending treasure hunt. Perhaps, like me, you have driven by and occasionally stopped in a dollar store and assumed that there were two kinds of customers, those there for the kitschy pleasure of it all — the Heather Manns of the world — and those for whom the dollar store affords a low-rent version of the American Consumer Experience, a place where the poor can splurge. That’s true. But current developments in this, the low end of retail, suggest that a larger shift in the American consumer market is under way.

We are awakening to a dollar-store economy. For years the dollar store has not only made a market out of the detritus of a hyperproductive global manufacturing system, but it has also made it appealing — by making it amazingly cheap. Before the market meltdown of 2008 and the stagnant, jobless recovery that followed, the conventional wisdom about dollar stores — whether one of the three big corporate chains (Dollar General, Family Dollar and Dollar Tree) or any of the smaller chains (like “99 Cents Only Stores”) or the world of independents — was that they appeal to only poor people. And while it’s true that low-wage earners still make up the core of dollar-store customers (42 percent earn $30,000 or less), what has turned this sector into a nearly recession-proof corner of the economy is a new customer base. “What’s driving the growth,” says James Russo, a vice president with the Nielsen Company, a consumer survey firm, “is affluent households.”

The affluent are not just quirky D.I.Y. types. These new customers are people who, though they have money, feel as if they don’t, or soon won’t. This anxiety — sure to be restoked by the recent stock-market gyrations and generally abysmal predictions for the economy — creates a kind of fear-induced pleasure in selective bargain-hunting. Rick Dreiling, the chief executive of Dollar General, the largest chain, with more than 9,500 stores, calls this idea the New Consumerism. “Savings is fashionable again,” Dreiling told me. “A gallon of Clorox bleach, say, is $1.44 at a drugstore or $1.24 at a grocery store, and you pay a buck for it at the Dollar General. When the neighbors come over, they can’t tell where you bought it, and you save anywhere from 20 to 40 cents, right?”

Financial anxiety — or the New Consumerism, if you like — has been a boon to dollar stores. Same-store sales, a key measure of a retailer’s health, spiked at the three large, publicly traded chains in this year’s first quarter — all were up by at least 5 percent — while Wal-Mart had its eighth straight quarterly decline. Dreiling says that much of Dollar General’s growth is generated by what he calls “fill-in trips” ­— increasingly made by wealthier people. Why linger in the canyons of Wal-Mart or Target when you can pop into a dollar store? Dreiling says that 22 percent of his customers make more than $70,000 a year and added, “That 22 percent is our fastest-growing segment.”

This growth has led to a building campaign. At a time when few businesses seem to be investing in new equipment or ventures or jobs, Dreiling’s company announced a few months ago that it would be creating 6,000 new jobs by building 625 new stores this year. Kiley Rawlins, vice president for investor relations at Family Dollar, said her company would add 300 new stores this year, giving it more than 7,000 in 44 states.

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Rita Sklar
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The Debt Crisis at American Colleges

by Andrew Hacker and Claudia Dreifus

How do colleges manage it? Kenyon has erected a $70 million sports palace featuring a 20-lane olympic pool. Stanford's professors now get paid sabbaticals every fourth year, handing them $115,000 for not teaching. Vanderbilt pays its president $2.4 million. Alumni gifts and endowment earnings help with the costs. But a major source is tuition payments, which at private schools are breaking the $40,000 barrier, more than many families earn. Sadly, there's more to the story. Most students have to take out loans to remit what colleges demand. At colleges lacking rich endowments, budgeting is based on turning a generation of young people into debtors.

As this semester begins, college loans are nearing the $1 trillion mark, more than what all households owe on their credit cards. Fully two-thirds of our undergraduates have gone into debt, many from middle class families, who in the past paid for much of college from savings. The College Board likes to say that the average debt is "only" $27,650. What the Board doesn't say is that when personal circumstances go wrong, as can happen in a recession, interest, late payment penalties, and other charges can bring the tab up to $100,000. Those going on to graduate school, as upwards of half will, can end up facing twice that.

Students are now more than $1 trillion in debt to their college educations, yet schools are encouraging the cycle.

Is it a bubble?

If you want to get a name as an economic seer, try this one. The next subprime crisis will come from defaults on student debts, starting with for-profit colleges and rising to the Ivy League. The parallels with housing are striking. In both, the written warnings aren't understood, especially on penalties and interest rates. And in both, it's assumed that what's being bought will rise in value, in one case the real estate, in the other the salaries which will accrue with a degree. One bubble has burst; the second is already losing air.

Still, there's a difference. With mortgage defaults, banks seize and resell the home. But if a degree can't be sold, that doesn't deter the banks. They essentially wrote the student loan law, in which the fine-print says they aren't "dischargable." So even if you file for bankruptcy, the payments continue due. Hence these stern word from Barmak Nassirian of the American Association of College Registrars and Admissions Officers. "You will be hounded for life," he warns. "They will garnish your wages. They will intercept your tax refunds. You become ineligible for federal employment." He adds that any professional license can be revoked and Social Security checks docked when you retire. We can't think of any other statute with such sadistic provisions.

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Has the Patent Game Changed? Just Ask Kodak

by Tim Carmody (excerpted)

The intellectual property hustle used to be so simple: purer, even. Patent holders extracted licensing fees, lump-sum settlements or cross-licensing agreements from nonholders, who paid up to avoid messy lawsuits or injunctions. It was a drag for almost everyone involved, but the stakes were comparatively small. Now, multibillion-dollar portfolio sales have put blood in the water, attracting an entirely different kind of shark.

We’ve already seen this play out once with Motorola. It’s easy to forget now that just a few weeks before Google stepped in to buy the company, investor Carl Icahn publicly and privately urged Motorola to sell off its patents, either for cash or by (again) splitting up the company.

This put both Motorola and Google in an awkward spot: If Motorola couldn’t find a buyer, the company could be torn apart; if Google didn’t step in, they risked losing another patent bidding war. In the end, Motorola was able to negotiate a premium price, and Icahn now stands to pocket millions of dollars.

Right now, it looks like a seller’s market. Because nobody seems to be kicking the tires to see exactly what they’re buying, the conventional wisdom is to sell. Like Motorola a few weeks ago, RIM is in a tough spot, so this pressure is hard to resist. If RIM were to publicly announce that it wasn’t for sale, its already-weakened stock, temporarily buoyant from acquisition rumors, would fall to the ground.

It’s even harder for Kodak, which really does have a substantial patent portfolio and is in an even weaker market position. On Wednesday, Bloomberg ran an analyst-driven story titled “Kodak Worth Five Times More in Breakup With $3 Billion Patents“:

Kodak’s stock jumped 16 percent overnight, fueled by rumors of a Motorola-style takeover or patent sell-off.

Steve Lohr’s “A Bull Market in Tech Patents,” published Wednesday in The New York Times, begins by detailing the broader downside of the patent craze: billions of dollars to purchase or defend existing patents is money companies like Apple or Google don’t have to spend on new products or research.

But that money doesn’t simply evaporate. “It’s a transfer of wealth from innovators to bondholders and stockholders who have no motivation to innovate,” Harvard Business School economist Josh Lerner tells the NYT. “It’s disturbing.”

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Economic Policy

[ed.  Federal Reserve and European Union economic recovery plans.]

Tom Petty, Eddie Vedder

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The Empire at Dusk

by Stephen Glain

In its scramble to avoid another legislative gang war over the nation's debt ceiling, Washington is preparing to shake down the Defense Department in the name of deficit reduction. While budget cutters preoccupy themselves with line-item expenditures, they overlook the Pentagon's biggest cost center: empire. The burden of global hegemony, the commitment to project force across every strategic waterway, air corridor, and land bridge, has exhausted the U.S. military and will be even harder to sustain as budget cuts force strategists and logisticians to do more with less. A national discussion about the logic of maintaining huge forward bases, to say nothing of their financial and human costs, is long overdue.

American relations with the world, and increasingly America's security policy at home, have become thoroughly and all but irreparably militarized. The culprits are not the nation's military leaders, though they can be aggressive and cunning interagency operators, but civilian elites who have seen to it that the nation is engaged in a self-perpetuating cycle of low-grade conflict. They have been hiding in plain sight, hyping threats and exaggerating the capabilities and resources of adversaries. They have convinced a plurality of citizens that their best guarantee of security is not peace but war, and they did so with the help of a supine or complicit Congress. Since the collapse of the Soviet Union, U.S. presidents have ordered troops into battle 22 times, compared with 14 times during the Cold War. Not once did they appeal to lawmakers for a declaration of war.

The legacy of American militarism is a national security complex that thrives on fraud, falsehood, and deception. In the 1950s, Americans were told the Soviets had not only the means to destroy the United States but the desire to do so. In reality, Moscow lacked the former and so gave little thought to the latter, while Washington squandered billions of dollars on needless weaponry. Time and again, U.S. presidents weaponized their response to challenges overseas to protect them from charges of appeasement from the right. Habitually, their administrations misinterpreted events -- from Russia's Bolshevik revolution to the September 11 attacks -- to disastrous effect. In each case, expert advice was overlooked, ignored, or concealed, while in others, threats were manufactured as chips in petty political wagers. The fraudulent bomber and missile gaps and the Gulf of Tonkin incident did as much to injure U.S. interests overseas as did the notion that Saddam Hussein possessed weapons of mass destruction and intended to use them preemptively.

Only a country so rich in resources and blessed by favorable geography could afford such malfeasance. America has been spared foreign invasion for more than 200 years and it can expect to remain inviolate for centuries to come. Yet each year, it spends enough money on national security to match the economic output of Indonesia -- with money borrowed largely from China, a country with which it is preparing for conflict. It insists on its right to launch a preemptive nuclear attack against such countries as North Korea and Iran -- oafish, bankrupt regimes that seek a complement of atomic bombs because they are surrounded by countries with bunkers full of them. America guarantees its friends and allies a place under its security umbrella even if their interests, particularly in the Middle East, diverge markedly from its own. In Europe, NATO remains a feudal confederation of armed forces with no raison d'être save to lend sanction to America's far-flung military enterprises. In Asia, South Korea, the world's 15th-largest economy, remains critically dependent on U.S. forces as a deterrent against its isolated, impoverished northern neighbor, while Japan wallows in a twilight world of middle-class prosperity and political ennui, content to slowly diminish as an American vassal.

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Tears for Fears

Is the SEC Covering Up Wall Street Crimes?

by Matt Taibbi

Imagine a world in which a man who is repeatedly investigated for a string of serious crimes, but never prosecuted, has his slate wiped clean every time the cops fail to make a case. No more Lifetime channel specials where the murderer is unveiled after police stumble upon past intrigues in some old file – "Hey, chief, didja know this guy had two wives die falling down the stairs?" No more burglary sprees cracked when some sharp cop sees the same name pop up in one too many witness statements. This is a different world, one far friendlier to lawbreakers, where even the suspicion of wrongdoing gets wiped from the record.

That, it now appears, is exactly how the Securities and Exchange Commission has been treating the Wall Street criminals who cratered the global economy a few years back. For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation's worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – "18,000 ... including Madoff," as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency's records – "including case files relating to preliminary investigations" – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term "Orwellian," devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or "Matters Under Inquiry" – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission's internal website. "After you have closed a MUI that has not become an investigation," the site advised staffers, "you should dispose of any documents obtained in connection with the MUI."

Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The widespread destruction of records was brought to the attention of Congress in July, when an SEC attorney named Darcy Flynn decided to blow the whistle. According to Flynn, who was responsible for helping to manage the commission's records, the SEC has been destroying records of preliminary investigations since at least 1993. After he alerted NARA to the problem, Flynn reports, senior staff at the SEC scrambled to hide the commission's improprieties.

As a federally protected whistle-blower, Flynn is not permitted to speak to the press. But in evidence he presented to the SEC's inspector general and three congressional committees earlier this summer, the 13-year veteran of the agency paints a startling picture of a federal police force that has effectively been conquered by the financial criminals it is charged with investigating. In at least one case, according to Flynn, investigators at the SEC found their desire to bring a case against an influential bank thwarted by senior officials in the enforcement division – whose director turned around and accepted a lucrative job from the very same bank they had been prevented from investigating. In another case, the agency farmed out its inquiry to a private law firm – one hired by the company under investigation. The outside firm, unsurprisingly, concluded that no further investigation of its client was necessary. To complete the bureaucratic laundering process, Flynn says, the SEC dropped the case and destroyed the files.

Much has been made in recent months of the government's glaring failure to police Wall Street; to date, federal and state prosecutors have yet to put a single senior Wall Street executive behind bars for any of the many well-documented crimes related to the financial crisis. Indeed, Flynn's accusations dovetail with a recent series of damaging critiques of the SEC made by reporters, watchdog groups and members of Congress, all of which seem to indicate that top federal regulators spend more time lunching, schmoozing and job-interviewing with Wall Street crooks than they do catching them. As one former SEC staffer describes it, the agency is now filled with so many Wall Street hotshots from oft-investigated banks that it has been "infected with the Goldman mindset from within."

The destruction of records by the SEC, as outlined by Flynn, is something far more than an administrative accident or bureaucratic fuck-up. It's a symptom of the agency's terminal brain damage. Somewhere along the line, those at the SEC responsible for policing America's banks fell and hit their head on a big pile of Wall Street's money – a blow from which the agency has never recovered. "From what I've seen, it looks as if the SEC might have sanctioned some level of case-related document destruction," says Sen. Chuck Grassley, the ranking Republican on the Senate Judiciary Committee, whose staff has interviewed Flynn. "It doesn't make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what time frame and to what extent its actions were consistent with the law."

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Anthony Freda
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Decision Fatigue

by John Tierney

Three men doing time in Israeli prisons recently appeared before a parole board consisting of a judge, a criminologist and a social worker. The three prisoners had completed at least two-thirds of their sentences, but the parole board granted freedom to only one of them. Guess which one:

Case 1 (heard at 8:50 a.m.): An Arab Israeli serving a 30-month sentence for fraud.

Case 2 (heard at 3:10 p.m.): A Jewish Israeli serving a 16-month sentence for assault.

Case 3 (heard at 4:25 p.m.): An Arab Israeli serving a 30-month sentence for fraud.

There was a pattern to the parole board’s decisions, but it wasn’t related to the men’s ethnic backgrounds, crimes or sentences. It was all about timing, as researchers discovered by analyzing more than 1,100 decisions over the course of a year. Judges, who would hear the prisoners’ appeals and then get advice from the other members of the board, approved parole in about a third of the cases, but the probability of being paroled fluctuated wildly throughout the day. Prisoners who appeared early in the morning received parole about 70 percent of the time, while those who appeared late in the day were paroled less than 10 percent of the time.

The odds favored the prisoner who appeared at 8:50 a.m. — and he did in fact receive parole. But even though the other Arab Israeli prisoner was serving the same sentence for the same crime — fraud — the odds were against him when he appeared (on a different day) at 4:25 in the afternoon. He was denied parole, as was the Jewish Israeli prisoner at 3:10 p.m, whose sentence was shorter than that of the man who was released. They were just asking for parole at the wrong time of day.

There was nothing malicious or even unusual about the judges’ behavior, which was reported earlier this year by Jonathan Levav of Stanford and Shai Danziger of Ben-Gurion University. The judges’ erratic judgment was due to the occupational hazard of being, as George W. Bush once put it, “the decider.” The mental work of ruling on case after case, whatever the individual merits, wore them down. This sort of decision fatigue can make quarterbacks prone to dubious choices late in the game and C.F.O.’s prone to disastrous dalliances late in the evening. It routinely warps the judgment of everyone, executive and nonexecutive, rich and poor — in fact, it can take a special toll on the poor. Yet few people are even aware of it, and researchers are only beginning to understand why it happens and how to counteract it.

Decision fatigue helps explain why ordinarily sensible people get angry at colleagues and families, splurge on clothes, buy junk food at the supermarket and can’t resist the dealer’s offer to rustproof their new car. No matter how rational and high-minded you try to be, you can’t make decision after decision without paying a biological price. It’s different from ordinary physical fatigue — you’re not consciously aware of being tired — but you’re low on mental energy. The more choices you make throughout the day, the harder each one becomes for your brain, and eventually it looks for shortcuts, usually in either of two very different ways. One shortcut is to become reckless: to act impulsively instead of expending the energy to first think through the consequences. (Sure, tweet that photo! What could go wrong?) The other shortcut is the ultimate energy saver: do nothing. Instead of agonizing over decisions, avoid any choice. Ducking a decision often creates bigger problems in the long run, but for the moment, it eases the mental strain. You start to resist any change, any potentially risky move — like releasing a prisoner who might commit a crime. So the fatigued judge on a parole board takes the easy way out, and the prisoner keeps doing time.

Decision fatigue is the newest discovery involving a phenomenon called ego depletion, a term coined by the social psychologist Roy F. Baumeister in homage to a Freudian hypothesis. Freud speculated that the self, or ego, depended on mental activities involving the transfer of energy. He was vague about the details, though, and quite wrong about some of them (like his idea that artists “sublimate” sexual energy into their work, which would imply that adultery should be especially rare at artists’ colonies). Freud’s energy model of the self was generally ignored until the end of the century, when Baumeister began studying mental discipline in a series of experiments, first at Case Western and then at Florida State University.

These experiments demonstrated that there is a finite store of mental energy for exerting self-control. When people fended off the temptation to scarf down M&M’s or freshly baked chocolate-chip cookies, they were then less able to resist other temptations. When they forced themselves to remain stoic during a tearjerker movie, afterward they gave up more quickly on lab tasks requiring self-discipline, like working on a geometry puzzle or squeezing a hand-grip exerciser. Willpower turned out to be more than a folk concept or a metaphor. It really was a form of mental energy that could be exhausted. The experiments confirmed the 19th-century notion of willpower being like a muscle that was fatigued with use, a force that could be conserved by avoiding temptation. To study the process of ego depletion, researchers concentrated initially on acts involving self-control ­— the kind of self-discipline popularly associated with willpower, like resisting a bowl of ice cream. They weren’t concerned with routine decision-making, like choosing between chocolate and vanilla, a mental process that they assumed was quite distinct and much less strenuous. Intuitively, the chocolate-vanilla choice didn’t appear to require willpower.

But then a postdoctoral fellow, Jean Twenge, started working at Baumeister’s laboratory right after planning her wedding. As Twenge studied the results of the lab’s ego-depletion experiments, she remembered how exhausted she felt the evening she and her fiancé went through the ritual of registering for gifts. Did they want plain white china or something with a pattern? Which brand of knives? How many towels? What kind of sheets? Precisely how many threads per square inch?

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Temporary Tattoos Fitted with Electronics Make Flexible, Ultrathin Sensors

by Kyle Niemeyer

Modern methods of measuring the body's activty, such as electroencephalography (EEG), electrocardiography (ECG), and electromyography (EMG), use electrical signals to measure changes in brain, heart, and muscle activity, respectively. Unfortunately, they rely on bulky and uncomfortable electrodes that are mounted using adhesive tape and conductive gel—or even needles. Because of this, these types of measurements are limited to research and hospital settings and typically used over short periods of time because the contacts can irritate skin.

These limitations may be at an end, however. New research published in Science describes technology that allows electrical measurements (and other measurements, such as temperature and strain) using ultra-thin polymers with embedded circuit elements. These devices connect to skin without adhesives, are practically unnoticeable, and can even be attached via temporary tattoo.

The authors refer to their approach as an "epidermal electronic system" (EES), which is basically a fancy way of saying that the device matches the physical properties of the skin (such as stiffness), and its thickness matches that of skin features (wrinkles, creases, etc.). In fact, it adheres to skin only using van der Waals forces—the forces of attraction between atoms and molecules—so no adhesive material is required. Between the flexibility and the lack of adhesive, you wouldn’t really notice one of these attached.

As demonstrations, the authors used their devices to measure heartbeats on the chest (ECG), muscle contractions in the leg (EMG), and alpha waves through the forehead (EEG). The results were all high quality, comparing well against traditional electrode/conductive gel measurements in the same locations. In addition, the devices continuously captured data for six hours, and the devices could be worn for a full 24 hours without any degradation or skin irritation.

One interesting demonstration that also suggests future applications was the measuring of throat muscle activity during speech. Different words showed distinctive signals, and a computer analysis enabled the authors to recognize the vocabulary being used.

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Gerry and the Pacemakers

Catherine McCarthy. My Petit Monsoon, 2005.
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Marc Chagall. The Three Candles, 1938 - 1940. France
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Dale Frank
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Mad About Metered Billing? They Were in 1886, too.

[ed.  Like your cable company?  Do you like paying metered rates for internet use and data transfer when cloud computing, streaming Netflix, Spotify and other web-based technologies are amping up broadband requirements for the use of their products?  Read this article.  The more things change the more they stay the same.]

by Matthew Lasar

Hopping mad about metered billing? Spluttering about tethering restrictions and early termination fees? Raging over data caps? You're not alone. Perhaps you can take some comfort from this editorial in The New York Times:

"The greedy and extortionate nature of the telephone monopoly is notorious. Controlling a means of communication which has now become indispensable to the business and social life of the country, the company takes advantage of the public's need to force from it every year an extortionate tribute".

Yes, that's how The Times saw it—in 1886. And the newspaper's readers applauded these words. But reading Richard R. John's wonderful book, Network Nation: Inventing American Telecommunications, one is struck by the contrasts between then and now. The issues are often recognizable; the players a little less so. 

Nothing whatever

It was 1887, and Charles M. Fay, General Manager of the Chicago Telephone Exchange, had had about as much as he could take. The pseudo populist legislatures that kowtowed to telephone subscriber groups were on a rampage, Fay warned in a lengthy screed that appeared in the National Telephone Exchange Association's annual journal. Now they were demanding rate caps and price regulation—but for whom?

The poor and working class have "nothing whatever" to do with the telephone, and never will, Fay insisted. "Telephone users are men whose business is so extended and whose time is so valuable as to demand rapid and universal communication," he continued, leaving to posterity this remarkable claim about the service:

"A laborer who goes to work with his dinner basket has no occasion to telephone home that he will be late to dinner; the small householder, whose grocer lives just around corner, would not pay once cent for a telephone wherewith to reach him; the villager, whose deliberate pace is never hurried, will walk every time the few steps necessary to see his neighbor in order to save a nickel. The telephone, like the telegraph, post office and the railroad, is only upon extraordinary occasions used or needed by the poor. It is demanded, and daily depended upon, and should be liberally paid for by the capitalist, mercantile, and manufacturing classes."

To be fair, Fay was right about the immediate moment. Given 1887 telephone subscription rates, hardly any workers or villagers bought regular telephone service. They couldn't afford it. But the Bell System's big problem in 1887 wasn't the poor and struggling masses. It was those "mercantile and manufacturing" types—also up in arms at Bell franchise prices.

Appalled at schemes like "measured service" for billing consumers for local calls, telephone subscribers launched municipal and state-wide reform campaigns, backed independent network providers, and ran "rate strikes" on more than one occasion.

"Telephomania," Fay bitterly called the phenomenon—the "only fit word" to describe these ingrates. But their largely forgotten uprisings made a difference.

"By demonstrating the vulnerability of operating companies to legislative intervention," writes John, "they goaded a new generation of telephone managers into providing telephone service to thousands of potential telephone users whom their predecessors had ignored. The popularization of the telephone was the result."

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